N-CSR 1 a08-7379_4ncsr.htm N-CSR

 

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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 29

 

 

Date of reporting period:

February 29, 2008

 

 

 


 

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):

 


Funds

Annual Report

February 29, 2008

ING Senior Income Fund

E-Delivery Sign-up – details inside

This report is submitted for general information to shareholders of the ING Funds. It is not authorized for distribution to prospective shareholders unless accompanied or preceded by a prospectus which includes details regarding the funds' investment objectives, risks, charges, expenses and other information. This information should be read carefully.



ING Senior Income Fund

ANNUAL REPORT

February 29, 2008

Table of Contents

Portfolio Managers' Report     3    
Report of Independent Registered Public Accounting Firm     8    
Statement of Assets and Liabilities     9    
Statement of Operations     11    
Statements of Changes in Net Assets     12    
Statement of Cash Flows     13    
Financial Highlights     14    
Notes to Financial Statements     16    
Additional Information     25    
Portfolio of Investments     26    
Shareholder Meeting Information     63    
Tax Information     65    
Trustee and Officer Information     66    
Advisory Contract Approval Discussion     72    

 

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ING Senior Income Fund

PORTFOLIO MANAGERS' REPORT

Dear Shareholders:

ING Senior Income Fund (the "Fund") is a continuously offered, 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 FEBRUARY 29, 2008		  
Net Assets   $ 1,351,096,350    
Total Assets   $ 1,909,809,746    
Assets Invested in Senior Loans   $ 1,770,872,313    
Senior Loans Represented     575    
Average Amount Outstanding per Loan   $ 3,079,778    
Industries Represented     37    
Average Loan Amount per Industry   $ 47,861,414    
Portfolio Turnover Rate (YTD)     56 %  
Weighted Average Days to Interest Rate Reset     42    
Average Loan Final Maturity     64 months    
Total Leverage as a Percentage of Total Assets     28.48 %  

 

PERFORMANCE SUMMARY

During the year ended February 29, 2008, the Fund's Class A and Class Q shares distributed total dividends from income of $0.95 and $1.01, respectively, resulting in an average annualized distribution rate of 7.12%(1) and 7.16%(1), respectively. During the same period, the Fund's Class B and Class C shares each distributed total dividends from income of $0.94 and $0.88, respectively, resulting in an average annualized distribution rate of 6.61%(1) and 6.60%(1), respectively.

The Fund's total return for the year ended February 29, 2008, for each of the share classes, excluding sales charges, was (8.94)% for Class A, (9.43)% for Class B, (9.42)% for Class C and (8.99)% for Class Q. The Fund's net returns were less than the returns of the S&P/LSTA Leveraged Loan Index ("LLI"), which had a gross return of (5.29)%.

MARKET REVIEW

The Fund's fiscal year ended February 29, 2008 marked arguably the most extraordinary and challenging period in recorded loan market history. The early part of the year saw a continuation of a very strong issuer's market, as investor demand for senior loans remained exceptionally robust and credit spreads and default rates compressed to record lows. Beginning in mid-summer, however, global credit markets began to quickly unravel as investors in the mortgage and asset backed securities markets struggled with accelerating losses and plummeting valuations. While the corporate loan market is not directly linked to these securities markets (the Fund has never invested directly in mortgages or mortgage-baked securities), they do share, in part, a common investor base. As a result of this broad reassessment of risk, underlying demand for senior loans fell dramatically, at a time when the visible supply of new loans coming to market hit an all time high. This extreme "technical" dislocation, in concert with falling short-term interest rates and concerns about the outlook for the U.S. economy, had a decidedly negative impact on loan prices (and loan

(1)  The distribution rate is calculated by annualizing dividends declared during the period and dividing the resulting annualized dividend by the Fund's average month-end net asset value (in the case of net asset value) or the average month-end New York Stock Exchange Composite closing price (in the case of Market). 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.


3


ING Senior Income Fund

PORTFOLIO MANAGERS' REPORT (continued)

fund NAVs) during the period, even though default rates, while up noticeably from the all-time low of December 2007, have thus far remained below the long-run historical average. Since the end of the fiscal year, loan prices have recovered somewhat, buoyed by a continued (albeit slow-moving) reduction in the supply overhang and improving, but still opportunistic, investor demand for senior secured loans at what many now consider exceptionally attractive yields.

The Fund's performance during this difficult time must be viewed from two perspectives. Total net returns relative to the LLI were negatively impacted by the use of leverage (see below). We continue to believe that the disciplined use of leverage in this asset category is appropriate and accretive to common shareholders under normal market conditions. The velocity of the technical dislocation described above effectively precluded us from materially reducing leverage sufficiently in advance of the contraction in loan prices. Conversely, performance based on asset selection and industry positioning continues to be solid. The Fund did not hold any defaulted loans over the course of the fiscal year ended February 29, 2008 and is, we believe, well positioned to withstand a rising default rate environment. Further, the Fund's long-standing underweight of the generally riskier component of the loan asset category (e.g., second lien loans) has proved beneficial to recent asset-level performance, as has a continual underweight of problematic industry sectors (e.g. autos and real estate). As loan investors look to increasingly factor in a more challenging fundamental credit landscape, better quality non-investment grade loans have begun to outperform the broader market. We expect that trend to continue.

TOP TEN SENIOR LOAN ISSUERS
AS OF FEBRUARY 29, 2008
AS A PERCENTAGE OF:		  
    TOTAL
ASSETS		   NET
ASSETS		  
Charter Communications Operating, LLC     3.1 %     4.4 %  
Cequel Communications, LLC     2.3 %     3.2 %  
Metro-Goldwyn-Mayer, Inc.     2.2 %     3.1 %  
CHS/Community Health Systems, Inc.     2.2 %     3.1 %  
Univision Communications, Inc.     1.5 %     2.1 %  
CSC Holdings, Inc.     1.5 %     2.1 %  
UPC Financing Partnership     1.4 %     2.0 %  
Georgia Pacific Corporation     1.4 %     2.0 %  
HCA, Inc.     1.4 %     2.0 %  
Idearc, Inc.     1.4 %     1.9 %  

 

USE OF LEVERAGE

The Fund utilizes financial leverage to seek to increase the yield to the holders of common shares while maintaining the appropriate credit standards. Using leverage for investment purposes involves borrowing at a floating short-term rate, and investing those proceeds at a higher floating rate. Unlike traditional fixed income asset classes, using leverage in the floating rate senior loan asset class does not expose investors to the same degree of risk from rising short-term interest rates, as the income produced from the Fund's loan investments will adjust in a fashion consistent with the Fund's borrowing costs. The use of leverage can, however, magnify the erosion of the Fund's net asset value in declining markets. As of February 29, 2008, the Fund had $544 million outstanding under a $765 million revolving credit facility.

TOP TEN INDUSTRY SECTORS
AS OF FEBRUARY 29, 2008
AS A PERCENTAGE OF:		  
    TOTAL
ASSETS		   NET
ASSETS		  
Healthcare, Education and Childcare     10.0 %     14.2 %  
North American Cable     10.0 %     14.1 %  
Printing & Publishing     6.1 %     8.6 %  
Retail Stores     5.0 %     7.1 %  
Utilities     4.9 %     6.9 %  
Chemicals, Plastics & Rubber     4.6 %     6.5 %  
Data and Internet Services     4.5 %     6.3 %  
Leisure, Amusement, Entertainment     4.0 %     5.7 %  
Radio and TV Broadcasting     4.0 %     5.7 %  
Foreign Cable, Foreign TV, Radio
and Equipment		     3.8 %     5.3 %  

 


4


ING Senior Income Fund

PORTFOLIO MANAGERS' REPORT (continued)

OUTLOOK

Looking forward, although decent progress has been made in mending the technical imbalance largely responsible for recent loan market woes, we believe substantial headwinds still exist. Global credit markets have not yet returned to full functionality, and most credit investors still envision further write-downs coming from the corporate banking ranks as weaker economic conditions take hold of both the consumer and corporate markets. However, we also believe that the recent actions taken by the Federal Reserve to aggressively infuse liquidity into the U.S financial system have not only had an immediate positive psychological impact on investor sentiment, but will provide the foundation for improved credit conditions longer-term. Specific to the senior loan market, we remain of the opinion that, given time, the still present technical imbalance will eventually subside and thus provide a natural catalyst to higher loan prices, even if default rates continue to moderately increase. We also believe that our strategy of investing primarily in the better quality and most liquid non-investment grade bank loans, combined with rigorous ongoing monitoring, has the potential to continue our favorable default experience. Recall that, absent a loss associated with a default, senior bank loans pay off at par, which would provide investors the opportunity to, over time, recapture price declines and price discounts. Investors looking to capitalize on that favorable total return opportunity must have a reasonable risk tolerance and a sufficiently long investment horizon.

   
Jeffrey A. Bakalar
Senior Vice President
Senior Portfolio Manager
ING Investment Management Co. 		  Daniel A. Norman
Senior Vice President
Senior Portfolio Manager
ING Investment Management Co.		  
   

 

ING Senior Income Fund
April 11, 2008


5


ING Senior Income Fund

PORTFOLIO MANAGERS' REPORT (continued)

    Average Annual Total Net Returns for the
Periods Ended February 29, 2008		  
    1 Year   3 Years   5 Years   April 2, 2001  
Including Sales Charge:  
Class A(1)     (11.23 )%     (0.15 )%     2.11 %     3.57 %  
Class B(2)     (11.98 )%     (0.42 )%     2.40 %     3.01 %  
Class C(3)     (10.27 )%     0.17 %     2.59 %     3.03 %  
Class Q     (8.99 )%     0.68 %     3.07 %     3.50 %  
Excluding Sales Charge:  
Class A     (8.94 )%     0.70 %     3.11 %     3.57 %  
Class B     (9.43 )%     0.15 %     2.56 %     3.01 %  
Class C     (9.42 )%     0.17 %     2.59 %     3.03 %  
Class Q     (8.99 )%     0.68 %     3.07 %     3.50 %  
S&P/LSTA Leveraged Loan Index(4)     (5.29 )%     2.27 %     4.20 %     3.85 %  

 

Total net returns reflect that ING Investments, LLC (the Fund's Investment Adviser) may have waived, reimbursed or recouped fees and expenses otherwise payable by 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 future 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)  Return calculations for the period beginning April 2, 2001 through June 30, 2002, reflect no deduction of a front-end sales charge. Return calculations for the period beginning July 1, 2002 through October 10, 2004, reflect deduction of the maximum Class A sales charge of 4.75%. Return calculations with a starting date after October 11, 2004 are based on a 2.50% sales charge. 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% Early Withdrawal Charge ("EWC") if they are repurchased by the Fund within one year of purchase.

(2)  Class B maximum 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 Syndications and Trading Association. The LLI 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 and 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, C and Class Q common shares.


6


ING Senior Income Fund

PORTFOLIO MANAGERS' REPORT (continued)

YIELDS AND DISTRIBUTION 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  
February 29, 2008     7.24 %     6.92 %     6.92 %     7.44 %     7.12 %     6.61 %     6.60 %     7.16 %  
August 31, 2007     6.64 %     6.31 %     6.31 %     6.78 %     6.82 %     6.33 %     6.32 %     6.85 %  

 

(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 Securities Exchange Commission standardized yield formula for open-end investment companies.

(2)  Distribution Rates are calculated by annualizing dividends declared during the period (i.e., by dividing the monthly dividend amount by the number of days in the month and multiplying by the number of days in the fiscal year) and then dividing the resulting annualized dividend by the month-ending NAV.

Risk is inherent in all investing. The following are the principal risks associated with investing in the Fund. This is not, and is not intended to be, a description of all risks of investing in the Fund. A more detailed description of the risks of investing in the Fund is contained in the Fund's current prospectus.

Credit Risk: The Fund invests a substantial portion of its assets in below investment grade senior loans and other below investment grade assets. Below investment grade loans involve a greater risk that borrowers may not make timely payment of the interest and principal due on their loans. They also involve a greater risk that the value of such loans could decline significantly. If borrowers do not make timely payments of the interest due on their loans, the yield on the Fund's common shares will decrease. If borrowers do not make timely payment of the principal due on their loans, or if the value of such loans decreases, the value of the Fund's NAV will decrease.

Interest Rate Risk: Changes in short-term market interest rates will directly affect the yield on the Fund's common shares. If short-term market interest rates fall, the yield on the Fund will also fall. To the extent that the interest rate spreads on loans in the Fund experience a general decline, the yield on the Fund will fall and the value of the Fund's assets may decrease, which will cause the Fund's value to decrease. Conversely, when short-term market interest rates rise, because of the lag between changes in such short-term rates and the resetting of the floating rates on assets in the Fund's portfolio, the impact of rising rates will be delayed to the extent of such lag.

Leverage Risk: The Fund's use of leverage through borrowings or the issuance of preferred shares can adversely affect the yield on the Fund's Common Shares. To the extent that the Fund is unable to invest the proceeds from the use of leverage in assets which pay interest at a rate which exceeds the rate paid on the leverage, the yield on the Fund's Common Shares will decrease. In addition, 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.

Liquidity Risk: The Fund does not repurchase its shares on a daily basis and no market for the Fund's Common Shares is expected to exist. To provide a measure of liquidity, the Fund will normally make monthly repurchase offers for not less than 5% of its outstanding Common Shares. If more than 5% of Common Shares are tendered, investors may not be able to completely liquidate their holdings in any one month. Shareholders also will not have liquidity between these monthly repurchase dates. For the months of August 2007 and February 2008, the Fund received redemption requests in excess of the respective monthly repurchase offer amounts and therefore had to reduce such requests pro rata.


7


ING Senior Income Fund

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Shareholders and Board of Trustees
ING Senior Income Fund

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of ING Senior Income Fund, as of February 29, 2008, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of February 29, 2008, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of ING Senior Income Fund as of February 29, 2008, the results of its operations and its cash flows, the changes in its net assets, and the financial highlights for the periods specified in the first paragraph above, in conformity with U.S. generally accepted accounting principles.

Boston, Massachusetts
April 29, 2008


8



ING Senior Income Fund

STATEMENT OF ASSETS AND LIABILITIES as of February 29, 2008

ASSETS:  
Investments in securities at value (Cost $1,985,008,308)   $ 1,775,058,087    
Cash     48,911,484    
Foreign currencies at value (Cost $1,454,532)     1,448,692    
Receivables:  
Investment securities sold     58,386,024    
Fund shares sold     5,447,619    
Interest     19,835,049    
Other     43,846    
Unrealized appreciation on forward foreign currency contracts     614,444    
Prepaid expenses     64,501    
Total assets     1,909,809,746    
LIABILITIES:  
Payable for investment securities purchased     1,833    
Notes payable     544,000,000    
Accrued interest payable     2,319,812    
Deferred arrangement fees on revolving credit facilities     675,772    
Payable to affiliates     1,953,744    
Income distribution payable     2,773,705    
Unrealized depreciation on forward foreign currency contracts     4,051,418    
Unrealized depreciation on unfunded commitments     2,403,268    
Accrued trustees fees     111,572    
Other accrued expenses and liabilities     422,272    
Total liabilities     558,713,396    
NET ASSETS   $ 1,351,096,350    
NET ASSETS WERE COMPRISED OF:  
Paid-in capital   $ 1,586,235,140    
Undistributed net investment income     420,670    
Accumulated net realized loss on investments
and foreign currency related transactions 		    (20,053,156 )  
Net unrealized depreciation on investments
and foreign currency related transactions		     (215,506,304 )  
NET ASSETS   $ 1,351,096,350    

 

See Accompanying Notes to Financial Statements
9


ING Senior Income Fund

STATEMENT OF ASSETS AND LIABILITIES as of February 29, 2008 (continued)

Class A:  
Net assets   $ 595,016,502    
Shares authorized     unlimited    
Par value   $ 0.01    
Shares outstanding     45,039,281    
Net asset value and redemption price per share   $ 13.21    
Maximum offering price per share (2.50%)(1)    $ 13.55    
Class B:  
Net assets   $ 75,885,072    
Shares authorized     unlimited    
Par value   $ 0.01    
Shares outstanding     5,759,810    
Net asset value and redemption price per share(2)    $ 13.17    
Class C:  
Net assets   $ 625,516,462    
Shares authorized     unlimited    
Par value   $ 0.01    
Shares outstanding     47,405,741    
Net asset value and redemption price per share(2)    $ 13.19    
Class Q:  
Net assets   $ 54,678,314    
Shares authorized     unlimited    
Par value   $ 0.01    
Shares outstanding     4,162,899    
Net asset value and redemption price per share   $ 13.13    

 

(1)  Maximum offering price is computed at 100/97.50 of net asset value. On purchases of $100,000 or more, the offering price is reduced.

(2)  Redemption price per share may be reduced for any applicable contingent deferred sales charge.

See Accompanying Notes to Financial Statements
10


ING Senior Income Fund

STATEMENT OF OPERATIONS for the Year Ended February 29, 2008

INVESTMENT INCOME:  
Interest   $ 181,765,140    
Arrangement fees earned     581,171    
Other     3,378,642    
Total investment income     185,724,953    
EXPENSES:  
Investment management fees     18,768,938    
Administration fees     2,346,117    
Distribution and service fees:  
Class A     2,187,574    
Class B     987,536    
Class C     6,304,995    
Class Q     263,760    
Transfer agent fees:  
Class A     356,815    
Class B     40,833    
Class C     346,672    
Class Q     41,471    
Shareholder reporting expense     292,800    
Interest expense     24,771,948    
Custodian fees     1,055,589    
Credit facility fees     16,293    
Professional fees     232,815    
Trustees' fees     139,000    
Registration fees     156,695    
Postage expense     699,800    
Miscellaneous expense     175,898    
Total expenses     59,185,549    
Less:  
Net waived fees     (246,884 )  
Net expenses     58,938,665    
Net investment income     126,786,288    
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS:		          
Net realized loss on:  
Investments     (13,256,985 )  
Foreign currency related transactions     (14,900,321 )  
Net realized loss on investments and foreign currency related transactions     (28,157,306 )  
Net change in unrealized appreciation or depreciation on:  
Investments     (242,764,710 )  
Foreign currency related transactions     (2,572,390 )  
Unfunded commitments     (2,403,268 )  
Net change in unrealized appreciation or depreciation on investments and
foreign currency related transactions		     (247,740,368 )  
Net realized and unrealized loss on investments and foreign currency
related transactions		     (275,897,674 )  
Decrease in net assets resulting from operations   $ (149,111,386 )  

 

See Accompanying Notes to Financial Statements
11


ING Senior Income Fund

STATEMENTS OF CHANGES IN NET ASSETS

    Year Ended
February 29,
2008		   Year Ended
February 28,
2007		  
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:		  
Net investment income   $ 126,786,288     $ 136,929,195    
Net realized loss on investments and foreign
currency related transactions		     (28,157,306 )     (1,310,799 )  
Net change in unrealized appreciation or
depreciation on investments and foreign currency
related transactions		     (247,740,368 )     4,713,875    
Increase (decrease) in net assets resulting
from operations		     (149,111,386 )     140,332,271    
DISTRIBUTIONS TO SHAREHOLDERS:  
Net investment income:  
Class A     (50,570,172)       (64,626,473)    
Class B     (5,246,598)       (7,057,368)    
Class C     (44,535,539)       (56,290,853)    
Class Q     (6,099,213)       (10,499,863)    
Net realized gain from investments:  
Class A     (1,182,115)       —    
Class B     (148,822)       —    
Class C     (1,241,046)       —    
Class Q     (116,903)       —    
Tax return of capital:  
Class A     (9,354,901 )     —    
Class B     (1,042,664 )     —    
Class C     (8,907,689 )     —    
Class Q     (1,143,727 )     —    
Decrease in net assets from distributions
to shareholders		     (129,589,389 )     (138,474,557 )  
CAPITAL SHARE TRANSACTIONS:  
Net proceeds from sale of shares     498,743,998       915,801,787    
Reinvestment of distributions     85,200,633       91,655,109    
      583,944,631       1,007,456,896    
Cost of shares repurchased     (1,127,661,585 )     (982,810,449 )  
Net increase (decrease) in net assets
resulting from capital share transactions		     (543,716,954 )     24,646,447    
Net increase (decrease) in net assets     (822,417,729 )     26,504,161    
NET ASSETS:  
Beginning of year     2,173,514,079       2,147,009,918    
End of year   $ 1,351,096,350     $ 2,173,514,079    
Undistributed net investment income/distributions
in excess of net investment income at end of year		   $ 420,670     $ (5,025,751 )  

 

See Accompanying Notes to Financial Statements
12


ING Senior Income Fund

STATEMENT OF CASH FLOWS for the Year Ended February 29, 2008

INCREASE (DECREASE) IN CASH
Cash Flows from Operating Activities:		  
Interest received   $ 179,621,990    
Arrangement fees received     774,603    
Other income received     3,385,299    
Interest paid     (23,807,251 )  
Other operating expenses paid     (34,691,882 )  
Purchases of investments     (1,331,486,254 )  
Proceeds on sale of investments     1,585,500,847    
Net cash provided by operating activities     379,297,352    
Cash Flows from Financing Activities:  
Distributions paid to common shareholders     (45,010,411 )  
Proceeds from capital shares sold     503,871,941    
Disbursements for capital shares repurchased     (1,127,661,585 )  
Net increase in notes payable     307,000,000    
Net cash flows used in financing activities     (361,800,055 )  
Net increase in cash     17,497,297    
Cash at beginning of year     31,414,187    
Cash at end of year   $ 48,911,484    
Reconciliation of Net Decrease in Net Assets Resulting from
Operations to Net Cash provided by Operating Activities:		          
Net decrease in net assets resulting from operations   $ (149,111,386 )  
Adjustments to reconcile net decrease in net assets resulting
from operations to net cash provided by operating activities:		          
Change in unrealized appreciation/depreciation on investments     242,764,710    
Change in unrealized appreciation/depreciation on foreign currencies     9,828    
Change in unrealized appreciation/depreciation on forward foreign
currency contracts		     2,845,287    
Change in unrealized appreciation on other assets and liabilities     (282,725 )  
Change in unrealized depreciation on unfunded commitments     2,403,268    
Net accretion of discounts on investments     (5,310,468 )  
Net amortization of premiums on investments     766,533    
Realized loss on sale of investments and foreign currency related transactions     28,157,306    
Purchases of investments     (1,331,486,254 )  
Proceeds on sale of investments     1,585,500,847    
Decrease in other assets     6,657    
Decrease in interest receivable     2,400,785    
Decrease in prepaid arrangement fees on notes payable     16,293    
Decrease in prepaid expenses     70,034    
Increase in deferred arrangement fees on revolving credit facilities     193,432    
Increase in accrued interest payable     964,697    
Decrease in payable to affiliate     (555,067 )  
Increase in accrued trustee fees     68,061    
Decrease in accrued expenses     (124,486 )  
Total adjustments     528,408,738    
Net cash provided by operating activities   $ 379,297,352    
Non Cash Financing Activities  
Receivable for shares sold   $ 5,447,619    
Reinvestment of distributions   $ 85,200,633    

 

See Accompanying Notes to Financial Statements
13



ING SENIOR INCOME FUND  FINANCIAL HIGHLIGHTS

Selected data for a share of beneficial interest outstanding for each year.

    Class A  
    Year Ended February 28 or 29,  
    2008   2007   2006   2005   2004  
Per Share Operating Performance:  
Net asset value, beginning of year   $ 15.57       15.56       15.59       15.47       14.83    
Income (loss) from investment operations:  
Net investment income   $ 1.04       1.01       0.78       0.55       0.61    
Net realized and unrealized gain (loss) on investments   $ (2.35 )     0.02       (0.03 )     0.18       0.69    
Total income (loss) from investment operations   $ (1.31 )     1.03       0.75       0.73       1.30    
Less distributions from:  
Net investment income   $ 0.95       1.02       0.78       0.56       0.64    
Net realized gains on investments   $ 0.03       —       —       0.05       0.02    
Return of capital   $ 0.07       —       —       —       —    
Total distributions   $ 1.05       1.02       0.78       0.61       0.66    
Net asset value, end of year   $ 13.21       15.57       15.56       15.59       15.47    
Total Investment Return(1)    % (8.94 )     6.84       4.96       4.80       8.93    
Ratios/Supplemental Data:  
Net assets, end of year (000's)   $ 595,017       998,140       918,621       736,740       172,975    
Average borrowings (000's)(2)    $ 426,164       404,137       325,044       34,767       20,771    
Asset coverage per $1,000 of debt   $ 3,484       10,171       6,519       1,251       — *  
Ratios to average net assets after reimbursement/recoupment:  
Expenses (before interest and other fees related to revolving credit facility)(3)    % 1.53       1.50       1.50       1.34       1.36    
Expenses (with interest and other fees related to revolving credit facility)(3)    % 2.81       2.56       2.20       1.45       1.43    
Net investment income(3)    % 6.85       6.42       4.98       3.49       3.84    
Ratios to average net assets before reimbursement/recoupment:  
Expenses (before interest and other fees related to revolving credit facility)(3)    % 1.53       1.48       1.48       1.35       1.46    
Expenses (with interest and other fees related to revolving credit facility)(3)    % 2.81       2.54       2.18       1.46       1.53    
Net investment income(3)    % 6.85       6.44       5.00       3.48       3.74    
Portfolio turnover rate   % 56       57       82       82       72    
Shares outstanding at end of year (000's)     45,039       64,122       59,029       47,252       11,180    
    Class B  
    Year Ended February 28 or 29,  
    2008   2007   2006   2005   2004  
Per Share Operating Performance:  
Net asset value, beginning of year   $ 15.53       15.53       15.57       15.45       14.82    
Income (loss) from investment operations:  
Net investment income   $ 0.96       0.92       0.70       0.47 **     0.53    
Net realized and unrealized gain (loss) on investments   $ (2.34 )     0.02       (0.04 )     0.18 **     0.69    
Total income (loss) from investment operations   $ (1.38 )     0.94       0.66       0.65       1.22    
Less distributions from:  
Net investment income   $ 0.94       0.94       0.70       0.48       0.57    
Net realized gains on investments   $ 0.03       —       —       0.05       0.02    
Return of capital   $ 0.01       —       —       —       —    
Total distributions   $ 0.98       0.94       0.70       0.53       0.59    
Net asset value, end of year   $ 13.17       15.53       15.53       15.57       15.45    
Total Investment Return(1)    % (9.43 )     6.26       4.37       4.28       8.33    
Ratios/Supplemental Data:  
Net assets, end of year (000's)   $ 75,885       111,749       120,254       125,200       62,852    
Average borrowings (000's)(2)    $ 426,164       404,137       325,044       34,767       20,771    
Asset coverage per $1,000 of debt   $ 3,484       10,171       6,519       1,251       — *  
Ratios to average net assets after reimbursement/recoupment:  
Expenses (before interest and other fees related to revolving credit facility)(3)    % 2.04       2.00       1.99       1.87       1.87    
Expenses (with interest and other fees related to revolving credit facility)(3)    % 3.35       3.06       2.69       1.94       1.97    
Net investment income(3)    % 6.36       5.91       4.45       2.93       3.47    
Ratios to average net assets before reimbursement/recoupment:  
Expenses (before interest and other fees related to revolving credit facility)(3)    % 2.29       2.23       1.97       2.13       2.22    
Expenses (with interest and other fees related to revolving credit facility)(3)    % 3.60       3.29       2.67       2.19       2.31    
Net investment income(3)    % 6.11       5.68       4.47       2.67       3.13    
Portfolio turnover rate   % 56       57       82       82       72    
Shares outstanding at end of year (000's)     5,760       7,195       7,742       8,043       4,068    

 

(1)  Total investment returns do not include sales load.

(2)  Based on the active days of borrowing.

(3)  The Investment Adviser 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 Adviser within three years 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

*  There were no loans outstanding at period end.

**  Calculated using average number of shares outstanding throughout the period.

See Accompanying Notes to Financial Statements
14


ING SENIOR INCOME FUND (CONTINUED)  FINANCIAL HIGHLIGHTS

Selected data for a share of beneficial interest outstanding for each year.

    Class C  
    Year Ended February 28 or 29,  
    2008   2007   2006   2005   2004  
Per Share Operating Performance:  
Net asset value, beginning of year   $ 15.55       15.55       15.58       15.46       14.82    
Income (loss) from investment operations:  
Net investment income   $ 0.96       0.93       0.70       0.47       0.53    
Net realized and unrealized gain (loss) on investments   $ (2.34 )     0.01       (0.03 )     0.18       0.70    
Total income (loss) from investment operations   $ (1.38 )     0.94       0.67       0.65       1.23    
Less distributions from:  
Net investment income   $ 0.88       0.94       0.70       0.48       0.57    
Net realized gains on investments   $ 0.03       —       —       0.05       0.02    
Return of capital   $ 0.07       —       —       —       —    
Total distributions   $ 0.98       0.94       0.70       0.53       0.59    
Net asset value, end of year   $ 13.19       15.55       15.55       15.58       15.46    
Total Investment Return(1)    % (9.42 )     6.25       4.44       4.28       8.40    
Ratios/Supplemental Data:  
Net assets, end of year (000's)   $ 625,516       927,950       923,549       830,584       275,849    
Average borrowings (000's)(2)    $ 426,164       404,137       325,044       34,767       20,771    
Asset coverage per $1,000 of debt   $ 3,484       10,171       6,519       1,251       — *  
Ratios to average net assets after reimbursement/recoupment:  
Expenses (before interest and other fees related to revolving credit facility)(3)    % 2.04       2.00       1.99       1.83       1.86    
Expenses (with interest and other fees related to revolving credit facility)(3)    % 3.35       3.06       2.69       1.94       1.94    
Net investment income(3)    % 6.35       5.92       4.46       2.88       3.38    
Ratios to average net assets before reimbursement/recoupment:  
Expenses (before interest and other fees related to revolving credit facility)(3)    % 2.04       1.98       1.97       1.83       1.96    
Expenses (with interest and other fees related to revolving credit facility)(3)    % 3.35       3.04       2.67       1.95       2.04    
Net investment income(3)    % 6.35       5.93       4.48       2.87       3.28    
Portfolio turnover rate   % 56       57       82       82       72    
Shares outstanding at end of year (000's)     47,406       59,679       59,402       53,316       17,841    
    Class Q  
    Year Ended February 28 or 29,  
    2008   2007   2006   2005   2004  
Per Share Operating Performance:  
Net asset value, beginning of year   $ 15.49       15.49       15.52       15.41       14.79    
Income (loss) from investment operations:  
Net investment income   $ 1.05       0.99       0.78       0.52       0.63    
Net realized and unrealized gain (loss) on investments   $ (2.36 )     0.03       (0.03 )     0.20       0.65    
Total income (loss) from investment operations   $ (1.31 )     1.02       0.75       0.72       1.28    
Less distributions from:  
Net investment income   $ 1.01       1.02       0.78       0.56       0.64    
Net realized gains on investments   $ 0.03       —       —       0.05       0.02    
Return of capital   $ 0.01       —       —       —       —    
Total distributions   $ 1.05       1.02       0.78       0.61       0.66    
Net asset value, end of year   $ 13.13       15.49       15.49       15.52       15.41    
Total Investment Return(1)    % (8.99 )     6.81       4.97       4.75       8.82    
Ratios/Supplemental Data:  
Net assets, end of year (000's)   $ 54,678       135,675       184,586       183,017       157,051    
Average borrowings (000's)(2)    $ 426,164       404,137       325,044       34,767       20,771    
Asset coverage per $1,000 of debt   $ 3,484       10,171       6,519       1,251       — *  
Ratios to average net assets after reimbursement/recoupment:  
Expenses (before interest and other fees related to revolving credit facility)(3)    % 1.53       1.50       1.49       1.34       1.40    
Expenses (with interest and other fees related to revolving credit facility)(3)    % 2.71       2.56       2.19       1.45       1.54    
Net investment income(3)    % 6.81       6.39       4.96       3.39       4.17    
Ratios to average net assets before reimbursement/recoupment:  
Expenses (before interest and other fees related to revolving credit facility)(3)    % 1.53       1.48       1.47       1.34       1.48    
Expenses (with interest and other fees related to revolving credit facility)(3)    % 2.71       2.54       2.17       1.45       1.62    
Net investment income(3)    % 6.81       6.41       4.98       3.38       4.09    
Portfolio turnover rate   % 56       57       82       82       72    
Shares outstanding at end of year (000's)     4,163       8,761       11,918       11,789       10,188    

 

(1)  Total investment returns do not include sales load.

(2)  Based on the active days of borrowing.

(3)  The Investment Adviser 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 Adviser within three years 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

*  There were no loans outstanding at period end.

See Accompanying Notes to Financial Statements
15



ING Senior Income Fund

NOTES TO FINANCIAL STATEMENTS as of February 29, 2008

NOTE 1 — ORGANIZATION

ING Senior Income Fund (the "Fund"), a Delaware statutory 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 net assets plus the amount of any borrowings, for investment purposes, in U.S. dollar denominated, floating rate secured senior loans, which generally are not registered under the Securities Act of 1933 as amended (the "'33 Act"), and 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 Adviser") 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 has four classes of shares: A, B, C and Q. Class A shares are subject to a sales charge of up to 2.50%. Class A shares purchased in excess of $1,000,000 are not subject to a sales charge but are subject to an Early Withdrawal Charge ("EWC") of 1% within one year of purchase. Class A shares are issued upon conversion of Class B shares eight years after purchase or through an exchange of Class A shares of certain ING Funds. Class B shares are subject to an EWC of up to 3% over the five-year period after purchase and Class C 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 cannot be changed without shareholder approval. 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 their distribution fees and shareholder servicing fees. All shareholders bear the common expenses of the Fund and earn income and realized gains/losses from the portfolio pro rata on the average daily net assets of each class, without distinction between share classes. Differences in the per share dividend rates generally result from differences in separate class expenses, including distribution fees and shareholder servicing fees.

Class B common shares of the Fund became closed to new investment, provided that: (1) Class B common shares of the Fund may be purchased through the reinvestment of dividends issued by the Fund; and (2) subject to the terms and conditions of relevant exchange privileges and as permitted under their respective prospectuses, Class B common shares of the Fund may be acquired through exchange of Class B shares of other funds in the ING mutual funds complex for the Fund's Class B common shares.

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 U.S. generally accepted accounting principles.

A.  Senior Loan and Other Security Valuation. Senior loans held by the Fund are normally valued at the average 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.


16


ING Senior Income Fund

NOTES TO FINANCIAL STATEMENTS as of February 29, 2008 (continued)

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)

It is expected that most of the loans held by the Fund will be valued with reference to quotations from the independent pricing service or with reference to the proxy procedure described above. As of February 29, 2008, 98.96% of total loans were valued based on these procedures.

Prices from a pricing service may not be available for all loans and the Investment Adviser 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 Adviser that the Investment Adviser 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 Adviser and monitored by the Fund's Board of Trustees through its Valuation, Proxy and Brokerage Committee (formerly, Valuation and Proxy 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. To the extent the Fund invests in other registered companies, the Fund's NAV is calculated based on the current NAV of the registered investment company in which the Fund invests. The prospectuses for those investment companies explain the circumstances under which they will use fair value pricing and the effects of using fair value pricing.

B.  Distributions to Shareholders. The Fund declares and goes ex-dividend daily and pays dividends monthly from 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 U.S. generally accepted accounting principles for investment companies. 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 partially or fully discontinued when, in the opinion of management, there is an indication that the borrower may be unable to meet payments as they become due. If determined to be uncollectible, unpaid accrued interest is also written off. Cash collections on non-accrual senior 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


17


ING Senior Income Fund

NOTES TO FINANCIAL STATEMENTS as of February 29, 2008 (continued)

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)

amortization and discount accretion are deferred and recognized 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. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

F.  Forward Foreign Currency Contracts. The Fund may enter into forward foreign currency contracts primarily to hedge against foreign currency exchange rate risks on its non-U.S. dollar denominated investment securities. When entering into a currency forward contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. These contracts are valued daily and the Fund's net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statement of Assets and Liabilities. Realized and unrealized gains and losses are included in the Statement of Operations. These instruments involve market and/or credit risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movement in currency and securities values and interest rates. Open forward foreign currency contracts are presented following the respective Portfolio of Investments.

NOTE 3 — INVESTMENTS

For the year ended February 29, 2008, the cost of purchases and the proceeds from principal repayment and sales of investments, excluding short-term investments, totaled $1,288,764,544 and $1,650,424,212, respectively. At February 29, 2008, the Fund held senior loans valued at $1,770,872,313 representing 99.8% of its total investments. The market value of these assets is established as set forth in Note 2.

The senior loans acquired by the Fund typically take the form of a direct lending relationship with the borrower acquired through an assignment of another 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 1933 Act. In some cases, these restrictions expire after a designated period of time after the issuance of the shares or warrants.


18


ING Senior Income Fund

NOTES TO FINANCIAL STATEMENTS as of February 29, 2008 (continued)

NOTE 3 — INVESTMENTS (continued)

Dates of acquisition and cost or assigned basis of restricted securities are as follows:

    Date of
Acquisition		   Cost or
Assigned Basis		  
Decision One Corporation (463,664 Common Shares)   06/03/05   $ 295,535    
Neoplan USA Corporation (1,627 Common Shares)   08/31/04     —    
Neoplan USA Corporation (170 Series B Preferred Shares)   08/29/03     —    
Neoplan USA Corporation (102 Series C Preferred Shares)   08/29/03     40,207    
Neoplan USA Corporation (331 Series D Preferred Shares)   08/29/03     330,600    
Norwood Promotional Products, Inc. (80,087 Common Shares)   08/23/04     10,046    
Norwood Promotional Products, Inc. (Contingent Value Rights)   12/14/07     372,001    
Safelite Realty Corporation (30,003 Common Shares)   06/21/01     —    
Total restricted securities excluding senior loans (market value
of $612,025 was 0.0% of net assets at February 29, 2008).		       $ 1,048,389    

 

NOTE 4 — MANAGEMENT AND ADMINISTRATION AGREEMENTS

The Fund has entered into an investment management agreement ("Management Agreement") with the Investment Adviser to provide advisory and management services. The Management Agreement compensates the Investment Adviser 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 and unpaid dividends on any outstanding preferred shares and accrued liabilities (other than liabilities for the principal amount of any borrowings incurred, commercial paper or notes issued by the Fund and the liquidation preference of any outstanding preferred shares) ("Managed Assets"). The Fund is sub-advised by ING Investment Management Co. ("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 Adviser. Both ING IM and the Investment Adviser are indirect, wholly-owned subsidiaries of ING Groep N.V. ("ING Groep") 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 compensated 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/or Service Fee based on average daily net assets at the following annual rates:

Class A   Class B   Class C   Class Q  
  0.25 %     1.00 %     0.75 %     0.25 %  

 

During the year ended February 29, 2008, the Distributor waived 0.25% of the Service Fee on Class B shares only.


19


ING Senior Income Fund

NOTES TO FINANCIAL STATEMENTS as of February 29, 2008 (continued)

NOTE 6 — EXPENSE LIMITATIONS

The Investment Adviser 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  

 

The Investment Adviser may at a later date recoup from the Fund management fees waived and other expenses assumed by the Investment Adviser during the previous 36 months, but only if, after such recoupment, the Fund's expense ratio does not exceed the percentage described above. Waived and reimbursed fees and any recoupment by the Investment Adviser of such waived and reimbursed fees are reflected on the accompanying Statement of Operations for the Fund.

The Expense Limitation Agreement is contractual and shall renew automatically for one-year terms unless ING Investments provides written notice of the termination of the Expense Limitation Agreement within 90 days of the end of the then current term.

As of February 29, 2008, the Fund did not have any amount of waived or reimbursed fees that would be subject to possible recoupment by the Investment Adviser.

NOTE 7 — COMMITMENTS

The Fund has entered into a revolving credit agreement, collateralized by assets of the Fund, to borrow up to $765 million maturing June 12, 2008. 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 $544 million of borrowings outstanding at February 29, 2008 at a rate of 5.61%, excluding other fees related to the entire facility. Average borrowings for the year ended February 29, 2008 were $426,163,934 and the average annualized interest rate was 5.81%, excluding other fees related to the entire facility.

NOTE 8 — SENIOR LOAN COMMITMENTS

As of February 29, 2008, the Fund had unfunded loan commitments pursuant to the terms of the following loan agreements:

Advance Food Co.   $ 175,316    
Calpine Corp.     2,295,000    
Cannery Casino Resorts     755,906    
Cellular South, Inc.     750,000    
Cengage Learning, Inc.     3,333,333    
Centaur Gaming     350,877    
Coach America Holdings, Inc.     493,837    
Coleto Creek Power     4,625,000    
Community Health Systems, Inc.     2,454,953    
Fleetcor Technologies
Operating Co., LLC		     133,333    
Fontainebleau Resorts, LLC     1,333,333    
Golden Nugget, Inc.   $ 636,364    
Hub International Holdings, Inc.     101,307    
Iasis Healthcare Corporation     325,517    
Kerasotes Theatres, Inc.     996,930    
Las Vegas Sands, LLC     1,600,000    
Longview Power, LLC     120,000    
Lucite International U.S. Finco Ltd.     362,119    
MEG Energy Corp.     2,820,000    
Sturm Foods, Inc.     500,000    
United Surgical Partners
International, Inc.		     147,177    
Univision Communications, Inc.     1,217,387    
Valassis Communications, Inc.     320,000    
    $ 25,847,689    

 

The unrealized depreciation on these commitments of $2,403,268 as of February 29, 2008 is reported as such on the Statement of Assets and Liabilities.


20


ING Senior Income Fund

NOTES TO FINANCIAL STATEMENTS as of February 29, 2008 (continued)

NOTE 9 — TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

At February 29, 2008, 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
Management Fees		   Accrued
Administrative Fees		   Accrued Distribution
and Service Fees		   Total  
$ 1,247,606     $ 155,951     $ 550,187     $ 1,953,744    

 

The Fund has adopted a Retirement Policy ("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 Policy are based on an annual rate as defined in the Policy 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 earnings credits for the year ended February 29, 2008.

NOTE 11 — SUBORDINATED LOANS AND UNSECURED LOANS

The primary risk arising from investing in subordinated loans or in unsecured loans is the potential loss in the event of default by the issuer of the loans. The Fund may invest up to 10% of its total assets, measured at the time of investment, in subordinated loans and up to 10% of its total assets, measured at the time of investment, in unsecured loans. As of February 29, 2008, the Fund held 0.2% of its total assets in subordinated loans and unsecured loans.

NOTE 12 — CAPITAL SHARES

Transactions in capital shares and dollars were as follows:

    Class A   Class B  
    Year Ended
February 29,
2008		   Year Ended
February 28,
2007		   Year Ended
February 29,
2008		   Year Ended
February 28,
2007		  
Number of Shares  
Shares sold     20,937,530       32,168,921       258,732       887,201    
Reinvestment of distributions     2,680,330       2,946,341       293,088       312,109    
Shares redeemed     (42,700,361 )     (30,022,776 )     (1,987,376 )     (1,746,090 )  
Net increase (decrease) in shares outstanding     (19,082,501 )     5,092,486       (1,435,556 )     (546,780 )  
Dollar Amount ($)  
Shares sold   $ 315,825,843     $ 498,004,945     $ 3,936,833     $ 13,712,848    
Reinvestment of distributions     40,028,039       44,687,774       4,350,436       4,755,391    
Shares repurchased     (632,655,516 )     (464,618,771 )     (29,552,375 )     (26,983,867 )  
Net increase (decrease)   $ (276,801,634 )   $ 78,073,948     $ (21,265,106 )   $ (8,515,628 )  
    Class C   Class Q  
    Year Ended
February 29,
2008		   Year Ended
February 28,
2007		   Year Ended
February 29,
2008		   Year Ended
February 28,
2007		  
Number of Shares  
Shares sold     10,033,170       19,971,910       1,715,120       6,177,228    
Reinvestment of distributions     2,577,751       2,633,036       167,147       145,573    
Shares redeemed     (24,884,246 )     (22,327,696 )     (6,480,360 )     (9,479,659 )  
Net increase (decrease) in shares outstanding     (12,273,325 )     277,250       (4,598,093 )     (3,156,858 )  
Dollar Amount ($)  
Shares sold   $ 153,006,108     $ 308,955,952     $ 25,975,214     $ 95,128,042    
Reinvestment of distributions     38,331,993       39,969,119       2,490,165       2,242,825    
Shares repurchased     (369,552,688 )     (345,190,055 )     (95,901,006 )     (146,017,756 )  
Net increase (decrease)   $ (178,214,587 )   $ 3,735,016     $ (67,435,627 )   $ (48,646,889 )  

 


21


ING Senior Income Fund

NOTES TO FINANCIAL STATEMENTS as of February 29, 2008 (continued)

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 U.S. generally accepted accounting principles for investment companies. These book/tax differences may be either temporary or permanent. Permanent differences are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences are not reclassified. Key differences include the treatment of short-term capital gains, foreign currency transactions, and wash sale deferrals. Distributions in excess of net investment income and/or net realized capital gains for tax purposes are reported as distributions of paid-in capital.

The following permanent tax differences have been reclassified as of February 29, 2008:

Undistributed
Net Investment
Income		   Accumulated
Net Realized
Gains/(Losses)		  
$ (14,888,345 )   $ 14,888,345    

 

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:

Year Ended February 29, 2008   Year Ended February 28, 2007  
Ordinary Income   Long-term Capital Gains   Return of Capital   Ordinary Income  
$ 106,464,636     $ 2,675,772     $ 20,448,981     $ 138,474,557    

 

The tax-basis components of distributable earnings for federal income tax purposes as of February 29, 2008 were:

Unrealized
Appreciation/
(Depreciation)		   Post-October
Currency
Losses
Deferred		   Post-October
Capital
Losses
Deferred		  
$ (212,293,520 )   $ (242,599 )   $ (19,828,966 )  

 

The Fund's major tax jurisdictions are federal and Arizona. The earliest tax year that remains subject to examination by these jurisdictions is 2003.

NOTE 14 — OTHER ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes." This standard defines the threshold for recognizing the benefits of tax-return positions in the financial statements as "more-likely-than-not" to be sustained upon challenge by the taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50 percent likely to be realized. FIN 48 was effective for fiscal years beginning after December 15, 2006, with early application permitted if no interim financial statements have been issued. Acknowledging the unique issues that FIN 48 presents for investment companies that calculate NAVs, the SEC indicated that they would not object if a fund implemented FIN 48 in its NAV calculation as late as its last NAV calculation in the first required financial statement reporting period for its fiscal year beginning after December 15, 2006. At adoption, companies must adjust their financial statements to reflect only those tax positions that are more likely-than-not to be sustained as of the adoption date. Management of the Fund has analyzed the tax positions of the Fund. Upon adoption of FIN 48, we identified no uncertain tax positions that have not met the more likely-than-not standard.

On September 15, 2006, the FASB issued Statement of Financial Accounting Standards No. 157 ("SFAS No. 157"), "Fair Value Measurements." The new accounting statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP"), and expands disclosures about fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). SFAS No. 157 also stipulates that, as a market-based measurement, fair value should be determined based on the


22


ING Senior Income Fund

NOTES TO FINANCIAL STATEMENTS as of February 29, 2008 (continued)

NOTE 14 — OTHER ACCOUNTING PRONOUNCEMENTS (continued)

assumptions that market participants would use in pricing the asset or liability, and establishes a fair value hierarchy that distinguishes between (a) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. As of February 29, 2008, management of the Fund is currently assessing the potential impact, in addition to expanded financial statement disclosure, that may result from adopting SFAS No. 157.

On March 19, 2008, the FASB issued Statement of Financial Accounting Standards No. 161 ("SFAS No. 161"), "Disclosure about Derivative Instruments and Hedging Activities." This new accounting statement requires enhanced disclosures about an entity's derivative and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity invests in derivatives, (b) how derivatives are accounted for under Statement 133, and (c) how derivatives affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 also requires enhanced disclosures regarding credit-risk-related contingent features of derivative instruments.

SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As of February 29, 2008, management of the Fund is currently assessing the impact of the expanded financial statement disclosures that will result from adopting SFAS No. 161.

NOTE 15 — INFORMATION REGARDING TRADING OF ING'S US MUTUAL FUNDS

As discussed in earlier supplements filed with the SEC, ING Investments, LLC ("Investments"), the adviser to the ING Funds, has reported to the Boards of Directors/Trustees (the "Boards") of the ING Funds that, like many U.S. financial services companies, Investments and certain of its U.S. affiliates have received informal and formal requests for information since September 2003 from various governmental and self-regulatory agencies in connection with investigations related to mutual funds and variable insurance products. Investments has advised the Boards that it and its affiliates have cooperated fully with each request.

In addition to responding to regulatory and governmental requests, Investments reported that management of U.S. affiliates of ING Groep N.V., including Investments (collectively, "ING"), on their own initiative, have conducted, through independent special counsel and a national accounting firm, an extensive internal review of trading in ING insurance, retirement, and mutual fund products. The goal of this review was to identify any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel. ING's internal review related to mutual fund trading is now substantially completed. ING has reported that, of the millions of customer relationships that ING maintains, the internal review identified several isolated arrangements allowing third parties to engage in frequent trading of mutual funds within ING's variable insurance and mutual fund products, and identified other circumstances where frequent trading occurred, despite measures taken by ING intended to combat market timing. ING further reported that each of these arrangements has been terminated and fully disclosed to regulators. The results of the internal review were also reported to the independent members of the Boards.

Investments has advised the Boards that most of the identified arrangements were initiated prior to ING's acquisition of the businesses in question in the U.S. Investments further reported that the companies in question did not receive special benefits in return for any of these arrangements, which have all been terminated.

Based on the internal review, Investments has advised the Boards that the identified arrangements do not represent a systemic problem in any of the companies that were involved.

Despite the extensive internal review conducted through independent special counsel and a national accounting firm, there can be no assurance that the instances of inappropriate trading reported to the Boards are the only instances of such trading respecting the ING Funds.


23


ING Senior Income Fund

NOTES TO FINANCIAL STATEMENTS as of February 29, 2008 (continued)

NOTE 15 — INFORMATION REGARDING TRADING OF ING'S U.S. MUTUAL FUNDS (continued)

Investments reported to the Boards that ING is committed to conducting its business with the highest standards of ethical conduct with zero tolerance for noncompliance. Accordingly, Investments advised the Boards that ING management was disappointed that its voluntary internal review identified these situations. Viewed in the context of the breadth and magnitude of its U.S. business as a whole, ING management does not believe that ING's acquired companies had systemic ethical or compliance issues in these areas. Nonetheless, Investments reported that given ING's refusal to tolerate any lapses, it has taken the steps noted below, and will continue to seek opportunities to further strengthen the internal controls of its affiliates.

•  ING has agreed with the ING Funds to indemnify and hold harmless the ING Funds from all damages resulting from wrongful conduct by ING or its employees or from ING's internal investigation, any investigations conducted by any governmental or self-regulatory agencies, litigation or other formal proceedings, including any proceedings by the SEC. Investments reported to the Boards that ING management believes that the total amount of any indemnification obligations will not be material to ING or its U.S. business.

•  ING updated its Code of Conduct for employees reinforcing its employees' obligation to conduct personal trading activity consistent with the law, disclosed limits, and other requirements.

Other Regulatory Matters

The New York Attorney General (the "NYAG") and other federal and state regulators are also conducting broad inquiries and investigations involving the insurance industry. These initiatives currently focus on, among other things, compensation and other sales incentives; potential conflicts of interest; potential anti-competitive activity; reinsurance; marketing practices (including suitability); specific product types (including group annuities and indexed annuities); fund selection for investment products and brokerage sales; and disclosure. It is likely that the scope of these industry investigations will further broaden before they conclude. ING has received formal and informal requests in connection with such investigations, and is cooperating fully with each request.

Other federal and state regulators could initiate similar actions in this or other areas of ING's businesses. These regulatory initiatives may result in new legislation and regulation that could significantly affect the financial services industry, including businesses in which ING is engaged. In light of these and other developments, ING continuously reviews whether modifications to its business practices are appropriate. At this time, in light of the current regulatory factors, ING U.S. is actively engaged in reviewing whether any modifications in our practices are appropriate for the future.

There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares, or other adverse consequences to ING Funds.

NOTE 16 — SUBSEQUENT EVENTS

Effective April 16, 2008, the Fund launched Class I and Class W.

DIVIDENDS DECLARED

Subsequent to February 29, 2008, the Fund declared the following dividends:

Per Share Amount   Type   Declaration Date   Record Date   Payable Date  
$ 0.07967 (A)   NII   Daily   Daily   April 1, 2008  
$ 0.07376 (B)   NII   Daily   Daily   April 1, 2008  

 

NII — Net Investment Income

(A) — For Class A and Q shares.

(B) — For Class B and C shares.


24


ING Senior Income Fund

ADDITIONAL INFORMATION (Unaudited)

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 (800) SEC-0330; and is available upon request from the Registrant by calling Shareholder Services toll-free at (800) 992-0180.


25



ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008

Senior Loans: 131.1%           Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Aerospace & Defense: 2.0%      
        Avio Group   NR   NR        
EUR 708,333       Term Loan, 6.425%,
maturing December 13, 2014		       $ 932,172    
$ 556,314       Term Loan, 6.510%,
maturing December 13, 2014		         478,430    
EUR 708,333       Term Loan, 7.050%,
maturing December 13, 2015		         936,880    
$ 590,346       Term Loan, 7.468%,
maturing December 13, 2015		         510,649    
        Delta Air Lines, Inc.   Ba2   BB-        
  2,835,000       Term Loan, 6.832%,
maturing April 30, 2012		         2,435,738    
  2,985,000       Term Loan, 8.082%,
maturing April 30, 2012		         2,537,250    
        Dyncorp International, LLC   Ba2   BB        
  2,163,626       Term Loan, 6.875%,
maturing February 11, 2011		         2,001,354    
        Hawker Beechcraft Acquisition Company, LLC   Ba3   BB        
  6,753,308       Term Loan, 6.830%,
maturing March 26, 2014		         6,270,027    
  735,650       Term Loan, 6.930%,
maturing March 26, 2014		         683,005    
        Hexcel Corporation   Ba1   BB+        
  582,999       Term Loan, 5.862%,
maturing March 01, 2012		         565,510    
        McKechnie Aerospace DE, Inc.   Ba3   B+        
  1,243,750       Term Loan, 6.772%,
maturing May 11, 2014		         1,094,500    
        United Airlines, Inc.   B1   BB-        
  2,852,468       Term Loan, 6.529%,
maturing February 01, 2014		         2,413,901    
        US Airways Group, Inc.   B2   B+        
  8,000,000       Term Loan, 5.625%,
maturing March 24, 2014		         6,327,504    
      27,186,920    
Automobile: 1.7%      
            Dollar Thrifty Automotive Group, Inc.   B1   BB        
  995,000       Term Loan, 5.122%,
maturing June 15, 2014		         858,188    
            Ford Motor Company   Ba3   B+        
  2,216,307       Term Loan, 8.000%,
maturing December 15, 2013		         1,904,177    
            KAR Holdings, Inc.   Ba3   B+        
  4,975,000       Term Loan, 7.080%,
maturing October 20, 2013		         4,470,037    
        Navistar International Corporation   BB-   NR        
  1,200,000       Term Loan, 7.276%,
maturing January 19, 2012		         1,080,000    

 

See Accompanying Notes to Financial Statements
26


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Automobile: (continued)      
        Oshkosh Truck Corporation   Ba3   BBB-        
$ 15,737,500       Term Loan, 6.900%,
maturing December 06, 2013		       $ 14,735,871    
      23,048,273    
Beverage, Food & Tobacco: 3.1%      
        Advance Food Company   B1   BB-        
  75,136       Term Loan, 2.364%,
maturing March 16, 2014		         63,114    
  870,008       Term Loan, 6.580%,
maturing March 16, 2014		         730,807    
        ARAMARK Corporation   Ba3   BB        
  14,245,668       Term Loan, 6.705%,
maturing January 26, 2014		         13,094,429    
  3,960,000       Term Loan, 6.705%,
maturing January 26, 2014		         3,676,274    
  1,751,637       Term Loan, 7.198%,
maturing January 26, 2014		         1,626,135    
        Birds Eye Foods, Inc.   B1   B+        
  859,167       Term Loan, 6.580%,
maturing March 22, 2013		         762,510    
        Bumble Bee Foods, LLC   B1   B+        
  1,800,000       Term Loan, 5.521%,
maturing May 02, 2012		         1,674,000    
        Golden State Foods   B1   B+        
  4,331,250       Term Loan, 4.994%,
maturing February 28, 2011		         4,233,797    
        Iglo Birds Eye   NR   NR        
EUR 51,247       Term Loan, 7.018%,
maturing October 25, 2014		         70,569    
EUR 380,330       Term Loan, 7.018%,
maturing October 27, 2014		         523,732    
EUR 568,424       Term Loan, 7.018%,
maturing October 27, 2014		         782,747    
EUR 51,247       Term Loan, 7.393%,
maturing October 25, 2015		         70,930    
EUR 568,424       Term Loan, 7.393%,
maturing October 27, 2015		         786,755    
EUR 380,330       Term Loan, 7.393%,
maturing October 27, 2015		         523,732    
        Pinnacle Foods Holding Corporation   B2   B        
$ 7,661,500       Term Loan, 7.483%,
maturing April 02, 2014		         6,773,249    
        Sturm Foods, Inc.   B1   B        
  2,977,500       Term Loan, 5.813%,
maturing January 31, 2014		         2,243,049    
        United Biscuits   NR   NR        
EUR 775,940       Term Loan, 6.829%,
maturing December 14, 2014		         1,030,278    
GBP 1,000,000       Term Loan, 7.962%,
maturing December 14, 2014		         1,737,685    

 

See Accompanying Notes to Financial Statements
27


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
        Van Houtte, Inc.   B1   BB-        
$ 1,094,500       Term Loan, 7.330%,
maturing July 19, 2014		       $ 1,017,885    
  149,250       Term Loan, 7.330%,
maturing July 19, 2014		         138,803    
      41,560,480    
Buildings & Real Estate: 1.4%      
        Contech Construction Products, Inc.   Ba3   BB        
  2,696,528       Term Loan, 5.191%,
maturing January 31, 2013		         2,359,462    
        Custom Building Products, Inc.   B1   BB-        
  4,288,276       Term Loan, 6.977%,
maturing October 29, 2011		         3,816,566    
        Headwaters, Inc.   Ba2   BB+        
  2,838,285       Term Loan, 6.808%,
maturing April 30, 2011		         2,710,562    
        John Maneely Company   B3   B+        
  4,478,799       Term Loan, 7.461%,
maturing December 08, 2013		         3,907,752    
        KCPC Acquisition, Inc.   Ba2   B        
  562,196       Term Loan, 5.318%,
maturing May 22, 2014		         500,354    
  189,655       Term Loan, 7.000%,
maturing May 22, 2014		         168,793    
        LaFarge Roofing   NR   NR        
EUR 441,573       Term Loan, 6.890%,
maturing June 14, 2015		         475,736    
EUR 180,337       Term Loan, 6.890%,
maturing June 14, 2015		         194,289    
$ 169,425       Term Loan, 6.955%,
maturing June 14, 2015		         120,150    
EUR 409,551       Term Loan, 7.140%,
maturing March 14, 2016		         453,680    
EUR 210,674       Term Loan, 7.140%,
maturing March 14, 2016		         233,374    
$ 171,654       Term Loan, 7.205%,
maturing March 14, 2016		         125,164    
        Nortek, Inc.   Ba2   B+        
  2,209,745       Term Loan, 5.350%,
maturing August 27, 2011		         1,916,954    
        Shea Capital I, LLC   Ba3   BB-        
  553,535       Term Loan, 6.828%,
maturing October 27, 2011		         426,222    
        Tishman Speyer   Ba2   BB-        
  2,000,000       Term Loan, 4.920%,
maturing December 27, 2012		         1,700,000    
      19,109,058    

 

See Accompanying Notes to Financial Statements
28


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Cargo Transport: 1.3%      
        Baker Tanks, Inc.   B1   B        
$ 3,473,750       Term Loan, 5.333%,
maturing May 08, 2014		       $ 3,213,219    
        Dockwise Transport, N.V.   NR   NR        
  1,368,524       Term Loan, 7.205%,
maturing January 11, 2015		         1,190,616    
  1,000,000       Term Loan, 7.205%,
maturing January 11, 2015		         870,000    
  1,368,524       Term Loan, 7.705%,
maturing January 11, 2016		         1,195,177    
  1,000,000       Term Loan, 7.705%,
maturing January 11, 2016		         873,333    
  750,000       Term Loan, 9.330%,
maturing July 11, 2016		         690,000    
  700,000       Term Loan, 9.330%,
maturing October 20, 2016		         644,000    
        Gainey Corporation   Caa1   B-        
  1,133,291       Term Loan, 10.000%,
maturing April 20, 2012		         747,972    
        Greatwide Logistics Services, Inc.   B3   B        
  3,217,500       Term Loan, 8.330%,
maturing December 19, 2013		         2,557,913    
        Inmar, Inc.   B1   B        
  719,563       Term Loan, 7.330%,
maturing April 29, 2013		         626,019    
        Kenan Advantage Group, Inc.   B3   B+        
  980,010       Term Loan, 7.580%,
maturing December 16, 2011		         891,809    
        (2 )   Neoplan USA Corporation   NR   NR        
  89,417       (3 )   Term Loan, 11.008%,
maturing June 30, 2006		         8,293    
        TNT Logistics   Ba2   BB-        
  1,907,611       Term Loan, 6.122%,
maturing November 04, 2013		         1,721,619    
  723,070       Term Loan, 7.830%,
maturing November 04, 2013		         667,032    
        US Shipping Partners, L.P.   B3   B        
  2,802,377       Term Loan, 8.330%,
maturing March 31, 2012		         2,276,931    
      18,173,933    
Cellular: 1.3%      
        Alltel Communications, Inc.   Ba3   BB-        
  1,000,000       Term Loan, 4.991%
maturing May 16, 2015		         909,716    
        Centennial Communications Corporation   Ba2   BB-        
  9,581,024       Term Loan, 6.705%,
maturing February 09, 2011		         9,159,459    

 

See Accompanying Notes to Financial Statements
29


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Cellular: (continued)      
        Cricket Communications, Inc.   Ba2   B+        
$ 1,910,000       Term Loan, 7.830%,
maturing June 16, 2013		       $ 1,829,356    
        NTELOS, Inc.   Ba3   BB-        
  3,317,133       Term Loan, 5.271%,
maturing August 24, 2011		         3,163,715    
        Telepak, Inc. / Cellular South   Ba3   B+        
  2,233,250       Term Loan, 4.665%,
maturing May 29, 2014		         2,076,923    
      17,139,169    
Chemicals, Plastics & Rubber: 6.5%      
        AZ Chem US, Inc.   B1   BB-        
EUR 753,893       Term Loan, 6.996%,
maturing February 28, 2013		         937,726    
        AZ Chem US, Inc.   Caa1   CCC+        
$ 333,333       Term Loan, 8.590%,
maturing February 28, 2014		         200,000    
        Borsodchem Nyrt.   NR   NR        
EUR 804,394       Term Loan, 6.593%,
maturing March 26, 2015		         1,066,227    
EUR 804,394       Term Loan, 7.075%,
maturing March 26, 2016		         1,072,337    
        Brenntag Holding GmbH & Co. KG   B1   B+        
$ 1,767,273       Term Loan, 5.794%,
maturing January 17, 2014		         1,538,632    
  5,432,727       Term Loan, 5.794%,
maturing January 17, 2014		         4,729,868    
EUR 500,000       Term Loan, 6.517%,
maturing January 17, 2014		         666,549    
GBP 1,000,000       Term Loan, 7.983%,
maturing September 21, 2014		         1,744,644    
        Celanese   Ba3   BB+        
$ 5,900,000       Term Loan, 3.144%,
maturing April 02, 2014		         5,532,070    
  9,001,750       Term Loan, 6.479%,
maturing April 02, 2014		         8,440,392    
        Cristal Inorganic Chemicals, Inc.   Ba3   BB-        
  3,700,000       Term Loan, 7.080%,
maturing May 15, 2014		         2,960,000    
        Cristal Inorganic Chemicals, Inc.   B3   CCC+        
  1,150,000       Term Loan, 10.580%,
maturing November 15, 2014		         787,750    
        Flint Group   NR   NR        
  936,821       Term Loan, 7.393%,
maturing December 31, 2012		         815,034    
  353,279       Term Loan, 7.393%,
maturing December 31, 2014		         307,353    
EUR 666,667       Term Loan, 7.002%,
maturing May 29, 2015		         886,200    

 

See Accompanying Notes to Financial Statements
30


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Chemicals, Plastics & Rubber: (continued)      
$ 2,333,333       Term Loan, 7.393%,
maturing May 29, 2015		       $ 2,030,000    
  1,290,100       Term Loan, 7.393%,
maturing December 31, 2015		         1,128,838    
        Hawkeye Renewables, LLC   B3   NR        
  3,693,750       Term Loan, 7.234%,
maturing June 30, 2012		         2,677,969    
        Hexion Specialty Chemicals, Inc.   Ba3   B+        
  987,500       Term Loan, 5.375%,
maturing May 05, 2013		         909,597    
  9,593,988       Term Loan, 7.000%,
maturing May 05, 2013		         8,837,127    
  2,083,221       Term Loan, 7.125%,
maturing May 05, 2013		         1,918,878    
  1,764,000       Term Loan, 7.474%,
maturing May 05, 2013		         1,624,840    
        Ineos US Finance, LLC   Ba3   BB-        
  3,225,922       Term Loan, 7.357%,
maturing December 16, 2012		         2,753,125    
  4,281,711       Term Loan, 7.357%,
maturing December 16, 2013		         3,807,512    
EUR 141,779       Term Loan, 6.973%,
maturing December 23, 2013		         191,536    
EUR 793,922       Term Loan, 7.237%,
maturing December 23, 2013		         1,072,548    
EUR 793,323       Term Loan, 7.737%,
maturing December 23, 2013		         1,071,739    
$ 4,280,537       Term Loan, 7.857%,
maturing December 16, 2014		         3,806,468    
EUR 140,283       Term Loan, 7.737%,
maturing December 23, 2014		         189,515    
        Invista   Ba1   BBB-        
$ 655,792       Term Loan, 6.330%,
maturing April 29, 2011		         615,351    
  1,402,031       Term Loan, 6.330%,
maturing April 29, 2011		         1,315,572    
        ISP Chemco, Inc.   Ba3   BB-        
  4,975,000       Term Loan, 5.294%,
maturing June 04, 2014		         4,499,266    
        JohnsonDiversey, Inc.   Ba2   BB-        
  503,580       Term Loan, 5.112%,
maturing December 16, 2010		         472,946    
        Kraton Polymers, LLC   Ba3   B+        
  2,373,651       Term Loan, 6.750%,
maturing May 12, 2013		         2,082,879    
        Lucite International US Finco, Ltd.   Ba3   BB-        
EUR 675,845       Term Loan, 4.410%,
maturing July 07, 2013		         885,567    
$ 1,032,977       Term Loan, 5.500%,
maturing July 07, 2013		         890,943    

 

See Accompanying Notes to Financial Statements
31


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Chemicals, Plastics & Rubber: (continued)      
$ 701,155       Term Loan, 5.500%,
maturing July 07, 2013		       $ 604,746    
        MacDermid, Inc.   B1   BB-        
  2,114,396       Term Loan, 6.830%,
maturing April 12, 2014		         1,776,093    
EUR 998,451       Term Loan, 7.021%,
maturing April 12, 2014		         1,213,478    
        Northeast Biofuels, LLC   B1   B+        
$ 1,073,171       Term Loan, 8.080%,
maturing June 30, 2013		         965,854    
        Polypore, Inc.   Ba3   BB-        
  3,316,667       Term Loan, 5.370%,
maturing July 03, 2014		         2,918,667    
        Rockwood Specialties Group, Inc.   Ba2   BB+        
  5,695,692       Term Loan, 4.744%,
maturing December 13, 2013		         5,365,814    
      87,311,650    
Containers, Packaging & Glass: 3.8%      
        Berry Plastics Corporation   B1   BB-        
  11,879,031       Term Loan, 5.095%,
maturing April 03, 2015		         10,308,029    
        Graham Packaging Company   B1   B+        
  16,140,250       Term Loan, 7.253%,
maturing October 07, 2011		         14,715,873    
        Graphic Packaging International, Inc.   Ba2   BB-        
  10,110,113       Term Loan, 6.032%,
maturing May 16, 2014		         9,106,118    
        Klockner Pentaplast   NR   NR        
  2,499,375       Term Loan, 7.043%,
maturing January 03, 2016		         1,855,786    
EUR 1,529,180       Term Loan, 7.116%,
maturing January 03, 2016		         1,669,750    
EUR 720,820       Term Loan, 7.116%,
maturing January 03, 2016		         787,082    
        Mauser AG   NR   NR        
EUR 875,000       Term Loan, 6.561%,
maturing June 13, 2013		         978,697    
EUR 875,000       Term Loan, 6.811%,
maturing June 13, 2014		         985,344    
$ 1,179,779       Term Loan, 5.498%,
maturing June 13, 2015		         868,612    
  1,179,779       Term Loan, 5.748%,
maturing June 13, 2016		         874,511    
        Owens-Illinois   Ba2   BBB-        
EUR 2,154,375       Term Loan, 5.677%,
maturing June 14, 2013		         2,929,270    
        Pro Mach, Inc.   B1   B        
$ 2,456,250       Term Loan, 7.080%,
maturing December 01, 2011		         2,296,594    

 

See Accompanying Notes to Financial Statements
32


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Containers, Packaging & Glass: (continued)      
        Tegrant Holding Company   B2   BB-        
$ 496,250       Term Loan, 7.600%,
maturing March 08, 2014		       $ 357,300    
        Tegrant Holding Company   Caa2   CCC+        
  500,000       Term Loan, 10.350%,
maturing March 08, 2015		         247,500    
        Xerium Technologies, Inc.   B2   B+        
  4,566,984       Term Loan, 7.580%,
maturing May 18, 2012		         3,961,859    
      51,942,325    
Data and Internet Services: 6.3%      
        Activant Solutions, Inc.   B1   B+        
  2,327,244       Term Loan, 6.771%,
maturing May 02, 2013		         2,001,429    
        Acxiom Corporation   Ba2   BB+        
  1,741,667       Term Loan, 5.840%,
maturing September 15, 2012		         1,584,917    
        Amadeus IT Group, S.A.   NR   NR        
EUR 768,581       Term Loan, 6.959%,
maturing May 04, 2015		         998,323    
EUR 768,581       Term Loan, 7.209%,
maturing May 04, 2016		         1,004,404    
        Audatex   B1   BB-        
$ 3,105,857       Term Loan, 7.063%,
maturing May 16, 2014		         2,764,213    
        Carlson Wagonlit Holdings, B.V.   Ba2   BB-        
  2,750,000       Term Loan, 5.501%,
maturing August 03, 2012		         2,392,500    
        First Data Corporation   Ba3   BB-        
  5,483,181       Term Loan, 7.630%,
maturing September 24, 2014		         4,998,073    
  249,375       Term Loan, 7.630%,
maturing September 24, 2014		         227,498    
  2,198,337       Term Loan, 7.630%,
maturing September 30, 2014		         2,004,059    
        Orbitz   B1   BB-        
  12,967,500       Term Loan, 6.965%,
maturing July 25, 2014		         11,346,563    
        Reynolds & Reynolds Company   Ba2   BB        
  9,957,012       Term Loan, 6.843%,
maturing October 26, 2012		         8,762,171    
        Sabre, Inc.   B1   B+        
  19,117,064       Term Loan, 5.244%,
maturing September 30, 2014		         15,943,191    
        Sitel, LLC   B2   B+        
  4,380,572       Term Loan, 5.900%,
maturing January 30, 2014		         3,526,360    
        Sungard Data Systems, Inc.   Ba3   BB        
  23,669,397       Term Loan, 5.128%,
maturing February 28, 2014		         21,927,471    

 

See Accompanying Notes to Financial Statements
33


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Data and Internet Services: (continued)      
        Transaction Network Services, Inc.   B1   BB-        
$ 2,541,858       Term Loan, 7.479%,
maturing March 28, 2014		       $ 2,325,800    
        Travelport, Inc.   Ba3   BB-        
  312,277       Term Loan, 7.080%,
maturing August 23, 2013		         275,731    
  1,556,322       Term Loan, 7.080%,
maturing August 23, 2013		         1,374,184    
  995,000       Term Loan, 7.080%,
maturing May 23, 2014		         877,777    
        Verifone, Inc.   B1   BB        
  1,057,500       Term Loan, 5.250%,
maturing October 31, 2013		         983,475    
      85,318,139    
Diversified / Conglomerate Manufacturing: 2.9%      
        BOC Edwards   B1   BB        
  2,238,750       Term Loan, 5.085%,
maturing May 31, 2014		         1,499,963    
        Brand Services, Inc.   B1   B        
  2,851,721       Term Loan, 6.971%,
maturing February 07, 2014		         2,680,617    
  1,246,875       Term Loan, 8.125%,
maturing February 07, 2014		         1,172,063    
        Brand Services, Inc.   Caa1   CCC+        
  1,600,000       Term Loan, 9.238%,
maturing February 07, 2015		         1,458,000    
        Dresser, Inc.   B2   B+        
  4,910,577       Term Loan, 5.566%,
maturing May 04, 2014		         4,552,105    
        EPD, Inc.   B1   B+        
  562,500       Term Loan, 5.630%,
maturing July 31, 2014		         467,578    
  3,927,656       Term Loan, 5.750%,
maturing July 31, 2014		         3,264,864    
        Ferretti, S.P.A   NR   NR        
EUR 900,000       Term Loan, 4.715%,
maturing March 31, 2015		         1,177,912    
EUR 900,000       Term Loan, 4.715%,
maturing March 31, 2016		         1,171,076    
        Flextronics International, Ltd.   Ba1   BB+        
$ 922,433       Term Loan, 7.394%,
maturing October 01, 2014		         861,707    
  264,429       Term Loan, 7.455%,
maturing October 01, 2014		         247,021    
        Generac Power Systems, Inc.   B1   B        
  4,410,000       Term Loan, 7.203%,
maturing November 09, 2013		         3,679,201    
        Gentek Holding Corporation   Ba3   BB-        
  382,635       Term Loan, 6.330%,
maturing February 28, 2011		         353,459    

 

See Accompanying Notes to Financial Statements
34


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Diversified / Conglomerate Manufacturing: (continued)      
$ 2,134,193       Term Loan, 6.347%,
maturing February 28, 2011		       $ 1,971,461    
        Mueller Group, Inc.   Ba3   BB+        
  4,461,848       Term Loan, 5.129%,
maturing May 24, 2014		         4,082,591    
        Norcross Safety Products, LLC   Ba1   BB        
  1,713,284       Term Loan, 5.125%,
maturing June 30, 2012		         1,593,354    
        Rexnord Corporation / RBS Global, Inc.   Ba2   BB-        
  987,500       Term Loan, 7.401%,
maturing July 19, 2013		         896,156    
        Sensata Technologies   Ba3   BB        
  5,195,751       Term Loan, 5.056%,
maturing April 27, 2013		         4,446,077    
EUR 1,970,018       Term Loan, 6.383%,
maturing April 27, 2013		         2,659,898    
        Springs Window Fashions, LLC   B1   B+        
$ 1,434,427       Term Loan, 7.625%,
maturing December 31, 2012		         1,032,788    
        Textron Fastening Systems   B2   B+        
  493,750       Term Loan, 8.330%,
maturing August 11, 2013		         459,188    
      39,727,079    
Diversified / Conglomerate Service: 3.2%      
        Affinion Group   Ba2   BB        
  3,937,668       Term Loan, 5.572%,
maturing October 17, 2012		         3,629,219    
        AlixPartners, LLP   B1   BB-        
  2,648,250       Term Loan, 6.380%,
maturing October 12, 2013		         2,449,631    
        Brickman Group   Ba3   BB-        
  2,481,250       Term Loan, 7.143%,
maturing January 23, 2014		         2,270,344    
        Brock Holdings, Inc.   B1   B        
  1,781,538       Term Loan, 7.142%,
maturing February 26, 2014		         1,576,661    
        Catalina Marketing Corporation   Ba3   BB-        
  2,992,500       Term Loan, 7.830%,
maturing October 01, 2014		         2,748,112    
        Coach America Holdings, Inc.   B2   B        
  1,911,518       Term Loan, 6.200%,
maturing April 20, 2014		         1,275,938    
  493,837       Term Loan, 7.680%,
maturing April 20, 2014		         329,636    
        Fleetcor Technologies Operating
Company, LLC		   Ba3   B+        
  661,667       Term Loan, 5.511%,
maturing April 30, 2013		         598,808    
        Intergraph Corporation   Ba3   BB-        
  2,792,584       Term Loan, 5.092%,
maturing May 29, 2014		         2,555,215    

 

See Accompanying Notes to Financial Statements
35


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Diversified / Conglomerate Service: (continued)      
        ISS Global A/S   NR   NR        
EUR 122,807       Term Loan, 6.949%,
maturing December 31, 2013		       $ 164,035    
EUR 877,193       Term Loan, 6.949%,
maturing December 31, 2013		         1,171,675    
        ISTA International GmbH   NR   NR        
EUR 2,502,783       Term Loan, 6.769%,
maturing June 30, 2015		         3,157,751    
EUR 497,217       Term Loan, 6.769%,
maturing June 30, 2015		         627,337    
        Mitchell International, Inc.   Ba3   B+        
$ 794,000       Term Loan, 6.843%,
maturing March 28, 2014		         702,690    
        Mitchell International, Inc.   Caa1   B+        
  250,000       Term Loan, 10.125%,
maturing March 28, 2015		         210,000    
        Valley National Gases, Inc.   Ba3   BB-        
  1,621,850       Term Loan, 6.741%,
maturing February 28, 2014		         1,378,573    
        Valley National Gases, Inc.   B3   CCC+        
  500,000       Term Loan, 9.122%,
maturing August 28, 2014		         425,000    
        Valleycrest Companies, LLC   B1   B+        
  1,981,898       Term Loan, 7.131%,
maturing October 04, 2013		         1,744,071    
        Vertafore, Inc.   B1   B        
  4,069,327       Term Loan, 5.593%,
maturing January 31, 2012		         3,784,474    
        West Corporation   B1   BB-        
  14,417,803       Term Loan, 5.744%,
maturing October 24, 2013		         12,338,035    
      43,137,205    
Diversified Nat'l Rsrcs, Precious Metals & Minerals: 2.0%      
        Georgia Pacific Corporation   Ba2   BB+        
  29,628,000       Term Loan, 6.696%,
maturing December 20, 2012		         27,383,679    
      27,383,679    
Ecological: 0.3%      
        Allied Waste North America, Inc.   Ba3   BBB-        
  302,909       Term Loan, 4.599%,
maturing January 15, 2012		         285,349    
  467,173       Term Loan, 6.000%,
maturing January 15, 2012		         440,091    
        IESI Corporation   B1   BB+        
  1,800,000       Term Loan, 6.610%,
maturing January 21, 2012		         1,656,000    
        Synagro Technologies, Inc.   Ba3   BB-        
  1,094,500       Term Loan, 5.088%,
maturing April 02, 2014		         922,116    

 

See Accompanying Notes to Financial Statements
36


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Ecological: (continued)      
        Synagro Technologies, Inc.   Caa1   B-        
$ 590,000       Term Loan, 7.820%,
maturing October 02, 2014		       $ 463,150    
      3,766,706    
Electronics: 1.0%      
        Aeroflex, Inc.   Ba3   BB-        
  997,500       Term Loan, 6.375%,
maturing August 15, 2014		         887,775    
        Decision One   NR   NR        
  443,200       Term Loan, 12.000%,
maturing April 15, 2010		         398,880    
        Freescale Semiconductor, Inc.   Ba1   BB        
  2,625,628       Term Loan, 5.014%,
maturing December 01, 2013		         2,239,989    
        Infor Global Solutions   B1   B+        
  497,500       Term Loan, 7.580%,
maturing July 28, 2012		         429,094    
EUR 990,000       Term Loan, 7.771%,
maturing July 28, 2012		         1,203,207    
        Infor Global Solutions   Caa2   CCC+        
EUR 500,000       Term Loan, 10.976%,
maturing March 02, 2014		         603,882    
        Kronos, Inc.   Ba3   B+        
$ 2,963,571       Term Loan, 7.080%,
maturing June 11, 2014		         2,411,606    
        NXP, B.V.   Ba3   BB-        
  1,750,000       Floating Rate Note, 7.008%,
maturing October 15, 2013		         1,413,125    
EUR 1,500,000       Floating Rate Note, 7.326%,
maturing October 15, 2013		         1,754,676    
        ON Semiconductor   Ba1   BB        
$ 2,672,931       Term Loan, 6.580%,
maturing September 03, 2013		         2,378,908    
      13,721,142    
Finance: 0.8%      
        LPL Holdings, Inc.   B1   B        
  7,449,969       Term Loan, 6.830%,
maturing June 28, 2013		         6,649,097    
        Rent-A-Center, Inc.   Ba2   BB+        
  2,411,071       Term Loan, 5.766%,
maturing June 30, 2012		         2,209,144    
        Riskmetrics   Ba3   BB        
  1,786,500       Term Loan, 7.080%,
maturing January 11, 2014		         1,699,408    
      10,557,649    
Foreign Cable, Foreign TV, Radio and Equipment: 5.3%      
        Casema Bidco/Serpering Investments, B.V.   NR   NR        
EUR 284,889       Term Loan, 6.685%,
maturing November 14, 2014		         400,704    
EUR 583,333       Term Loan, 6.685%,
maturing November 14, 2014		         820,473    

 

See Accompanying Notes to Financial Statements
37


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Foreign Cable, Foreign TV, Radio and Equipment: (continued)      
EUR 548,444       Term Loan, 6.685%,
maturing November 14, 2014		       $ 771,401    
EUR 833,333       Term Loan, 7.185%,
maturing November 14, 2015		         1,177,732    
EUR 583,333       Term Loan, 7.185%,
maturing November 14, 2015		         824,413    
        Com Hem   NR   NR        
SEK 8,666,667       Term Loan, 7.030%,
maturing January 31, 2014		         1,263,127    
SEK 8,000,000       Term Loan, 7.155%,
maturing January 31, 2015		         1,165,963    
        Levana Holding 4 GmbH   NR   NR        
EUR 1,297,631       Term Loan, 6.770%,
maturing March 02, 2015		         1,394,035    
EUR 1,297,631       Term Loan, 7.284%,
maturing March 02, 2016		         1,403,891    
        Numericable/YPSO France SAS   NR   NR        
EUR 957,340       Term Loan, 6.054%,
maturing July 28, 2016		         1,202,600    
EUR 2,480,685       Term Loan, 6.679%,
maturing July 28, 2016		         3,116,209    
EUR 1,561,975       Term Loan, 6.679%,
maturing July 28, 2016		         1,962,136    
EUR 694,875       Term Loan, 6.929%,
maturing July 28, 2016		         882,131    
EUR 1,305,125       Term Loan, 6.929%,
maturing July 28, 2016		         1,656,832    
        ProSiebenSat.1 Media AG   NR   NR        
EUR 64,583       Term Loan, 6.123%,
maturing July 02, 2014		         79,768    
EUR 1,190,021       Term Loan, 6.123%,
maturing July 02, 2014		         1,469,806    
SEK 2,269,914       Term Loan, 6.223%,
maturing July 02, 2014		         299,682    
EUR 146,593       Term Loan, 6.248%,
maturing May 09, 2015		         158,597    
EUR 3,258,145       Term Loan, 6.248%,
maturing May 09, 2015		         4,086,940    
        TDF, S.A.   NR   NR        
EUR 1,500,000       Term Loan, 6.185%,
maturing January 31, 2015		         1,819,415    
EUR 1,500,000       Term Loan, 6.645%,
maturing January 31, 2016		         1,829,774    
        UPC Financing Partnership   Ba3   B+        
$ 7,000,000       Term Loan, 5.014%,
maturing December 31, 2014		         6,170,941    
EUR 1,741,434       Term Loan, 6.193%,
maturing December 31, 2014		         2,288,983    
EUR 14,473,566       Term Loan, 6.193%,
maturing December 31, 2014		         19,024,408    

 

See Accompanying Notes to Financial Statements
38


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Foreign Cable, Foreign TV, Radio and Equipment: (continued)      
        Virgin Media Investment Holdings, Ltd.   Ba2   BB        
GBP 3,928,977       Term Loan, 7.657%,
maturing September 03, 2012		       $ 7,203,207    
GBP 3,361,429       Term Loan, 7.657%,
maturing September 03, 2012		         6,162,690    
GBP 1,104,678       Term Loan, 7.680%,
maturing September 03, 2012		         2,025,266    
GBP 561,701       Term Loan, 7.680%,
maturing September 03, 2012		         1,029,796    
      71,690,920    
Gaming: 3.3%      
        Cannery Casino Resorts, LLC   B2   BB        
$ 590,551       Term Loan, 4.025%,
maturing May 18, 2013		         553,641    
  1,645,276       Term Loan, 5.320%,
maturing May 18, 2013		         1,542,446    
        CCM Merger, Inc.   Ba3   BB-        
  3,567,323       Term Loan, 6.519%,
maturing July 13, 2012		         3,103,571    
        Centaur, LLC   B1   BB-        
  1,649,123       Term Loan, 8.830%,
maturing October 30, 2012		         1,442,982    
        Fontainebleau Las Vegas, LLC   B1   B+        
  2,666,667       Term Loan, 8.400%,
maturing June 06, 2014		         2,226,667    
        Golden Nugget, Inc.   B1   BB-        
  1,113,636       Term Loan, 5.125%,
maturing June 30, 2014		         968,864    
        Green Valley Ranch Gaming, LLC   B1   BB-        
  956,136       Term Loan, 5.740%,
maturing February 16, 2014		         779,251    
        Green Valley Ranch Gaming, LLC   Caa1   CCC+        
  500,000       Term Loan, 6.335%,
maturing August 16, 2014		         382,500    
        Greenwood Racing, Inc.   B2   BB-        
  1,485,000       Term Loan, 5.380%,
maturing November 28, 2011		         1,373,625    
        Isle Of Capri Casinos, Inc.   Ba3   BB+        
  1,412,857       Term Loan, 4.875%,
maturing November 25, 2013		         1,223,298    
  1,874,390       Term Loan, 6.580%,
maturing November 25, 2013		         1,622,909    
  4,685,975       Term Loan, 6.580%,
maturing November 25, 2013		         4,057,272    
        Las Vegas Sands, LLC   Ba3   BB        
  6,368,000       Term Loan, 6.580%,
maturing May 23, 2014		         5,688,082    
        Mississippi Band Of Choctaw Indians   Ba2   BB+        
  1,910,870       Term Loan, 6.468%,
maturing November 14, 2011		         1,796,217    

 

See Accompanying Notes to Financial Statements
39


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Gaming: (continued)      
        New World Gaming Partners, Ltd.   Ba3   BB-        
$ 750,000       Term Loan, 7.229%,
maturing September 30, 2014		       $ 641,250    
  3,750,000       Term Loan, 7.229%,
maturing September 30, 2014		         3,206,250    
        Penn National Gaming, Inc.   Ba2   BBB-        
  15,306       Term Loan, 4.959%,
maturing October 03, 2012		         14,596    
        Seminole Tribe Of Florida   Baa3   BBB        
  20,522       Term Loan, 6.688%,
maturing March 05, 2014		         19,445    
        Tropicana Entertainment - Landco   B3   B-        
  4,500,000       Term Loan, 5.372%,
maturing July 03, 2008		         4,291,875    
        VML US Finance, LLC   B1   BB-        
  2,400,000       Term Loan, 7.080%,
maturing May 26, 2012		         2,181,274    
  7,800,000       Term Loan, 7.080%,
maturing May 25, 2013		         7,089,139    
      44,205,154    
Grocery: 0.1%      
        Roundys Supermarkets, Inc.   Ba3   B+        
  1,701,793       Term Loan, 5.910%,
maturing November 03, 2011		         1,598,622    
      1,598,622    
Healthcare, Education and Childcare: 14.2%      
        Accellent, Inc.   B2   BB-        
  2,940,000       Term Loan, 5.839%,
maturing November 22, 2012		         2,496,551    
        Advanced Medical Optics, Inc.   Ba2   BB-        
  992,500       Term Loan, 6.631%,
maturing April 02, 2014		         880,844    
        AGA Medical Corporation   B1   BB-        
  3,722,471       Term Loan, 5.150%,
maturing April 28, 2013		         3,331,611    
        AMN Healthcare, Inc.   Ba2   BB-        
  565,818       Term Loan, 6.580%,
maturing November 02, 2011		         512,065    
        Catalent Pharma Solutions   Ba3   BB-        
  5,726,777       Term Loan, 7.080%,
maturing April 10, 2014		         4,796,176    
        CHG Medical Staffing, Inc.   Ba3   B+        
  400,000       Term Loan, 7.210%,
maturing June 20, 2012		         378,000    
  1,584,000       Term Loan, 6.342%,
maturing December 20, 2012		         1,496,880    
        CHS/Community Health Systems, Inc.   Ba3   BB        
  45,032,155       Term Loan, 5.335%,
maturing July 25, 2014		         41,298,224    

 

See Accompanying Notes to Financial Statements
40


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Healthcare, Education and Childcare: (continued)      
        Concentra Operating Corporation   B1   B+        
$ 2,786,000       Term Loan, 7.080%,
maturing June 25, 2014		       $ 2,340,240    
        CRC Health Corporation   Ba3   BB-        
  1,816,644       Term Loan, 7.093%,
maturing February 06, 2013 		        1,633,844    
  1,473,844       Term Loan, 7.448%,
maturing February 06, 2013		         1,325,538    
        Davita, Inc.   Ba1   BB+        
  999,007       Term Loan, 5.336%,
maturing October 05, 2012		         939,691    
        Education Management Corporation   B2   B+        
  8,235,191       Term Loan, 6.625%,
maturing June 01, 2013		         7,167,194    
        Emdeon Business Services, LLC   B1   BB-        
  2,850,795       Term Loan, 7.200%,
maturing November 16, 2013		         2,629,712    
        EMSC, L.P.   Ba1   BB        
  3,202,387       Term Loan, 7.117%,
maturing February 10, 2012		         2,978,220    
        Gambro   NR   NR        
  646,459       Term Loan, 5.565%,
maturing June 05, 2014		         592,049    
SEK 2,146,343       Term Loan, 7.196%,
maturing June 05, 2014		         319,209    
SEK 2,111,070       Term Loan, 7.196%,
maturing June 05, 2014		         313,964    
$ 646,459       Term Loan, 6.065%,
maturing June 05, 2015		         595,281    
SEK 2,111,070       Term Loan, 7.696%,
maturing June 05, 2015		         315,678    
SEK 2,146,343       Term Loan, 7.696%,
maturing June 05, 2015		         320,952    
        Gentiva Health Services, Inc.   Ba3   BB-        
$ 3,351,351       Term Loan, 6.207%,
maturing March 31, 2013		         3,074,865    
        Golden Gate National Senior Care
Holdings, LLC		   Ba3   BB-        
  1,634,786       Term Loan, 5.872%,
maturing March 14, 2011		         1,504,003    
        Harlan Sprague Dawley, Inc.   B2   BB-        
  3,512,250       Term Loan, 5.706%,
maturing July 11, 2014		         3,213,709    
        Harrington Holdings, Inc.   B1   BB-        
  2,646,667       Term Loan, 7.080%,
maturing January 11, 2014		         2,368,767    
        HCA, Inc.   Ba3   BB        
  29,187,035       Term Loan, 7.080%,
maturing November 17, 2013		         26,950,112    

 

See Accompanying Notes to Financial Statements
41


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Healthcare, Education and Childcare: (continued)      
        Health Management Associates, Inc.   Ba2   BB-        
$ 8,605,228       Term Loan, 6.580%,
maturing February 28, 2014		       $ 7,435,137    
        Iasis Healthcare, LLC   Ba2   B+        
  3,636,668       Term Loan, 5.248%,
maturing March 15, 2014		         3,200,268    
  926,471       Term Loan, 5.551%,
maturing March 15, 2014		         815,295    
  333,863       Term Loan, 6.631%,
maturing March 15, 2014		         293,800    
        IM US Holdings, LLC   B1   BB        
  4,975,000       Term Loan, 6.843%,
maturing June 26, 2014		         4,433,969    
        inVentiv Health, Inc.   Ba3   BB-        
  1,407,214       Term Loan, 6.580%,
maturing July 06, 2014		         1,264,734    
        Lifepoint Hospitals, Inc.   Ba2   BB        
  2,567,536       Term Loan, 4.710%,
maturing April 15, 2012		         2,354,338    
        Multiplan, Inc.   B1   B+        
  1,975,341       Term Loan, 5.622%,
maturing April 12, 2013		         1,798,179    
        Mylan Laboratories, Inc.   B1   BB        
  1,500,000       Term Loan, 7.098%,
maturing October 02, 2014		         1,454,166    
        National Mentor, Inc.   B1   B+        
  117,736       Term Loan, 6.600%,
maturing June 29, 2013		         103,019    
  1,989,837       Term Loan, 6.730%,
maturing June 29, 2013		         1,741,108    
        Nycomed   NR   NR        
EUR 543,619       Term Loan, 7.013%,
maturing December 10, 2014		         622,841    
EUR 1,418,795       Term Loan, 7.013%,
maturing December 10, 2014		         1,625,557    
EUR 87,538       Term Loan, 7.013%,
maturing December 10, 2014		         100,295    
EUR 55,762       Term Loan, 7.013%,
maturing December 10, 2014		         63,889    
EUR 394,286       Term Loan, 7.013%,
maturing December 10, 2014		         451,745    
EUR 1,418,795       Term Loan, 7.763%,
maturing December 10, 2014		         1,625,557    
EUR 394,286       Term Loan, 7.763%,
maturing December 10, 2014		         451,745    
EUR 55,762       Term Loan, 7.763%,
maturing December 10, 2014		         63,889    
EUR 543,619       Term Loan, 7.763%,
maturing December 10, 2014		         622,841    

 

See Accompanying Notes to Financial Statements
42


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Healthcare, Education and Childcare: (continued)      
EUR 87,538       Term Loan, 7.763%,
maturing December 10, 2014		       $ 100,295    
        Orthofix International/Colgate Medical   Ba3   BB+        
$ 1,804,242       Term Loan, 6.580%,
maturing September 22, 2013		         1,632,839    
        Psychiatric Solutions, Inc.   Ba3   BB-        
  862,559       Term Loan, 6.173%,
maturing July 01, 2012		         795,711    
        Quintiles Transnational Corporation   B1   BB        
  5,256,375       Term Loan, 6.830%,
maturing March 31, 2013		         4,914,711    
        Renal Advantage, Inc.   NR   B+        
  4,638,373       Term Loan, 7.466%,
maturing October 06, 2012		         4,139,748    
        Select Medical Corporation   Ba2   BB-        
  2,431,250       Term Loan, 5.149%,
maturing February 24, 2012		         2,204,840    
        Sterigenics International, Inc.   B3   BB-        
  2,442,888       Term Loan, 7.330%,
maturing November 21, 2013		         2,223,028    
        Stiefel Laboratories, Inc.   B1   BB-        
  1,608,949       Term Loan, 6.693%,
maturing December 28, 2013		         1,492,300    
  2,103,551       Term Loan, 6.693%,
maturing December 28, 2013		         1,951,044    
        Sun Healthcare Group, Inc.   Ba2   B+        
  196,552       Term Loan, 5.901%,
maturing April 12, 2014		         178,862    
  1,192,587       Term Loan, 5.918%,
maturing April 12, 2014		         1,085,254    
  305,747       Term Loan, 6.930%,
maturing April 12, 2014		         278,230    
        Surgical Care Affiliates, LLC   Ba3   B        
  2,985,000       Term Loan, 7.080%,
maturing December 29, 2014		         2,492,475    
        Team Health, Inc.   B1   BB-        
  2,723,145       Term Loan, 5.089%,
maturing November 23, 2012		         2,403,175    
        United Surgical Partners International, Inc.   Ba3   B        
  256,048       Term Loan, 4.166%,
maturing April 19, 2014		         230,443    
  2,081,048       Term Loan, 5.490%,
maturing April 19, 2014		         1,872,944    
        Vanguard Health Holdings Company II, LLC   Ba3   B+        
  8,944,726       Term Loan, 5.372%,
maturing September 23, 2011		         8,296,233    
        Viant Holdings, Inc.   Ba3   B+        
  995,000       Term Loan, 7.080%,
maturing June 25, 2014		         761,175    

 

See Accompanying Notes to Financial Statements
43


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Healthcare, Education and Childcare: (continued)      
        VWR International, Inc.   B1   B+        
EUR 2,500,000       Term Loan, 7.271%,
maturing June 29, 2014		       $ 3,399,211    
$ 4,500,000       Term Loan, 7.330%,
maturing June 29, 2014		         3,881,248    
        Warner Chilcott Holdings Company III, Ltd.   Ba3   BB-        
  2,338,020       Term Loan, 6.181%,
maturing January 18, 2012		         2,171,436    
  804,182       Term Loan, 6.563%,
maturing January 18, 2012		         746,884    
      191,547,837    
Home & Office Furnishings: 1.2%      
        Global Garden Products Italy, S.P.A.   NR   NR        
EUR 1,250,000       Term Loan, 7.148%,
maturing October 19, 2014		         1,666,373    
EUR 1,250,000       Term Loan, 7.648%,
maturing October 19, 2015		         1,675,868    
        Hilding Anders   NR   NR        
SEK 20,428,571       Term Loan, 6.690%,
maturing April 25, 2015		         2,570,988    
EUR 371,429       Term Loan, 6.999%,
maturing April 25, 2015		         464,116    
        National Bedding Company   B1   BB        
$ 4,138,797         Term Loan, 7.250%
maturing February 28, 2013		         3,474,913    
        Simmons Company   Ba2   BB-        
  6,991,524       Term Loan, 5.627%,
maturing December 19, 2011		         6,274,886    
      16,127,144    
Insurance: 1.4%      
        AmWINS Group, Inc.   B2   B-        
  2,487,500       Term Loan, 6.708%,
maturing June 08, 2013		         1,772,344    
        Applied Systems, Inc.   B1   B-        
  1,975,000       Term Loan, 7.190%,
maturing September 26, 2013		         1,797,250    
        Conseco, Inc.   Ba3   B+        
  7,413,777       Term Loan, 5.122%,
maturing October 10, 2013		         6,128,725    
        Crawford & Company   B1   BB-        
  2,861,161       Term Loan, 7.580%,
maturing October 30, 2013		         2,625,115    
        Hub International, Ltd.   B2   B+        
  354,959       Term Loan, 6.069%,
maturing June 13, 2014		         308,815    
  2,032,271       Term Loan, 7.330%,
maturing June 13, 2014		         1,768,076    
        Swett & Crawford   B2   B        
  3,176,000       Term Loan, 6.248%,
maturing April 03, 2014		         2,509,040    

 

See Accompanying Notes to Financial Statements
44


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Insurance: (continued)      
        USI Holdings Corporation   B2   B        
$ 2,238,750       Term Loan, 7.580%,
maturing May 05, 2014		       $ 1,998,084    
      18,907,449    
Leisure, Amusement, Entertainment: 5.7%      
        24 Hour Fitness Worldwide, Inc.   Ba3   B+        
  4,175,625       Term Loan, 6.949%,
maturing June 08, 2012		         3,465,769    
        Alpha D2, Ltd.   NR   NR        
  2,285,714       Term Loan, 7.093%,
maturing December 31, 2012		         2,003,429    
  1,714,286       Term Loan, 7.093%,
maturing December 31, 2013		         1,502,571    
        AMF Bowling Worldwide, Inc.   B1   B+        
  3,109,375       Term Loan, 7.678%,
maturing June 10, 2013		         2,565,234    
        Cedar Fair, L.P.   Ba3   BB        
  1,877,531       Term Loan, 5.122%,
maturing August 30, 2012		         1,750,329    
        Cinemark USA, Inc.   Ba3   B        
  3,688,682       Term Loan, 5.340%,
maturing October 05, 2013		         3,276,011    
        HIT Entertainment, Inc.   Ba3   B+        
  3,404,852       Term Loan, 5.150%,
maturing March 20, 2012		         2,911,148    
        Kerasotes Showplace Theater, LLC   B1   B-        
  120,000       Revolver, 1.098%,
maturing October 31, 2010		         114,000    
  403,061       Term Loan, 5.438%,
maturing October 28, 2011		         362,754    
        Metro-Goldwyn-Mayer, Inc.   Ba3   B+        
  17,032,247       Term Loan, 8.108%,
maturing April 08, 2012		         14,150,953    
  33,326,493       Term Loan, 8.108%,
maturing April 08, 2012		         27,688,750    
        NEP II, Inc.   B1   B        
  4,463,748       Term Loan, 7.108%,
maturing February 16, 2014		         3,969,017    
        Warner Music Group   Ba3   BB-        
  14,931,517       Term Loan, 5.249%,
maturing February 28, 2011		         13,519,249    
      77,279,214    
Lodging: 1.9%      
        Audio Visual Services Corporation   Ba3   B+        
  1,496,250       Term Loan, 5.520%,
maturing February 28, 2014		         1,361,588    
        Hotel Del Coronado   NR   NR        
  24,600,000       Term Loan, 5.987%,
maturing January 15, 2009		         24,600,000    
      25,961,588    

 

See Accompanying Notes to Financial Statements
45


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Machinery: 0.9%      
        Enersys Capital, Inc.   Ba2   BB        
$ 3,210,674       Term Loan, 5.242%,
maturing March 17, 2011		       $ 2,993,954    
        Kion Group   NR   NR        
EUR 1,238,909       Term Loan, 6.775%,
maturing December 23, 2014		         1,610,806    
EUR 1,145,833       Term Loan, 7.275%,
maturing December 23, 2015		         1,497,529    
        LN Acquisition Corporation   B1   BB-        
$ 362,045       Term Loan, 5.751%,
maturing July 11, 2014		         336,702    
  135,682       Term Loan, 5.754%,
maturing July 11, 2014		         126,184    
        Maxim Crane Works, L.P.   B1   BB-        
  3,482,500       Term Loan, 5.145%,
maturing June 29, 2014		         3,064,600    
        NACCO Materials Handling Group, Inc.   NR   NR        
  985,000       Term Loan, 5.599%,
maturing March 21, 2013		         849,563    
        United Rentals, Inc.   Ba1   BB+        
  2,135,014       Term Loan, 5.100%,
maturing February 14, 2011		         2,035,380    
  233,630       Term Loan, 6.750%,
maturing February 14, 2011		         222,727    
      12,737,445    
Mining, Steel, Iron & Nonprecious Metals: 0.8%      
        Continental Alloys & Services, Inc.   B2   B        
  497,500       Term Loan, 7.330%,
maturing June 15, 2012		         472,625    
        Noranda Aluminum Acquisition Corporation   Ba2   BB-        
  889,875       Term Loan, 5.065%,
maturing May 18, 2014		         783,090    
        Novelis   Ba2   BB        
  3,420,313       Term Loan, 6.830%,
maturing July 06, 2014		         3,021,846    
  1,554,688       Term Loan, 6.830%,
maturing July 06, 2014		         1,373,566    
        Oxbow Carbon and Minerals Holdings, LLC   B1   BB-        
  3,804,274       Term Loan, 6.820%,
maturing May 08, 2014		         3,366,782    
  340,570       Term Loan, 6.830%,
maturing May 08, 2014		         301,405    
        Tube City IMS Corporation   Ba3   BB        
  162,162       Term Loan, 7.080%,
maturing January 25, 2013		         147,568    
  1,327,804       Term Loan, 7.080%,
maturing January 25, 2013		         1,208,302    
      10,675,184    

 

See Accompanying Notes to Financial Statements
46


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
North American Cable: 14.1%      
        Atlantic Broadband   B1   B        
$ 3,940,233       Term Loan, 7.080%,
maturing August 10, 2012		       $ 3,485,463    
        Bresnan Communications, LLC   B2   BB-        
  4,750,000       Term Loan, 5.576%,
maturing September 29, 2013		         4,280,087    
  3,253,061       Term Loan, 5.930%,
maturing April 30, 2014		         2,931,239    
        Cequel Communications, LLC   B1   BB-        
  50,335,963       Term Loan, 6.509%,
maturing April 04, 2013		         42,551,053    
        Cequel Communications, LLC   Caa1   B-        
  975,000       Term Loan, 7.739%,
maturing May 05, 2014		         750,750    
        Charter Communications Operating, LLC   B1   B+        
  67,718,750       Term Loan, 5.260%,
maturing March 06, 2014		         59,713,446    
        CSC Holdings, Inc.   Ba1   BBB-        
  30,138,279       Term Loan, 6.896%,
maturing March 29, 2013		         27,944,453    
        Insight Midwest Holdings, LLC   Ba3   BB-        
  12,019,643       Term Loan, 6.730%,
maturing April 06, 2014		         10,830,828    
        Knology, Inc.   B2   B        
  2,985,000       Term Loan, 6.953%,
maturing June 30, 2012		         2,537,250    
        Mediacom Broadband, LLC   Ba3   BB-        
  2,913,750       Term Loan, 4.645%,
maturing March 31, 2010		         2,549,531    
  15,485,580       Term Loan, 4.895%,
maturing January 31, 2015		         13,414,384    
        Mediacom LLC Group   Ba3   BB-        
  8,472,750       Term Loan, 4.895%,
maturing January 31, 2015		         7,371,293    
        Quebecor Media, Inc.   B1   B        
  3,920,000       Term Loan, 6.258%,
maturing January 17, 2013		         3,586,800    
        San Juan Cable, LLC   B1   BB-        
  3,922,513       Term Loan, 6.978%,
maturing October 31, 2012		         3,353,749    
        WideOpenWest Finance, LLC   B2   B-        
  5,833,333       Term Loan, 5.831%,
maturing June 28, 2014		         4,943,750    
      190,244,076    
Oil & Gas: 4.3%      
        Alon USA   B1   BB        
  1,751,111       Term Loan, 5.372%,
maturing June 22, 2013		         1,562,867    
  218,889       Term Loan, 5.521%,
maturing June 22, 2013		         195,358    

 

See Accompanying Notes to Financial Statements
47


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Oil & Gas: (continued)      
        Atlas Pipeline Partners, L.P.   Ba3   BB-        
$ 4,000,000       Term Loan, 5.880%,
maturing July 27, 2014		       $ 3,786,668    
        Calumet Lubricants Company   B1   BB-        
  2,102,012       Term Loan, 7.065%,
maturing December 15, 2014		         1,986,401    
  272,989       Term Loan, 8.553%,
maturing December 15, 2014		         257,974    
        Coffeyville Resources, LLC   B2   BB-        
  1,203,165       Term Loan, 7.979%,
maturing December 28, 2010		         1,135,989    
  1,391,544       Term Loan, 7.479%,
maturing December 28, 2013		         1,313,850    
        CR Gas Storage   Ba3   BB-        
  814,042       Term Loan, 6.741%,
maturing May 13, 2011		         763,164    
  550,160       Term Loan, 6.808%,
maturing May 12, 2013		         515,775    
  5,008,847       Term Loan, 7.323%,
maturing May 12, 2013		         4,695,794    
  812,176       Term Loan, 7.323%,
maturing May 12, 2013		         761,415    
        Energy Transfer Company, L.P.   Ba2   NR        
  3,245,000       Term Loan, 4.878%,
maturing February 08, 2012		         3,048,947    
        Hercules Offshore, LLC   Ba3   BB        
  3,482,500       Term Loan, 6.580%,
maturing July 11, 2013		         3,234,372    
        MEG Energy   Ba3   BB        
  1,378,200       Term Loan, 3.217%,
maturing April 03, 2013		         1,250,717    
  4,126,500       Term Loan, 6.830%,
maturing April 03, 2013		         3,771,621    
        Semcrude, L.P.   Ba2   NR        
  5,211,875       Term Loan, 5.122%,
maturing March 01, 2011		         5,016,430    
        SG Resources Mississippi, LLC   B1   BB-        
  1,200,000       Term Loan, 5.019%,
maturing April 02, 2014		         1,128,000    
        Targa Resources, Inc.   Ba3   B+        
  4,232,853       Term Loan, 6.903%,
maturing October 31, 2012		         3,974,649    
  4,182,782       Term Loan, 6.955%,
maturing October 31, 2012		         3,927,633    
        Venoco, Inc.   Caa1   B        
  3,000,000       Term Loan, 7.125%,
maturing September 20, 2011		         2,640,000    

 

See Accompanying Notes to Financial Statements
48


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Oil & Gas: (continued)      
        Vulcan Energy Corporation   Ba2   BB        
$ 2,919,383       Term Loan, 4.628%,
maturing August 12, 2011		       $ 2,747,869    
        Western Refining, Inc.   B1   BB+        
  10,902,357       Term Loan, 4.994%,
maturing May 30, 2014		         9,862,087    
      57,577,580    
Other Broadcasting and Entertainment: 1.6%      
        Deluxe Entertainment Services Group, Inc.   B1   B        
  265,835       Term Loan, 7.080%,
maturing May 11, 2013		         228,618    
  2,875,898       Term Loan, 7.080%,
maturing May 11, 2013		         2,473,272    
  137,795       Term Loan, 7.080%,
maturing May 11, 2013		         118,504    
        VNU   Ba3   B+        
  20,834,619       Term Loan, 5.346%,
maturing August 09, 2013		         18,490,724    
      21,311,118    
Other Telecommunications: 2.6%      
        Asurion Corporation   B2   B-        
  15,250,000       Term Loan, 6.095%,
maturing July 03, 2014		         13,008,250    
        BCM Ireland Holdings, Ltd.   Ba3   BB        
EUR 2,083,333       Term Loan, 6.625%,
maturing September 30, 2014		         2,778,507    
EUR 2,083,333       Term Loan, 6.875%,
maturing September 30, 2015		         2,782,564    
        Cavalier Telephone   B3   B-        
$ 3,168,013       Term Loan, 9.580%,
maturing December 31, 2012		         2,439,370    
        Gabriel Communications   B2   CCC+        
  497,500       Term Loan, 8.241%,
maturing May 31, 2014		         449,616    
        Hargray Communications Group, Inc.   B1   B        
  721,038       Term Loan, 7.080%,
maturing June 29, 2014		         661,552    
        Hawaiian Telcom Communications, Inc.   Ba3   B-        
  2,818,023       Term Loan, 7.080%,
maturing June 01, 2014		         2,299,036    
        Kentucky Data Link, Inc.   B1   B        
  4,213,784       Term Loan, 5.372%,
maturing February 26, 2014		         3,792,406    
        One Communications   B2   B-        
  2,851,071       Term Loan, 9.000%,
maturing June 30, 2012		         2,551,709    
        PAETEC Holding Corporation   B1   B-        
  803,340       Term Loan, 5.622%,
maturing February 28, 2013		         727,692    

 

See Accompanying Notes to Financial Statements
49


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Other Telecommunications: (continued)      
        Time Warner Telecom Holdings, Inc.   Ba2   B        
$ 3,187,800       Term Loan, 5.130%,
maturing January 07, 2013		       $ 2,974,217    
        U.S. Telepacific Corporation   B1   CCC+        
  987,503       Term Loan, 8.965%,
maturing August 04, 2011		         957,878    
      35,422,797    
Personal & Nondurable Consumer Products: 3.7%      
        Advantage Sales And Marketing   B2   B-        
  3,826,228       Term Loan, 5.563%,
maturing March 29, 2013		         3,328,818    
        Bushnell Performance Optics   Ba3   BB-        
  1,745,625       Term Loan, 8.580%,
maturing August 24, 2013		         1,640,888    
        Fender Musical Instruments Corporation   B2   B+        
  1,166,667       Term Loan, 6.970%,
maturing June 09, 2014		         991,667    
  2,321,667       Term Loan, 7.160%,
maturing June 09, 2014		         1,973,417    
        Gibson Guitar Corporation   B2   B        
  742,500       Term Loan, 7.330%,
maturing December 29, 2013		         712,800    
        Huish Detergents, Inc.   B1   B+        
  3,283,500       Term Loan, 6.830%,
maturing April 26, 2014		         2,684,261    
        Information Resources, Inc.   Ba2   B+        
  463,080       Term Loan, 4.845%,
maturing May 16, 2014		         400,565    
        Jarden Corporation   Ba3   BB-        
  1,184,282       Term Loan, 6.580%,
maturing January 24, 2012		         1,090,198    
  11,289,568       Term Loan, 6.580%,
maturing January 24, 2012		         10,392,680    
  995,000       Term Loan, 7.330%,
maturing January 24, 2012		         951,966    
        KIK Custom Products, Inc.   B1   B        
  72,988       Term Loan, 7.110%,
maturing May 31, 2014		         53,038    
  425,762       Term Loan, 7.110%,
maturing May 31, 2014		         309,387    
        Mega Bloks Inc.   Ba3   B        
  975,000       Term Loan, 5.500%,
maturing July 26, 2012		         770,250    
        Natural Products Group, LLC   B1   B+        
  1,588,142       Term Loan, 6.182%,
maturing March 08, 2014		         1,052,144    
        Norwood Promotional Products   NR   NR        
  18,964,288       Term Loan, 6.000%,
maturing August 17, 2011		         17,447,145    

 

See Accompanying Notes to Financial Statements
50


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Personal & Nondurable Consumer Products: (continued)      
        Spectrum Brands, Inc.   B2   B-        
$ 56,383       Term Loan, 7.144%,
maturing March 30, 2013		       $ 50,759    
  1,122,322       Term Loan, 7.815%,
maturing March 30, 2013		         1,010,370    
        Totes Isotoner Corporation   B2   B        
  412,500       Term Loan, 7.331%,
maturing January 31, 2013		         367,125    
        Yankee Candle Company, Inc.   Ba3   BB-        
  4,616,346       Term Loan, 6.831%,
maturing February 06, 2014		         4,097,007    
      49,324,485    
Personal, Food & Miscellaneous: 2.3%      
        Acosta, Inc.   B1   B        
  4,432,500       Term Loan, 5.370%,
maturing July 28, 2013		         3,871,049    
        Arbys Restaurant Group, Inc.   Ba3   BB        
  5,157,225       Term Loan, 5.715%,
maturing July 25, 2012		         4,763,986    
        Culligan International Company   B2   B+        
  1,488,750       Term Loan, 6.345%,
maturing November 24, 2012		         1,133,932    
        Dennys, Inc.   Ba2   BB        
  1,016,818       Term Loan, 6.855%,
maturing March 31, 2012		         958,351    
  801,667       Term Loan, 6.950%,
maturing March 31, 2012		         755,571    
        MD Beauty, Inc.   B1   BB-        
  2,406,749       Term Loan, 5.380%,
maturing February 18, 2012		         2,310,479    
        N.E.W. Customer Services Companies, Inc.   B1   B        
  4,665,486       Term Loan, 6.416%,
maturing May 22, 2014		         3,802,371    
        NPC International   Ba3   BB-        
  1,200,000       Term Loan, 5.519%,
maturing May 03, 2013		         1,056,000    
        OSI Restaurant Partners, Inc.   B1   BB-        
  378,313       Term Loan, 7.488%,
maturing June 14, 2013		         309,676    
  4,445,407       Term Loan, 5.438%,
maturing June 14, 2014		         3,638,882    
        QCE, LLC   B2   B+        
  3,710,167       Term Loan, 7.030%,
maturing May 05, 2013		         3,169,543    
        Reddy Ice Group, Inc.   Ba3   BB-        
  3,000,000       Term Loan, 6.127%,
maturing August 09, 2012		         2,700,000    
        Sagittarius Brands, Inc (Del Taco & Capt D)   B2   B+        
  1,473,750       Term Loan, 7.080%,
maturing March 29, 2013		         1,142,156    

 

See Accompanying Notes to Financial Statements
51


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Personal, Food & Miscellaneous: (continued)      
        Sbarro, Inc.   Ba3   B+        
$ 496,250       Term Loan, 7.407%,
maturing January 31, 2014		       $ 443,523    
        Seminole Hard Rock Entertainment   B1   BB        
  1,000,000       Floating Rate Note, 7.491%,
maturing March 15, 2014		         780,000    
        U.S. Security Holdings, Inc.   B1   B+        
  614,063       Term Loan, 7.350%,
maturing May 08, 2013		         610,992    
      31,446,511    
Printing & Publishing: 8.6%      
        American Achievement Corporation   Ba3   BB-        
  1,041,062       Term Loan, 5.424%,
maturing March 25, 2011		         962,982    
        Ascend Media Holdings, LLC   B3   B        
  853,249       Term Loan, 8.964%,
maturing January 31, 2012		         733,794    
        Black Press, Ltd.   Ba3   BB-        
  728,621       Term Loan, 5.085%,
maturing August 02, 2013		         658,313    
  1,203,136       Term Loan, 5.085%,
maturing August 02, 2013		         1,087,334    
        Canwest Media, Inc.   Ba1   BB-        
  729,375       Term Loan, 5.085%,
maturing July 10, 2014		         664,643    
        Caribe Information Investments, Inc.   B1   B+        
  2,614,113       Term Loan, 6.013%,
maturing March 31, 2013		         2,372,307    
        Cengage Learning, Inc.   B1   B+        
  19,950,000       Term Loan, 5.813%,
maturing July 05, 2014		         17,510,654    
        Cenveo Corporation   Ba2   BB+        
  78,510       Term Loan, 6.660%,
maturing June 21, 2013		         69,482    
  3,849,177       Term Loan, 6.660%,
maturing June 21, 2013		         3,406,522    
        Hanley Wood, LLC   B2   B        
  2,715,688       Term Loan, 6.745%,
maturing March 08, 2014		         2,063,923    
        Idearc, Inc.   Ba2   BBB-        
  31,268,874       Term Loan, 6.830%,
maturing November 17, 2014		         25,914,080    
        Intermedia Outdoor, Inc.   NR   NR        
  1,980,000       Term Loan, 7.830%,
maturing January 31, 2013		         1,732,500    
        Mediannuaire Holding   NR   NR        
EUR 825,000       Term Loan, 7.177%,
maturing April 10, 2016		         1,046,017    
EUR 825,000       Term Loan, 7.677%,
maturing April 10, 2016		         1,051,239    

 

See Accompanying Notes to Financial Statements
52


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Printing & Publishing: (continued)      
        Medimedia USA, Inc.   Ba3   BB-        
$ 1,234,375       Term Loan, 7.171%,
maturing October 05, 2013		       $ 1,129,453    
        Merrill Communications, LLC   Ba3   BB-        
  5,807,878       Term Loan, 6.399%,
maturing May 15, 2011		         5,198,051    
        Nelson Canada   Ba3   BB-        
  4,987,500       Term Loan, 7.330%,
maturing July 05, 2014		         4,588,500    
        PagesJaunes Groupe, S.A.   NR   NR        
EUR 1,100,000       Term Loan, 6.677%,
maturing October 24, 2013		         1,447,309    
        PBL Media   B1   B        
AUD 24,331,191       Term Loan, 9.865%,
maturing February 05, 2013		         20,243,274    
        Prism Business Media Holdings/
Penton Media, Inc.		   B1   BB-        
$ 2,183,500       Term Loan, 5.372%,
maturing February 01, 2013		         1,754,988    
        R.H. Donnelley Corporation   Ba1   BB+        
  2,835,284       Term Loan, 5.573%,
maturing June 30, 2011		         2,625,297    
  4,729,157       Term Loan, 5.866%,
maturing June 30, 2011		         4,377,752    
        Readers Digest   B1   B+        
EUR 751,552       Term Loan, 6.791%,
maturing March 02, 2014		         936,242    
$ 4,342,188       Term Loan, 7.131%,
maturing March 02, 2014		         3,573,620    
        Source Media, Inc.   B1   B        
  3,529,084       Term Loan, 7.080%,
maturing November 08, 2011		         3,105,594    
        Thomas Nelson Publishers   B1   B        
  2,298,333       Term Loan, 6.380%,
maturing June 12, 2012		         1,896,125    
        Tribune Company   B2   BB-        
  497,500       Term Loan, 7.910%,
maturing May 19, 2014		         365,787    
        Valassis Communications, Inc.   Ba2   BB        
  971,150       Term Loan, 6.580%,
maturing March 02, 2014		         892,851    
        Yell Group, PLC   Ba3   BB-        
  2,000,000       Term Loan, 5.122%,
maturing February 10, 2013		         1,738,750    
EUR 2,000,000       Term Loan, 6.185%,
maturing February 27, 2013		         2,676,746    
      115,824,129    

 

See Accompanying Notes to Financial Statements
53


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Radio and TV Broadcasting: 5.7%      
        Block Communications, Inc.   Ba1   BB        
$ 1,225,000       Term Loan, 6.830%,
maturing December 22, 2012		       $ 1,127,000    
        Citadel Broadcasting Corporation   Ba3   BB-        
  11,300,000       Term Loan, 5.625%,
maturing June 12, 2014		         8,602,125    
        CMP KC, LLC   NR   NR        
  2,044,744       Term Loan, 7.220%,
maturing May 03, 2011		         1,840,270    
        CMP Susquehanna Corporation   B1   B-        
  7,404,429       Term Loan, 5.166%,
maturing May 05, 2013		         6,053,120    
        Cumulus Media, Inc.   Ba3   B        
  2,847,027       Term Loan, 4.885%,
maturing June 11, 2014		         2,363,032    
        Emmis Communication   B2   B+        
  1,205,201       Term Loan, 6.843%,
maturing November 01, 2013		         1,014,378    
        Local TV Finance, LLC   Ba3   B+        
  3,383,000       Term Loan, 5.161%,
maturing May 07, 2013		         2,926,295    
        Nexstar Broadcasting Group   Ba3   BB-        
  4,502,662       Term Loan, 6.580%,
maturing October 01, 2012		         4,108,679    
  4,755,331       Term Loan, 6.580%,
maturing October 01, 2012		         4,339,240    
        Nextmedia Operating, Inc.   B1   B+        
  4,101,599       Term Loan, 5.086%,
maturing November 15, 2012		         3,588,899    
  1,822,933       Term Loan, 5.098%,
maturing November 15, 2012		         1,595,066    
        Paxson Communications   B1   CCC+        
  6,500,000       Term Loan, 7.508%,
maturing January 15, 2012		         5,525,000    
        Regent Communications   B2   B+        
  2,227,500       Term Loan, 7.093%,
maturing November 21, 2013		         1,820,981    
        Spanish Broadcasting Systems   B2   B-        
  4,375,031       Term Loan, 6.580%,
maturing June 11, 2012		         3,675,026    
        Univision Communications, Inc.   Ba3   B+        
  30,546,295       Term Loan, 5.490%,
maturing September 29, 2014		         25,732,321    
        Univision Communications, Inc.   B3   CCC+        
  2,850,000       Term Loan, 5.625%,
maturing March 29, 2009		         2,757,375    
      77,068,807    

 

See Accompanying Notes to Financial Statements
54


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Retail Stores: 7.1%      
        Amscan Holdings, Inc.   B1   B        
$ 1,985,000       Term Loan, 5.901%,
maturing May 25, 2013		       $ 1,786,500    
        Burlington Coat Factory   B2   B-        
  5,744,684       Term Loan, 5.340%,
maturing May 28, 2013		         4,853,063    
        CBR Fashion Holding   NR   NR        
EUR 750,000       Term Loan, 6.310%,
maturing July 20, 2015		         937,157    
EUR 690,000       Term Loan, 6.560%,
maturing July 20, 2016		         867,425    
        Claires Stores, Inc.   B1   B+        
$ 4,975,000       Term Loan, 6.472%,
maturing May 29, 2014		         3,930,250    
        Dollar General Corporation   B2   B+        
  14,000,000       Term Loan, 5.994%,
maturing July 06, 2014		         12,512,500    
        Dollarama Group, L.P.   Ba1   BB-        
  5,336,203       Term Loan, 4.994%,
maturing November 18, 2011		         4,695,859    
        General Nutrition Centers, Inc.   B1   B-        
  4,764,000       Term Loan, 7.035%,
maturing September 16, 2013		         3,904,098    
        Guitar Center, Inc.   B2   B-        
  5,200,000       Term Loan, 6.640%,
maturing October 09, 2014		         4,368,000    
        Harbor Freight Tools USA, Inc.   B1   B+        
  8,038,834       Term Loan, 5.368%,
maturing July 15, 2010		         7,154,562    
        Mapco Express, Inc.   B2   B+        
  2,205,959       Term Loan, 6.010%,
maturing April 28, 2011		         2,051,542    
        Mattress Firm   B1   B+        
  992,513       Term Loan, 5.500%,
maturing January 18, 2014		         719,572    
        Michaels Stores, Inc.   B2   B        
  7,669,033       Term Loan, 5.432%,
maturing October 31, 2013		         6,634,588    
        Nebraska Book Company, Inc.   Ba2   B        
  3,343,858       Term Loan, 7.650%,
maturing March 04, 2011		         3,130,687    
        Neiman Marcus Group, Inc.   Ba3   BB+        
  10,493,249       Term Loan, 6.602%,
maturing April 06, 2013		         9,734,828    
        Oriental Trading Company, Inc.   B1   B+        
  2,401,524       Term Loan, 5.360%,
maturing July 31, 2013		         1,999,269    
        Petco Animal Supplies, Inc.   Ba3   BB-        
  5,073,750       Term Loan, 6.261%,
maturing October 26, 2013		         4,610,770    

 

See Accompanying Notes to Financial Statements
55


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Retail Stores: (continued)      
        Phones 4U Group, Ltd.   NR   NR        
GBP 1,615,726       Term Loan, 7.849%,
maturing September 22, 2014		       $ 2,449,442    
GBP 1,545,301       Term Loan, 8.599%,
maturing September 22, 2015		         2,351,321    
        Rite Aid   Ba3   BB-        
$ 5,000,000       Term Loan, 4.907%,
maturing June 04, 2014		         4,454,690    
        Sally Holding, LLC   B2   BB-        
  3,703,125       Term Loan, 5.700%,
maturing November 16, 2013		         3,438,614    
        Sports Authority   B2   B        
  2,955,000       Term Loan, 7.080%,
maturing May 03, 2013		         2,452,650    
        Toys "R" Us, Inc.   B2   BB-        
  1,368,159       Term Loan, 7.315%,
maturing July 19, 2012		         1,267,542    
        Vivarte   NR   NR        
EUR 2,500,000       Term Loan, 6.175%,
maturing June 28, 2015		         2,729,133    
EUR 2,500,000       Term Loan, 6.675%,
maturing June 28, 2016		         2,746,768    
      95,780,830    
Telecommunications Equipment: 1.0%      
        Macquarie UK Broadcast Ventures, Ltd.   NR   NR        
GBP 5,500,000       Term Loan, 7.951%,
maturing December 01, 2014		         9,103,462    
        Sorenson Communications, Inc.   B1   B        
$ 4,885,214       Term Loan, 7.375%,
maturing August 16, 2014		         4,598,207    
      13,701,669    
Textiles & Leather: 0.8%      
        Hanesbrands, Inc.   Ba2   BB        
  937,041       Term Loan, 4.998%,
maturing September 05, 2013		         896,631    
        Iconix Brand Group, Inc.   Ba2   BB        
  2,530,907       Term Loan, 7.080%,
maturing April 30, 2013		         2,360,071    
        Polymer Group, Inc.   B1   BB        
  6,013,293       Term Loan, 7.093%,
maturing November 22, 2012		         5,141,365    
        St. John Knits International, Inc.   B1   BB        
  492,455       Term Loan, 7.843%,
maturing March 21, 2012		         428,436    
        Targus Group, Inc.   B2   B        
  1,943,668       Term Loan, 7.608%,
maturing November 22, 2012		         1,678,033    
      10,504,536    

 

See Accompanying Notes to Financial Statements
56


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Utilities: 6.9%      
        Astoria Generating Company
Acquisitions, LLC		   B1   BB-        
$ 2,819,347       Term Loan, 6.930%,
maturing February 23, 2013		       $ 2,645,957    
        Boston Generating, LLC   B1   B+        
  1,062,345       Term Loan, 7.080%,
maturing December 20, 2013		         934,294    
  5,345,288       Term Loan, 7.080%,
maturing December 20, 2013		         4,700,988    
  1,794,089       Term Loan, 7.080%,
maturing December 20, 2013		         1,577,836    
        Calpine Corporation   B2   B+        
  405,000       Revolver, 1.337%,
maturing March 29, 2009		         362,475    
  12,734,685       Term Loan, 7.080%,
maturing March 29, 2009		         11,373,666    
        Cellnet Technology, Inc.   Ba2   NR        
  1,549,545       Term Loan, 6.860%,
maturing July 22, 2011		         1,433,329    
        Cellnet Technology, Inc.   B2   NR        
  333,333       Term Loan, 9.110%,
maturing October 22, 2011		         303,333    
        Coleto Creek WLE, L.P.   B1   BB-        
  375,000       Revolver, 1.709%,
maturing June 30, 2011		         273,750    
  5,215,703       Term Loan, 7.580%,
maturing June 28, 2013		         4,635,456    
  764,331       Term Loan, 7.948%,
maturing June 28, 2013		         679,299    
        FirstLight Power Resources, Inc.   B1   BB-        
  792,683       Term Loan, 7.375%,
maturing November 01, 2013		         679,726    
  1,834,852       Term Loan, 7.430%,
maturing November 01, 2013		         1,573,386    
        FirstLight Power Resources, Inc.   B3   B-        
  1,675,000       Term Loan, 9.438%,
maturing May 01, 2014		         1,384,667    
        Infrastrux Group, Inc.   B2   B        
  4,279,474       Term Loan, 7.771%,
maturing November 03, 2012		         3,851,526    
        KGEN, LLC   Ba3   BB        
  1,546,875       Term Loan, 6.625%,
maturing February 05, 2014		         1,353,516    
  937,500       Term Loan, 6.625%,
maturing February 05, 2014		         820,313    
        Longview Power, LLC   Ba3   BB        
  1,046,667       Term Loan, 6.092%,
maturing February 28, 2014		         952,467    
        MACH Gen, LLC   B2   B+        
  263,910       Term Loan, 6.830%,
maturing February 22, 2013		         246,492    

 

See Accompanying Notes to Financial Statements
57


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Utilities: (continued)      
$ 2,525,621       Term Loan, 5.100%,
maturing February 22, 2014		       $ 2,358,930    
        NRG Energy, Inc.   Ba1   BB        
  15,343,428       Term Loan, 6.480%,
maturing February 01, 2013		         14,173,491    
  7,119,499       Term Loan, 6.580%,
maturing February 01, 2013		         6,576,637    
        NSG Holdings, LLC   Ba2   BB        
  244,898       Term Loan, 6.560%,
maturing June 15, 2014		         217,959    
  1,853,482       Term Loan, 6.560%,
maturing June 15, 2014		         1,649,599    
        Texas Competitive Electric Holdings
Company, LLC		   Ba3   B+        
  5,980,000       Term Loan, 6.579%,
maturing October 10, 2014		         5,473,883    
  2,246,875       Term Loan, 6.583%,
maturing October 10, 2014		         2,055,891    
        TPF Generation Holdings, LLC   Ba3   BB-        
  1,415,762       Term Loan, 6.930%,
maturing December 15, 2013		         1,239,677    
  5,770,770       Term Loan, 6.830%,
maturing December 15, 2013		         5,053,030    
  1,916,282       Term Loan, 6.930%,
maturing December 15, 2013		         1,677,944    
        TPF Generation Holdings, LLC   B3   B-        
  2,000,000       Term Loan, 9.080%,
maturing December 15, 2014		         1,733,334    
        Viridian Group, PLC   NR   NR        
EUR 1,310,694       Term Loan, 8.304%,
maturing December 19, 2012		         1,656,021    
GBP 1,320,000       Term Loan, 9.726%,
maturing December 19, 2012		         2,222,010    
        Wolf Hollow I, L.P.   B1   B+        
$ 850,000       Term Loan, 5.372%,
maturing June 22, 2012		         701,250    
  3,400,000       Term Loan, 5.372%,
maturing June 22, 2012		         2,890,000    
  3,987,857       Term Loan, 7.080%,
maturing June 22, 2012		         3,389,678    
      92,851,810    
    Total Senior Loans
(Cost $1,979,909,919)		             1,770,872,313    

 

See Accompanying Notes to Financial Statements
58


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

            Bank Loan
Ratings†
(Unaudited)		   Market
Value		  
Principal Amount       Borrower/Tranche Description   Moody's   S&P   USD  
Other Corporate Debt: 0.3%  
Automobile: 0.3%  
    Avis Budget Car Rental   Ba1   BB-    
$ 750,000       Floating Rate Note, 7.369%,
maturing May 15, 2014		       $ 603,750    
    Navistar International Corporation   NR   NR    
  3,300,000       Unsecured Term Loan, 6.501%,
maturing January 19, 2012		         2,970,000    
    Total Other Corporate Debt
(Cost $4,050,000)		             3,573,750    
Equities and Other Assets: 0.0%  

 

  Description   Market
Value
USD		  
(@), (R)   Decision One Corporation (463,664 Common Shares)           —    
(@), (R)   Neoplan USA Corporation (1,627 Common Shares)           —    
(@), (R)   Neoplan USA Corporation (170 Series B Preferred Shares)           —    
(@), (R)   Neoplan USA Corporation (102 Series C Preferred Shares)           —    
(@), (R)   Neoplan USA Corporation (331 Series D Preferred Shares)           —    
(@), (R)   Norwood Promotional Products, Inc. (80,087 Common Shares)           —    
(@), (R)   Norwood Promotional Products, Inc. (Contingent Value Rights)           372,001    
(@), (R)   Safelite Realty Corporation (30,003 Common Shares)           240,024    
    Total for Equities and Other Assets
(Cost $1,048,389)		             612,025    
    Total Investments
(Cost $1,985,008,308)**		     131.4 %   $ 1,775,058,087    
    Other Assets and Liabilities — Net     (31.4 )     (423,961,737 )  
    Net Assets     100.0 %   $ 1,351,096,350    

 

  *  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 considered to be below investment grade.

  NR  Not Rated

  (1)  The borrower filed for protection under Chapter 7 of the U.S. Federal Bankruptcy code.

  (2)  The borrower filed for protection under Chapter 11 of the U.S. Federal Bankruptcy code.

  (3)  Loan is on non-accrual basis.

See Accompanying Notes to Financial Statements
59


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

  AUD  Australian Dollar

  GBP  British Pound Sterling

  EUR  Euro

  SEK  Sweden Kronor

  (@)  Non-income producing security.

  (R)  Restricted security.

  **  For Federal Income Tax purposes cost of investments is $1,985,232,498. Net unrealized depreciation consists of the following:

Gross Unrealized Appreciation   $ 4,981,067    
Gross Unrealized Depreciation     (215,155,478 )  
Net Unrealized Depreciation   $ (210,174,411 )  

 

See Accompanying Notes to Financial Statements
60


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

At February 29, 2008 the following forward foreign currency contracts were outstanding for ING Senior Income Fund :

Currency   Buy/Sell   Settlement
Date		   In Exchange
For		   Unrealized
Value		   Appreciation/
(Depreciation)		  
Australian Dollar
AUD 632,000		     
Buy  		  
04/15/08		     USD
$567,555		      
$585,729		       $18,174    
Australian Dollar
AUD 474,000		   Buy   05/15/08     423,993       437,476       13,483    
Euro
EUR 480,000		   Buy   04/15/08     705,888       728,138       22,250    
Euro
EUR 2,600,000		   Buy   04/15/08     3,799,848       3,944,083       144,235    
Euro
EUR 1,400,000		   Buy   04/15/08     2,052,750       2,123,737       70,987    
Euro
EUR 1,950,000		   Buy   05/15/08     2,846,747       2,954,526       107,779    
Euro
EUR 1,050,000		   Buy   05/15/08     1,537,883       1,590,899       53,016    
British Pound Sterling
GBP 560,000		   Buy   04/15/08     1,101,184       1,109,811       8,627    
British Pound Sterling
GBP 600,000		   Buy   04/15/08     1,173,096       1,189,083       15,987    
British Pound Sterling
GBP 450,000		   Buy   05/15/08     878,094       889,810       11,716    
Swedish Krona
SEK 1,200,000		   Buy   04/15/08     185,988       194,480       8,492    
Swedish Krona
SEK 960,000		   Buy   04/15/08     155,195       155,584       389    
Swedish Krona
SEK 900,000		   Buy   05/15/08     139,318       145,645       6,327    
Swedish Krona
SEK 720,000		   Buy   05/15/08     116,237       116,516       279    
Australian Dollar
AUD 9,360,000		   Sell   04/15/08     8,160,142       8,674,718       (514,576 )  
Australian Dollar
AUD 2,182,000		   Sell   04/15/08     2,049,116       2,022,247       26,869    
Australian Dollar
AUD 7,020,000		   Sell   05/15/08     6,165,947       6,479,071       (313,124 )  
Australian Dollar
AUD 4,364,000		   Sell   06/13/08     4,064,542       4,011,009       53,533    
Euro
EUR 37,460,000		   Sell   04/15/08     55,104,784       56,825,131       (1,720,347 )  
Euro
EUR 8,245,000		   Sell   04/15/08     12,467,223       12,507,293       (40,070 )  
Euro
EUR 27,735,000		   Sell   05/15/08     40,886,937       42,022,447       (1,135,510 )  
Euro
EUR 16,490,000		   Sell   06/13/08     24,875,742       24,953,794       (78,052 )  
British Pound Sterling
GBP 9,120,000		   Sell   04/15/08     18,126,365       18,074,064       52,301    
British Pound Sterling
GBP 1,990,000		   Sell   04/15/08     3,941,533       3,943,792       (2,259 )  
British Pound Sterling
GBP 6,420,000		   Sell   05/15/08     12,674,364       12,694,622       (20,258 )  
British Pound Sterling
GBP 3,980,000		   Sell   06/13/08     7,848,918       7,852,843       (3,925 )  

 

See Accompanying Notes to Financial Statements
61


ING Senior Income Fund

PORTFOLIO OF INVESTMENTS as of February 29, 2008 (continued)

Currency   Buy/Sell   Settlement
Date		   In Exchange
For		   Value   Unrealized
Appreciation/
(Depreciation)		  
Swedish Krona
SEK 18,876,000		  
Sell		  
04/15/08		     USD
$2,931,971		      
$3,059,176		       $(127,205)    
Swedish Krona
SEK 4,179,000		   Sell   04/15/08     673,014       677,278       (4,264 )  
Swedish Krona
SEK 14,157,000		   Sell   05/15/08     2,207,272       2,290,998       (83,726 )  
Swedish Krona
SEK 8,358,000		   Sell   06/13/08     1,342,349       1,350,451       (8,102 )  
    $ 219,203,995     $ 223,604,451     $ (3,436,974 )  

 

See Accompanying Notes to Financial Statements
62



ING Senior Income Fund

SHAREHOLDER MEETING INFORMATION (Unaudited)

A special meeting of shareholders of the ING Senior Income Fund was held October 25, 2007, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258.

A brief description of each matter voted upon as well as the results are outlined below:

Matters:

1  To approve the election of eleven nominees to the Board of Trustees of the Fund to represent the interests of the holders of Common Shares of the Fund until the election and qualification of their successors.

2  To approve the conversion of the Fund's investment objectives from fundamental to non-fundamental.

Results:

    Proposal*   Shares voted for   Shares voted
against or
withheld		   Shares
abstained		   Broker
non-vote		   Total shares
voted		  
Colleen D. Baldwin     1       101,257,514.246       1,857,246.742       0.000       0.000       103,114,760.988    
John V. Boyer     1       101,320,163.145       1,794,597.843       0.000       0.000       103,114,760.988    
Patricia W. Chadwick     1       101,261,918.179       1,852,842.809       0.000       0.000       103,114,760.988    
Robert W. Crispin     1       101,321,035.284       1,793,725.704       0.000       0.000       103,114,760.988    
Peter S. Drotch     1       101,286,048.031       1,828,712.957       0.000       0.000       103,114,760.988    
J. Michael Earley     1       101,324,017.161       1,790,743.827       0.000       0.000       103,114,760.988    
Patrick W. Kenny     1       101,335,388.902       1,779,372.086       0.000       0.000       103,114,760.988    
Shaun P. Mathews     1       101,325,223.859       1,789,537.129       0.000       0.000       103,114,760.988    
Sheryl K. Pressler     1       101,252,019.721       1,862,741.267       0.000       0.000       103,114,760.988    
David W.C. Putnam     1       101,323,812.984       1,790,948.004       0.000       0.000       103,114,760.988    
Roger B. Vincent     1       101,324,791.445       1,789,969.543       0.000       0.000       103,114,760.988    
ING Senior Income Fund     2       46,443,875.098       4,053,067.750       2,573,757.140       50,044,061.000       103,114,760.988    

 

*  The Shareholder Meeting was adjourned to November 21, 2007.

A special meeting of shareholders of the ING Senior Income Fund was held November 21, 2007, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258.

A brief description of each matter voted upon as well as the results are outlined below:

Matters:

1  To approve the election of eleven nominees to the Board of Trustees of the Fund to represent the interests of the holders of Common Shares of the Fund until the election and qualification of their successors.

2  To approve the conversion of the Fund's investment objectives from fundamental to non-fundamental.

Results:

    Proposal*   Shares voted for   Shares voted
against or
withheld		   Shares
abstained		   Broker
non-vote		   Total shares
voted		  
Colleen D. Baldwin     1       101,668,038.714       2,226,488.715       0.000       0.000       103,894,527.429    
John V. Boyer     1       101,736,885.613       2,157,641.816       0.000       0.000       103,894,527.429    
Patricia W. Chadwick     1       101,675,343.647       2,219,183.782       0.000       0.000       103,894,527.429    
Robert W. Crispin     1       101,737,757.752       2,156,769.677       0.000       0.000       103,894,527.429    
Peter S. Drotch     1       101,700,755.499       2,193,771.930       0.000       0.000       103,894,527.429    
J. Michael Earley     1       101,740,739.629       2,153,787.800       0.000       0.000       103,894,527.429    
Patrick W. Kenny     1       101,752,111.370       2,142,416.059       0.000       0.000       103,894,527.429    
Shaun P. Mathews     1       101,739,931.327       2,154,596.102       0.000       0.000       103,894,527.429    
Sheryl K. Pressler     1       101,665,445.189       2,229,082.240       0.000       0.000       103,894,527.429    
David W.C. Putnam     1       101,737,769.469       2,156,757.960       0.000       0.000       103,894,527.429    
Roger B. Vincent     1       101,741,513.913       2,153,013.516       0.000       0.000       103,894,527.429    
ING Senior Income Fund     2       53,471,580.827       4,102,488.547       2,838,330.055       43,482,128.000       103,894,527.429    

 

*  Proposal 1 passed at this meeting; Proposal 2 was adjourned to December 17, 2007.


63


ING Senior Income Fund

SHAREHOLDER MEETING INFORMATION (Unaudited) (continued)

A special meeting of shareholders of the ING Senior Income Fund was held December 17, 2007, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258.

A brief description of each matter voted upon as well as the results are outlined below:

Matters:

2  To approve the conversion of the Fund's investment objectives from fundamental to non-fundamental.

Results:

    Proposal*   Shares voted for   Shares voted
against or
withheld		   Shares
abstained		   Broker
non-vote		   Total shares
voted		  
ING Senior Income Fund     2       61,293,440.164       5,076,653.088       3,390,728.510       37,196,921.000       106,957,742.762    

 

*  Proposal 2 was adjourned to December 31, 2007.

A special meeting of shareholders of the ING Senior Income Fund was held December 31, 2007, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258.

A brief description of each matter voted upon as well as the results are outlined below:

Matters:

2  To approve the conversion of the Fund's investment objectives from fundamental to non-fundamental.

Results:

    Proposal*   Shares voted for   Shares voted
against or
withheld		   Shares
abstained		   Broker
non-vote		   Total shares
voted		  
ING Senior Income Fund     2       68,836,627.845       5,476,501.568       3,642,515.961       33,054,301.000       111,009,946.374    

 

*  Proposal 2 was not passed at this meeting.


64


ING Senior Income Fund

TAX INFORMATION (Unaudited)

Dividends paid during the year ended February 29, 2008 were as follows:

Class   Type   Per Share
Amount		  
Class A   NII   $ 0.9500    
Class B   NII   $ 0.9400    
Class C   NII   $ 0.8800    
Class Q   NII   $ 1.0100    
Class A   LTCG   $ 0.0249    
Class B   LTCG   $ 0.0249    
Class C   LTCG   $ 0.0249    
Class Q   LTCG   $ 0.0249    
Class A   ROC   $ 0.0700    
Class B   ROC   $ 0.0100    
Class C   ROC   $ 0.0700    
Class Q   ROC   $ 0.0100    

 

NII - Net investment income

LTCG - Long-term capital gain

ROC - Return of capital

Pursuant to Internal Revenue Code Section 871(k), the Fund designates 100.00% of net investment income distributions as interest-related dividends.

Above figures may differ from those cited elsewhere in this report due to differences in the calculation of income and gains under U.S. generally accepted accounting principles (book) purposes and Internal Revenue Service (tax) purposes.

Shareholders are strongly advised to consult their own tax advisers with respect to the tax consequences of their investments in the Fund. In January, shareholders, excluding corporate shareholders, receive an IRS 1099-DIV regarding the federal tax status of the dividends and distributions they received in the calendar year.


65


ING Senior Income Fund

TRUSTEE AND OFFICER INFORMATION (Unaudited)

The business and affairs of the Trust are managed under the direction of the Trust's Board. A Trustee who is not an interested person of the Trust, as defined in the 1940 Act, is an independent trustee ("Independent Trustee"). The Trustees and Officers of the Trust are listed below. The Statement of Additional Information includes additional information about trustees of the Trust and is available, without charge, upon request at (800) 992-0180.

Name, Address
and Age		   Position(s)
Held With
Trust		   Term of
Office and
Length of
Time
Served(1) 		   Principal
Occupation(s)
During the
Past 5 Years		   Number of
Portfolios in
Fund Complex(2)
Overseen
by Trustee		   Other
Directorships
Held by
Trustee		  
Independent Trustees:  
Colleen D. Baldwin
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 47		   Trustee   November
2007 - Present		   Consultant (January 2005 - Present). Formerly, Chief Operating Officer, Ivy Asset Management Group (April 2002 - October 2004).     179     None  
John V. Boyer
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 54		   Trustee   January 2005 - Present   President, Bechtler Arts Foundation (March 2008 - Present), and Consultant (July 2007 - Present). Formerly, President and Chief Executive Officer, Franklin and Eleanor Roosevelt Institute (March 2006 - July 2007), and Executive Director, The Mark Twain House & Museum(3) (September 1989 - November 2005).     179     None  
Patricia W. Chadwick
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 59		   Trustee   January 2006 - Present   Consultant and President of self-owned company, Ravengate Partners LLC (January 2000 - Present).     179     Wisconsin Energy (June 2006 - Present).  
Peter S. Drotch
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 66 		  Trustee   November
2007 - Present		   Retired partner. PricewaterhouseCoopers.     179     First Marblehead Corporation,(October 2003 - Present); BlackRock Funds/State Street Research Funds, Trustee (February 2004 - January 2007); Tufts Health Plan, Director (June 2006 - Present); and University of Connecticut, Trustee (November 2004 - Present)  
J. Michael Earley
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 62		   Trustee   February
2002 - Present		   President, Chief Executive Officer and Director, Bankers Trust Company, N.A., Des Moines (June 1992 - Present).     179     Midamerica Financial Corporation (December 2002 - Present).  
Patrick W. Kenny
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 65		   Trustee   January 2005 - Present   President and Chief Executive Officer, International Insurance Society (June 2001 - Present).     179     Assured Guaranty Ltd. (April 2004 - Present); and Odyssey Reinsurance Holdings (November 2006 - Present).  
Sheryl K. Pressler
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 57		   Trustee   January 2006 - Present   Consultant (May 2001 - Present).     179     Stillwater Mining Company (May 2002 - Present); California HealthCare Foundation (June 1999 - Present); Romanian-American Enterprise Fund (February 2004 - Present) and Global Alternative Asset Management, Inc.
(October 2007 - present).		  
Roger B. Vincent
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 62		   Chairman/ Trustee   February
2002 - Present		   President, Springwell Corporation (March 1989 - Present).     179     UGI Corporation (February 2006 - Present); and UGI Utilities, Inc. (February 2006 - Present).  

 


66


ING Senior Income Fund

TRUSTEE AND OFFICER INFORMATION (Unaudited) (continued)

Name, Address
and Age		   Position(s)
Held with
Trust		   Term of
Office and
Length of
Time
Served(1) 		   Principal
Occupation(s)
During the
Past 5 Years		   Number of
Portfolios in
Fund Complex
Overseen
by Trustee		   Other
Directorships
Held by
Trustee		  
Trustees who are "Interested Persons":  
Robert W. Crispin(4)
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 61		   Trustee   November
2007 - Present		   Retired Chairman and Chief Investment Officer, ING Investment Management Co. (June 2001 - December 2007).     179     ING Life Insurance and Annuity Company (May 2006 - Present); ING USA Annuity and Life Insurance Company (May 2006 - Present); Midwestern United Life Insurance Company (May 2006 - Present); ReliaStar Life Insurance Company (May 2006 - Present); Security Life of Denver Insurance Company (May 2006 - Present); Belair Insurance Company Inc. (August 2005 - Present); The Nordic Insurance Company of Canada (February 2005 - Present); Trafalgar Insurance Company of Canada (February 2005 - Present); ING Novex Insurance Company of Canada (February 2005 - Present); Allianz Insurance Company of Canada (February 2005 - Present); ING Canada Inc. (December 2004 - Present); ING Bank, fsb (June 2001 - Present); ING Investment Management, Inc (June 2001 - December 2007); ING Insurance Company of Canada (June 2001 - Present); Sul America S.A. (June 2001 - Present); and ING Foundation (March 2004 - Present)  
Shaun P. Mathews(4)
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 52		   Trustee   November
2007 - Present		   President and Chief Executive Officer, ING Investments, LLC (December 2006 - Present), and Head of ING USFS Mutual Funds and Investment Products (November 2004 -
November 2006). Formerly, CMO, ING USFS (April 2002 - October 2004), and Head of Rollover/Payout (October 2001 - December 2003).		     179     Mark Twain House & Museum(3) (September 2002 - Present); Connecticut Forum (May 2002 - Present); Capital Community College Foundation (February 2002 - Present); ING Services Holding Company, Inc. (May 2000 - Present); Southland Life Insurance Company (June 2002 - Present); and ING Capital Corporation, LLC, ING Funds Distributor, LLC(5), ING Funds Services, LLC(6), ING Investments, LLC(7) and ING Pilgrim Funding, Inc. (March 2006 - Present).  

 

(1)  The Board is divided into three classes, with the term of one class expiring at each annual meeting of the Fund. At each annual meeting, one class of Trustees is elected to a three-year term and serves until their successors are duly elected and qualified. The tenure of each Trustee is subject to the Board's retirement policy, which states that each duly elected or appointed Trustee who is not an "interested person" of the Fund, as defined in the Investment Company Act of 1940, as amended ("1940 Act") ("Independent Trustees"), shall retire from service as a Trustee at the conclusion of the first regularly scheduled meeting of the Board that is held after (a) the Trustee reaches the age of 70, if that Trustee qualifies for a retirement benefit as discussed in the board's retirement policy; or (b) the Trustee reaches the age of 72 or has served as a Trustee for 15 years, if that Trustee does not qualify for the retirement benefit. A unanimous vote of the Board may extend the retirement date of a Trustee for up to one year. An extension may be permitted if the retirement would trigger a requirement to hold a meeting of shareholders of the Fund under applicable law, whether for purposes of appointing a successor to the Trustee or if otherwise necessary under applicable law, in which case the extension would apply until such time as the shareholder meeting can be held or is no longer needed.


67


ING Senior Income Fund

TRUSTEE AND OFFICER INFORMATION (Unaudited) (continued)

(2)  For the purposes of this table, "Fund Complex" means the following investment companies: ING Asia Pacific High Dividend Equity Income Fund, ING Equity Trust; ING Funds Trust; ING Global Equity Dividend and Premium Opportunity Fund; ING Global Advantage and Premium Opportunity Fund; ING International High Dividend Equity Income Fund; ING Investors Trust; ING Mayflower Trust; ING Mutual Funds; ING Prime Rate Trust; ING Risk Managed Natural Resources Fund; ING Senior Income Fund; ING Variable Insurance Trust; ING Variable Products Trust; and ING Partners, Inc.

(3)  Shaun Mathews, President, ING USFS Mutual Funds and Investment Products, has held a seat on the Board of Directors of The Mark Twain House & Museum since September 19, 2002. ING Groep N.V. makes non-material, charitable contributions to The Mark Twain House & Museum.

(4)  Messrs. Mathews and Crispin are deemed to be "interested persons" of the Trust as defined in the 1940 Act because of their relationship with ING Groep, the parent corporation of the Adviser, ING Investments, LLC and the Distributor, ING Funds Distributor, LLC.

(5)  ING Funds Distributor, LLC is the sucessor in interest to ING Funds Distributor, Inc., which was previously known as ING Pilgrim Securities, Inc., and before that was known as Pilgrim Securities, Inc., and before that was known as Pilgrim America Securities, Inc.

(6)  ING Funds Services, LLC was previously named ING Pilgrim Group, LLC. ING Pilgrim Group, LLC is the sucessor in interest to ING Pilgrim Group, Inc., which was previously known as Pilgrim Group, Inc. and before that was known as Pilgrim America Group, Inc.

(7)  ING Investments, LLC was previously named ING Pilgrim Investments, LLC. ING Pilgrim Investments, LLC is the sucessor in interest to ING Pilgrim Investments, Inc., which was previously known as Pilgrim Investments, Inc. and before that was known as Pilgrim America Investments, Inc.


68


ING Senior Income Fund

TRUSTEE AND OFFICER INFORMATION (Unaudited) (continued)

Name, Address
and Age		   Position(s) Held
with the Trust		   Term of Office
and Length of
Time Served(1) 		   Principal
Occupation(s)
during the
Past Five Years		  
Officers:  
Shaun P. Mathews(5)
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 52		   President and Chief Executive Officer   November 2006 - Present   President and Chief Executive Officer, ING Investments, LLC(2) and ING Funds Services, LLC(3) (December 2006 - Present); and Head of ING USFS Mutual Funds and Investment Products (November 2004 - November 2006). Formerly, CMO, ING USFS (April 2002 - October 2004); and Head of Rollover/Payout (October 2001 - December 2003).  
Michael J. Roland
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 49		   Executive Vice President   February 2002 - Present   Head of Mutual Fund Platform (February 2007 - Present); and Executive Vice President, ING Investments, LLC(2) and ING Funds Services, LLC(3) (December 2001 - Present). Formerly, Head of Product Management (January 2005 - January 2007); Chief Compliance Officer, ING Investments, LLC(2) and Directed Services, LLC(6) (October 2004 - December 2005); and Chief Financial Officer and Treasurer, ING Investments, LLC(2) (December 2001 - March 2005).  
Stanley D. Vyner
230 Park Avenue
New York, New York 10169
Age: 57		   Executive Vice President   August 2003 - Present   Executive Vice President, ING Investments, LLC(2) (July 2000 - Present); and Chief Investment Risk Officer, ING Investments, LLC(2) (January 2003 - Present). Formerly, Chief Investment Officer of International Investments (August 2000 - January 2003).  
Joseph M. O'Donnell
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 53		   Executive Vice President and Chief Compliance Officer   March 2006 - Present November 2004 - Present   Chief Compliance Officer of the ING Funds (November 2004 - Present), ING Investments, LLC(2) and Directed Services, LLC(6) (March 2006 - Present); and Executive Vice President of the ING Funds (March 2006 - Present). Formerly, Chief Compliance Officer of ING Life Insurance and Annuity Company (March 2006 - December 2006); Vice President, Chief Legal Counsel, Chief Compliance Officer and Secretary of Atlas Securities, Inc., Atlas Advisers, Inc. and Atlas Funds (October 2001 - October 2004).  
Todd Modic
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 40		   Senior Vice President, Chief/Principal Financial Officer and Assistant Secretary   March 2005 - Present   Senior Vice President, ING Funds Services, LLC(3) (April 2005 - Present). Formerly, Vice President, ING Funds Services, LLC(3) (September 2002 - March 2005); and Director of Financial Reporting, ING Investments, LLC(2) (March 2001 - September 2002).  
Daniel A. Norman
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 50		   Senior Vice President and Treasurer   January 2001 - Present   Senior Vice President and Group Head, ING Senior Debt Group, ING Investment Management Co. (January 2000 - Present).  
Jeffrey A. Bakalar
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 48		   Senior Vice President   January 2001 - Present   Senior Vice President and Group Head, ING Senior Debt Group, ING Investment Management Co. (January 2000 - Present).  
Elliot Rosen
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 54		   Senior Vice President   May 2002 - Present   Senior Vice President in the Senior Floating Rate Loan Group, ING Investment Management Co. (February 1999 - Present).  

 


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TRUSTEE AND OFFICER INFORMATION (Unaudited) (continued)

Name, Address
and Age		   Position(s) Held
with the Trust		   Term of Office
and Length of
Time Served(1) 		   Principal
Occupation(s)
during the
Past Five Years		  
William H. Rivoir III
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 57		   Senior Vice President and Assistant Secretary   January 2001 - Present   Senior Vice President, ING Investment Management Co. (January 2004 - Present). Formerly, Counsel, ING USFS Law Department (January 2003 - December 2003); and Senior Vice President, ING Investments, LLC (June 1998 - December 2002).  
Curtis F. Lee
7337 E. Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 53		   Senior Vice President and Chief Credit Officer   February 2001 - Present   Senior Vice President and Chief Credit Officer in the Senior Floating Rate Loan Group, ING Investment Management Co. (January 2001 - Present).  
Kimberly A. Anderson
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 43		   Senior Vice President   November 2003 - Present   Senior Vice President, ING Investments, LLC(2) (October 2003 - Present). Formerly, Vice President and Assistant Secretary, ING Investments, LLC(2) (January 2001 - October 2003).  
Robert Terris
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 37		   Senior Vice President   May 2006 - Present   Senior Vice President, Head of Division Operations, ING Funds (May 2006 - Present); and Vice President, Head of Division Operations, ING Funds Services, LLC(3) (March 2006 - Present). Formerly, Vice President of Administration, ING Funds Services, LLC(3) (October 2001 - March 2006).  
Robyn L. Ichilov
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 40		   Vice President   January 2000 - Present   Vice President and Treasurer, ING Funds Services, LLC(3) (October 2001 - Present) and ING Investments, LLC(2) (August 1997 - Present).  
Lauren D. Bensinger
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 54		   Vice President   Augusut 2003 - Present   Vice President and Chief Compliance Officer, ING Funds Distributor, LLC(4) (July 1995 - Present); and Vice President, ING Investments, LLC(2) (February 1996 - Present); and Director of Compliance, ING Investments, LLC(2) (October 2004 - Present). Formerly, Chief Compliance Officer, ING Investments, LLC(2) (October 2001 - October 2004).  
William Evans
10 State House Square
Hartford, Connecticut 06103
Age: 35		   Vice President   September 2007 - Present   Vice President, Head of Mutual Fund Advisory Group (April 2007 - Present), Vice President, U.S. Mutual Funds and Investment Products (May 2005 - April 2007), Senior Fund Analyst, U.S. Mutual Funds and Investment Products (May 2002 - May 2005)  
Maria M. Anderson
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 49		   Vice President   September 2004 - Present   Vice President, ING Funds Services, LLC(3) (September 2004 - Present). Formerly, Assistant Vice President, ING Funds Services, LLC(3) (October 2001 - September 2004); and Manager of Fund Accounting and Fund Compliance, ING Investments, LLC(2) (September 1999 - October 2001).  
Denise Lewis
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 44		   Vice President   January 2007 - Present   Vice President, ING Funds Services, LLC (December 2006 - Present). Formerly, Senior Vice President, UMB Investment Services Group, LLC - November 2003 - December 2006); and Vice President, Wells Fargo Funds Management, LLC (December 2000 - August 2003).  

 


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TRUSTEE AND OFFICER INFORMATION (Unaudited) (continued)

Name, Address
and Age		   Position(s) Held
with the Trust		   Term of Office
and Length of
Time Served(1) 		   Principal
Occupation(s)
during the
Past Five Years		  
Kimberly K. Palmer
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 50		   Vice President   March 2006 - Present   Vice President, ING Funds Services, LLC(3) (March 2006 - Present). Formerly, Assistant Vice President, ING Funds Services, LLC(3) (August 2004 - March 2006); Manager, Registration Statements, ING Funds Services, LLC(3) (May 2003 - August 2004); Associate Partner, AMVESCAP PLC (October 2000 - May 2003); and Director of Federal Filings and Blue Sky Filings, INVESCO Funds Group, Inc. (March 1994 - May 2003).  
Susan P. Kinens
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 31		   Assistant Vice President   February 2003 - Present   Assistant Vice President, ING Funds Services, LLC(3) (December 2002 - Present); and has held various other positions with ING Funds Services, LLC(3) for more than the last five years.  
Huey P. Falgout, Jr.
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 44		   Secretary   August 2003 - Present   Chief Counsel, ING Americas, U.S. Legal Services (September 2003 - Present). Formerly, Counsel, ING Americas, U.S. Legal Services (November 2002 - September 2003); and Associate General Counsel of AIG American General (January 1999 - November 2002).  
Theresa K. Kelety
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 45		   Assistant Secretary   August 2003 - Present   Senior Counsel, ING Americas, U.S. Legal Services (April 2003 - Present). Formerly, Senior Associate with Shearman & Sterling (February 2000 - April 2003).  

 

(1)  The officers hold office until the next annual meeting of the Trustees and until their successors shall have been elected and qualified.

(2)  ING Investments, LLC was previously named ING Pilgrim Investments, LLC. ING Pilgrim Investments, LLC is the sucessor in interest to ING Pilgrim Investments, Inc., which was previously known as Pilgrim Investments, Inc. and before that was known as Pilgrim America Investments, Inc.

(3)  ING Funds Services, LLC was previously named ING Pilgrim Group, LLC. ING Pilgrim Group, LLC is the sucessor in interest to ING Pilgrim Group, Inc., which was previously known as Pilgrim Group, Inc. and before that was known as Pilgrim America Group, Inc.

(4)  ING Funds Distributor, LLC is the sucessor in interest to ING Funds Distributor, Inc., which was previously known as ING Pilgrim Securities, Inc., and before that was known as Pilgrim Securities, Inc., and before that was known as Pilgrim America Securities, Inc.

(5)  Mr. Mathews commenced services as CEO and President of the ING Funds on November 11, 2006.

(6)  Directed Services, LLC is the sucessor in interest to Directed Services, Inc.


71


ING Senior Income Fund

ADVISORY CONTRACT APPROVAL DISCUSSION (Unaudited)

Board Consideration and Re-Approval of Investment Advisory and Sub-Advisory Contracts

Section 15(c) of the 1940 Act provides that, after an initial period, the existing investment advisory and sub-advisory contracts of ING Senior Income Fund (the "Fund") will remain in effect only if the Board of Trustees (the "Board") of the Fund, including a majority of Board members who have no direct or indirect interest in the advisory and sub-advisory contracts, and who are not "interested persons" of the Fund, as such term is defined under the 1940 Act (the "Independent Trustees"), annually review and approve them. Thus, at a meeting held on November 30, 2007, the Board, including a majority of the Independent Trustees, considered whether to renew the investment advisory contract (the "Advisory Contract") between ING Investments, LLC (the "Adviser") and the Fund and the sub-advisory contract ("Sub-Advisory Contract") with ING Investment Management Co. (the "Sub-Adviser").

The Independent Trustees also held separate meetings on October 10 and November 28, 2007 to consider the renewal of the Advisory Contract and Sub-Advisory Contract. As a result, subsequent references herein to factors considered and determinations made by the Independent Trustees include, as applicable, factors considered and determinations made on those earlier dates by the Independent Trustees.

At its November 30, 2007 meeting, the Board voted to renew the Advisory and Sub-Advisory Contracts for the Fund. In reaching these decisions, the Board took into account information furnished to it throughout the year at regular meetings of the Board and the Board's committees, as well as information prepared specifically in connection with the annual renewal process. Determinations by the Independent Trustees also took into account various factors that they believed, in light of the legal advice furnished to them by Kirkpatrick & Lockhart Preston Gates Ellis LLP ("K&L Gates"), their independent legal counsel, and their own business judgment, to be relevant. Further, while the Advisory Contract and Sub-Advisory Contract for the Fund were considered at the same Board meeting, the Trustees considered the Fund's advisory and sub-advisory relationships separately.

Provided below is an overview of the Board's contract approval process in general, as well as a discussion of certain specific factors that the Board considered at its renewal meeting. While the Board gave its attention to the information furnished, at its request, that was most relevant to its considerations, discussed below are a number of the primary factors relevant to the Board's consideration as to whether to renew the Advisory and Sub-Advisory Contracts for the one-year period ending November 30, 2008. Each Board member may have accorded different weight to the various factors in reaching his or her conclusions with respect to the Fund's advisory and sub-advisory arrangements.

Overview of the Contract Renewal and Approval Process

Several years ago, the Independent Trustees instituted a revised process by which they seek and consider relevant information when they decide whether to approve new or existing advisory and sub-advisory arrangements for the investment companies in the ING Funds complex under their jurisdiction, including the Fund's existing Advisory and Sub-Advisory Contracts. Among other actions, the Independent Trustees: retained the services of independent consultants with experience in the mutual fund industry to assist the Independent Trustees in working with the personnel employed by the Adviser or its affiliates who administer the Fund ("Management") to identify the types of information presented to the Board to inform its deliberations with respect to advisory and sub-advisory relationships and to help evaluate that information; established a specific format in which certain requested information is provided to the Board; and determined the process for reviewing such information in connection with advisory and sub-advisory contract renewals and approvals. The end result was an enhanced process which is currently employed by


72


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ADVISORY CONTRACT APPROVAL DISCUSSION (Unaudited) (continued)

Board Consideration and Re-Approval of Investment Advisory and Sub-Advisory Contracts (continued)

the Independent Trustees to review and analyze information in connection with their annual renewal of the Fund's Advisory and Sub-Advisory Contracts, as well as their review and approval of new advisory relationships.

Since the current renewal and approval process was first implemented, the Board's membership has changed substantially through periodic retirements of some Trustees and the appointment and election of new Trustees. In addition, throughout this period the Independent Trustees have reviewed and refined the renewal and approval process at least annually. The Board also established a Contracts Committee and two Investment Review Committees, including the International/Balanced/Fixed Income Funds Investment Review Committee (the "I/B/F IRC"). Among other matters, the Contracts Committee provides oversight with respect to the contracts renewal process, and the Fund is assigned to the I/B/F IRC, which provides oversight regarding, among other matters, investment performance.

The type and format of the information provided to the Board or to legal counsel for the Independent Trustees in connection with the contract approval and renewal process has been codified in the Fund's 15(c) Methodology Guide. This Guide was developed under the direction of the Independent Trustees and sets out a blueprint pursuant to which the Independent Trustees request certain information that they deem important to facilitate an informed review in connection with initial and annual approvals of advisory and sub-advisory contracts.

Management provides certain of the information requested by the 15(c) Methodology Guide in Fund Analysis and Comparison Tables ("FACT sheets") prior to the Independent Trustees' review of advisory and sub-advisory arrangements (including the Funds' Advisory and Sub-Advisory Contracts). The Independent Trustees previously retained an independent firm to verify and test the accuracy of certain FACT sheet data for a representative sample of funds in the ING Funds complex. In 2007, the Contracts Committee employed the services of an independent consultant to assist in its review and analysis of, among other matters, the 15(c) Methodology Guide, the content and format of the FACT sheets, and proposed selected peer groups of investment companies ("SPGs") to be used by the Fund for certain comparison purposes during the renewal process.

As part of an ongoing process, the Contracts Committee recommends or considers recommendations from Management for refinements to the 15(c) Methodology Guide and other aspects of the review process, and the Board's Investment Review Committees (including the I/B/F IRC) review benchmarks used to assess the performance of the funds in the ING Funds complex. The Investment Review Committees may apply a heightened level of scrutiny in cases where performance has lagged an ING Fund's relevant benchmark and/or SPG.

The Board employed its process for reviewing contracts when considering the renewals of the Fund's Advisory and Sub-Advisory Contracts that would be effective through November 30, 2008. Set forth below is a discussion of many of the Board's primary considerations and conclusions resulting from this process.

Nature, Extent and Quality of Service

In determining whether to approve the Advisory and Sub-Advisory Contracts for the Fund for the year ending November 30, 2008, the Independent Trustees received and evaluated such information as they deemed necessary regarding the nature, extent and quality of services provided to the Fund by the Adviser and Sub-Adviser. This included information regarding the Adviser and Sub-Adviser provided throughout the year at regular meetings of the Board and its committees, as well as information furnished in connection with the contract renewal meetings.


73


ING Senior Income Fund

ADVISORY CONTRACT APPROVAL DISCUSSION (Unaudited) (continued)

Board Consideration and Re-Approval of Investment Advisory and Sub-Advisory Contracts (continued)

The materials requested by and provided to the Board and/or to K&L Gates prior to the November 30, 2007 Board meeting included, among other information, the following items: (1) FACT sheets for the Fund that provided information regarding the performance and expenses of the Fund and other similarly managed funds in its SPG, as well as information regarding the Fund's investment portfolio, objective and strategies; (2) the 15(c) Methodology Guide, which describes how the FACT sheets were prepared, including the manner in which its benchmark and SPG were selected and how profitability was determined; (3) responses from the Adviser and Sub-Adviser to a series of questions posed by K&L Gates on behalf of the Trustees; (4) copies of the form of Advisory Contract and Sub-Advisory Contract; (5) copies of the Forms ADV for the Adviser and Sub-Adviser; (6) financial statements for the Adviser and Sub-Adviser; (7) drafts of narrative summaries addressing key factors the Board customarily considers in evaluating the renewals of the ING Funds' (including the Fund's) advisory and sub-advisory contracts, including a written analysis for the Fund of how its performance, fees and expenses compare to its SPG and/or designated benchmarks; (8) independent analyses of Fund performance by the Fund's Chief Investment Risk Officer; (9) information regarding net asset flows into and out of the Fund; and (10) other information relevant to the Board's evaluations.

The Fund's Class A shares were used for purposes of certain comparisons to the funds in its SPG. Class A shares were selected so that the Fund class with the longest performance history was compared to the analogous class of shares for each SPG fund. The mutual funds included in the Fund's SPG were selected based upon criteria designed to mirror the Fund class being compared to the SPG.

In arriving at its conclusions with respect to the Advisory Contract, the Board was mindful of the "manager-of-managers" platform of the ING Funds that has been developed by Management. The Board also considered the techniques that the Adviser has developed, at the Board's direction, to screen and perform due diligence on Sub-Advisers that are recommended to the Board to manage the investment portfolios of the Funds in the ING Funds complex. The Board noted the resources that the Adviser has committed to the Board and to the I/B/F IRC to assist the Board and the I/B/F IRC with their assessment of the investment performance of the Fund on an ongoing basis throughout the year. This includes the appointment of a Chief Investment Risk Officer and his staff, who report directly to the Board and who have developed attribution analyses and other metrics used by the Board's Investment Review Committees to analyze the key factors underlying investment performance for the funds in the ING Funds complex.

The Board also noted the techniques used by the Adviser to monitor the performance of the Sub-Adviser and the proactive approach that the Adviser, working in cooperation with the I/B/F IRC, has taken to advocate or recommend, when it believed appropriate, changes designed to assist in improving the Fund's performance. In considering the Fund's Advisory Contract, the Board considered the extent of benefits provided to the Fund's shareholders, beyond advisory services, from being part of the ING family of Funds. The Board also took into account the Adviser's efforts in recent years to reduce the expenses of the ING Funds through renegotiated arrangements with the ING Funds' service providers.

Further, the Board received periodic reports showing that the investment policies and restrictions for the Fund were consistently complied with and other periodic reports covering matters such as compliance by Adviser and Sub-Adviser personnel with codes of ethics. The Board considered reports from the Fund's Chief Compliance Officer ("CCO") evaluating whether the regulatory compliance systems and procedures of the Adviser and Sub-Adviser are reasonably designed to assure compliance with the federal securities laws, including those related to, among others, late


74


ING Senior Income Fund

ADVISORY CONTRACT APPROVAL DISCUSSION (Unaudited) (continued)

Board Consideration and Re-Approval of Investment Advisory and Sub-Advisory Contracts (continued)

trading and market timing, best execution, fair value pricing, proxy voting and trade allocation practices. The Board also took into account the CCO's annual and periodic reports and recommendations with respect to service provider compliance programs. In this regard, the Board also considered the policies and procedures developed by the CCO in consultation with the Board's Compliance Committee that guide the CCO's compliance oversight function.

The Board reviewed the level of staffing, quality and experience of the Fund's portfolio management team. The Board took into account the respective resources and reputations of the Adviser and the Sub-Adviser, and evaluated the ability of the Adviser and the Sub-Adviser to attract and retain qualified investment advisory personnel. The Board also considered the adequacy of the resources committed to the Fund (and other relevant funds in the ING Funds complex) by the Adviser and the Sub-Adviser, and whether those resources are commensurate with the needs of the Fund and are sufficient to sustain appropriate levels of performance and compliance needs.

Based on their deliberations and the materials presented to them, the Board concluded that the advisory and related services provided by the Adviser and Sub-Adviser are appropriate in light of the Fund's operations, the competitive landscape of the investment company business, and investor needs, and that the nature and quality of the overall services provided by the Adviser and Sub-Adviser were appropriate.

Fund Performance

In assessing advisory and sub-advisory relationships, the Board placed emphasis on the net investment returns of the Fund. While the Board considered the performance reports and discussions with portfolio managers at Board and committee meetings during the year, particular attention in assessing performance was given to the FACT sheets furnished in connection with the renewal process. The FACT sheet prepared for the Fund included its investment performance compared to the Fund's Morningstar category median, Lipper category median, SPG and primary benchmark. The Board's findings specific to the Fund's performance are discussed under "Specific Factors Considered," below.

Economies of Scale

When evaluating the reasonableness of advisory fee rates, the Board also considered whether economies of scale will be realized by the Adviser as the Fund grows larger and the extent to which any such economies are reflected in contractual fee rates. In this regard, the Board considered the compensation under an Advisory Contract with level fees that does not include breakpoints, taking into account that the Fund is a closed-end fund. The Board also considered the extent to which economies of scale could be realized through waivers, reimbursements or expense reductions.

In evaluating economies of scale, the Independent Trustees also considered prior periodic management reports and industry information on this topic, and the Independent Trustees who were Board members at that time also considered a November 2006 evaluation and analysis presented to them by an independent consultant regarding fee breakpoint arrangements and economies of scale.


75


ING Senior Income Fund

ADVISORY CONTRACT APPROVAL DISCUSSION (Unaudited) (continued)

Board Consideration and Re-Approval of Investment Advisory and Sub-Advisory Contracts (continued)

Information Regarding Services to Other Clients

The Board requested and, if received, considered information regarding the nature of services and fee rates offered by the Adviser and the Sub-Adviser to other clients, including other registered investment companies and institutional accounts. When fee rates offered to other clients differed materially from those charged to the Fund, the Board considered any underlying rationale provided by the Adviser or Sub-Adviser for these differences. The Board also noted that the fee rates charged to the Fund and similar institutional clients may differ materially due to the different services and additional regulatory overlay associated with registered investment companies, such as the Fund.

Fee Rates and Profitability

The Board reviewed and considered the contractual investment advisory fee rate, combined with the administrative fee rate, payable by the Fund to the Adviser. The Board also considered the contractual sub-advisory fee rate payable by the Adviser to the Sub-Adviser for sub-advisory services. In addition, the Board considered any existing and proposed fee waivers and expense limitations applicable to the fees payable by the Fund.

The Board considered the fee structure of the Fund as it relates to the services provided under the contracts and the potential fall-out benefits to the Adviser and Sub-Adviser and their respective affiliates from their association with the Fund. For the Fund, the Board determined that the fees payable to the Adviser and Sub-Adviser are reasonable for the services that each performs, which were considered in light of the nature and quality of the services that each has performed and is expected to perform.

The Board considered information on revenues, costs and profits realized by the Adviser, which was prepared by Management in accordance with the allocation methodology (including related assumptions) specified in the 15(c) Methodology Guide. In analyzing the profitability of the Adviser in connection with its services to the Fund, the Board took into account the sub-advisory fee rate payable by the Adviser to the Sub-Adviser. The Board also considered information that it requested and was provided by Management with respect to the profitability of service providers affiliated with the Adviser, as well as information provided by the Sub-Adviser with respect to its profitability.

The Board determined that it had requested and received sufficient information to gain a reasonable understanding regarding the Adviser's and the Sub-Adviser's profitability. The Board also recognized that profitability analysis is not an exact science and there is no uniform methodology for determining profitability for this purpose. In this context, the Board realized that Management's calculations regarding its costs incurred in establishing the infrastructure necessary for the Fund's operations may not be fully reflected in the expenses allocated to the Fund in determining profitability, and that the information presented may not portray all of the costs borne by Management or capture Management's entrepreneurial risk associated with offering and managing a mutual fund complex in the current regulatory and market environment.

Based on the information on revenues, costs, and profitability considered by the Board, and after considering the factors described in this section, the Board concluded that the profits, if any, realized by the Adviser and Sub-Adviser were not excessive. In making its determinations, the Board based its conclusions on the reasonableness of the advisory and sub-advisory fees of the Adviser and Sub-Adviser primarily on the factors described for the Fund below.


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ADVISORY CONTRACT APPROVAL DISCUSSION (Unaudited) (continued)

Board Consideration and Re-Approval of Investment Advisory and Sub-Advisory Contracts (continued)

Specific Factors Considered

The following paragraphs outline certain of the specific factors that the Board considered, and the conclusions reached, at its November 30, 2007 meeting in relation to renewing the Fund's current Advisory Contract and Sub-Advisory Contract for the year ending November 30, 2008. These specific factors are in addition to those considerations discussed above. In each case, the Fund's performance was compared to its Morningstar category median and its primary benchmark, a broad-based securities market index that appears in the Fund's prospectus. With respect to Morningstar quintile rankings, the first quintile represents the highest (best) performance and the fifth quintile represents the lowest performance. The Fund's management fee and expense ratio were compared to the fees and expense ratios of the funds in its SPG.

In considering whether to approve the renewal of the Advisory and Sub-Advisory Contracts for the Fund, the Board considered that, based on performance data for the periods ended June 30, 2007: (1) the Fund outperformed its Morningstar category median for all periods presented; (2) the Fund outperformed its primary benchmark for the year-to-date and one-year periods, but underperformed for the most recent calendar quarter, three-year, and five-year periods; and (3) the Fund is ranked in the first (highest) quintile of its Morningstar category for the one-year period, and the second quintile for the most recent calendar quarter, year-to-date, three-year, and five-year periods.

In considering the fees payable under the Advisory and Sub-Advisory Contracts for the Fund, the Board took into account the factors described above and also considered: (1) the fairness of the compensation under an Advisory Contract with level fees that does not include breakpoints; (2) the pricing structure (including the expense ratio to be borne by shareholders) of ING Senior Income Fund, as compared to its SPG, including that: (a) the management fee (inclusive of 0.10% administration fee) for the Fund is above the median and above the average management fees of the funds in its SPG; and (b) the expense ratio for the Fund is above the median and above the average expense ratios of the funds in its SPG.

After its deliberation, the Board reached the following conclusions: (1) the Fund's management fee rate is reasonable in the context of all factors considered by the Board; (2) the Fund's expense ratio is reasonable in the context of all factors considered by the Board; (3) the Fund's performance is reasonable in the context of all factors considered by the Board; and (4) the sub-advisory fee rate payable by the Adviser to the Sub-Adviser is reasonable in the context of all factors considered by the Board. Based on these conclusions and other factors, the Board voted to renew the Advisory and Sub-Advisory Contracts for the Fund for the year ending November 30, 2008. During this renewal process, different Board members may have given different weight to different individual factors and related conclusions.


77



Investment Adviser

ING Investments, LLC
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258

Sub-Adviser

ING Investment Management Co.
230 Park Avenue
New York, New York 10169

Administrator

ING Funds Services, LLC
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258

Independent Registered Public
Accounting Firm

KPMG LLP
99 High Street
Boston, Massachusetts 02110

Institutional Investors and Analysts

Call ING Senior Income Fund
1-800-336-3436

Written Requests

Please mail all account inquiries and other comments to:
ING Senior Income Fund
c/o ING Funds Services, LLC
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258

Distributor

ING Funds Distributor, LLC
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258

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

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.

PRAR-USIF

(0208-042508)



 

Item 2. Code of Ethics.

 

As of the end of the period covered by this report, Registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to the Registrant’s principal executive officer and principal financial officer.  There were no amendments to the Code during the period covered by the report.  The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code during the period covered by this report.  The code of ethics is filed herewith pursuant to Item 10(a)(1), Exhibit 99.CODE ETH.

 

Item 3. Audit Committee Financial Expert.

 

The Board of Trustees has determined that J. Michael Earley is an audit committee financial expert, as defined in Item 3 of Form N-CSR.  Mr. Earley is “independent” for purposes of Item 3 of Form N-CSR.

 

Item 4.  Principal Accountant Fees and Services.

 

(a)           Audit Fees:  The aggregate fees billed for each of the last two fiscal years for professional services rendered by KPMG LLP (“KPMG”), the principal accountant for the audit of the registrant’s annual financial statements, for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $66,000 for the year ended February 29, 2008 and $68,750 for the year ended February 28, 2007.

 

(b)           Audit-Related Fees:  The aggregate fees billed in each of the last two fiscal years for assurance and related services by KPMG that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the year ended February 29, 2008 and $3,487 for the year ended February 28, 2007.

 

(c)           Tax Fees:  The aggregate fees billed in each of the last two fiscal years for professional services rendered by KPMG for tax compliance, tax advice, and tax planning were $8,749 for the year ended February 29, 2008 and $11,928 for the year ended February 28, 2007.  Such services included review of excise distribution calculations (if applicable), preparation of the Funds’ federal, state and excise tax returns, tax services related to mergers and routine consulting.

 

(d)           All Other Fees:  None.

 

(e) (1)      Audit Committee Pre-Approval Policies and Procedures

 

2


 

AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY

 

I.              Statement of Principles

 

Under the Sarbanes-Oxley Act of 2002 (the “Act”), the Audit Committee of the Board of Directors or Trustees (the “Committee”) of the ING Funds (each a “Fund,” collectively, the “Funds”) set out on Exhibit A to this Audit and Non-Audit Services Pre-Approval Policy (“Policy”) is responsible for the oversight of the work of the Funds’ independent auditors. As part of its responsibilities, the Committee must pre-approve the audit and non-audit services performed by the auditors in order to assure that the provision of these services does not impair the auditors’ independence from the Funds. The Committee has adopted, and the Board has ratified, this Policy, which sets out the procedures and conditions under which the services of the independent auditors may be pre-approved.

 

Under Securities and Exchange Commission (“SEC”) rules promulgated in accordance with the Act, the Funds may establish two different approaches to pre-approving audit and non-audit services. The Committee may approve services without consideration of specific case-by-case services (“general pre-approval”) or it may pre-approve specific services (“specific pre-approval”). The Committee believes that the combination of these approaches contemplated in this Policy results in an effective and efficient method for pre-approving audit and non-audit services to be performed by the Funds’ independent auditors. Under this Policy, services that are not of a type that may receive general pre-approval require specific pre-approval by the Committee. Any proposed services that exceed pre-approved cost levels or budgeted amounts will also require the Committee’s specific pre-approval.

 

For both types of approval, the Committee considers whether the subject services are consistent with the SEC’s rules on auditor independence and that such services are compatible with maintaining the auditors independence. The Committee also considers whether a particular audit firm is in the best position to provide effective and efficient services to the Funds. Reasons that the auditors are in the best position include the auditors’ familiarity with the Funds’ business, personnel, culture, accounting systems, risk profile, and other factors, and whether the services will enhance the Funds’ ability to manage and control risk or improve audit quality. Such factors will be considered as a whole, with no one factor being determinative.

 

The appendices attached to this Policy describe the audit, audit-related, tax-related, and other services that have the Committee’s general pre-approval. For any service that has been approved through general pre-approval, the general pre-approval will remain in place for a period 12 months from the date of pre-approval, unless the Committee determines that a different period is appropriate. The Committee will annually review and pre-approve the services that may be provided by the independent auditors without specific pre-approval. The Committee will revise the list of services subject to general pre-approval as appropriate. This Policy does not serve as a delegation to Fund management of the Committee’s duty to pre-approve services performed by the Funds’ independent auditors.

 


 

II.            Audit Services

 

The annual audit services engagement terms and fees are subject to the Committee’s specific pre-approval. Audit services are those services that are normally provided by auditors in connection with statutory and regulatory filings or engagements or those that generally only independent auditors can reasonably provide. They include the Funds’ annual financial statement audit and procedures that the independent auditors must perform in order to form an opinion on the Funds’ financial statements (e.g., information systems and procedural reviews and testing). The Committee will monitor the audit services engagement and approve any changes in terms, conditions or fees deemed by the Committee to be necessary or appropriate.

 

The Committee may grant general pre-approval to other audit services, such as statutory audits and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or issued in connection with securities offerings.

 

The Committee has pre-approved the audit services listed on Appendix A. The Committee must specifically approve all audit services not listed on Appendix A.

 

III.           Audit-related Services

 

Audit-related services are assurance and related services that are reasonably related to the performance of the audit or the review of the Funds’ financial statements or are traditionally performed by the independent auditors. The Committee believes that the provision of audit-related services will not impair the independent auditors’ independence, and therefore may grant pre-approval to audit-related services. Audit-related services include accounting consultations related to accounting, financial reporting or disclosure matters not classified as “audit services;” assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures relating to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Form N-SAR or Form N-CSR.

 

The Committee has pre-approved the audit-related services listed on Appendix B. The Committee must specifically approve all audit-related services not listed on Appendix B.

 

IV.           Tax Services

 

The Committee believes the independent auditors can provide tax services to the Funds, including tax compliance, tax planning, and tax advice, without compromising the auditors’ independence. Therefore, the Committee may grant general pre-approval with respect to tax services historically provided by the Funds’ independent auditors that do not, in the Committee’s view, impair auditor independence and that are consistent with the SEC’s rules on auditor independence.

 

The Committee will not grant pre-approval if the independent auditors initially recommends a transaction the sole business purpose of which is tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Committee may consult

 

2


 

outside counsel to determine that tax planning and reporting positions are consistent with this Policy.

 

The Committee has pre-approved the tax-related services listed on Appendix C. The Committee must specifically approve all tax-related services not listed on Appendix C.

 

V.            Other Services

 

The Committee believes it may grant approval of non-audit services that are permissible services for independent auditors to a Fund. The Committee has determined to grant general pre-approval to other services that it believes are routine and recurring, do not impair auditor independence, and are consistent with SEC rules on auditor independence.

 

The Committee has pre-approved the non-audit services listed on Appendix D. The Committee must specifically approve all non-audit services not listed on Appendix D.

 

A list of the SEC’s prohibited non-audit services is attached to this Policy as Appendix E. The SEC’s rules and relevant guidance should be consulted to determine the precise definitions of these impermissible services and the applicability of exceptions to certain of the SEC’s prohibitions.

 

VI.           Pre-approval of Fee levels and Budgeted Amounts

 

The Committee will annually establish pre-approval fee levels or budgeted amounts for audit, audit-related, tax and non-audit services to be provided to the Funds by the independent auditors. Any proposed services exceeding these levels or amounts require the Committee’s specific pre-approval. The Committee considers fees for audit and non-audit services when deciding whether to pre-approve services. The Committee may determine, for a pre-approval period of 12 months, the appropriate ratio between the total amount of fees for the Fund’s audit, audit-related, and tax services (including fees for services provided to Fund affiliates that are subject to pre-approval), and the total amount of fees for certain permissible non-audit services for the Fund classified as other services (including any such services provided to Fund affiliates that are subject to pre-approval).

 

VII.         Procedures

 

Requests or applications for services to be provided by the independent auditors will be submitted to management. If management determines that the services do not fall within those services generally pre-approved by the Committee and set out in the appendices to these procedures, management will submit the services to the Committee or its delagee. Any such submission will include a detailed description of the services to be rendered. Notwithstanding this paragraph, the Committee will, on a quarterly basis, receive from the independent auditors a list of services provided for the previous calendar quarter on a cumulative basis by the auditors during the Pre-Approval Period.

 

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VIII.        Delegation

 

The Committee may delegate pre-approval authority to one or more of the Committee’s members. Any member or members to whom such pre-approval authority is delegated must report any pre-approval decisions, including any pre-approved services, to the Committee at its next scheduled meeting. The Committee will identify any member to whom pre-approval authority is delegated in writing. The member will retain such authority for a period of 12 months from the date of pre-approval unless the Committee determines that a different period is appropriate. The period of delegated authority may be terminated by the Committee or at the option of the member.

 

IX.           Additional Requirements

 

The Committee will take any measures the Committee deems necessary or appropriate to oversee the work of the independent auditors and to assure the auditors’ independence from the Funds. This may include reviewing a formal written statement from the independent auditors delineating all relationships between the auditors and the Funds, consistent with Independence Standards Board No. 1, and discussing with the auditors their methods and procedures for ensuring independence.

 

Last Approved:  November 29, 2007

 

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Appendix A
Pre-Approved Audit Services for the Pre-Approval Period January 1, 2008 through December 31, 2008

 

Service

 

The Fund(s)

 

Fee Range

 

 

 

 

 

Statutory audits or financial audits (including tax services associated with audit services)

 

Ö

 

As presented to Audit Committee (1)

 

 

 

 

 

Services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., consents), and assistance in responding to SEC comment letters.

 

Ö

 

Not to exceed $9,750 per filing

 

 

 

 

 

Consultations by Fund management with respect to accounting or disclosure treatment of transactions or events and/or the actual or potential effect of final or proposed rules, standards or interpretations by the SEC, Financial Accounting Standards Board, or other regulatory or standard setting bodies.

 

Ö

 

Not to exceed $8,000 during the Pre-Approval
Period

 

 

 

 

 

Seed capital audit and related review and issuance of consent on the N-2 registration statement

 

Ö

 

Not to exceed $12,600 per audit

 

(1)           For new Funds launched during the Pre-Approval Period, the fee ranges pre-approved will be the same as those for existing Funds, pro-rated in accordance with inception dates as provided in the auditors’ Proposal or any Engagement Letter covering the period at issue.  Fees in the Engagement Letter will be controlling.

 

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Appendix B
Pre-Approved Audit-Related Services for the Pre-Approval Period January 1, 2008 through December 31, 2008

 

Service

 

The Fund(s)

 

Fund Affiliates

 

Fee Range

 

 

 

 

 

 

 

Services related to Fund mergers (Excludes tax services - See Appendix C for tax services associated with Fund mergers)

 

Ö

 

Ö

 

Not to exceed $10,000 per merger

 

 

 

 

 

 

 

Consultations by Fund management with respect to accounting or disclosure treatment of transactions or events and/or the actual or potential effect of final or proposed rules, standards or interpretations by the SEC, Financial Accounting Standards Board, or other regulatory or standard setting bodies. [Note:  Under SEC rules some consultations may be “audit” services and others may be “audit-related” services.]

 

Ö

 

 

 

Not to exceed $5,000 per occurrence during the Pre-Approval Period

 

 

 

 

 

 

 

Review of the Funds’ semi-annual financial statements

 

Ö

 

 

 

Not to exceed $2,200 per set of financial statements per fund

 

 

 

 

 

 

 

Reports to regulatory or government agencies related to the annual engagement

 

Ö

 

 

 

Up to $5,000 per occurrence during the Pre-Approval Period

 

 

 

 

 

 

 

Regulatory compliance assistance

 

Ö

 

Ö

 

Not to exceed $5,000 per quarter

 

 

 

 

 

 

 

Training courses

 

 

 

Ö

 

Not to exceed $2,000 per course

 

 

 

 

 

 

 

For Prime Rate Trust, agreed upon procedures for quarterly reports to rating agencies

 

Ö

 

 

 

Not to exceed $9,450 per quarter

 

 

 

 

 

 

 

For Prime Rate Trust and Senior Income Fund, agreed upon procedures for the Revolving Credit and Security Agreement with Citigroup

 

Ö

 

 

 

Not to exceed $21,000 per fund per year

 

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Appendix C
Pre-Approved Tax Services for the Pre-Approval Period January 1, 2008 through December 31, 2008

 

Service

 

The Fund(s)

 

Fund
Affiliates

 

Fee Range

 

 

 

 

 

 

 

Preparation of federal and state income tax returns and federal excise tax returns for the Funds including assistance and review with excise tax distributions

 

Ö

 

 

 

As presented to Audit Committee (2)

 

 

 

 

 

 

 

Review of IRC Sections 851(b) and 817(h) diversification testing on a real-time basis

 

Ö

 

 

 

As presented to Audit Committee (2)

 

 

 

 

 

 

 

Assistance and advice regarding year-end reporting for 1099’s

 

Ö

 

 

 

As presented to Audit Committee (2)

 

 

 

 

 

 

 

Tax assistance and advice regarding statutory, regulatory or administrative developments

 

Ö

 

Ö

 

Not to exceed $5,000 for the Funds or for the Funds’ investment adviser during the Pre-Approval Period

 

(2)           For new Funds launched during the Pre-Approval Period, the fee ranges pre-approved will be the same as those for existing Funds, pro-rated in accordance with inception dates as provided in the auditors’ Proposal or any Engagement Letter covering the period at issue.  Fees in the Engagement Letter will be controlling.

 

7


 

Service

 

The Fund(s)

 

Fund
Affiliates

 

Fee Range

Tax training courses

 

 

 

Ö

 

Not to exceed $2,000 per course during the Pre-Approval Period

 

 

 

 

 

 

 

Tax services associated with Fund mergers

 

Ö

 

Ö

 

Not to exceed $4,000 per fund per merger during the Pre-Approval Period

 

 

 

 

 

 

 

Other tax-related assistance and consultation, including, without limitation, assistance in evaluating derivative financial instruments and international tax issues, qualification and distribution issues, and similar routine tax consultations.

 

Ö

 

 

 

Not to exceed $120,000 during the Pre-Approval Period

 

8


 

Appendix D
Pre-Approved Other Services for the Pre-Approval Period January 1, 2008 through December 31, 2008

 

Service

 

The Fund(s)

 

Fund Affiliates

 

Fee Range

 

 

 

 

 

 

 

Agreed-upon procedures for Class B share 12b-1 programs

 

 

 

Ö

 

Not to exceed $50,000 during the Pre-Approval Period

 

 

 

 

 

 

 

Security counts performed pursuant to Rule 17f-2 of the 1940 Act (i.e., counts for Funds holding securities with affiliated sub-custodians)

Cost to be borne 50% by the Funds and 50% by ING Investments, LLC.

 

Ö

 

Ö

 

Not to exceed $5,000 per Fund during the Pre-Approval Period

 

 

 

 

 

 

 

Agreed upon procedures for 15 (c) FACT Books

 

Ö

 

 

 

Not to exceed $35,000 during the Pre-Approval Period

 

9


 

Appendix E

 

Prohibited Non-Audit Services

Dated:            January 1, 2008

 

•      Bookkeeping or other services related to the accounting records or financial statements of the Funds

 

•      Financial information systems design and implementation

 

•      Appraisal or valuation services, fairness opinions, or contribution-in-kind reports

 

•      Actuarial services

 

•      Internal audit outsourcing services

 

•      Management functions

 

•      Human resources

 

•      Broker-dealer, investment adviser, or investment banking services

 

•      Legal services

 

•      Expert services unrelated to the audit

 

•      Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible

 

10


 

EXHIBIT A

 

ING EQUITY TRUST

ING FUNDS TRUST

ING ASIA PACIFIC HIGH DIVIDEND EQUITY INCOME FUND

ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND

ING GLOBAL EQUITY DIVIDEND AND PREMIUM OPPORTUNITY FUND

ING INTERNATIONAL HIGH DIVIDEND EQUITY INCOME FUND

ING RISK MANAGED NATURAL RESOURCES FUND

ING INVESTMENT FUNDS, INC.

ING INVESTORS TRUST

ING MAYFLOWER TRUST

ING MUTUAL FUNDS

ING PARTNERS, INC.

ING PRIME RATE TRUST

ING SENIOR INCOME FUND

ING SEPARATE PORTFOLIOS TRUST

ING VARIABLE INSURANCE TRUST

ING VARIABLE PRODUCTS TRUST

 


 

(e) (2)      Percentage of services referred to in 4(b) — (4)(d) that were approved by the audit committee 

 

100% of the services were approved by the audit committee.

 

(f)            Percentage of hours expended attributable to work performed by other than full time employees of KPMG if greater than 50%.

 

Not applicable.

 

(g)           Non-Audit Fees:  The non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were $1,394,538 for the year ended February 29, 2008 and $901,328 for the year ended February 28, 2007.

 

(h)           Principal Accountants Independence:  The Registrant’s Audit committee has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is compatible with maintaining KPMG’s independence.

 

Item 5.  Audit Committee of Listed Registrants.

 

a.             The registrant has a separately-designated standing audit committee.  The members are J. Michael Earley, Patricia W. Chadwick and Peter S. Drotch.

 

b.             Not applicable.

 

Item 6.  Schedule of Investments

 

Schedule is included as part of the report to shareholders filed under Item 1 of this Form.

 

Item 7.  Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment companies.

 

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ING FUNDS

 

PROXY VOTING PROCEDURES AND GUIDELINES

 

Effective Date:  July 10, 2003

Revision Date:  March 27, 2008

 

I.                                         INTRODUCTION

 

The following are the Proxy Voting Procedures and Guidelines (the “Procedures and Guidelines”) of the ING Funds set forth on Exhibit 1 attached hereto and each portfolio or series thereof, except for any “Sub-Adviser-Voted Series” identified on Exhibit 1 and further described in Section III below (each non-Sub-Adviser-Voted Series hereinafter referred to as a “Fund” and collectively, the “Funds”).  The purpose of these Procedures and Guidelines is to set forth the process by which each Fund subject to these Procedures and Guidelines will vote proxies related to the equity assets in its investment portfolio (the “portfolio securities”).  The Procedures and Guidelines have been approved by the Funds’ Boards of Trustees/Directors(1) (each a “Board” and collectively, the “Boards”), including a majority of the independent Trustees/Directors(2) of the Board.  These Procedures and Guidelines may be amended only by the Board.  The Board shall review these Procedures and Guidelines at its discretion, and make any revisions thereto as deemed appropriate by the Board.

 

II.                                     COMPLIANCE COMMITTEE

 

The Boards hereby delegate to the Compliance Committee of each Board (each a “Committee” and collectively, the “Committees”) the authority and responsibility to oversee the implementation of these Procedures and Guidelines, and where applicable, to make determinations on behalf of the Board with respect to the voting of proxies on behalf of each Fund.  Furthermore, the Boards hereby delegate to each Committee the authority to review and approve material changes to proxy voting procedures of any Fund’s investment adviser (the “Adviser”).  The Proxy Voting Procedures of the Adviser (the “Adviser Procedures”) are attached hereto as Exhibit 2.  Any determination regarding the voting of proxies of each Fund that is made by a Committee, or any member thereof, as permitted herein, shall be deemed to be a good faith determination regarding the voting of proxies by the full Board.  Each Committee

 

(1)

 

Reference in these Procedures to one or more Funds shall, as applicable, mean those Funds that are under the jurisdiction of the particular Board or Compliance Committee at issue. No provision in these Procedures is intended to impose any duty upon the particular Board or Compliance Committee with respect to any other Fund.

 

 

 

(2)

 

The independent Trustees/Directors are those Board members who are not “interested persons” of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940.

 


 

may rely on the Adviser through the Agent, Proxy Coordinator and/or Proxy Group (as such terms are defined for purposes of the Adviser Procedures) to deal in the first instance with the application of these Procedures and Guidelines.  Each Committee shall conduct itself in accordance with its charter.

 

III.                                 DELEGATION OF VOTING AUTHORITY

 

Except as otherwise provided for herein, the Board hereby delegates to the Adviser to each Fund the authority and responsibility to vote all proxies with respect to all portfolio securities of the Fund in accordance with then current proxy voting procedures and guidelines that have been approved by the Board.  The Board may revoke such delegation with respect to any proxy or proposal, and assume the responsibility of voting any Fund proxy or proxies as it deems appropriate.  Non-material amendments to the Procedures and Guidelines may be approved for immediate implementation by the President or Chief Financial Officer of a Fund, subject to ratification at the next regularly scheduled meeting of the Compliance Committee.

 

A Board may elect to delegate the voting of proxies to the Sub-Adviser of a portfolio or series of the ING Funds.  In so doing, the Board shall also approve the Sub-Adviser’s proxy policies for implementation on behalf of such portfolio or series (a “Sub-Adviser-Voted Series”).  Sub-Adviser-Voted Series shall not be covered under these Procedures and Guidelines but rather shall be covered by such Sub-Adviser’s proxy policies, provided that the Board, including a majority of the independent Trustees/Directors(1), has approved them on behalf of such Sub-Adviser-Voted Series.

 

When a Fund participates in the lending of its securities and the securities are on loan at record date, proxies related to such securities will not be forwarded to the Adviser by the Fund’s custodian and therefore will not be voted.  However, the Adviser shall use best efforts to recall or restrict specific securities from loan for the purpose of facilitating a “material” vote as described in the Adviser Procedures.

 

Funds that are “funds-of-funds” will “echo” vote their interests in underlying mutual funds, which may include ING Funds (or portfolios or series thereof) other than those set forth on Exhibit 1 attached hereto.  This means that, if the fund-of-funds must vote on a proposal with respect to an underlying investment company, the fund-of-funds will vote its interest in that underlying fund in the same proportion all other shareholders in the investment company voted their interests.

 

A fund that is a “feeder” fund in a master-feeder structure does not echo vote.  Rather, it passes votes requested by the underlying master fund to its shareholders.  This means that, if the feeder fund is solicited by the master fund, it will request instructions from its own shareholders, either directly or, in the case of an insurance-dedicated Fund, through an insurance product or retirement plan, as to the manner in which to vote its interest in an underlying master fund.

 

(1)

 

The independent Trustees/Directors are those Board members who are not “interested persons” of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940.

 

2


 

When a Fund is a feeder in a master-feeder structure, proxies for the portfolio securities owned by the master fund will be voted pursuant to the master fund’s proxy voting policies and procedures.  As such, and except as otherwise noted herein with respect to vote reporting requirements, feeder Funds shall not be subject to these Procedures and Guidelines.

 

IV.                                APPROVAL AND REVIEW OF PROCEDURES

 

Each Fund’s Adviser has adopted proxy voting procedures in connection with the voting of portfolio securities for the Funds as attached hereto in Exhibit 2.  The Board hereby approves such procedures.  All material changes to the Adviser Procedures must be approved by the Board or the Compliance Committee prior to implementation; however, the President or Chief Financial Officer of a Fund may make such non-material changes as they deem appropriate, subject to ratification by the Board or the Compliance Committee at its next regularly scheduled meeting.

 

V.                                    VOTING PROCEDURES AND GUIDELINES

 

The Guidelines that are set forth in Exhibit 3 hereto specify the manner in which the Funds generally will vote with respect to the proposals discussed therein.

 

Unless otherwise noted, the defined terms used hereafter shall have the same meaning as defined in the Adviser Procedures

 

A.                                   Routine Matters
 

The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear “For,” “Against,” “Withhold” or “Abstain” on a proposal.  However, the Agent shall be directed to refer any proxy proposal to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional (as such term is defined for purposes of the Adviser Procedures) recommends a vote contrary to the Guidelines.

 

B.                                     Matters Requiring Case-by-Case Consideration

 

The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted “case-by-case” consideration.

 

Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.

 

Except in cases in which the Proxy Group has previously provided the Proxy Coordinator

 

3


 

with standing instructions to vote in accordance with the Agent’s recommendation, the Proxy Coordinator will forward the Agent’s analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent or any other source to the Proxy Group.  The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.

 

The Proxy Coordinator shall use best efforts to convene the Proxy Group with respect to all matters requiring its consideration.  In the event quorum requirements cannot be timely met in connection with a voting deadline, it shall be the policy of the Funds to vote in accordance with the Agent’s recommendation, unless the Agent’s recommendation is deemed to be conflicted as provided for under the Adviser Procedures, in which case no action shall be taken on such matter (i.e., a “Non-Vote”).

 

1.

 

Within-Guidelines Votes: Votes in Accordance with a Fund’s Guidelines and/or, where applicable, Agent Recommendation

 

In the event the Proxy Group, and where applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in this manner.  Except as provided for herein, no Conflicts Report (as such term is defined for purposes of the Adviser Procedures) is required in connection with Within-Guidelines Votes.

 

2.

 

Non-Votes:  Votes in Which No Action is Taken

 

The Proxy Group may recommend that a Fund refrain from voting under circumstances including, but not limited to, the following:  (1) if the economic effect on shareholders’ interests or the value of the portfolio holding is indeterminable or insignificant, e.g., proxies in connection with fractional shares, securities no longer held in the portfolio of an ING Fund or proxies being considered on behalf of a Fund that is no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g., certain international proxies, particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security.  In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy.  The Proxy Group may provide the Proxy Coordinator with standing instructions on parameters that would dictate a Non-Vote without the Proxy Group’s review of a specific proxy.  It is noted a Non-Vote determination would generally not be made in connection with voting rights received pursuant to class action participation; while a Fund may no longer hold the security, a continuing economic effect on shareholders’ interests is likely.

 

Reasonable efforts shall be made to secure and vote all other proxies for the Funds, but, particularly in markets in which shareholders’ rights are limited, Non-Votes may also occur in connection with a Fund’s related inability to timely

 

4


 

access ballots or other proxy information in connection with its portfolio securities.

 

Non-Votes may also result in certain cases in which the Agent’s recommendation has been deemed to be conflicted, as described in V.B. above and V.B.4. below.

 

3.

 

Out-of-Guidelines Votes: Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, Where No Recommendation is Provided by Agent, or Where Agent’s Recommendation is Conflicted

 

If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, if the Agent has made no recommendation on a matter requiring case-by-case consideration and the Procedures and Guidelines are silent, or the Agent’s recommendation on a matter requiring case-by-case consideration is deemed to be conflicted as provided for under the Adviser Procedures, the Proxy Coordinator will then request that all members of the Proxy Group, including any members not in attendance at the meeting at which the relevant proxy is being considered, and each Investment Professional participating in the voting process complete a Conflicts Report (as such term is defined for purposes of the Adviser Procedures).  As provided for in the Adviser Procedures, the Proxy Coordinator shall be responsible for identifying to Counsel potential conflicts of interest with respect to the Agent.

 

If Counsel determines that a conflict of interest appears to exist with respect to the Agent, any member of the Proxy Group or the participating Investment Professional(s), the Proxy Coordinator will then contact the Compliance Committee(s) and forward to such Committee(s) all information relevant to their review, including the following materials or a summary thereof:  the applicable Procedures and Guidelines, the recommendation of the Agent, where applicable, the recommendation of the Investment Professional(s), where applicable, any resources used by the Proxy Group in arriving at its recommendation, the Conflicts Report and any other written materials establishing whether a conflict of interest exists, and findings of Counsel (as such term is defined for purposes of the Adviser Procedures).  Upon Counsel’s finding that a conflict of interest exists with respect to one or more members of the Proxy Group or the Advisers generally, the remaining members of the Proxy Group shall not be required to complete a Conflicts Report in connection with the proxy.

 

If Counsel determines that there does not appear to be a conflict of interest with respect to the Agent, any member of the Proxy Group or the participating Investment Professional(s), the Proxy Coordinator will instruct the Agent to vote the proxy as recommended by the Proxy Group.

 

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4.

 

Referrals to a Fund’s Compliance Committee

 

A Fund’s Compliance Committee may consider all recommendations, analysis, research and Conflicts Reports provided to it by the Agent, Proxy Group and/or Investment Professional(s), and any other written materials used to establish whether a conflict of interest exists, in determining how to vote the proxies referred to the Committee.  The Committee will instruct the Agent through the Proxy Coordinator how to vote such referred proposals.

 

The Proxy Coordinator shall use best efforts to timely refer matters to a Fund’s Committee for its consideration.  In the event any such matter cannot be timely referred to or considered by the Committee, it shall be the policy of the Funds to vote in accordance with the Agent’s recommendation, unless the Agent’s recommendation is conflicted on a matter requiring case-by-case consideration, in which case no action shall be taken on such matter (i.e., a “Non-Vote”).

 

The Proxy Coordinator will maintain a record of all proxy questions that have been referred to a Fund’s Committee, all applicable recommendations, analysis, research and Conflicts Reports.

 

VI.                                CONFLICTS OF INTEREST

 

In all cases in which a vote has not been clearly determined in advance by the Procedures and Guidelines or for which the Proxy Group recommends an Out-of-Guidelines Vote, and Counsel has determined that a conflict of interest appears to exist with respect to the Agent, any member of the Proxy Group, or any Investment Professional participating in the voting process, the proposal shall be referred to the Fund’s Committee for determination so that the Adviser shall have no opportunity to vote a Fund’s proxy in a situation in which it or the Agent may be deemed to have a conflict of interest.  In the event a member of a Fund’s Committee believes he/she has a conflict of interest that would preclude him/her from making a voting determination in the best interests of the beneficial owners of the applicable Fund, such Committee member shall so advise the Proxy Coordinator and recuse himself/herself with respect to determinations regarding the relevant proxy.

 

VII.                            REPORTING AND RECORD RETENTION

 

Annually in August, each Fund will post its proxy voting record or a link thereto, for the prior one-year period ending on June 30th on the ING Funds website.  No proxy voting record will be posted on the ING Funds website for any Fund that is a feeder in a master/feeder structure; however, a cross-reference to that of the master fund’s proxy voting record as filed in the SEC’s EDGAR database will be posted on the ING Funds website.  The proxy voting record for each Fund will also be available in the EDGAR database on the SEC’s website.

 

6


 

EXHIBIT 1

to the

ING Funds

Proxy Voting Procedures

 

ING ASIA PACIFIC HIGH DIVIDEND EQUITY INCOME FUND

ING EQUITY TRUST

ING FUNDS TRUST

ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND

ING GLOBAL EQUITY DIVIDEND AND PREMIUM OPPORTUNITY FUND

ING INFRASTRUCTURE DEVELOPMENT EQUITY FUND

ING INTERNATIONAL HIGH DIVIDEND EQUITY INCOME FUND

ING INVESTMENT FUNDS, INC.

ING INVESTORS TRUST(1)

ING MAYFLOWER TRUST

ING MUTUAL FUNDS

ING PARTNERS, INC.

ING PRIME RATE TRUST

ING RISK MANAGED NATURAL RESOURCES FUND

ING SENIOR INCOME FUND

ING SEPARATE PORTFOLIOS TRUST

ING VARIABLE INSURANCE TRUST

ING VARIABLE PRODUCTS TRUST

ING VP NATURAL RESOURCES TRUST

 

(1)                  Sub-Adviser-Voted Series:  ING Franklin Mutual Shares Portfolio

 


 

EXHIBIT 2

to the

ING Funds

Proxy Voting Procedures

 

ING INVESTMENTS, LLC,

ING INVESTMENT MANAGEMENT CO.

AND

DIRECTED SERVICES, LLC

 

PROXY VOTING PROCEDURES

 

I.                                         INTRODUCTION

 

ING Investments, LLC, ING Investment Management Co. and Directed Services, LLC (each an “Adviser” and collectively, the “Advisers”) are the investment advisers for the registered investment companies and each series or portfolio thereof (each a “Fund” and collectively, the “Funds”) comprising the ING family of funds.  As such, the Advisers have been delegated the authority to vote proxies with respect to securities for certain Funds over which they have day-to-day portfolio management responsibility.

 

The Advisers will abide by the proxy voting guidelines adopted by a Fund’s respective Board of Directors or Trustees (each a “Board” and collectively, the “Boards”) with regard to the voting of proxies unless otherwise provided in the proxy voting procedures adopted by a Fund’s Board.

 

In voting proxies, the Advisers are guided by general fiduciary principles.  Each must act prudently, solely in the interest of the beneficial owners of the Funds it manages.  The Advisers will not subordinate the interest of beneficial owners to unrelated objectives.  Each Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.

 

The following are the Proxy Voting Procedures of ING Investments, LLC, ING Investment Management Co. and Directed Services, LLC (the “Adviser Procedures”) with respect to the voting of proxies on behalf of their client Funds as approved by the respective Board of each Fund.

 

Unless otherwise noted, best efforts shall be used to vote proxies in all instances.

 


 

II.            ROLES AND RESPONSIBILITIES

 

A.                                   Proxy Coordinator

 

The Proxy Coordinator identified in Appendix 1 will assist in the coordination of the voting of each Fund’s proxies in accordance with the ING Funds Proxy Voting Procedures and Guidelines (the “Procedures” or “Guidelines” and collectively the “Procedures and Guidelines”).  The Proxy Coordinator is authorized to direct the Agent to vote a Fund’s proxy in accordance with the Procedures and Guidelines unless the Proxy Coordinator receives a recommendation from an Investment Professional (as described below) to vote contrary to the Procedures and Guidelines.  In such event, and in connection with proxy proposals requiring case-by-case consideration (except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation), the Proxy Coordinator will call a meeting of the Proxy Group (as described below).

 

Responsibilities assigned herein to the Proxy Coordinator, or activities in support thereof, may be performed by such members of the Proxy Group or employees of the Advisers’ affiliates as are deemed appropriate by the Proxy Group.

 

Unless specified otherwise, information provided to the Proxy Coordinator in connection with duties of the parties described herein shall be deemed delivered to the Advisers.

 

B.                                     Agent

 

An independent proxy voting service (the “Agent”), as approved by the Board of each Fund, shall be engaged to assist in the voting of Fund proxies for publicly traded securities through the provision of vote analysis, implementation, recordkeeping and disclosure services.  The Agent is ISS Governance Services, a unit of RiskMetrics Group, Inc.  The Agent is responsible for coordinating with the Funds’ custodians to ensure that all proxy materials received by the custodians relating to the portfolio securities are processed in a timely fashion.  To the extent applicable, the Agent is required to vote and/or refer all proxies in accordance with these Adviser Procedures.  The Agent will retain a record of all proxy votes handled by the Agent.  Such record must reflect all the information required to be disclosed in a Fund’s Form N-PX pursuant to Rule 30b1-4 under the Investment Company Act.  In addition, the Agent is responsible for maintaining copies of all proxy statements received by issuers and to promptly provide such materials to the Adviser upon request.

 

The Agent shall be instructed to vote all proxies in accordance with a Fund’s Guidelines, except as otherwise instructed through the Proxy Coordinator by the Adviser’s Proxy Group or a Fund’s Compliance Committee (“Committee”).

 

9


 

The Agent shall be instructed to obtain all proxies from the Funds’ custodians and to review each proxy proposal against the Guidelines.  The Agent also shall be requested to call the Proxy Coordinator’s attention to specific proxy proposals that although governed by the Guidelines appear to involve unusual or controversial issues.

 

Subject to the oversight of the Advisers, the Agent shall establish and maintain adequate internal controls and policies in connection with the provision of proxy voting services voting to the Advisers, including methods to reasonably ensure that its analysis and recommendations are not influenced by conflict of interest, and shall disclose such controls and policies to the Advisers when and as provided for herein.  Unless otherwise specified, references herein to recommendations of the Agent shall refer to those in which no conflict of interest has been identified.

 

C.                                     Proxy Group

 

The Adviser shall establish a Proxy Group (the “Group” or “Proxy Group”) which shall assist in the review of the Agent’s recommendations when a proxy voting issue is referred to the Group through the Proxy Coordinator.  The members of the Proxy Group, which may include employees of the Advisers’ affiliates, are identified in Appendix 1, as may be amended from time at the Advisers’ discretion.

 

A minimum of four (4) members of the Proxy Group (or three (3) if one member of the quorum is either the Fund’s Chief Investment Risk Officer or Chief Financial Officer) shall constitute a quorum for purposes of taking action at any meeting of the Group.  The vote of a simple majority of the members present and voting shall determine any matter submitted to a vote.  Tie votes shall be broken by securing the vote of members not present at the meeting; provided, however, that the Proxy Coordinator shall ensure compliance with all applicable voting and conflict of interest procedures and shall use best efforts to secure votes from all or as many absent members as may reasonably be accomplished.  The Proxy Group may meet in person or by telephone.  The Proxy Group also may take action via electronic mail in lieu of a meeting, provided that each Group member has received a copy of any relevant electronic mail transmissions circulated by each other participating Group member prior to voting and provided that the Proxy Coordinator follows the directions of a majority of a quorum (as defined above) responding via electronic mail.  For all votes taken in person or by telephone or teleconference, the vote shall be taken outside the presence of any person other than the members of the Proxy Group and such other persons whose attendance may be deemed appropriate by the Proxy Group from time to time in furtherance of its duties or the day-to-day administration of the Funds.  In its discretion, the Proxy Group may provide the Proxy Coordinator with standing instructions to perform responsibilities assigned herein to the Proxy Group, or activities in support thereof, on its behalf, provided that such instructions do not contravene any requirements of these Adviser Procedures or a Fund’s Procedures and Guidelines.

 

10


 

A meeting of the Proxy Group will be held whenever (1) the Proxy Coordinator receives a recommendation from an Investment Professional to vote a Fund’s proxy contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, (2) the Agent has made no recommendation with respect to a vote on a proposal, or (3) a matter requires case-by-case consideration, including those in which the Agent’s recommendation is deemed to be conflicted as provided for under these Adviser Procedures, provided that, if the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation and no issue of conflict must be considered, the Proxy Coordinator may implement the instructions without calling a meeting of the Proxy Group.

 

For each proposal referred to the Proxy Group, it will review (1) the relevant Procedures and Guidelines, (2) the recommendation of the Agent, if any, (3) the recommendation of the Investment Professional(s), if any, and (4) any other resources that any member of the Proxy Group deems appropriate to aid in a determination of a recommendation.

 

If the Proxy Group recommends that a Fund vote in accordance with the Procedures and Guidelines, or the recommendation of the Agent, where applicable, it shall instruct the Proxy Coordinator to so advise the Agent.

 

If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, or if the Agent’s recommendation on a matter requiring case-by-case consideration is deemed to be conflicted, it shall follow the procedures for such voting as established by a Fund’s Board.

 

The Proxy Coordinator shall use best efforts to convene the Proxy Group with respect to all matters requiring its consideration.  In the event quorum requirements cannot be timely met in connection with to a voting deadline, the Proxy Coordinator shall follow the procedures for such voting as established by a Fund’s Board.

 

D.            Investment Professionals

 

The Funds’ Advisers, sub-advisers and/or portfolio managers (each referred to herein as an “Investment Professional” and collectively, “Investment Professionals”) may submit, or be asked to submit, a recommendation to the Proxy Group regarding the voting of proxies related to the portfolio securities over which they have day-to-day portfolio management responsibility.  The Investment Professionals may accompany their recommendation with any other research materials that they deem appropriate or with a request that the vote be deemed “material” in the context of the portfolio(s) they manage, such that lending activity on behalf of such portfolio(s) with respect to the relevant security should be reviewed by the Proxy Group and considered for recall and/or restriction.  Input from the relevant sub-advisers and/or portfolio managers shall be given primary consideration in the Proxy Group’s determination of whether a given proxy vote

 

11


 

is to be deemed material and the associated security accordingly restricted from lending.  The determination that a vote is material in the context of a Fund’s portfolio shall not mean that such vote is considered material across all Funds voting that meeting.  In order to recall or restrict shares timely for material voting purposes, the Proxy Group shall use best efforts to consider, and when deemed appropriate, to act upon, such requests timely, and requests to review lending activity in connection with a potentially material vote may be initiated by any relevant Investment Professional and submitted for the Proxy Group’s consideration at any time.

 

III.          VOTING PROCEDURES

 

A.            In all cases, the Adviser shall follow the voting procedures as set forth in the Procedures and Guidelines of the Fund on whose behalf the Adviser is exercising delegated authority to vote.

 

B.            Routine Matters
 

The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear “For”, “Against,” “Withhold” or “Abstain” on a proposal.  However, the Agent shall be directed to refer any proxy proposal to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional recommends a vote contrary to the Guidelines.

 

C.            Matters Requiring Case-by-Case Consideration

 

The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted “case-by-case” consideration.

 

Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.

 

Except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation, the Proxy Coordinator will forward the Agent’s analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent or any other source to the Proxy Group.  The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.

 

1.     Within-Guidelines Votes:  Votes in Accordance with a Fund’s Guidelines and/or, where applicable, Agent Recommendation

 

12


 

In the event the Proxy Group, and where applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in this manner.  Except as provided for herein, no Conflicts Report (as such term is defined herein) is required in connection with Within-Guidelines Votes.

 

2.     Non-Votes:  Votes in Which No Action is Taken

 

The Proxy Group may recommend that a Fund refrain from voting under circumstances including, but not limited to, the following:  (1) if the economic effect on shareholders’ interests or the value of the portfolio holding is indeterminable or insignificant, e.g., proxies in connection with fractional shares, securities no longer held in the portfolio of an ING Fund or proxies being considered on behalf of a Fund that is no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g., certain international proxies, particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security.  In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy.  The Proxy Group may provide the Proxy Coordinator with standing instructions on parameters that would dictate a Non-Vote without the Proxy Group’s review of a specific proxy.  It is noted a Non-Vote determination would generally not be made in connection with voting rights received pursuant to class action participation; while a Fund may no longer hold the security, a continuing economic effect on shareholders’ interests is likely.

 

Reasonable efforts shall be made to secure and vote all other proxies for the Funds, but, particularly in markets in which shareholders’ rights are limited, Non-Votes may also occur in connection with a Fund’s related inability to timely access ballots or other proxy information in connection with its portfolio securities.

 

Non-Votes may also result in certain cases in which the Agent’s recommendation has been deemed to be conflicted, as provided for in the Funds’ Procedures.

 

3.     Out-of-Guidelines Votes:  Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, Where No Recommendation is Provided by Agent, or Where Agent’s Recommendation is Conflicted

 

If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, if the Agent has made no recommendation on a matter requiring case-by-case consideration and the Procedures and Guidelines are silent, or the Agent’s recommendation on a matter requiring case-by-case consideration is deemed to be conflicted as

 

13


 

provided for under these Adviser Procedures, the Proxy Coordinator will then implement the procedures for handling such votes as adopted by the Fund’s Board.

 

4.     The Proxy Coordinator will maintain a record of all proxy questions that have been referred to a Fund’s Compliance Committee, all applicable recommendations, analysis, research and Conflicts Reports.

 

IV.          ASSESSMENT OF THE AGENT AND CONFLICTS OF INTEREST

 

In furtherance of the Advisers’ fiduciary duty to the Funds and their beneficial owners, the Advisers shall establish the following:

 

A.            Assessment of the Agent

 

The Advisers shall establish that the Agent (1) is independent from the Advisers, (2) has resources that indicate it can competently provide analysis of proxy issues and (3) can make recommendations in an impartial manner and in the best interests of the Funds and their beneficial owners.  The Advisers shall utilize, and the Agent shall comply with, such methods for establishing the foregoing as the Advisers may deem reasonably appropriate and shall do not less than annually as well as prior to engaging the services of any new proxy service.  The Agent shall also notify the Advisers in writing within fifteen (15) calendar days of any material change to information previously provided to an Adviser in connection with establishing the Agent’s independence, competence or impartiality.

 

Information provided in connection with assessment of the Agent shall be forwarded to a member of the mutual funds practice group of ING US Legal Services (“Counsel”) for review.  Counsel shall review such information and advise the Proxy Coordinator as to whether a material concern exists and if so, determine the most appropriate course of action to eliminate such concern.

 

B.            Conflicts of Interest

 

The Advisers shall establish and maintain procedures to identify and address conflicts that may arise from time to time concerning the Agent.  Upon the Advisers’ request, which shall be not less than annually, and within fifteen (15) calendar days of any material change to such information previously provided to an Adviser, the Agent shall provide the Advisers with such information as the Advisers deem reasonable and appropriate for use in determining material relationships of the Agent that may pose a conflict of interest with respect to the Agent’s proxy analysis or recommendations.  The Proxy Coordinator shall forward all such information to Counsel for review.  Counsel shall review such information and provide the Proxy Coordinator with a brief statement regarding whether or not a

 

14


 

material conflict of interest is present.  Matters as to which a material conflict of interest is deemed to be present shall be handled as provided in the Fund’s Procedures and Guidelines.

 

In connection with their participation in the voting process for portfolio securities, each member of the Proxy Group, and each Investment Professional participating in the voting process, must act solely in the best interests of the beneficial owners of the applicable Fund.  The members of the Proxy Group may not subordinate the interests of the Fund’s beneficial owners to unrelated objectives, including taking steps to reasonably insulate the voting process from any conflict of interest that may exist in connection with the Agent’s services or utilization thereof.

 

For all matters for which the Proxy Group recommends an Out-of-Guidelines Vote, or for which a recommendation contrary to that of the Agent or the Guidelines has been received from an Investment Professional and is to be utilized, the Proxy Coordinator will implement the procedures for handling such votes as adopted by the Fund’s Board, including completion of such Conflicts Reports as may be required under the Fund’s Procedures.  Completed Conflicts Reports shall be provided to the Proxy Coordinator within two (2) business days.  Such Conflicts Report should describe any known conflicts of either a business or personal nature, and set forth any contacts with respect to the referral item with non-investment personnel in its organization or with outside parties (except for routine communications from proxy solicitors).  The Conflicts Report should also include written confirmation that any recommendation from an Investment Professional provided in connection with an Out-of-Guidelines Vote or under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

 

The Proxy Coordinator shall forward all Conflicts Reports to Counsel for review.  Counsel shall review each report and provide the Proxy Coordinator with a brief statement regarding whether or not a material conflict of interest is present.  Matters as to which a material conflict of interest is deemed to be present shall be handled as provided in the Fund’s Procedures and Guidelines.

 

V.            REPORTING AND RECORD RETENTION

 

The Adviser shall maintain the records required by Rule 204-2(c)(2), as may be amended from time to time, including the following: (1) A copy of each proxy statement received regarding a Fund’s portfolio securities.  Such proxy statements received from issuers are available either in the SEC’s EDGAR database or are kept by the Agent and are available upon request. (2) A record of each vote cast on behalf of a Fund. (3) A copy of any document created by the Adviser that was material to making a decision how to vote a proxy, or that memorializes the basis for that decision. (4) A copy of written requests for Fund proxy voting information and any written

 

15


 

response thereto or to any oral request for information on how the Adviser voted proxies on behalf of a Fund.  All proxy voting materials and supporting documentation will be retained for a minimum of six (6) years.

 

16


 

APPENDIX 1

to the

Advisers’ Proxy Voting Procedures

 

Proxy Group for registered investment company clients of ING Investments, LLC, ING Investment Management Co. and Directed Services, LLC:

 

Name

 

Title or Affiliation

 

 

 

Stanley D. Vyner

 

Chief Investment Risk Officer and Executive Vice President, ING Investments, LLC

 

 

 

Todd Modic

 

Senior Vice President, ING Funds Services, LLC and ING Investments, LLC; and Chief Financial Officer of the ING Funds

 

 

 

Maria Anderson

 

Vice President of Fund Compliance, ING Funds Services, LLC

 

 

 

Karla J. Bos

 

Proxy Coordinator for the ING Funds and Assistant Vice President – Special Projects, ING Funds Services, LLC

 

 

 

Julius A. Drelick III, CFA

 

Vice President, Platform Product Management and Project Management, ING Funds Services, LLC

 

 

 

Harley Eisner

 

Vice President of Financial Analysis, ING Funds Services, LLC

 

 

 

Theresa K. Kelety, Esq.

 

Counsel, ING Americas US Legal Services

 

Effective as of January 1, 2008

 

17


 

EXHIBIT 3

to the

ING Funds
Proxy Voting Procedures

 

PROXY VOTING GUIDELINES OF THE ING FUNDS

 

I.             INTRODUCTION

 

The following is a statement of the Proxy Voting Guidelines (“Guidelines”) that have been adopted by the respective Boards of Directors or Trustees of each Fund.  Unless otherwise provided for herein, any defined term used herein shall have the meaning assigned to it in the Funds’ and Advisers’ Proxy Voting Procedures (the “Procedures”).

 

Proxies must be voted in the best interest of the Fund(s).  The Guidelines summarize the Funds’ positions on various issues of concern to investors, and give a general indication of how Fund portfolio securities will be voted on proposals dealing with particular issues.  The Guidelines are not exhaustive and do not include all potential voting issues.

 

The Advisers, in exercising their delegated authority, will abide by the Guidelines as outlined below with regard to the voting of proxies except as otherwise provided in the Procedures.  In voting proxies, the Advisers are guided by general fiduciary principles.  Each must act prudently, solely in the interest of the beneficial owners of the Funds it manages.  The Advisers will not subordinate the interest of beneficial owners to unrelated objectives.  Each Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.

 

II.            GUIDELINES

 

The following Guidelines are grouped according to the types of proposals generally presented to shareholders of U.S. issuers:  Board of Directors, Proxy Contests, Auditors, Proxy Contest Defenses, Tender Offer Defenses, Miscellaneous, Capital Structure, Executive and Director Compensation, State of Incorporation, Mergers and Corporate Restructurings, Mutual Fund Proxies, and Social and Environmental Issues.  An additional section addresses proposals most frequently found in global proxies.

 

General Policies

 

These Guidelines apply to securities of publicly traded companies and to those of privately held companies if publicly available disclosure permits such application.  All matters for which such disclosure is not available shall be considered CASE-BY-CASE.

 


 

It shall generally be the policy of the Funds to take no action on a proxy for which no Fund holds a position or otherwise maintains an economic interest in the relevant security at the time the vote is to be cast.

 

In all cases receiving CASE-BY-CASE consideration, including cases not specifically provided for under these Guidelines, unless otherwise provided for under these Guidelines, it shall generally be the policy of the Funds to vote in accordance with the recommendation provided by the Funds’ Agent, Institutional Shareholder Services, Inc.

 

Unless otherwise provided for herein, it shall generally be the policy of the Funds to vote in accordance with the Agent’s recommendation in cases in which such recommendation aligns with the recommendation of the relevant issuer’s management or management has made no recommendation.  However, this policy shall not apply to CASE-BY-CASE proposals for which a contrary recommendation from the Investment Professional for the relevant Fund has been received and is to be utilized, provided that incorporation of any such recommendation shall be subject to the conflict of interest review process required under the Procedures.

 

Recommendations from the Investment Professionals, while not required under the Procedures, are likely to be considered with respect to proxies for private equity securities and/or proposals related to merger transactions/corporate restructurings, proxy contests, or unusual or controversial issues.  Such input shall be given primary consideration with respect to CASE-BY-CASE proposals being considered on behalf of the relevant Fund.

 

Except as otherwise provided for herein, it shall generally be the policy of the Funds not to support proposals that would impose a negative impact on existing rights of the Funds to the extent that any positive impact would not be deemed sufficient to outweigh removal or diminution of such rights.

 

The foregoing policies may be overridden in any case as provided for in the Procedures.  Similarly, the Procedures provide that proposals whose Guidelines prescribe a firm voting position may instead be considered on a CASE-BY-CASE basis in cases in which unusual or controversial circumstances so dictate.

 

Interpretation and application of these Guidelines is not intended to supersede any law, regulation, binding agreement or other legal requirement to which an issuer may be or become subject.  No proposal shall be supported whose implementation would contravene such requirements.

 

1.             The Board of Directors

 

Voting on Director Nominees in Uncontested Elections

 

Unless otherwise provided for herein, the Agent’s standards with respect to determining director independence shall apply.  These standards generally provide that, to be considered completely

 

19


 

independent, a director shall have no material connection to the company other than the board seat.

 

Agreement with the Agent’s independence standards shall not dictate that a Fund’s vote shall be cast according to the Agent’s corresponding recommendation.  Votes on director nominees not subject to specific policies described herein should be made on a CASE-BY-CASE basis.

 

Where applicable and except as otherwise provided for herein, it shall be the policy of the Funds to lodge disagreement with an issuer’s policies or practices by withholding support from a proposal for the relevant policy or practice rather than the director nominee(s) to which the Agent assigns a correlation.  Support shall be withheld from culpable nominees as appropriate, but if they are not standing for election (e.g., the board is classified), support shall generally not be withheld from others in their stead.

 

If application of the policies described herein would result in withholding votes from the majority of independent outside directors sitting on a board, or removal of such directors is likely to negatively impact majority board independence, primary consideration shall be given to retention of such independent outside director nominees unless the concerns identified are of such grave nature as to merit removal of the independent directors.

 

Where applicable and except as otherwise provided for herein, generally DO NOT WITHHOLD support (or DO NOT VOTE AGAINST, pursuant to the applicable election standard) in connection with issues raised by the Agent if the nominee did not serve on the board or relevant committee during the majority of the time period relevant to the concerns cited by the Agent.

 

WITHHOLD support from a nominee who, during both of the most recent two years, attended less than 75 percent of the board and committee meetings without a valid reason for the absences.  DO NOT WITHHOLD support in connection with attendance issues for nominees who have served on the board for less than the two most recent years.

 

WITHHOLD support from a nominee in connection with poison pill or anti-takeover considerations (e.g., furtherance of measures serving to disenfranchise shareholders or failure to remove restrictive pill features or ensure pill expiration or submission to shareholders for vote) in cases for which culpability for implementation or renewal of the pill in such form can be specifically attributed to the nominee.

 

Provided that a nominee served on the board during the relevant time period, WITHHOLD support from a nominee who has failed to implement a shareholder proposal that was approved by (1) a majority of the issuer’s shares outstanding (most recent annual meeting) or (2) a majority of the votes cast for two consecutive years.  However, in the case of shareholder proposals seeking shareholder ratification of a poison pill, generally DO NOT WITHHOLD support from a nominee in such cases if the company has already implemented a policy that should reasonably prevent abusive use of the pill.

 

20


 

If a nominee has not acted upon negative votes (WITHHOLD or AGAINST, as applicable based on the issuer’s election standard) representing a majority of the votes cast at the previous annual meeting, consider such nominee on a CASE-BY-CASE basis.  Generally, vote FOR nominees when (1) the issue relevant to the majority negative vote has been adequately addressed or cured or (2) the Funds’ Guidelines or voting record do not support the relevant issue.

 

WITHHOLD support from inside directors or affiliated outside directors who sit on the audit committee.

 

DO NOT WITHHOLD support from inside directors or affiliated outside directors who sit on the nominating or compensation committee, provided that such committee meets the applicable independence requirements of the relevant listing exchange.

 

DO NOT WITHHOLD support from inside directors or affiliated outside directors if the full board serves as the compensation or nominating committee OR has not created one or both committees, provided that the issuer is in compliance with all provisions of the listing exchange in connection with performance of relevant functions (e.g., performance of relevant functions by a majority of independent directors in lieu of the formation of a separate committee).

 

Compensation Practices:

 

It shall generally be the policy of the Funds that matters of compensation are best determined by an independent board and compensation committee.  Generally:

 

(1)       Where applicable and except as otherwise provided for herein, DO NOT WITHHOLD support from nominees who did not serve on the compensation committee, or board, as applicable based on the Agent’s analysis, during the majority of the time period relevant to the concerns cited by the Agent.

(2)       In cases in which the Agent has identified a “pay for performance” disconnect, or internal pay disparity, as such issues are defined by the Agent, DO NOT WITHHOLD support from director nominees.

(3)       If the Agent recommends withholding support from nominees in connection with executive compensation or perquisites related to retention or recruitment, including severance or termination arrangements, vote FOR such nominees if the issuer has provided adequate rationale and/or disclosure.

(4)       If the Agent has raised issues of options backdating, consider members of the compensation committee, or board, as applicable, as well as company executives nominated as directors, on a CASE-BY-CASE basis.

(5)       If the Agent has raised other considerations regarding poor compensation practices, consider nominees on a CASE-BY-CASE basis.

 

Accounting Practices:

 

(1)       Generally, vote FOR independent outside director nominees serving on the audit committee.

(2)       Where applicable and except as otherwise provided for herein, generally DO NOT WITHHOLD support from nominees serving on the audit committee who did not serve

 

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on that committee during the majority of the time period relevant to the concerns cited by the Agent.

(3)       If the Agent has raised concerns regarding poor accounting practices, consider the company’s CEO and CFO, if nominated as directors, and nominees serving on the audit committee on a CASE-BY-CASE basis.

(4)       If total non-audit fees exceed the total of audit fees, audit-related fees and tax compliance and preparation fees, the provisions under Section 3., Auditor Ratification, shall apply.

 

Board Independence:

 

It shall generally be the policy of the Funds that a board should be majority independent and therefore to consider inside director or affiliated outside director nominees in cases in which the full board is not majority independent on a CASE-BY-CASE basis.  Generally:

 

(1)       WITHHOLD support from the fewest directors whose removal would achieve majority independence across the remaining board, except that support may be withheld from additional nominees whose relative level of independence cannot be differentiated.

(2)       WITHHOLD support from all non-independent nominees, including the founder, chairman or CEO, if the number required to achieve majority independence is equal to or greater than the number of non-independent nominees.

(3)       Except as provided above, vote FOR non-independent nominees in the role of CEO, and when appropriate, founder or chairman, and determine support for other non-independent nominees based on the qualifications and contributions of the nominee as well as the Funds’ voting precedent for assessing relative independence to management, e.g., insiders holding senior executive positions are deemed less independent than affiliated outsiders with a transactional or advisory relationship to the company, and affiliated outsiders with a material transactional or advisory relationship are deemed less independent than those with lesser relationships.

(4)       Non-voting directors (e.g., director emeritus or advisory director) shall be excluded from calculations with respect to majority board independence.

(5)       When conditions contributing to a lack of majority independence remain substantially similar to those in the previous year, it shall generally be the policy of the Funds to vote on nominees in a manner consistent with votes cast by the Fund(s) in the previous year.

 

Generally vote FOR nominees without regard to “over-boarding” issues raised by the Agent unless other concerns requiring CASE-BY-CASE consideration have been raised.

 

Generally, when the Agent recommends withholding support due to assessment that a nominee acted in bad faith or against shareholder interests in connection with a major transaction, such as a merger or acquisition, consider on a CASE-BY-CASE basis, factoring in the merits of the nominee’s performance and rationale and disclosure provided.

 

Performance Test for Directors

 

Consider nominees failing the Agent’s performance test, which includes market-based and operating performance measures, on a CASE-BY-CASE basis.  Input from the Investment

 

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Professional(s) for a given Fund shall be given primary consideration with respect to such proposals.

 

Proposals Regarding Board Composition or Board Service

 

Generally, except as otherwise provided for herein, vote AGAINST shareholder proposals to impose new board structures or policies, including those requiring that the positions of chairman and CEO be held separately, except support proposals in connection with a binding agreement or other legal requirement to which an issuer has or reasonably may expect to become subject, and consider such proposals on a CASE-BY-CASE basis if the board is not majority independent or pervasive corporate governance concerns have been identified.  Generally, except as otherwise provided for herein, vote FOR management proposals to adopt or amend board structures or policies, except consider such proposals on a CASE-BY-CASE basis if the board is not majority independent, pervasive corporate governance concerns have been identified, or the proposal may result in a material reduction in shareholders’ rights.

 

Generally, vote AGAINST shareholder proposals asking that more than a simple majority of directors be independent.

 

Generally, vote AGAINST shareholder proposals asking that board compensation and/or nominating committees be composed exclusively of independent directors.

 

Generally, vote AGAINST shareholder proposals to limit the number of public company boards on which a director may serve.

 

Generally, vote AGAINST shareholder proposals that seek to redefine director independence or directors’ specific roles (e.g., responsibilities of the lead director).

 

Generally, vote AGAINST shareholder proposals requesting creation of additional board committees or offices, except as otherwise provided for herein.

 

Generally, vote FOR shareholder proposals that seek creation of an audit, compensation or nominating committee of the board, unless the committee in question is already in existence or the issuer has availed itself of an applicable exemption of the listing exchange (e.g., performance of relevant functions by a majority of independent directors in lieu of the formation of a separate committee).

 

Generally, vote AGAINST shareholder proposals to limit the tenure of outside directors.

 

Generally, vote AGAINST shareholder proposals to impose a mandatory retirement age for outside directors unless the proposal seeks to relax existing standards, but generally DO NOT VOTE AGAINST management proposals seeking to establish a retirement age for directors.

 

Stock Ownership Requirements

 

Generally, vote AGAINST shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director or to remain on the board.

 

Director and Officer Indemnification and Liability Protection

 

Proposals on director and officer indemnification and liability protection should be evaluated on a CASE-BY-CASE basis, using Delaware law as the standard.  Vote AGAINST proposals to limit or eliminate entirely directors’ and officers’ liability for monetary damages for violating the duty of care.  Vote AGAINST indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary

 

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obligation than mere carelessness.  Vote FOR only those proposals providing such expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if:

 

(1)       The director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and

(2)       Only if the director’s legal expenses would be covered.

 

2.             Proxy Contests

 

These proposals should generally be analyzed on a CASE-BY-CASE basis.  Input from the Investment Professional(s) for a given Fund shall be given primary consideration with respect to proposals in connection with proxy contests being considered on behalf of that Fund.

 

Voting for Director Nominees in Contested Elections

 

Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis.

 

Reimburse Proxy Solicitation Expenses

 

Voting to reimburse proxy solicitation expenses should be analyzed on a CASE-BY-CASE basis.

 

3.             Auditors

 

Ratifying Auditors

 

Generally, except in cases of poor accounting practices or high non-audit fees, vote FOR management proposals to ratify auditors.  Consider management proposals to ratify auditors on a CASE-BY-CASE basis if the Agent cites poor accounting practices.  If fees for non-audit services exceed 50 percent of total auditor fees as described below, consider on a CASE-BY-CASE basis, voting AGAINST management proposals to ratify auditors only if concerns exist that remuneration for the non-audit work is so lucrative as to taint the auditor’s independence.  For purposes of this review, fees deemed to be reasonable, generally non-recurring, exceptions to the non-audit fee category (e.g., those related to an IPO) shall be excluded.  If independence concerns exist or an issuer has a history of questionable accounting practices, also vote FOR shareholder proposals asking the issuer to present its auditor annually for ratification, but in other cases generally vote AGAINST.

 

Auditor Independence

 

Generally, consider shareholder proposals asking companies to prohibit their auditors from engaging in non-audit services (or capping the level of non-audit services) on a CASE-BY-CASE basis.

 

Audit Firm Rotation:

 

Generally, vote AGAINST shareholder proposals asking for mandatory audit firm rotation.

 

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4.             Proxy Contest Defenses

 

Board Structure: Staggered vs. Annual Elections

 

Generally, vote AGAINST proposals to classify the board or otherwise restrict shareholders’ ability to vote upon directors.

 

Generally, vote FOR proposals to repeal classified boards and to elect all directors annually.

 

Shareholder Ability to Remove Directors

 

Generally, vote AGAINST proposals that provide that directors may be removed only for cause.

 

Generally, vote FOR proposals to restore shareholder ability to remove directors with or without cause.

 

Generally, vote AGAINST proposals that provide that only continuing directors may elect replacements to fill board vacancies.

 

Generally, vote FOR proposals that permit shareholders to elect directors to fill board vacancies.

 

Cumulative Voting

 

If the company maintains a classified board of directors, generally, vote AGAINST management proposals to eliminate cumulative voting, except that such proposals may be supported irrespective of classification in furtherance of an issuer’s plan to adopt a majority voting standard.

 

In cases in which the company maintains a classified board of directors, generally vote FOR shareholder proposals to restore or permit cumulative voting.

 

Time-Phased Voting

 

Generally, vote AGAINST proposals to implement, and FOR proposals to eliminate, time-phased or other forms of voting that do not promote a one share, one vote standard.

 

Shareholder Ability to Call Special Meetings

 

Generally, vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.

 

Generally, vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.

 

Shareholder Ability to Act by Written Consent

 

Generally, vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent.

 

Generally, vote FOR proposals to allow or make easier shareholder action by written consent.

 

Shareholder Ability to Alter the Size of the Board

 

Generally, vote FOR proposals that seek to fix the size of the board or designate a range for its size.

 

Generally, vote AGAINST proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.

 

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5.             Tender Offer Defenses

 

Poison Pills

 

Generally, vote FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification, or to redeem its pill in lieu thereof, unless (1) shareholders have approved adoption of the plan, (2) a policy has already been implemented by the company that should reasonably prevent abusive use of the pill, or (3) the board had determined that it was in the best interest of shareholders to adopt a pill without delay, provided that such plan would be put to shareholder vote within twelve months of adoption or expire, and if not approved by a majority of the votes cast, would immediately terminate.

 

Review on a CASE-BY-CASE basis shareholder proposals to redeem a company’s poison pill.

 

Review on a CASE-BY-CASE basis management proposals to approve or ratify a poison pill or any plan that can reasonably be construed as an anti-takeover measure, with voting decisions generally based on the Agent’s approach to evaluating such proposals, considering factors such as rationale, trigger level and sunset provisions.  Votes will generally be cast in a manner that seeks to preserve shareholder value and the right to consider a valid offer, voting AGAINST management proposals in connection with poison pills or anti-takeover activities that do not meet the Agent’s standards.

 

Fair Price Provisions

 

Vote proposals to adopt fair price provisions on a CASE-BY-CASE basis.

 

Generally, vote AGAINST fair price provisions with shareholder vote requirements greater than a majority of disinterested shares.

 

Greenmail

 

Generally, vote FOR proposals to adopt antigreenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments.

 

Review on a CASE-BY-CASE basis antigreenmail proposals when they are bundled with other charter or bylaw amendments.

 

Pale Greenmail

 

Review on a CASE-BY-CASE basis restructuring plans that involve the payment of pale greenmail.

 

Unequal Voting Rights

 

Generally, vote AGAINST dual-class exchange offers.

 

Generally, vote AGAINST dual-class recapitalizations.

 

Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws

 

Generally, vote AGAINST management proposals to require a supermajority shareholder vote to approve charter and bylaw amendments or other key proposals.

 

Generally, vote FOR shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw amendments, unless the proposal also asks the issuer to

 

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mount a solicitation campaign or similar form of comprehensive commitment to obtain passage of the proposal.

 

Supermajority Shareholder Vote Requirement to Approve Mergers

 

Generally, vote AGAINST management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations.

 

Generally, vote FOR shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations.

 

White Squire Placements

 

Generally, vote FOR shareholder proposals to require approval of blank check preferred stock issues for other than general corporate purposes.

 

6.             Miscellaneous

 

Amendments to Corporate Documents

 

Except to align with legislative or regulatory changes or when support is recommended by the Agent or Investment Professional (including, for example, as a condition to a major transaction such as a merger), generally, vote AGAINST proposals seeking to remove shareholder approval requirements or otherwise remove or diminish shareholder rights, e.g., by (1) adding restrictive provisions, (2) removing provisions or moving them to portions of the charter not requiring shareholder approval, or (3) in corporate structures such as holding companies, removing provisions in an active subsidiary’s charter that provide voting rights to parent company shareholders.  This policy would also generally apply to proposals seeking approval of corporate agreements or amendments to such agreements that the Agent recommends AGAINST because a similar reduction in shareholder rights is requested.

 

Generally, vote AGAINST proposals for charter amendments that may support board entrenchment or may be used as an anti-takeover device, particularly if the proposal is bundled or the board is classified.

 

Generally, vote FOR proposals seeking charter or bylaw amendments to remove anti-takeover provisions.

 

Consider proposals seeking charter or bylaw amendments not addressed under these Guidelines on a CASE-BY-CASE basis.

 

Confidential Voting

 

Generally, vote FOR shareholder proposals that request companies to adopt confidential voting, use independent tabulators, and use independent inspectors of election as long as the proposals include clauses for proxy contests as follows:

 

·      In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy.

 

·      If the dissidents agree, the policy remains in place.

 

·      If the dissidents do not agree, the confidential voting policy is waived.

 

Generally, vote FOR management proposals to adopt confidential voting.

 

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Proxy Access

 

Consider on a CASE-BY-CASE basis shareholder proposals seeking access to management’s proxy material in order to nominate their own candidates to the board.

 

Majority Voting Standard

 

Except as otherwise provided for herein, it shall generally be the policy of the Funds to extend discretion to issuers to determine when it may be appropriate to adopt a majority voting standard.  Generally, vote FOR management proposals, irrespective of whether the proposal contains a plurality carve-out for contested elections, but AGAINST shareholder proposals unless also supported by management, seeking election of directors by the affirmative vote of the majority of votes cast in connection with a meeting of shareholders, including amendments to corporate documents or other actions in furtherance of such standard, and provided such standard when supported does not conflict with state law in which the company is incorporated.  For issuers with a history of board malfeasance or pervasive corporate governance concerns, consider such proposals on a CASE-BY-CASE basis.

 

Bundled Proposals

 

Except as otherwise provided for herein, review on a CASE-BY-CASE basis bundled or “conditioned” proxy proposals, generally voting AGAINST bundled proposals containing one or more items not supported under these Guidelines if the Agent or an Investment Professional deems the negative impact, on balance, to outweigh any positive impact.

 

Shareholder Advisory Committees

 

Review on a CASE-BY-CASE basis proposals to establish a shareholder advisory committee.

 

Reimburse Shareholder for Expenses Incurred

 

Voting to reimburse expenses incurred in connection with shareholder proposals should be analyzed on a CASE-BY-CASE basis, with voting decisions determined based on the Agent’s criteria, considering whether the related proposal received the requisite support for approval and was adopted for the benefit of the company and its shareholders.

 

Other Business

 

In connection with proxies of U.S. issuers, generally vote FOR management proposals for Other Business, except in connection with a proxy contest in which a Fund is not voting in support of management.

 

Quorum Requirements

 

Review on a CASE-BY-CASE basis proposals to lower quorum requirements for shareholder meetings below a majority of the shares outstanding.

 

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Advance Notice for Shareholder Proposals

 

Generally, vote FOR management proposals related to advance notice period requirements, provided that the period requested is in accordance with applicable law and no material governance concerns have been identified in connection with the issuer.

 

7.             Capital Structure

 

Analyze on a CASE-BY-CASE basis.

 

Common Stock Authorization

 

Review proposals to increase the number of shares of common stock authorized for issue on a CASE-BY-CASE basis.  Except where otherwise indicated, the Agent’s proprietary approach, utilizing quantitative criteria (e.g., dilution, peer group comparison, company performance and history) to determine appropriate thresholds and, for requests marginally above such allowable threshold, a qualitative review (e.g., rationale and prudent historical usage), will generally be utilized in evaluating such proposals.

 

·      Generally vote FOR proposals to authorize capital increases within the Agent’s allowable thresholds or those in excess but meeting Agent’s qualitative standards, but consider on a CASE-BY-CASE basis those requests failing the Agent’s review for proposals in connection with which a contrary recommendation from the Investment Professional(s) has been received and is to be utilized (e.g., in support of a merger or acquisition proposal).

 

·      Generally vote FOR proposals to authorize capital increases within the Agent’s allowable thresholds or those in excess but meeting Agent’s qualitative standards, unless the company states that the stock may be used as a takeover defense.  In those cases, consider on a CASE-BY-CASE basis if a contrary recommendation from the Investment Professional(s) has been received and is to be utilized.

 

·      Generally vote FOR proposals to authorize capital increases exceeding the Agent’s thresholds when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain.

 

·      Generally, vote AGAINST proposals to increase the number of authorized shares of a class of stock if the issuance which the increase is intended to service is not supported under these Guidelines.

 

Dual Class Capital Structures

 

Generally, vote AGAINST proposals to increase the number of authorized shares of the class of stock that has superior voting rights in companies that have dual class capital structures, but consider CASE-BY-CASE if (1) bundled with favorable proposal(s), (2) approval of such proposal(s) is a condition of such favorable proposal(s), or (3) part of a recapitalization for which support is recommended by the Agent or an Investment Professional.

 

Generally, vote AGAINST management proposals to create or perpetuate dual class capital structures with unequal voting rights, and vote FOR shareholder proposals to eliminate them, in cases in which the relevant Fund owns the class with inferior voting rights, but generally vote FOR management proposals and AGAINST shareholder proposals in cases in which the relevant

 

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Fund owns the class with superior voting rights.  Consider CASE-BY-CASE if bundled with favorable proposal(s), (2) approval of such proposal(s) is a condition of such favorable proposal(s), or (3) part of a recapitalization for which support is recommended by the Agent or an Investment Professional.

 

Consider management proposals to eliminate dual class capital structures CASE-BY-CASE, generally voting with the Agent’s recommendation unless a contrary recommendation has been received from the Investment Professional for the relevant Fund and is to be utilized.

 

Stock Distributions: Splits and Dividends

 

Generally, vote FOR management proposals to increase common share authorization for a stock split, provided that the increase in authorized shares falls within the Agent’s allowable thresholds, but consider on a CASE-BY-CASE basis those proposals exceeding the Agent’s threshold for proposals in connection with which a contrary recommendation from the Investment Professional(s) has been received and is to be utilized.

 

Reverse Stock Splits

 

Consider on a CASE-BY-CASE basis management proposals to implement a reverse stock split.  In the event the split constitutes a capital increase effectively exceeding the Agent’s allowable threshold because the request does not proportionately reduce the number of shares authorized, vote FOR the split if the Agent otherwise supports management’s rationale.

 

Preferred Stock

 

Generally, vote AGAINST proposals authorizing the issuance of preferred stock or creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (“blank check” preferred stock), but vote FOR if the Agent or an Investment Professional so recommends because the issuance is required to effect a merger or acquisition proposal.

 

Generally, vote FOR proposals to issue or create blank check preferred stock in cases when the company expressly states that the stock will not be used as a takeover defense.  Generally vote AGAINST in cases where the company expressly states that, or fails to disclose whether, the stock may be used as a takeover defense, but vote FOR if the Agent or an Investment Professional so recommends because the issuance is required to effect a merger or acquisition proposal.

 

Generally, vote FOR proposals to authorize or issue preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable.

 

Vote CASE-BY-CASE on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company’s industry and performance in terms of shareholder returns.

 

Shareholder Proposals Regarding Blank Check Preferred Stock

 

Generally, vote FOR shareholder proposals to have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in the normal course of business, submitted for shareholder ratification.

 

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Adjustments to Par Value of Common Stock

 

Generally, vote FOR management proposals to reduce the par value of common stock.

 

Preemptive Rights

 

Review on a CASE-BY-CASE basis shareholder proposals that seek preemptive rights or management proposals that seek to eliminate them.  In evaluating proposals on preemptive rights, consider the size of a company and the characteristics of its shareholder base.

 

Debt Restructurings

 

Review on a CASE-BY-CASE basis proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan.

 

Share Repurchase Programs

 

Generally, vote FOR management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms, but vote AGAINST plans with terms favoring selected, non-Fund parties.

 

Generally, vote FOR management proposals to cancel repurchased shares.

 

Generally, vote AGAINST proposals for share repurchase methods lacking adequate risk mitigation as assessed by the Agent.

 

Tracking Stock

 

Votes on the creation of tracking stock are determined on a CASE-BY-CASE basis.

 

8.                                      Executive and Director Compensation

 

Except as otherwise provided for herein, votes with respect to compensation and employee benefit plans should be determined on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such plans, which includes determination of costs and comparison to an allowable cap.

 

·                  Generally, vote in accordance with the Agent’s recommendations FOR equity-based plans with costs within such cap and AGAINST those with costs in excess of it, except that plans above the cap may be supported if so recommended by the Agent or Investment Professional as a condition to a major transaction such as a merger.

 

·                  Generally, vote AGAINST plans if the Agent suggests cost or dilution assessment may not be possible due to the method of disclosing shares allocated to the plan(s), except that such concerns arising in connection with evergreen provisions shall be considered CASE-BY-CASE.

 

·                  Generally, vote FOR plans with costs within the cap if the primary considerations raised by the Agent pertain to matters that would not result in a negative vote under these Guidelines on the relevant board or committee member(s), or equity compensation burn rate or pay for performance as defined by Agent.

 

·                  Generally, vote AGAINST plans administered by potential grant recipients.

 

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·                  Generally, vote AGAINST proposals to eliminate existing shareholder approval requirements for plan changes assessed as material by the Agent, unless the company has provided a reasonable rationale and/or adequate disclosure regarding the requested changes.

 

·                  Consider plans CASE-BY-CASE if the Agent raises other considerations not otherwise provided for herein.

 

Restricted Stock or Stock Option Plans

 

Consider proposals for restricted stock or stock option plans, or the issuance of shares in connection with such plans, on a CASE-BY-CASE basis, considering factors such as level of disclosure and adequacy of vesting or performance requirements.  Plans that do not meet the Agent’s criteria in this regard may be supported, but vote AGAINST if no disclosure is provided regarding either vesting or performance requirements.

 

Management Proposals Seeking Approval to Reprice Options

 

Review on a CASE-BY-CASE basis management proposals seeking approval to reprice, replace or exchange options, considering factors such as rationale, historic trading patterns, value-for-value exchange, vesting periods and replacement option terms.  Generally, vote FOR proposals that meet the Agent’s criteria for acceptable repricing, replacement or exchange transactions, except that considerations raised by the Agent regarding burn rate or executive participation shall not be grounds for withholding support.

 

Vote AGAINST compensation plans that (1) permit or may permit (e.g., history of repricing and no express prohibition against future repricing) repricing of stock options, or any form or alternative to repricing, without shareholder approval, (2) include provisions that permit repricing, replacement or exchange transactions that do not meet the Agent’s criteria (except regarding burn rate or executive participation as noted above), or (3) give the board sole discretion to approve option repricing, replacement or exchange programs.

 

Director Compensation

 

Votes on stock-based plans for directors are made on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s quantitative approach described above as well as a review of qualitative features of the plan in cases in which costs exceed the Agent’s threshold.  DO NOT VOTE AGAINST plans for which burn rate is the sole consideration raised by the Agent.

 

Employee Stock Purchase Plans

 

Votes on employee stock purchase plans, and capital issuances in support of such plans, should be made on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such plans, except that negative recommendations by the Agent due to evergreen provisions will be reviewed CASE-BY-CASE.

 

OBRA-Related Compensation Proposals

 

Votes on plans intended to qualify for favorable tax treatment under the provisions of Section 162(m) of OBRA should be evaluated irrespective of the Agent’s assessment of board

 

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independence, provided that the board meets the independence requirements of the relevant listing exchange.

 

Amendments that Place a Cap on Annual Grants or Amend Administrative Features

 

Generally, vote FOR plans that simply amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m) of OBRA.

 

Amendments to Add Performance-Based Goals

 

Generally, vote FOR amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of OBRA.

 

Amendments to Increase Shares and Retain Tax Deductions Under OBRA

 

Votes on amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatment under the provisions of Section 162(m) should be evaluated on a CASE-BY-CASE basis.

 

Approval of Cash or Cash-and-Stock Bonus Plans

 

Generally, vote FOR cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of OBRA, with primary consideration given to management’s assessment that such plan meets the requirements for exemption of performance-based compensation.

 

Shareholder Proposals Regarding Executive and Director Pay

 

Regarding the remuneration of individuals other than senior executives and directors, generally, vote AGAINST shareholder proposals that seek to expand or restrict disclosure or require shareholder approval beyond regulatory requirements and market practice.  Vote AGAINST shareholder proposals that seek disclosure of executive or director compensation if providing it would be out of step with market practice and potentially disruptive to the business.

 

Unless evidence exists of abuse in historical compensation practices, and except as otherwise provided for herein, generally vote AGAINST shareholder proposals that seek to impose new compensation structures or policies, such as “claw back” recoupments or advisory votes.

 

Severance and Termination Payments

 

Generally, vote FOR shareholder proposals to have parachute arrangements submitted for shareholder ratification (with “parachutes” defined as compensation arrangements related to termination that specify change-in-control events) and provided that the proposal does not include unduly restrictive or arbitrary provisions such as advance approval requirements.

 

Generally vote AGAINST shareholder proposals to submit executive severance agreements for shareholder ratification, unless such proposals specify change-in-control events, Supplemental Executive Retirement Plans or deferred executive compensation plans, or ratification is required by the listing exchange.

 

Review on a CASE-BY-CASE basis all proposals to approve, ratify or cancel executive severance or termination arrangements, including those related to executive recruitment or

 

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retention, generally voting FOR such compensation arrangements if the issuer has provided adequate rationale and/or disclosure or support is recommended by the Agent or Investment Professional (e.g., as a condition to a major transaction such as a merger).

 

Employee Stock Ownership Plans (ESOPs)

 

Generally, vote FOR proposals that request shareholder approval in order to implement an ESOP or to increase authorized shares for existing ESOPs, except in cases when the number of shares allocated to the ESOP is “excessive” (i.e., generally greater than five percent of outstanding shares).

 

401(k) Employee Benefit Plans

 

Generally, vote FOR proposals to implement a 401(k) savings plan for employees.

 

Holding Periods

 

Generally, vote AGAINST proposals requiring mandatory periods for officers and directors to hold company stock.

 

Advisory Votes on Executive Compensation

 

Generally, management proposals seeking ratification of the company’s compensation program will be voted FOR unless the program includes practices or features not supported under these Guidelines and the proposal receives a negative recommendation from the Agent.  Unless otherwise provided for herein, reports not receiving the Agent’s support due to concerns regarding severance/termination payments, incentive structures or vesting or performance criteria not otherwise supported by these Guidelines will be considered on a CASE-BY-CASE basis, generally voted FOR if the company has provided a reasonable rationale and/or adequate disclosure regarding the matter(s) under consideration.

 

9.                                      State of Incorporation

 

Voting on State Takeover Statutes

 

Review on a CASE-BY-CASE basis proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freezeout provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, antigreenmail provisions, and disgorgement provisions).

 

Voting on Reincorporation Proposals

 

Proposals to change a company’s state of incorporation should be examined on a CASE-BY-CASE basis, generally supporting management proposals not assessed by the Agent as a potential takeover defense, but if so assessed, weighing management’s rationale for the change.  Generally, vote FOR management reincorporation proposals upon which another key proposal, such as a merger transaction, is contingent if the other key proposal is also supported.  Generally, vote AGAINST shareholder reincorporation proposals not also supported by the company.

 

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10.                               Mergers and Corporate Restructurings

 

Input from the Investment Professional(s) for a given Fund shall be given primary consideration with respect to proposals regarding business combinations, particularly those between otherwise unaffiliated parties, or other corporate restructurings being considered on behalf of that Fund.

 

Generally, vote FOR a proposal not typically supported under these Guidelines if a key proposal, such as a merger transaction, is contingent upon its support and a vote FOR is accordingly recommended by the Agent or an Investment Professional.

 

Mergers and Acquisitions

 

Votes on mergers and acquisitions should be considered on a CASE-BY-CASE basis.

 

Corporate Restructuring

 

Votes on corporate restructuring proposals, including demergers, minority squeezeouts, leveraged buyouts, spinoffs, liquidations, dispositions, divestitures and asset sales, should be considered on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such proposals.

 

Adjournment

 

Generally, vote FOR proposals to adjourn a meeting to provide additional time for vote solicitation when the primary proposal is also voted FOR.

 

Appraisal Rights

 

Generally, vote FOR proposals to restore, or provide shareholders with, rights of appraisal.

 

Changing Corporate Name

 

Generally, vote FOR changing the corporate name.

 

11.                               Mutual Fund Proxies

 

Election of Directors

 

Vote the election of directors on a CASE-BY-CASE basis.

 

Converting Closed-end Fund to Open-end Fund

 

Vote conversion proposals on a CASE-BY-CASE basis.

 

Proxy Contests

 

Vote proxy contests on a CASE-BY-CASE basis.

 

Investment Advisory Agreements

 

Vote the investment advisory agreements on a CASE-BY-CASE basis.

 

Approving New Classes or Series of Shares

 

Generally, vote FOR the establishment of new classes or series of shares.

 

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Preferred Stock Proposals

 

Vote the authorization for or increase in preferred shares on a CASE-BY-CASE basis.

 

1940 Act Policies

 

Vote these proposals on a CASE-BY-CASE basis.

 

Changing a Fundamental Restriction to a Nonfundamental Restriction

 

Vote these proposals on a CASE-BY-CASE basis.

 

Change Fundamental Investment Objective to Nonfundamental

 

Generally, consider proposals to change a fund’s fundamental investment objective to nonfundamental on a CASE-BY-CASE basis.

 

Name Rule Proposals

 

Vote these proposals on a CASE-BY-CASE basis.

 

Disposition of Assets/Termination/Liquidation

 

Vote these proposals on a CASE-BY-CASE basis.

 

Changes to the Charter Document

 

Vote changes to the charter document on a CASE-BY-CASE basis.

 

Changing the Domicile of a Fund

 

Vote reincorporations on a CASE-BY-CASE basis.

 

Change in Fund’s Subclassification

 

Vote these proposals on a CASE-BY-CASE basis.

 

Authorizing the Board to Hire and Terminate Subadvisors Without Shareholder Approval

 

Generally, vote FOR these proposals.

 

Distribution Agreements

 

Vote these proposals on a CASE-BY-CASE basis.

 

Master-Feeder Structure

 

Generally, vote FOR the establishment of a master-feeder structure.

 

Mergers

 

Vote merger proposals on a CASE-BY-CASE basis.

 

Establish Director Ownership Requirement

 

Generally, vote AGAINST shareholder proposals for the establishment of a director ownership requirement.

 

36


 

Reimburse Shareholder for Expenses Incurred

 

Voting to reimburse proxy solicitation expenses should be analyzed on a CASE-BY-CASE basis.

 

Terminate the Investment Advisor

 

Vote to terminate the investment advisor on a CASE-BY-CASE basis.

 

12.                               Social and Environmental Issues

 

These issues cover a wide range of topics.  In general, unless otherwise specified herein, vote CASE-BY-CASE.  While a wide variety of factors may go into each analysis, the overall principle guiding all vote recommendations focuses on how or whether the proposal will enhance the economic value of the company.  Because a company’s board is likely to have access to relevant, non-public information regarding a company’s business, such proposals will generally be voted in a manner intended to give the board (rather than shareholders) latitude to set corporate policy and oversee management.

 

Absent concurring support from the issuer, compelling evidence of abuse, significant public controversy or litigation, the issuer’s significant history of relevant violations; or activities not in step with market practice or regulatory requirements, or unless provided for otherwise herein, generally vote AGAINST shareholder proposals seeking to dictate corporate conduct, apply existing law, duplicate policies already substantially in place and/or addressed by the issuer, or release information that would not help a shareholder evaluate an investment in the corporation as an economic matter.  Such proposals would generally include those seeking preparation of reports and/or implementation or additional disclosure of corporate policies related to issues such as consumer and public safety, environment and energy, labor standards and human rights, military business and political concerns, workplace diversity and non-discrimination, sustainability, social issues, vendor activities, economic risk or matters of science and engineering.

 

13.                               Global Proxies

 

The foregoing Guidelines provided in connection with proxies of U.S. issuers shall also be applied to global proxies where applicable and not provided for otherwise herein.  The following provide for differing regulatory and legal requirements, market practices and political and economic systems existing in various global markets.

 

Unless otherwise provided for herein, it shall generally be the policy of the Funds to vote AGAINST global proxy proposals in cases in which the Agent recommends voting AGAINST such proposal because relevant disclosure by the issuer, or the time provided for consideration of such disclosure, is inadequate.  For purposes of these global Guidelines, “AGAINST” shall mean withholding of support for a proposal, resulting in submission of a vote of AGAINST or ABSTAIN, as appropriate for the given market and level of concern raised by the Agent regarding the issue or lack of disclosure or time provided.

 

37


 

In connection with practices described herein that are associated with a firm AGAINST vote, it shall generally be the policy of the Funds to consider them on a CASE-BY-CASE basis if the Agent recommends their support (1) as the issuer or market transitions to better practices (e.g., having committed to new regulations or governance codes) or (2) as the more favorable choice in cases in which shareholders must choose between alternate proposals.

 

Routine Management Proposals

 

Generally, vote FOR the following and other similar routine management proposals:

 

·                  the opening of the shareholder meeting

 

·                  that the meeting has been convened under local regulatory requirements

 

·                  the presence of quorum

 

·                  the agenda for the shareholder meeting

 

·                  the election of the chair of the meeting

 

·                  the appointment of shareholders to co-sign the minutes of the meeting

 

·                  regulatory filings (e.g., to effect approved share issuances)

 

·                  the designation of inspector or shareholder representative(s) of minutes of meeting

 

·                  the designation of two shareholders to approve and sign minutes of meeting

 

·                  the allowance of questions

 

·                  the publication of minutes

 

·                  the closing of the shareholder meeting

 

Discharge of Management/Supervisory Board Members

 

Generally, vote FOR management proposals seeking the discharge of management and supervisory board members, unless the Agent recommends AGAINST due to concern about the past actions of the company’s auditors or directors or legal action is being taken against the board by other shareholders, including when the proposal is bundled.

 

Director Elections

 

Unless otherwise provided for herein, the Agent’s standards with respect to determining director independence shall apply.  These standards generally provide that, to be considered completely independent, a director shall have no material connection to the company other than the board seat.

 

Agreement with the Agent’s independence standards shall not dictate that a Fund’s vote shall be cast according to the Agent’s corresponding recommendation.  Further, unless otherwise provided for herein, the application of Guidelines in connection with such standards shall apply only in cases in which the nominee’s level of independence can be ascertained based on available disclosure.  These policies generally apply to director nominees in uncontested elections; votes in contested elections, and votes on director nominees not subject to policies described herein, should be made on a CASE-BY-CASE basis, with primary consideration in contested elections given to input from the Investment Professional(s) for a given Fund.

 

38


 

For issuers domiciled in Canada, Finland, France, Ireland, the Netherlands, Sweden or tax haven markets, generally vote AGAINST non-independent directors in cases in which the full board serves as the audit committee, or the company does not have an audit committee.

 

For issuers in all markets, including those in tax haven markets and those in Japan that have adopted the U.S.-style board-with-committees structure, vote AGAINST non-independent nominees to the audit committee, or, if the slate of nominees is bundled, vote AGAINST the slate.  If the slate is bundled and audit committee membership is unclear or proposed as a separate agenda item, vote FOR if the Agent otherwise recommends support.  For Canadian issuers, the Funds’ U.S. Guidelines with respect to audit committees shall apply.

 

In tax haven markets, DO NOT VOTE AGAINST non-independent directors in cases in which the full board serves as the compensation committee, or the company does not have a compensation committee.

 

DO NOT VOTE AGAINST non-independent directors who sit on the compensation or nominating committees, provided that such committees meet the applicable independence requirements of the relevant listing exchange.

 

In cases in which committee membership is unclear, consider non-independent director nominees on a CASE-BY-CASE basis if no other issues have been raised in connection with his/her nomination.

 

Generally follow Agent’s recommendations to vote AGAINST individuals nominated as outside/non-executive directors who do not meet the Agent’s standard for independence, unless the slate of nominees is bundled, in which case the proposal(s) to elect board members shall be considered on a CASE-BY-CASE basis.

 

For issuers in tax haven markets, generally withhold support (AGAINST or ABSTAIN, as appropriate) from bundled slates of nominees if the board is non-majority independent.  For issuers in Canada and other global markets, generally follow the Agent’s standards for withholding support from bundled slates or non-independent directors (typically excluding the CEO), as applicable, if the board does not meet the Agent’s independence standards or the board’s independence cannot be ascertained due to inadequate disclosure.

 

Generally, withhold support (AGAINST or ABSTAIN, as appropriate) from nominees or slates of nominees presented in a manner not aligned with market practice and/or legislation, including:

 

·                  bundled slates of nominees (e.g., France, Hong Kong or Spain);

 

·                  simultaneous reappointment of retiring directors (e.g., South Africa);

 

·                  in markets with term lengths capped by legislation or market practice, nominees whose terms exceed the caps or are not disclosed (except that bundled slates with such lack of disclosure shall be considered on a CASE-BY-CASE basis); or

 

39


 

·                  nominees whose names are not disclosed in advance of the meeting (e.g., Austria, Philippines, Hong Kong or South Africa) or far enough in advance relative to voting deadlines (e.g., Italy) to make an informed voting decision.

 

Such criteria will not generally provide grounds for withholding support in countries in which they may be identified as best practice but such legislation or market practice is not yet applicable, unless specific governance shortfalls identified by the Agent dictate that less latitude should be extended to the issuer.

 

Generally vote FOR nominees without regard to recommendations that the position of chairman should be separate from that of CEO or otherwise required to be independent, unless other concerns requiring CASE-BY-CASE consideration have been raised.

 

In cases in which cumulative or net voting applies, generally vote with Agent’s recommendation to support nominees asserted by the issuer to be independent, even if independence disclosure or criteria fall short of Agent’s standards.

 

Consider nominees for whom the Agent has raised concerns regarding scandals or internal controls on a CASE-BY-CASE basis, generally withholding support (AGAINST or ABSTAIN, as appropriate) from nominees or slates of nominees when:

 

·                  the scandal or shortfall in controls took place at the company, or an affiliate, for which the nominee is being considered;

 

·                  culpability can be attributed to the nominee (e.g., nominee manages or audits relevant function), and

 

·                  the nominee has been directly implicated, with resulting arrest and criminal charge or regulatory sanction.

 

For markets such as the tax havens, Australia, Canada, Hong Kong, Japan, Malaysia, Singapore and South Africa (and for outside directors in South Korea) in which nominees’ attendance records are adequately disclosed, the Funds’ U.S. Guidelines with respect to director attendance shall apply.  The same policy shall be applied regarding attendance by statutory auditors of Japanese companies.

 

Consider self-nominated director candidates on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such candidates.

 

Generally vote FOR nominees without regard to “over-boarding” issues raised by the Agent unless other concerns requiring CASE-BY-CASE consideration have been raised.

 

For companies incorporated in tax haven markets but which trade exclusively in the U.S., the Funds’ U.S. Guidelines with respect to director elections shall apply.

 

Board Structure

 

Generally, vote FOR proposals to fix board size, but also support proposals seeking a board range if the range is reasonable in the context of market practice and anti-takeover

 

40


 

considerations.  Proposed article amendments in this regard shall be considered on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such proposals.

 

Director and Officer Indemnification and Liability Protection

 

Generally, vote in accordance with the Agent’s standards for indemnification and liability protection for officers and directors, voting AGAINST overly broad provisions.

 

Independent Statutory Auditors

 

With respect to Japanese companies that have not adopted the U.S.-style board-with-committees structure, vote AGAINST any nominee to the position of “independent statutory auditor” whom the Agent considers affiliated, e.g., if the nominee has worked a significant portion of his career for the company, its main bank or one of its top shareholders.  Where shareholders are forced to vote on multiple nominees in a single resolution, vote AGAINST all nominees.  In cases in which multiple slates of statutory auditors are presented, generally vote with the Agent’s recommendation, typically to support nominees deemed to be more independent and/or aligned with interests of minority shareholders.

 

Generally, vote AGAINST incumbent nominees at companies implicated in scandals or exhibiting poor internal controls.

 

Key Committees

 

Generally, vote AGAINST proposals that permit non-board members to serve on the audit, compensation or nominating committee, provided that bundled slates may be supported if no slate nominee serves on the relevant committee(s).

 

Director and Statutory Auditor Remuneration

 

Consider director compensation plans on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such proposals, while also factoring in the merits of the rationale and disclosure provided.  Generally, vote FOR proposals to approve the remuneration of directors and auditors as long as the amount is not excessive (e.g., significant increases should be supported by adequate rationale and disclosure) and there is no evidence of abuse.  For Toronto Stock Exchange (TSX) issuers, the Agent’s limits with respect to equity awards to non-employee directors shall apply.

 

Bonus Payments

 

With respect to Japanese companies, generally vote FOR retirement bonus proposals if all payments are for directors and auditors who have served as executives of the company.  Generally vote AGAINST such proposals if one or more payments are for non-executive, affiliated directors or statutory auditors when one or more of the individuals to whom the grants are being proposed (1) has not served in an executive capacity for the company for at least three years or (2) has been designated by the company as an independent statutory auditor, regardless of the length of time he/she has served.  In all markets, if issues have been raised regarding a scandal or internal controls, generally vote AGAINST bonus proposals for retiring directors or continuing directors or auditors when culpability can be attributed to the nominee (e.g., if a Fund

 

41


 

is also voting AGAINST the nominee under criteria herein regarding issues of scandal or internal controls), unless bundled with bonuses for a majority of directors or auditors a Fund is voting FOR.

 

Stock Option Plans for Independent Internal Statutory Auditors

 

With respect to Japanese companies, follow the Agent’s guidelines with respect to proposals regarding option grants to independent internal statutory auditors, generally voting AGAINST such plans.

 

Compensation Plans

 

Unless otherwise provided for herein, votes with respect to compensation plans, and awards thereunder or capital issuances in support thereof, should be determined on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such plans, considering quantitative or qualitative factors as appropriate for the market.

 

Amendment Procedures for Equity Compensation Plans and ESPPs

 

For TSX issuers, votes with respect to amendment procedures for security-based compensation arrangements and employee share purchase plans shall generally be cast in a manner designed to preserve shareholder approval rights, with voting decisions generally based on the Agent’s recommendation.

 

Shares Reserved for Equity Compensation Plans

 

Unless otherwise provided for herein, voting decisions shall generally be based on the Agent’s methodology, including classification of a company’s stage of development as growth or mature and the corresponding determination as to reasonability of the share requests.

 

Generally, vote AGAINST equity compensation plans (e.g., option, warrant, restricted stock or employee share purchase plans or participation in company offerings such as IPOs or private placements), the issuance of shares in connection with such plans, or related management proposals (e.g., article amendments) that:

 

·                  exceed Agent’s recommended dilution limits, including cases in which the Agent suggests dilution cannot be fully assessed (e.g., due to inadequate disclosure);

 

·                  provide deep or near-term discounts to executives or directors, unless discounts to executives are deemed by the Agent to be adequately mitigated by other requirements such as long-term vesting (e.g., Japan) or broad-based employee participation otherwise meeting Agent’s standards (e.g., France);

 

·                  are administered with discretion by potential grant recipients;

 

·                  provide for retirement benefits or equity incentive awards to outside directors if not in line with market practice (e.g., Australia, Belgium, The Netherlands);

 

·                  permit financial assistance in the form of non-recourse (or essentially non-recourse) loans in connection with executive’s participation;

 

·                  for matching share plans, do not meet the Agent’s standards, considering holding period, discounts, dilution, participation, purchase price and performance criteria;

 

·                  provide for vesting upon change in control if deemed by the Agent to evidence a conflict of interest or anti-takeover device;

 

42


 

·                  provide no disclosure regarding vesting or performance criteria (provided that proposals providing disclosure in one or both areas, without regard to Agent’s criteria for such disclosure, shall be supported provided they otherwise satisfy these Guidelines);

 

·                  permit post-employment vesting if deemed inappropriate by the Agent;

 

·                  allow plan administrators to make material amendments without shareholder approval unless adequate prior disclosure has been provided, with such voting decisions generally based on the Agent’s approach to evaluating such plans; or

 

·                  provide for retesting in connection with achievement of performance hurdles unless the Agent’s analysis indicates that (1) performance targets are adequately increased in proportion to the additional time available, (2) the retesting is de minimis as a percentage of overall compensation or is acceptable relative to market practice, or (3) the issuer has committed to cease retesting within a reasonable period of time.

 

Generally, vote FOR such plans/awards or the related issuance of shares that (1) do not suffer from the defects noted above, or (2) otherwise meet the Agent’s tests if the considerations raised by the Agent pertain primarily to performance hurdles, contract or notice periods, discretionary bonuses, recruitment awards, retention incentives, non-compete payments or vesting upon change in control (other than addressed above), if the company has provided adequate disclosure and/or a reasonable rationale regarding the relevant plan/award, practice or participation.  Unless otherwise provided for herein, market practice of the primary country in which a company does business, or in which an employee is serving, as applicable, shall supersede that of the issuer’s domicile.

 

Consider proposals in connection with such plans or the related issuance of shares in other instances on a CASE-BY-CASE basis.

 

Remuneration Reports

 

Generally, withhold support (AGAINST or ABSTAIN as appropriate for specific market and level of concerns identified by the Agent) from remuneration reports that include compensation plans permitting:

 

(1)          practices or features not supported under these Guidelines, including financial assistance under the conditions described above;

(2)          retesting deemed by the Agent to be excessive relative to market practice (irrespective of the Agent’s support for the report as a whole);

(3)          equity award valuation triggering a negative recommendation from the Agent; or

(4)          provisions for retirement benefits or equity incentive awards to outside directors if not in line with market practice, except that reports will generally be voted FOR if contractual components are reasonably aligned with market practices on a going-forward basis (e.g., existing obligations related to retirement benefits or terms contrary to evolving standards would not preclude support for the report).

 

Reports receiving the Agent’s support and not triggering the concerns cited above will generally be voted FOR.  Unless otherwise provided for herein, reports not receiving the Agent’s support due to concerns regarding severance/termination payments, “leaver” status, incentive structures and vesting or performance criteria not otherwise supported by these Guidelines shall be

 

43


 

considered on a CASE-BY-CASE basis, generally voted FOR if the company has provided a reasonable rationale and/or adequate disclosure regarding the matter(s) under consideration.  Reports with typically unsupported features may be voted FOR in cases in which the Agent recommends their initial support as the issuer or market transitions to better practices (e.g., having committed to new regulations or governance codes).

 

Shareholder Proposals Regarding Executive and Director Pay

 

The Funds’ U.S. Guidelines with respect to such shareholder proposals shall apply.

 

General Share Issuances

 

Unless otherwise provided for herein, voting decisions shall generally be based on the Agent’s practice to determine support for general issuance requests (with or without preemptive rights), or related requests to repurchase and reissue shares, based on their amount relative to currently issued capital as well as market-specific considerations (e.g., priority right protections in France, reasonable levels of dilution and discount in Hong Kong).  Requests to reissue repurchased shares will not be supported unless a related general issuance request is also supported.

 

Consider specific issuance requests on a CASE-BY-CASE basis based on the proposed use and the company’s rationale.

 

Generally, vote AGAINST proposals to issue shares (with or without preemptive rights), convertible bonds or warrants, to grant rights to acquire shares, or to amend the corporate charter relative to such issuances or grants in cases in which concerns have been identified by the Agent with respect to inadequate disclosure, inadequate restrictions on discounts, failure to meet the Agent’s standards for general issuance requests, or authority to refresh share issuance amounts without prior shareholder approval.

 

Increases in Authorized Capital

 

Unless otherwise provided for herein, voting decisions should generally be based on the Agent’s approach, as follows:

 

·                  Generally, vote FOR nonspecific proposals, including bundled proposals, to increase authorized capital up to 100 percent over the current authorization unless the increase would leave the company with less than 30 percent of its new authorization outstanding.

 

·                  Vote FOR specific proposals to increase authorized capital, unless:

 

·                  the specific purpose of the increase (such as a share-based acquisition or merger) does not meet these Guidelines for the purpose being proposed; or

 

·                  the increase would leave the company with less than 30 percent of its new authorization outstanding after adjusting for all proposed issuances.

 

·                  Vote AGAINST proposals to adopt unlimited capital authorizations.

 

·                  The Agent’s market-specific exceptions to the above parameters (e.g., The Netherlands, due to hybrid market controls) shall be applied.

 

Preferred Stock

 

Unless otherwise provided for herein, voting decisions should generally be based on the Agent’s approach, including:

 

44


 

·                  Vote FOR the creation of a new class of preferred stock or issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred stock would adversely affect the rights of existing shareholders.

 

·                  Vote FOR the creation/issuance of convertible preferred stock as long as the maximum number of common shares that could be issued upon conversion meets the Agent’s guidelines on equity issuance requests.

 

·                  Vote AGAINST the creation of (1) a new class of preference shares that would carry superior voting rights to the common shares or (2) blank check preferred stock unless the board states that the authorization will not be used to thwart a takeover bid.

 

Poison Pills/Protective Preference Shares

 

Generally, vote AGAINST management proposals in connection with poison pills or anti-takeover activities (e.g., disclosure requirements or issuances, transfers or repurchases) that do not meet the Agent’s standards.  Generally vote in accordance with Agent’s recommendation to withhold support from a nominee in connection with poison pill or anti-takeover considerations when culpability for the actions can be specifically attributed to the nominee.  Generally DO NOT VOTE AGAINST director remuneration in connection with poison pill considerations raised by the Agent.

 

Approval of Financial Statements and Director and Auditor Reports

 

Generally, vote FOR management proposals seeking approval of financial accounts and reports, unless there is concern about the company’s financial accounts and reporting, which, in the case of related party transactions, would include concerns raised by the Agent regarding consulting agreements with non-executive directors.  Unless otherwise provided for herein, reports not receiving the Agent’s support due to concerns regarding severance/termination payments not otherwise supported by these Guidelines shall be considered on a CASE-BY-CASE basis, factoring in the merits of the rationale and disclosure provided.  Generally, vote AGAINST board-issued reports receiving a negative recommendation from the Agent due to concerns regarding independence of the board or the presence of non-independent directors on the audit committee.  However, generally do not withhold support from such proposals in connection with remuneration practices otherwise supported under these Guidelines or as a means of expressing disapproval of broader practices of the issuer or its board.

 

Remuneration of Auditors

 

Generally, vote FOR proposals to authorize the board to determine the remuneration of auditors, unless there is evidence of excessive compensation relative to the size and nature of the company.

 

Indemnification of Auditors

 

Generally, vote AGAINST proposals to indemnify auditors.

 

Ratification of Auditors and Approval of Auditors’ Fees

 

For Canadian issuers, the Funds’ U.S. Guidelines with respect to auditors and auditor fees shall apply.  For other markets, generally, follow the Agent’s standards for proposals seeking auditor

 

45


 

ratification or approval of auditors’ fees, which indicate a vote FOR such proposals for companies in the MSCI EAFE index, provided the level of audit fee disclosure meets the Agent’s standards.  In other cases, generally vote FOR such proposals unless there are material concerns raised by the Agent about the auditor’s practices or independence.

 

Allocation of Income and Dividends

 

Generally, vote FOR management proposals concerning allocation of income and the distribution of dividends, including adjustments to reserves to make capital available for such purposes.  In the event management offers multiple dividend proposals on the same agenda, primary consideration shall be given to input from the relevant Investment Professional(s).

 

Stock (Scrip) Dividend Alternatives

 

Generally, vote FOR most stock (scrip) dividend proposals, but vote AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value.

 

Debt Instruments

 

Generally, vote AGAINST proposals authorizing excessive discretion, as assessed by the Agent, to a board to issue or set terms for debt instruments (e.g., commercial paper).

 

Debt Issuance Requests

 

When evaluating a debt issuance request, the issuing company’s present financial situation is examined.  The main factor for analysis is the company’s current debt-to-equity ratio, or gearing level.  A high gearing level may incline markets and financial analysts to downgrade the company’s bond rating, increasing its investment risk factor in the process.  A gearing level up to 100 percent is considered acceptable.

 

Generally, vote FOR debt issuances for companies when the gearing level is between zero and 100 percent.  Review on a CASE-BY-CASE basis proposals where the issuance of debt will result in the gearing level being greater than 100 percent, or for which inadequate disclosure precludes calculation of the gearing level, comparing any such proposed debt issuance to industry and market standards, and with voting decisions generally based on the Agent’s approach to evaluating such requests.

 

Financing Plans

 

Generally, vote FOR the adoption of financing plans if they are in the best economic interests of shareholders.

 

Related Party Transactions

 

Consider related party transactions on a CASE-BY-CASE basis.  Generally, vote FOR approval of such transactions unless the agreement requests a strategic move outside the company’s charter or contains unfavorable or high-risk terms (e.g., deposits without security interest or guaranty).

 

46


 

Approval of Donations

 

Generally, vote AGAINST such proposals unless adequate, prior disclosure of amounts is provided; if so, single- or multi-year authorities may be supported.

 

Capitalization of Reserves

 

Generally, vote FOR proposals to capitalize the company’s reserves for bonus issues of shares or to increase the par value of shares.

 

Investment of Company Reserves

 

These proposals should generally be analyzed on a CASE-BY-CASE basis, with primary consideration given to input from the Investment Professional(s) for a given Fund.

 

Article Amendments

 

Review on a CASE-BY-CASE basis all proposals seeking amendments to the articles of association.

 

Generally, vote FOR an article amendment if:

 

·                  it is editorial in nature;

 

·                  shareholder rights are protected;

 

·                  there is negligible or positive impact on shareholder value;

 

·                  management provides adequate reasons for the amendments or the Agent otherwise supports management’s position;

 

·                  it seeks to discontinue and/or delist a form of the issuer’s securities in cases in which the relevant Fund does not hold the affected security type; or

 

·                  the company is required to do so by law (if applicable).

 

Generally, vote AGAINST an article amendment if:

 

·                  it removes or lowers quorum requirements for board or shareholder meetings below levels recommended by the Agent;

 

·                  it reduces relevant disclosure to shareholders;

 

·                  it seeks to align the articles with provisions of another proposal not supported by these Guidelines;

 

·                  it is not supported under these Guidelines, is presented within a bundled proposal, and the Agent deems the negative impact, on balance, to outweigh any positive impact; or

 

·                  it imposes a negative impact on existing shareholder rights, including rights of the Funds, to the extent that any positive impact would not be deemed by the Agent to be sufficient to outweigh removal or diminution of such rights.

 

With respect to article amendments for Japanese companies:

 

·                  Generally vote FOR management proposals to amend a company’s articles to expand its business lines.

 

·                  Generally vote FOR management proposals to amend a company’s articles to provide for an expansion or reduction in the size of the board, unless the expansion/reduction is

 

47


 

clearly disproportionate to the growth/decrease in the scale of the business or raises anti-takeover concerns.

 

·                  If anti-takeover concerns exist, generally vote AGAINST management proposals, including bundled proposals, to amend a company’s articles to authorize the Board to vary the annual meeting record date or to otherwise align them with provisions of a takeover defense.

 

·                  Generally follow the Agent’s guidelines with respect to management proposals regarding amendments to authorize share repurchases at the board’s discretion, voting AGAINST proposals unless there is little to no likelihood of a “creeping takeover” (major shareholder owns nearly enough shares to reach a critical control threshold) or constraints on liquidity (free float of shares is low), and where the company is trading at below book value or is facing a real likelihood of substantial share sales; or where this amendment is bundled with other amendments which are clearly in shareholders’ interest.

 

Other Business

 

In connection with global proxies, vote in accordance with the Agent’s market-specific recommendations on management proposals for Other Business, generally AGAINST.

 

48


 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

 

(a) (1) Portfolio Management. The following individuals share responsibility for the day-to-day management of the Fund’s portfolio:

 

Daniel A. Norman. Mr. Norman is Senior Vice President and Senior Portfolio Manager in the Senior Debt Group, and has served in that capacity since November 1999. Prior to that, Mr. Norman was Senior Vice President and Portfolio Manager in the Senior Debt Group (since April 1995). Mr. Norman also serves as Senior Vice President and Treasurer of the Fund (since January 2001), and he serves as Senior Vice President and Treasurer of ING Prime Rate Trust, another closed-end fund sub-advised by ING IM that invests primarily in Senior Loans. Mr. Norman has co-managed the Fund with Jeffrey A. Bakalar and Curtis F. Lee since April of 2001.

 

Jeffrey A. Bakalar. Mr. Bakalar is Senior Vice President and Senior Portfolio Manager in the Senior Debt Group, and has served in that capacity since November 1999. Prior to that, Mr. Bakalar was Senior Vice President and Portfolio Manager in the Senior Debt Group (since January 1998). Before joining ING Groep, Mr. Bakalar was Vice President of The First National Bank of Chicago (from 1994 to 1998). Mr. Bakalar also serves as Senior Vice President of the Fund (since January 2001) and as Senior Vice President of ING Prime Rate Trust, another closed-end fund sub-advised by ING IM that invests primarily in Senior Loans. Mr. Bakalar co-managed the Fund with Mr. Norman and Mr. Lee since April of 2001.

 

Curtis F. Lee. Mr. Lee is Senior Vice President and Chief Credit Officer in the Senior Debt Group and has served in that capacity since January 2001. Prior to joining ING Groep, Mr. Lee held a series of positions with Standard Chartered Bank in the credit approval and problem loan management functions (1992 - 1999). Mr. Lee also serves as Senior Vice President and Chief Credit Officer of the Fund (since January 2001), and he serves as Senior Vice President and Chief Credit Officer of ING Prime Rate Trust, another closed-end fund sub-advised by ING IM that invests primarily in Senior Loans (since January 2001). Mr. Lee has been associated with the management of the Fund since April of 2001.

 

(a) (2) (i-iii) Other Accounts Managed

 

The following table shows the number of accounts and total assets in the accounts managed by the portfolio managers as of February 28, 2007.

 

 

 

Registered Investment
Companies

 

Other Pooled
Investment Vehicles

 

Other Accts*

 

Portfolio
Manager

 

Number of
Accounts

 

Total Assets
(in billions)

 

Number of
Accounts

 

Total Assets
(in billions)

 

Number of
Accounts

 

Total Assets
(in billions)

 

Daniel A. Norman

 

2

 

$

4.2

b

0

 

$

0

 

13

 

$

3.5

b

Jeffrey A. Bakalar

 

2

 

$

4.2

b

0

 

$

0

 

13

 

$

3.5

b

Curtis F. Lee

 

2

 

$

4.2

b

0

 

$

0

 

13

 

$

3.5

b

 

*  Of these other accounts, none have an advisory fee based on performance.

 


 

(a) (2) (iv) Conflicts of Interest

 

A portfolio manager may be subject to potential conflicts of interest because the portfolio manager is responsible for other accounts in addition to a Portfolio.  These other accounts may include, among others, other mutual funds, separately managed advisory accounts, commingled trust accounts, insurance separate accounts, wrap fee programs and hedge funds.  Potential conflicts may arise out of the implementation of differing investment strategies for the portfolio manager’s various accounts, the allocation of investment opportunities among those accounts or differences in the advisory fees paid by the portfolio manager’s accounts. 

 

A potential conflict of interest may arise as a result of the portfolio manager’s responsibility for multiple accounts with similar investment guidelines.  Under these circumstances, a potential investment may be suitable for more than one of the portfolio manager’s accounts, but the quantity of the investment available for purchase is less than the aggregate amount the accounts would ideally devote to the opportunity.  Similar conflicts may arise when multiple accounts seek to dispose of the same investment.

 

A portfolio manager may also manage accounts whose objectives and policies differ from those of the Portfolio.  These differences may be such that under certain circumstances, trading activity appropriate for one account managed by the portfolio manager may have adverse consequences for another account managed by the portfolio manager.  For example, if an account were to sell a significant position in a security, which could cause the market price of that security to decrease, while the Portfolio maintained its position in that security.

 

A potential conflict may arise when a portfolio manager is responsible for accounts that have different advisory fees – the difference in the fees may create an incentive for the portfolio manager to favor one account over another, for example, in terms of access to particularly appealing investment opportunities.  This conflict may be heightened where an account is subject to a performance-based fee. 

 

As part of its compliance program, ING IM has adopted policies and procedures reasonably designed to address the potential conflicts of interest described above.  Finally, a potential conflict of interest may arise because the investment mandates for certain other accounts, such as hedge funds, may allow extensive use of short sales, which, in theory, could allow them to enter into short positions in securities where other accounts hold long positions. ING IM has policies and procedures reasonably designed to limit and monitor short sales by the other accounts to avoid harm to the Portfolios.

 

(a) (3) Compensation

 

Compensation consists of (a) fixed base salary; (b) bonus which is based on ING IM’s performance, one- and three- year pre-tax performance of the accounts the portfolio managers are primarily and jointly responsible for relative to account benchmarks and peer universe performance, and revenue growth of the accounts they are responsible for; and (c) long-term equity awards tied to the performance of our parent company, ING Groep.

 

Portfolio managers are also eligible to participate in an annual cash incentive plan.  The overall design of the ING IM annual incentive plan was developed to closely tie pay to performance, structured in such a way as to drive performance and promote retention of top talent.  As with base salary compensation, individual target awards are determined and set based on external market data and internal comparators.  Investment performance is measured on both relative and absolute performance in all areas.  ING IM has a defined index, the Standard & Poor’s (“S&P’s”) LSTA Leveraged Loan Index and, where applicable, peer groups including but not limited to Russell, Morningstar, Lipper and Lehman and set performance goals to appropriately reflect requirements for each investment team.  The measures for each team are outlined on a “scorecard” that is reviewed on an annual basis.  These scorecards reflect a comprehensive approach to measuring investment performance versus both benchmarks and peer groups over one and three year periods

 


 

and year-to-date net cash flow (changes in the accounts’ net assets not attributable to changes in the value of the accounts’ investments) for all accounts managed by the team.  The results for overall IIM scorecards are calculated on an asset weighted performance basis of the individual team scorecards.   

 

Investment professionals’ performance measures for bonus determinations are weighted by 25% being attributable to the overall ING IM performance and 75% attributable to their specific team results (60% investment performance and 15% revenue).

 

Based on job function, internal comparators and external market data, portfolio managers participate in the ING Long-Term Incentive Plan.  Plan awards are based on the current year’s performance as defined by the ING IM component of the annual incentive plan.  The awards vest in three years and are paid in a combination of ING restricted stock, stock options and restricted performance units.

 

Portfolio managers whose fixed base salary compensation exceeds a particular threshold may participate in ING’s deferred compensation plan.  The plan provides an opportunity to invest deferred amounts of compensation in mutual funds, ING stock or at an annual fixed interest rate.  Deferral elections are done on an annual basis and the amount of compensation deferred is irrevocable.

 

(a) (4) Ownership of Securities

 

The following table shows the dollar range of shares of the Fund owned by each team member as of February 28, 2007, including investments by their immediate family members and amounts invested through retirement and deferred compensation plans.

 

Portfolio Manager

 

Dollar Range of Fund Shares Owned

 

Daniel A. Norman

 

none

 

Jeffrey A. Bakalar

 

none

 

Curtis F. Lee

 

none

 

 

(b)                                 Not applicable.

 


 

Item 9.  Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

 

None

 

Item 10.  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 11.  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 12. Exhibits.

 

(a)(1)

 

Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH.

 

 

 

 

 

(a)(2)

 

A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT.

 

 

 

 

 

(b)

 

The officer certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX-99.906CERT.

 

 

 

 

 

(3)

 

Not applicable.

 

 

 


 

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/ Shaun P. Mathews

 

Shaun P. Mathews

 

President and Chief Executive Officer

 

Date: May 9, 2008

 

 

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/ Shaun P. Mathews

 

Shaun P. Mathews

 

President and Chief Executive Officer

 

Date: May 9, 2008

 

 

By

/s/ Todd Modic

 

Todd Modic

 

Senior Vice President and Chief Financial Officer

 

Date: May 9, 2008