-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FT6xDEA/2r1pGfNazYVYJ4tfadWZb1oxmsd6QiZexoc1YS93RiPqM61g7roUnN8J EBjF46/YpXbJvv4vW4xfFg== 0001047469-04-027527.txt : 20040830 0001047469-04-027527.hdr.sgml : 20040830 20040830153622 ACCESSION NUMBER: 0001047469-04-027527 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040830 DATE AS OF CHANGE: 20040830 EFFECTIVENESS DATE: 20040830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING VP BALANCED PORTFOLIO INC CENTRAL INDEX KEY: 0000846799 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05773 FILM NUMBER: 041005392 BUSINESS ADDRESS: STREET 1: 7337 E. DOUBLETREE RANCH ROAD STREET 2: . CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 8602738902 MAIL ADDRESS: STREET 1: 7337 E. DOUBLETREE RANCH ROAD STREET 2: . CITY: SCOTTSDALE STATE: AZ ZIP: 06156 FORMER COMPANY: FORMER CONFORMED NAME: AETNA INVESTMENT ADVISERS FUND INC DATE OF NAME CHANGE: 20020322 FORMER COMPANY: FORMER CONFORMED NAME: ING VP BALANCED PORTFOLIO INC DATE OF NAME CHANGE: 20020320 FORMER COMPANY: FORMER CONFORMED NAME: AETNA INVESTMENT ADVISERS FUND INC DATE OF NAME CHANGE: 19920703 N-CSRS 1 a2142243zn-csrs.txt N-CSRS ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: October 31, 2006 Estimated average burden hours per response: 19.3 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-05773 -------------------------------------------- ING VP Balanced Portfolio, Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) The Corporation Trust Inc., 300 E. Lombard Street, Baltimore, MD 21202 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-992-0180 ---------------------------- Date of fiscal year end: December 31 -------------------------- Date of reporting period: January 1, 2004 to June 30, 2004 --------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1): 1 SEMI-ANNUAL REPORT SEMI-ANNUAL REPORT JUNE 30, 2004 CLASSES I AND S [GRAPHIC] ING VARIABLE PRODUCT PORTFOLIOS GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO (FORMERLY, ING VP TECHNOLOGY PORTFOLIO) ING VP INTERNATIONAL EQUITY PORTFOLIO DOMESTIC EQUITY GROWTH PORTFOLIOS ING VP GROWTH PORTFOLIO ING VP SMALL COMPANY PORTFOLIO DOMESTIC EQUITY VALUE PORTFOLIO ING VP VALUE OPPORTUNITY PORTFOLIO DOMESTIC EQUITY AND INCOME PORTFOLIOS ING VP BALANCED PORTFOLIO ING VP GROWTH AND INCOME PORTFOLIO FIXED INCOME PORTFOLIOS ING VP BOND PORTFOLIO ING VP MONEY MARKET PORTFOLIO [ING FUNDS LOGO] TABLE OF CONTENTS President's Letter 1 Market Perspective 2 Portfolio Managers' Reports: Global and International Equity Portfolios 4 Domestic Equity Growth Portfolios 8 Domestic Equity Value Portfolio 12 Domestic Equity and Income Portfolios 14 Fixed Income Portfolios 18 Statements of Assets and Liabilities 21 Statements of Operations 23 Statements of Changes in Net Assets 25 Financial Highlights 30 Notes to Financial Statements 39 Portfolios of Investments 49 Director and Officer Information 82
(THIS PAGE INTENTIONALLY LEFT BLANK) PRESIDENT'S LETTER [PHOTO OF JAMES M. HENNESSY] JAMES M. HENNESSY Dear Shareholder, The past year has been unpredictable for investors. Strong growth in the overall economy coupled with questions concerning mutual fund trading practices have challenged investors. In general, economic activity has continued to increase, with the growth being widespread. Personal consumption of goods and services is leading the recovery supported by corporate purchases of equipment and software and by Government spending on defense. Worries of possible interest rate increases, worsening global turmoil and increasing oil prices have reduced the gains the market realized in the first few months of 2004. However, investors remain steadfast as nearly each of the last six months has seen an overall increase in assets invested in mutual funds despite continuing investigations into late trading and market timing issues at some of the largest and most respected financial services companies in the country. You should have received a letter from Thomas J. McInerney, the Chief Executive Officer of ING U.S. Financial Services, which provided information about the internal review ING management conducted regarding trading practices in ING mutual fund products. If you did not receive a copy of the letter, please contact Investor Services at 1-800-992-0180 and we will provide you with a copy. I wish to thank you on behalf of everyone here at ING Funds for your continued confidence. We look forward to helping you meet your investment goals in the future. Sincerely, /s/ James M. Hennessy James M. Hennessy President ING Funds July 19, 2004 1 MARKET PERSPECTIVE: SIX MONTHS ENDED JUNE 30, 2004 OVERVIEW Perhaps it was inevitable that the markets should be a little neurotic after the heady gains of 2003. But whatever the reasons, investors in 2004 alternately cheered and fretted over the developing economic outlook, sending markets up, down and up again before ending the first six months of 2004 with modest and distinctly fragile gains. At first the worry was the so-called jobless recovery, then half way through the six-month period a very strong U.S. employment report was released. The report generated euphoria until people realized that as the job market tightens, inflation picks up and rising interest rates were likely not far away. Investors took comfort from Federal Open Market Committee ("FOMC") Chairman Greenspan's soothing advice that the rebound in interest rates would be "measured". But as the six months ended June 30, 2004 drew to a close, attention switched nervously to the impending U.S. earnings season and the strong possibility that the splendid results of the last few quarters would likely not be maintained. GLOBAL EQUITIES managed a 3.52% return, net of withholding tax on dividends, for the six months ended June 30, 2004 according to the Morgan Stanley Capital International ("MSCI") World Index(1) in dollars, after peaking on average in mid February and spending much of May in negative territory. Among CURRENCIES, the euro reached a post launch record also in mid February before retreating and ending about 3.0% lower for the six months ended June 30, 2004. The British pound ended the six months 2.0% higher against the dollar, as the Bank of England became the first of the major central banks to raise interest rates. The yen lost approximately 1.5%, ironically after the Bank of Japan stopped buying dollars to keep the yen weak, spending a staggering $144 billion in the first quarter of 2004 to do so. FIXED INCOME MARKET U.S. FIXED INCOME classes started 2004 as they had ended 2003. Disappointing jobs reports, together with stubbornly high new unemployment claims, suggested continuing weakness, and gave bond investors a solid first quarter of gains. That all changed on the first Friday in April 2004, with the very bullish U.S. employment report. Investment grade bonds unsurprisingly bore the brunt of fears that a new cycle of rising interest rates from multi-decade low levels was about to start. For the six months ended June 30, 2004, the Lehman Brothers Aggregate Bond Index(2) of investment grade bonds returned a tiny 0.16%. The Lehman Brothers Corporate Index(3) component and the Lehman Brothers Treasury Bond Index(4) fell by 0.26% and 0.20%, respectively. Ten-year Treasury yields rose by 36 basis points to 4.62%, passing through rates not seen in nearly two years. Yields on 90-day Treasury Bills rose 39 basis points to 1.3%, emphatically breaching the 1.0% level, a rate above which they had not closed since June 9, 2003. High yield bonds did better, the Lehman Brothers U.S. Corporate High Yield Bond Index(5) hung on to return 1.35% for the six-month period. DOMESTIC EQUITY MARKET The U.S. EQUITIES market rose 3.44% in the six months ended June 30, 2004, based on the Standard & Poor's ("S&P") 500 Index(6) including dividends. This implies a price-to-earnings (P/E) level of just over 17 times 2004 earnings. Three strong employment reports in the second quarter of 2004 were welcomed, but all was not in harmony. For while successive, upbeat economic statistics sang of good economic times, there was also a steady drumbeat of evidence that inflation was picking up. The Federal Funds rate at just 1.0% meant that real interest rates were becoming ever more negative at the same time, while the economy was growing at over 4.0%. With labor markets tightening and oil prices breaking above $40 per barrel, this appears to be an increasingly unstable situation. Meanwhile, the FOMC took almost the entire second quarter of 2004 before increasing the Federal Funds rate to 1.25% on June 30, 2004. However, in the week before the increase, the wind seemed to shift again. First quarter of 2004 gross domestic product ("GDP") growth was revised down to 3.9%, durable goods orders fell, and retailers and auto companies complained of slack sales. On the day the FOMC raised rates, the Chicago Purchasing Managers' Index(7) had its largest monthly drop in 30 years. Perhaps Greenspan's "measured" policy was right, but perhaps something else was wrong. The first half of 2004 ended, with investors again nervously awaiting the employment report two days later. 2 MARKET PERSPECTIVE: SIX MONTHS ENDED JUNE 30, 2004 INTERNATIONAL MARKETS Most INTERNATIONAL MARKETS eked out similarly modest gains for the six months ended June 30, 2004, but JAPAN was the star, rising 10.73% in dollars according to the MSCI Japan Index(8). Sentiment was encouraged by first quarter GDP growth, reported at a surprisingly strong 6.1% annualized, suggesting that the world's second largest economy was at last emerging from its slump of more than a decade. EUROPEAN EX UK MARKETS gained 2.88% in dollars in the six months ended June 30, 2004, according to the MSCI Europe ex UK Index(9). Buoyant exports were about the only good news, as domestic demand still languished under unemployment of 9.0%. Still, these markets look relatively cheap. Finally the UK market rose 3.32% in dollars during the first six months of 2004, based on the MSCI UK Index(10). The economy appears to be strong, but the troubling imbalances of an over-indebted consumer and a housing price bubble led to three interest rate increases by the Bank of England, with more likely on the way. - ---------- (1) The MSCI WORLD INDEX reflects the stock markets of 22 countries, including the United States, Europe, Canada, Australia, New Zealand and the Far East - -- comprising approximately 1,500 securities -- with values expressed in U.S. dollars. (2) The LEHMAN BROTHERS AGGREGATE BOND INDEX is composed of securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. (3) The LEHMAN BROTHERS CORPORATE INDEX includes all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade corporate debt. (4) The LEHMAN BROTHERS TREASURY BOND INDEX (U.S. Dollars) is composed of all bonds covered by the Lehman Brothers Aggregate Bond Index with maturities of 10 years or greater. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. (5) The LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD BOND INDEX is generally representative of corporate bonds rated below investment-grade. (6) The S&P 500 INDEX is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. (7) The CHICAGO PURCHASING MANAGERS' INDEX measures manufacturing activity in the industrial Midwest. (8) The MSCI JAPAN INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Japan. (9) The MSCI EUROPE EX UK INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe, excluding the UK. (10) The MSCI UK INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in the UK. ALL INDICES ARE UNMANAGED AND INVESTORS CANNOT INVEST DIRECTLY IN AN INDEX. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIOS' PERFORMANCE IS SUBJECT TO CHANGE SINCE THE PERIOD'S END AND MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA SHOWN. FOR VARIABLE ANNUITY CONTRACTS, PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. MARKET PERSPECTIVE REFLECTS THE VIEWS OF THE CHIEF INVESTMENT RISK OFFICER ONLY THROUGH THE END OF THE PERIOD, AND IS SUBJECT TO CHANGE BASED ON MARKET AND OTHER CONDITIONS. 3 ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: Thomas P. Callan, CFA, Managing Director and Senior Portfolio Manager, Daniel M. Rea, Vice President and Portfolio Manager, BlackRock Advisors, Inc. -- the Sub-Adviser (*). GOAL: The ING VP Global Science and Technology Portfolio (formerly, ING VP Technology Portfolio, the "Portfolio") seeks long-term capital appreciation. PERFORMANCE: During the six months ended June 30, 2004, the Portfolio's Class I shares provided a total return of -5.43% compared to 3.44% for the Standard & Poor's ("S&P") 500 Index(1) and 5.64% for the Pacific Stock Exchange ("PSE") Technology Index(2). PORTFOLIO SPECIFICS: During the period January 1, 2004 through June 30, 2004, the Portfolio underperformed its benchmark, the PSE Technology Index. Throughout the period, market participants became increasingly concerned about the sustainability of the global economic recovery. The lack of confidence was likely fueled by the increasing likelihood of tighter U.S. monetary policy, the potential for controlled GDP deceleration in China, global terrorism concerns, and a more contentious U.S. presidential election. These macroeconomic and geopolitical issues resulted in a reassessment of risk and precipitated a shift away from economically sensitive sectors including technology, industrials, and materials. Within technology, the more cyclical sub-industries such as semiconductor capital equipment and semiconductor devices experienced weak performance. As for the healthcare sector, performance was driven by capital flow into segments with greater revenue and earnings visibility as investors favored medical devices over biotechnology. The majority of the relative underperformance for the period can be attributed to stock selection, particularly in the semiconductor devices and internet software and services industries. Within the semiconductor devices industry, the Portfolio's excessive exposure to small and mid cap stocks, which underperformed, resulted in the negative contribution to performance from that group. In the internet software and services industry, stock selection was also negative due to the Portfolio's lack of exposure to Check Point Software Technologies, Inc., which gained over 60% in the period. Other detractors from performance include the Portfolio's underweight in the medical equipment group and overweight in the semiconductor devices industry, as well as stock selection in the computer peripherals and communications equipment industries. On a positive note, the Portfolio benefited from an overweight to the internet software and services industry, which was a strong performing group in the benchmark during the period. Stock selection in the systems software sub-industry also contributed positively to performance. Companies including Adobe Systems, Inc. and Symantec Corp. appreciated notably, returning 19% and 27%, respectively, for the period January 1 through June 30, 2004, as underlying business fundamentals continued to improve. Finally, category-dominant Internet companies such as eBay, Inc. and Yahoo!, Inc., which returned 42% and 62%, respectively for the same period, benefited from increasing on-line traffic and transaction volumes, as well as an acceleration in online advertising. MARKET OUTLOOK: For the past several quarters, global economic data have pointed to a broad-based industrial recovery. In the United States, accommodative monetary policy and stimulative fiscal policy have produced a dramatic re-acceleration in GDP. Furthermore, corporations appear to have successfully realigned their cost structures and improved their balance sheets, which has generally led to improved profitability. Although increasing inflationary pressures have led to monetary tightening, we don't anticipate substantial increases in the Fed Funds rate over the intermediate term. Furthermore, a low nominal interest rate environment is still supportive of additional capital investment and we anticipate greater enterprise spending in the next several quarters. In addition, we believe many IT companies have sufficient operating leverage to drive earnings growth and can outperform throughout this portion of the economic cycle. However, unlike much of 2003 where multiple expansion was a major contributor to returns, we believe the market will begin to reward higher quality companies with consistent top-line growth and the ability to expand margins. We would characterize the recent pullback as a mid-cycle correction and view it as an attractive opportunity to increase our exposure to selective segments of the market. In our view, many of the factors that drove recent weakness were macro in nature and have not directly impacted the investment dynamics within the technology sector. - ---------- (*) Effective January 1, 2004, BlackRock Advisors, Inc. ("BlackRock") began acting as sub-adviser to ING VP Technology Portfolio under an interim sub-advisory agreement. On March 23, 2004, the Portfolio's shareholders approved the change in sub-adviser of ING VP Technology Portfolio from AIC Asset Management, LLC to BlackRock. In connection with the change in sub-adviser were the following changes to the name and non-fundamental investment strategy and policies of the Portfolio: (1) a name change to ING VP Global Science and Technology Portfolio from ING VP Technology Portfolio; (2) strategy and policy changes so that the Portfolio became a global fund investing 80% of its assets in common stocks and securities convertible into common stock of companies in the science and technology sectors; and (3) the comparative index for the Portfolio was changed from the Goldman Sachs Technology Industry Composite Index to the Standard & Poor's 500 Index and the Pacific Stock Exchange Technology Index was added as a comparative index. 4 PORTFOLIO MANAGERS' REPORT ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 ------------------------------------ SINCE INCEPTION OF CLASS I 1 YEAR MAY 1, 2000 ------ --------------- Class I 18.45% (21.43)% S&P 500 Index(1) 19.11% (4.19)% PSE Technology Index(2) 31.19% (31.73)% Goldman Sachs Technology Industry Composite Index(3) 17.10% (20.28)%
The table above illustrates the total return of ING VP Global Science and Technology Portfolio against the S&P 500 Index, the PSE Technology Index and the Goldman Sachs Technology Industry Composite Index. The Indices have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large capitalization companies whose securities are traded on major U.S. stock markets. (2) The PSE Technology Index, an unmanaged index published by the Pacific Exchange, is comprised of 100 listed and over-the-counter stocks from 15 different industries including computer hardware, software, semiconductors, telecommunications, data storage and processing, electronics and biotechnology. (3) The Goldman Sachs Technology Industry Composite Index is a widely recognized, unmanaged index of technology stocks. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. The Portfolio focuses its investments in science and technology sectors. The Portfolio's focus on stocks in the science and technology sectors makes it more susceptible to factors affecting those sectors and more volatile than funds that invest in many different sectors. In addition, investing in science and technology companies exposes the Portfolio to special risks. For example, rapid advances in science and technology might cause existing products to become obsolete, and the Portfolio's returns could suffer to the extent it holds an affected company's shares. The Portfolio's investments in small- and mid-sized companies may be more susceptible to price swings than larger companies. International investing involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Portfolio. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. 5 ING VP INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of investment specialists, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP International Equity Portfolio (the "Portfolio") seeks long-term capital growth primarily through investment in a diversified portfolio of common stocks principally traded in countries outside of the United States. The Portfolio will not target any given level of current income. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares provided a total return of 3.71% compared to the Morgan Stanley Capital International Europe, Australasia and Far East ("MSCI EAFE") Index(1), which returned 4.86% for the same period. PORTFOLIO SPECIFICS: International markets commenced the new year on a strong note, supported by rising growth expectations and investor confidence, but ran out of steam by mid-February. This period was reminiscent of the post-March 2003 recovery, in which speculative, generally smaller stocks led the advance. Rising oil prices, a steadily deteriorating security situation in Iraq, concerns that the Chinese economy was heading for a hard landing, and higher global long-term interest rates combined to undermine sentiment, and markets have essentially traded sideways since. This latter phase saw an increasing focus on company fundamentals, a move that benefited the relative performance of the Portfolio in the period mid-February 2004 through June 30, 2004; however, the Portfolio did underperform the benchmark. Our regional allocation strategy added some value in the review period due to our positive allocation in the strongly performing Japanese market and being underweight in the lesser performing Pan-European and Developed Asia/Australian regions. The performance deficit was the result of stock selection within the aforementioned regions. Positive selection results in Japan were offset by a negative outcome in Developed Asia/Australia. The sector strategy result was negative largely due to being underweight in consumer staples, which had strong relative performance. Our focus on the energy sector and underweight exposure to the poorly performing technology sector impacted positively on the sector allocation result. While stock selection proved to be successful in most of the economic sectors, performance deficits in the consumer discretionary, health care, and information technology sectors yielded an overall adverse stock selection outcome. In Hong Kong, CITIC International Financial Holdings Ltd. was impacted by the suddenly escalating China concerns. Weakness in the previously held cellular telephone equipment manufacturer Nokia impacted the result in technology, as did a lack of exposure to competitor L.M. Ericsson, which was gaining market share at its cost. A lack of exposure to French oil producer Total SA also hurt performance, as did our exposure to Japanese automaker Nissan Motor Co., Ltd., which was previously held, and Australian media company Seven Network Ltd. On the positive side, our accent on the recovering Japanese banks proved rewarding, especially our holdings in The Sumitomo Trust & Banking Co. Ltd. and Bank of Yokohama Ltd., which was held during the period. Japanese industrial holding Itochu Corp. and supermarket operator Ito-Yokado, which was previously held, were also material positive contributors. MARKET OUTLOOK: The maturing of the global economic recovery and the potential for continued interest rate increases suggests a less pro-cyclical portfolio stance, with a focus on stocks with steady earnings growth and sustainable and growing dividends. Our Portfolio evolved from a modest pro-cyclical positioning to a cyclically neutral stance in the course of the six month period. In our view, the potential for upside earnings surprises remains strongest in Japan, where we maintain a modest overweight position and maintain a slightly aggressive positioning offset elsewhere. For EAFE as a whole, the upside remains modest, with the benefit of continued, albeit reducing, earnings momentum likely to be partly offset by the lower valuations demanded by rising interest rates. A stronger outlook is contingent on the continued combination of high earnings growth and stable interest rates, which, while not impossible, is deemed an unlikely outcome. On balance, the Portfolio currently has a price/earnings multiple approximating that of the benchmark, but we expect it to generate higher and more visible earnings growth in both 2004 and 2005. 6 PORTFOLIO MANAGERS' REPORT ING VP INTERNATIONAL EQUITY PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 22, 1997 NOVEMBER 1, 2001 ------ ------ ----------------- ---------------- Class I 28.09% (3.53)% 1.83% -- Class S 27.72% -- -- 2.13% MSCI EAFE Index(1) 32.85% 0.40% 3.85%(2) 9.82%
The table above illustrates the total return of ING VP International Equity Portfolio against the MSCI EAFE Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The MSCI EAFE Index is an unmanaged index that measures the performance of securities listed on exchanges in markets in Europe, Australia and the Far East. (2) Since inception performance for the index is shown from January 1, 1998. PRINCIPAL RISK FACTOR(S): Those generally attributable to stock investing. These risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets. Derivatives are subject to the risk of changes in the market price of the security and the risk of loss due to changes in interest rates. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Portfolio. The value of convertible securities may fall when interest rates rise. Convertible securities with longer maturities tend to be more sensitive to changes in interest rates, usually making them more volatile than convertible securities with shorter maturities. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. 7 ING VP GROWTH PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of equity investment specialists led by Kenneth Bragdon, CFA, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Growth Portfolio (the "Portfolio") seeks growth of capital through investment in a diversified portfolio consisting primarily of common stocks and securities convertible into common stocks believed to offer growth potential. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares provided a total return of 1.34% compared to the Russell 1000 Growth Index(1), which returned 2.74% for the same period. PORTFOLIO SPECIFICS: The market rose during the six months ended June 30, 2004; however, economic data remained positive, but concerns about the outlook for interest rates and sustainability of the economic expansion may have caused some of the more cyclically sensitive sectors, such as technology and materials, to lag the market. Energy and transportation were the strong sectors year-to-date 2004. Energy was helped by a constructive outlook for commodity prices and margins going forward. Despite higher energy prices, demand for transportation services may have provided an opportunity to raise prices at a faster rate than input costs. For the six month period, the Portfolio underperformed its benchmark. The sectors with the greatest positive impact to the Portfolio's performance during the period were energy, other (multi-industry), and most importantly, our overweight in industrials. Offsetting these positive contributors were technology, materials and consumer staples. The Portfolio was overweight several large multi-industry companies with strong six month results. Tyco International Ltd., Eaton Corp., and 3M Co. were significant contributors due to stronger-than-expected international growth and product positioning. Record energy prices and strong refining margins caused the energy sector to outperform, as demand for energy outstripped supply. Halliburton Co., Pogo Producing Co., and previously held Valero all benefited from these industry trends. In health care, the Portfolio remained underexposed to pharmaceutical companies, which benefited performance, although stock selection within the sector was weak. Stock selection in the technology sector was a large detractor to performance year-to-date. Semiconductor companies were the worst performing subcategories of technology. Company-specific shortfalls at SanDisk Corp. and VERITAS Software Corp., which were held during the period, drove their stock prices lower. In addition, large bellwethers, such as EMC Corp. and Intel Corp., depreciated in the first half of the year as high expectations for robust results began to ebb. An overweight position in materials, which was lightened by period-end, detracted from results as concerns over high economic growth in Asia and the outlook for interest rates began to weigh on company prospects. These growth concerns benefited the consumer staples sector as investors rotated into companies and industries with more stable and predictable earnings prospect. The Portfolio's underweight exposure to the sector hurt results in the first half of 2004. MARKET OUTLOOK: Our outlook for the market remains constructive. We believe the prospect for strong corporate profits and the ability of companies to successfully pass through rising input prices is the foundation for a solid earnings outlook going forward. The risk of inflation and volatile interest rates is higher than it was a year ago. That said, the Federal Reserve's ability to maintain price stability during moderate growth is not our concern at this time. We would expect rising earnings to offset any interest rate or inflation concerns and keep equities relatively attractive. We will continue to follow our disciplined approach of investing in companies that we believe demonstrate improving business fundamentals. 8 PORTFOLIO MANAGERS' REPORT ING VP GROWTH PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 13, 1996 NOVEMBER 1, 2001 ------ ------ ----------------- ---------------- Class I 15.88% (6.45)% 5.64% -- Class S 15.70% -- -- (0.74)% Russell 1000 Growth Index(1) 17.88% (6.48)% 4.56%(2) 1.91%
The table above illustrates the total return of ING VP Growth Portfolio against the Russell 1000 Growth Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Russell 1000 Growth Index measures the performance of the 1,000 largest companies in the Russell 3000 Index with higher price-to-book ratios and higher forecasted growth. The Russell 3000 Index is an unmanaged index that measures the performance of 3,000 U.S. companies based on total market capitalization. (2) Since inception performance for the index is shown from December 1, 1996. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. Growth-oriented stocks typically sell at relatively high valuations as compared to other types of stocks. Historically, growth-oriented stocks have been more volatile than value-oriented stocks. The value of convertible securities may fall when interest rates rise. Stocks of small- and mid-sized companies tend to be less liquid and more volatile than stocks of larger companies. Stocks of small- and mid-sized companies also can be particularly sensitive to unexpected changes in interest rates, borrowing costs and earnings. The Portfolio's investments in derivatives are subject to the risk that changes in market prices of securities or interest rates may result in a loss. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio and may reduce its returns. The Portfolio's investments in high yield securities are subject to greater risk than higher quality securities, including the risks associated with greater price volatility, principal and income risk. The Portfolio's investments in foreign securities involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. 9 ING VP SMALL COMPANY PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of equity investment specialists led by Carolie Burroughs, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Small Company Portfolio (the "Portfolio") seeks growth of capital primarily through investment in a diversified portfolio of common stocks and securities convertible into common stocks of companies with smaller market capitalizations. PERFORMANCE: For the period ended June 30, 2004, the Portfolio's Class I shares returned 2.86% compared to the Russell 2000 Index(1), which returned 6.76% for the same period. PORTFOLIO SPECIFICS: For the six months ended June 30, 2004, the Russell 2000 Index rose 6.76%, while the Portfolio returned 2.86%. Energy was a strong performing sector, while telecommunications was weak. The Russell 2000 Value Index beat the Russell 2000 Growth Index by 1.50%. Small-cap stocks outperformed all other asset classes, as evidenced by the major equity indices. During the six month period, the Standard & Poor's ("S&P") 500 Index(3) was up 3.44% and the Dow Jones Industrial Average(4) gained only 0.80%, while the S&P SmallCap 600 Index(5) returned 10.05%. The U.S. economy, the war in Iraq, corporate profits, and the Federal Reserve's ("Fed") language with respect to monetary tightening dominated the headlines and the U.S. equities market during the period. Equities experienced strong funds flow through mid-January 2004, as the economy and corporate profits improved and the situation in Iraq appeared to be relatively controlled. However, flows decelerated as company managements provided 2004 guidance below consensus expectations, citing continued caution on the economy and their business environments. Outflows eventually accompanied the dwindling public support of the U.S. involvement in Iraq and the change in Fed rhetoric indicating that the first rate increase would be much sooner than expected. Sector rotation was prevalent in the market as investors alternated between growth and value, fundamentals and speculation, and market risk and headline risk. Stock selection in the telecommunications and materials sectors contributed positively to the Portfolio's performance. Stock selection in the health care and technology sectors contributed negatively. The large individual positive contributors to performance during the period were Briggs & Stratton, Eon Labs, Inc., and Louisiana-Pacific Corp. The large negative contributors were Knight Trading Group, Inc., Lexar Media, Inc. and Alliance Gaming, which was held during the period. During the period, we continued to add to the materials and processing sector and producer durables, as the outlook for the U.S. and global economy improved. We lowered the weight in technology and shifted the mix to more defensive industrial technology stocks. Toward the end of the period, we trimmed our health care exposure as investors began to take their profits and move on and trimmed our financial services exposure since this group typically underperforms in a rising rate environment. We maintain the +/- 5% collar for all of our sector active weights and a style neutral position to mitigate the harm caused by market swings. On average, our cash position during the period was 7%. MARKET OUTLOOK: We expect a choppy market for U.S. equities over the next six months of 2004, given geopolitical issues, a rising interest rate environment, and the U.S. presidential campaign. Despite this near-term volatility, we expect the U.S. equities market to trend upward. We have witnessed pockets of outperformance by stocks with better fundamentals, though it is sometimes short-lived and not as widespread as we expected. Although a rising rate environment will likely accompany the summer slowdown in the market, we expect the market to broaden and to continue rewarding better quality stocks, although price volatility in the small-cap asset class may initially mask the effect. We expect the small-cap cycle to remain on course and for smaller capitalization stocks to outperform large-cap stocks. First, smaller capitalization stocks offer comparable earnings and revenue growth to large-cap stocks but generally provide a better value on a price-to-earnings, price-to-book, and price-to-free cash flow basis. Although rising interest rates may cause an interruption in the cycle, this should serve to make smaller capitalization stocks even more attractive relative to large-cap stocks. Second, access to capital for small-cap stocks continues through strong equity and debt issuance. A rebound in commercial lending by the banking industry will likely help to fuel their growth, as well. Finally, merger and acquisition activity remains strong. On a price-to-cash basis, large-cap companies tend to trump their smaller capitalization counterparts. We expect consolidation to continue with most deals occurring in the small-cap space. We look forward to the new fiscal year. Whatever challenges the market presents in the short term, we believe the Portfolio is well positioned to benefit as the small-cap cycle continues to move up the market cap spectrum and better quality stocks begin to consistently outperform. 10 PORTFOLIO MANAGERS' REPORT ING VP SMALL COMPANY PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 27, 1996 NOVEMBER 1, 2001 ------ ------ ----------------- ---------------- Class I 24.16% 7.61% 10.86% -- Class S 23.83% -- -- 7.09% Russell 2000 Index(1) 33.37% 6.63% 8.12%(2) 14.35%
The table above illustrates the total return of ING VP Small Company Portfolio against the Russell 2000 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index is an unmanaged index that measures the performance of 3,000 U.S. companies based on total market capitalization. (2) Since inception performance for the index is shown from January 1, 1997. (3) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large, capitalization companies whose securities are traded on major U.S. stock markets. (4) The Dow Jones Industrial Average is an unmanaged U.S. stock index based on the stock prices of 30 large and actively traded U.S. companies. (5) The S&P SmallCap 600 Index is an unmanaged index that measures the performance of the small-size company segment of the U.S. market. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility and less liquidity than investing in stocks of larger companies. The Portfolio may invest in foreign securities. International investing does pose special risks including currency fluctuation, economical and political risks not found in domestic investments. Risks of foreign investing are generally intensified in emerging markets. The value of convertible securities may fall when interest rates rise. Investments in derivatives are subject to the risk that changes in market prices of securities or interest rates may result in a loss. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio and may reduce returns. The Portfolio's investments in high yield securities are subject to greater risk than higher quality securities, including the risks associated with greater price volatility, principal and income risk. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. 11 ING VP VALUE OPPORTUNITY PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of equity investment specialists led by William F. Coughlin, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Value Opportunity Portfolio (the "Portfolio ") seeks growth of capital primarily through investment in a diversified portfolio of common stocks and securities convertible into common stock. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares returned 2.65% compared to the Standard & Poor's ("S&P") 500 Index(1), which returned 3.44% over the same period. PORTFOLIO SPECIFICS: The positive contribution from favorable sector allocation was not able to overcome the negative impact of unfavorable stock selection during the six months ended June 30, 2004. With regard to sector allocation, an overweighted position in energy and underweighting the information technology sector were key positive contributors. Within the industrials group, holdings of General Dynamics Corp., Honeywell International, Inc., and Masco Corp. all provided double-digit returns. On the other hand, stock selection in the financial services and energy sectors, led on the downside by Morgan Stanley, Merrill Lynch & Co., Inc., and Royal Dutch Petroleum, which was held during the period, had the most important negative impact on performance. The S&P 500 Index has more than 20% of its market capitalization in the financial services sector. We have also invested a large percentage of the Portfolio in this interest rate sensitive group as a risk control measure. However, as interest rates trended higher during the second quarter, this group has been under pressure and has been a negative factor to overall performance. MARKET OUTLOOK: Given the favorable environment we see ahead for stocks, we believe the Portfolio is well positioned in high quality, large-capitalization companies with strong balance sheets, low valuations, strong management teams, favorable operating outlooks, and catalysts in place that will, in our opinion, lead to higher share prices. 12 PORTFOLIO MANAGERS' REPORT ING VP VALUE OPPORTUNITY PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 13, 1996 JULY 16, 2001 ------ ------ ----------------- ---------------- Class I 16.56% 0.41% 9.35% -- Class S 16.22% -- -- (5.04)% S&P 500 Index(1) 19.11% (2.17)% 7.19%(2) (0.37)%(3)
The table above illustrates the total return of ING VP Value Opportunity Portfolio against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large-capitalization companies whose securities are traded on major U.S. stock markets. (2) Since inception performance for the index is shown from December 1, 1996. (3) Since inception performance for the index is shown from August 1, 2001. PRINCIPAL RISK FACTOR(S): The principal risks of investing in the Portfolio are those generally attributable to stock investing. They include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. Because the prices of value-oriented stocks tend to correlate more closely with economic cycles than growth-oriented stocks, they generally are more sensitive to changing economic conditions, such as changes in interest rates, corporate earnings and industrial production. Stocks of small- and mid-sized companies tend to be less liquid and more volatile than stocks of larger companies. Derivatives are subject to the risk that changes in market prices of securities or interest rates may result in a loss. The value of convertible securities may fall when interest rates rise. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. The Portfolio's investments in high yield securities are subject to greater risk than higher quality securities, including the risks associated with greater price volatility, principal and income risk. The Portfolio's investments in foreign securities involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. 13 ING VP BALANCED PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: Hugh T. Whelan and James B. Kauffmann, ING Investment Management Co.(formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Balanced Portfolio (the "Portfolio") seeks to maximize investment return consistent with reasonable safety of principal, by investing in a diversified portfolio of one or more of the following asset classes: stocks, bonds and cash equivalents, based on the judgment of the Portfolio's management, of which of those sectors or mix thereof offers the best investment prospects. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares returned 2.32%, compared to 3.44% for the Standard & Poor's ("S&P") 500 Index(1) and the composite index consisting of 60% of the return of the S&P 500 Index and 40% of the return of the Lehman Brothers Aggregate Bond Index(2), which returned 2.13% for the same period. PORTFOLIO SPECIFICS: During the six months ended June 30, 2004, the Portfolio underperformed the S&P 500 Index. The equity component of the Portfolio, however, outperformed the S&P 500 Index for the period, primarily due to strong security selection. Stock selection in the health care and financial sectors had a strong positive impact on results, while selection among telecom and consumer staples names detracted from performance. Sector allocation had a small negative impact on results, notably through an overweight in technology. Our short duration stance was a major source of the good performance of the fixed income portion relative to the Lehman Brothers Aggregate Bond Index. During the period, we reduced our exposure to longer-dated and lower-rated corporates in the face of stretched valuations. As a rule, longer-dated credit-sensitive paper underperformed. Our exposure in securitized sectors generally proved beneficial. In the second half we were underweight the financials sector, which also contributed positively to relative performance as the sector fared poorly as the market prepared for Federal Reserve ("Fed") tightening. We were also underweight in dollar-denominated issues of foreign countries, another sector that had a negative return. Mortgages produced a small positive excess return, and our position varied from neutral to underweight during the period. Exposure to emerging market debt contributed to returns in the first half of the reporting period but was a significant drag on our performance in the second half as incremental yield was not sufficient to offset price depreciation. Our high yield exposure was also a drag on performance. MARKET OUTLOOK: The second quarter ended a little softer as inflation crept up slightly, employment took a sideways move, and oil continued to be high. The second-quarter corporate profit outlook continues to be revised upward by analysts and likely will exceed the increased optimism as it has for the past five quarters. Despite this potentially strong earnings season, the S&P 500 Index turned in lackluster performance. On June 30, at the much anticipated Federal Open Market Committee meeting, the Fed Funds rate was increased to 1.25%, a 25 basis point increase that was in line with consensus expectations. The Fed's comments pointed to a measured path of tightenings versus aggressive tightenings going forward. The equity component of the Portfolio is overweight in the consumer discretionary energy and technology sectors and underweight in the health care, consumer staples, and telecom sectors. However, our overall sector exposures are by design quite close to those of the S&P 500 Index so that nearly all of our relative performance is driven by individual stock selection. Tactically, the fixed income component of the Portfolio is still short in duration in the face of anticipated improving global economic fundamentals, but we have reduced the magnitude of that posture following the recent rise in rates. We are neutral home mortgages, overweight asset-backed and commercial mortgage-backed securities, and underweight the front-end of the yield curve, which appears most vulnerable in a tightening cycle. We are underweight agencies. Stretched valuations in investment-grade credit and plus sectors warrant some caution, and we have reduced the contribution to duration of these spread sectors. Additionally, we have reduced our exposure in emerging markets, and our high yield position has been eliminated with the exception of a few crossover and special situation issues that tend to track the investment-grade market. However, we are watchful for points of potential re-entry. 14 PORTFOLIO MANAGERS' REPORT ING VP BALANCED PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION OF CLASS S 1 YEAR 5 YEAR 10 YEAR MAY 29, 2003 ------ ------ ------- --------------- Class I 10.97% 2.08% 9.83% -- Class S 10.78% -- -- 11.77% S&P 500 Index(1) 19.11% (2.17)% 11.87% 18.90%(3) Lehman Brothers Aggregate Bond Index(2) 0.32% 6.95% 7.39% 0.12%(3) Composite Index (60% S&P 500 Index/ 40% Lehman Brothers Aggregate Bond Index) 11.36% 1.78% 10.41% 11.14%(3)
The table above illustrates the total return of ING VP Balanced Portfolio against the S&P 500 Index, the Lehman Brothers Aggregate Bond Index and the Composite Index (60% S&P 500 Index, 40% Lehman Brothers Aggregate Bond Index). The Indices have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large capitalization companies whose securities are traded on major U.S. stock markets. (2) The Lehman Brothers Aggregate Bond Index is an unmanaged index composed of securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. (3) Since inception performance for the index is shown from June 1, 2003. PRINCIPAL RISK FACTOR(S): The principal risks of investing in the Portfolio are those generally attributable to stock and bond investing. Because the Portfolio's assets are allocated between equities and fixed income securities, the Portfolio may underperform stock funds when stocks are in favor and underperform bond funds when bonds are in favor. Investments in high yield bonds are high risk investments. Certain high yield/high risk bonds carry particular market and credit risks and may experience greater volatility in market value than investment grade corporate bonds. The Portfolio's investments in mortgage-related securities may entail prepayment risk. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets. Stocks of smaller companies tend to be less liquid and more volatile than stocks of larger companies. Further, stocks of smaller companies also can be particularly sensitive to expected changes in interest rates, borrowing costs and earnings. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. Some U.S. Government agency securities may be subject to varying degrees of credit risk, particularly those not backed by the full faith and credit of the U.S. Government. The value of convertible securities may fall when interest rates rise. 15 ING VP GROWTH AND INCOME PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Christopher F. Corapi, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Growth and Income Portfolio (the "Portfolio") seeks to maximize total return through investments in a diversified portfolio of common stocks and securities convertible into common stock. It is anticipated that capital appreciation and investment income will both be major factors in achieving total return. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares returned 3.05% compared to the Standard & Poor's ("S&P") 500 Index(1), which returned 3.44% over the same period. PORTFOLIO SPECIFICS: For this period, positive contribution from stock selection was virtually offset by negative impact from sector allocation. Stock selection impact varied widely, with significant gains in the consumer discretionary, financials, and telecom sectors being largely offset by the negative impact of selections in consumer staples, information technology and materials. A new portfolio management team was assigned to the Portfolio effective May 1, 2004. The Portfolio was successfully transitioned to reflect the new team's views at both the sector and stock level. There were only minor adjustments to the sector weightings, although a significant number of existing positions were sold and new stocks were purchased in their place. The overall number of holdings remained virtually unchanged. MARKET OUTLOOK: We believe that the market is poised to generate positive returns in 2004. Our research indicates that the underlying fundamentals of the economy remain sound, and we anticipate continued positive earnings reports from much of corporate America. Despite these strong undercurrents, investor psychology has been complicated by both the rise in interest rates and increasing geopolitical tensions. We do not believe that the recent rise in interest rates will be so large as to offset the underlying earnings trends. However, we do expect the mood shifts that accompany both the global political situation and the U.S. presidential elections may continue to result in market volatility. 16 PORTFOLIO MANAGERS' REPORT ING VP GROWTH AND INCOME PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION OF CLASS S 1 YEAR 5 YEAR 10 YEAR JUNE 11, 2003 ------ ------- ------- --------------- Class I 17.95% (5.44)% 7.61% -- Class S 17.67% -- -- 14.30% S&P 500 Index(1) 19.11% (2.17)% 11.87% 18.90%(2)
The table above illustrates the total return of ING VP Growth and Income Portfolio against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large-capitalization companies whose securities are traded on major U.S. stock markets. (2) Since inception performance for the index is shown from June 1, 2003. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. International investing involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. Risks of foreign investing are generally intensified for investment in emerging markets. In exchange for higher growth potential, investing in stocks of mid-size and smaller companies may entail greater price volatility and less liquidity than investing in stocks of larger companies. The value of convertible securities may fall when interest rates rise. Although the Sub-Adviser emphasizes large-cap stocks, to the extent the Portfolio is diversified across asset classes, it may not perform as well as less diversified funds when large-caps stocks are in favor. The use of certain derivatives may increase the volatility of the Portfolio. Because the Portfolio may invest in other investment companies, you may pay a proportionate share of the expenses of that other investment company (including management fees, administration fees and custodial fees) in addition to the expenses of the Portfolio. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. The Portfolio's investments in high yield securities are subject to greater risk than higher quality securities, including the risks associated with greater price volatility, principal and income risk. The Portfolio's investments in mortgage-related securities may entail prepayment risk. 17 ING VP BOND PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT: James B. Kauffmann, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Bond Portfolio* (the "Portfolio") seeks to maximize total return consistent with reasonable risk, through investments in a diversified portfolio consisting of investment-grade corporate bonds and debt securities issued by the U.S. Government, its agencies or instrumentalities. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares returned 0.37% compared to the Lehman Brothers Aggregate Bond Index(1), which returned 0.16% over the same period. PORTFOLIO SPECIFICS: Our short duration stance was a major source of the positive performance of the fixed income portion relative to the benchmark. During the period, we reduced our exposure to longer-dated and lower-rated corporates in the face of stretched valuations. As a rule, longer-dated credit-sensitive paper underperformed. Our exposure in securitized sectors generally proved beneficial. We were underweight in dollar-denominated issues of foreign countries, a sector that had a negative return. Mortgages produced a small positive excess return, and our position varied from neutral to underweight during the period. Exposure to emerging market debt contributed to returns in the first half of the reporting period, but was a significant drag on our performance in the second half as incremental yield was not sufficient to offset price depreciation. Our high yield exposure was also a drag on performance. MARKET OUTLOOK: In our opinion, Treasury yields do not yet fully reflect the quickening pace of the economy and the recent rise in a number of inflation metrics, but the bond market has begun to incorporate a cycle of less accommodative monetary policy. Now that Dr. Greenspan has navigated the economy past the immediate concerns of deflation, we are anxious to see if he can avoid the effects of inflation. While the recent rise in inflation releases were likely amplified by increases in hotel rates, apparel, medical care, and adjustments to owners' equivalent rent, the trajectory is worrisome. One observer drew the analogy that Federal Reserve ("Fed") tightening cycles are like confronting a tee shot with a putter. Should inflationary expectations become manifest in unit labor costs, the Fed may be forced into a more aggressive stance. Many in the bond market believe that the Fed's reactive approach will be tardy in responding to increasing inflation, and we are cognizant of the lagged effect of monetary policy. Historically, changes in the Fed Funds rate can take 12 to 18 months to influence economic activity, but one may argue that today's domestic scene of high consumer indebtedness and increased variable rate financing could indicate speedier transmission of policy changes. In the months ahead, employment and inflation releases and comments from Fed officials will remain key data as bond market observers seek to divine the timing, frequency, and magnitude of future tightenings. Tactically, the Portfolio is still short in duration in the face of anticipated improving global economic fundamentals, but we have reduced the magnitude of that posture following the recent rise in rates. We are neutral home mortgages, overweight asset-backed and commercial mortgage-backed securities, and underweight the front-end of the yield curve, which appears most vulnerable in a tightening cycle. We are underweight agencies. Stretched valuations in investment-grade credit and plus sectors warrant some caution, and we have reduced the contribution to duration of these spread sectors. Additionally, we have reduced our exposure in emerging markets, and our high yield position has been eliminated with the exception of a few crossover and special situation issues that tend to track the investment grade market. However, we are watchful for points of potential re-entry. - ---------- * On August 6, 2004, the ING VP Bond Portfolio changed its name to ING VP Intermediate Bond Portfolio. 18 PORTFOLIO MANAGERS' REPORT ING VP BOND PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION OF CLASS S 1 YEAR 5 YEAR 10 YEAR MAY 3, 2002 ------ ------ ------- --------------- Class I 1.37% 6.71% 7.11% -- Class S 1.12% -- -- 6.33% Lehman Brothers Aggregate Bond Index(1) 0.32% 6.95% 7.39% 5.66%(2)
The table above illustrates the total return of ING VP Bond Portfolio against the Lehman Brothers Aggregate Bond Index. The Index has has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Lehman Brothers Aggregate Bond Index is an unmanaged index composed of securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. (2) Since inception performance for the index is shown from May 1, 2002. PRINCIPAL RISK FACTOR(S): The principal risks of investing in the Portfolio are those generally attributable to debt investing, including increases in interest rates and loss of principal. Generally, when interest rates rise, bond prices fall. Bonds with longer maturities tend to be more sensitive to changes in interest rates. For all bonds there is a risk that the issuer will default. High-yield bonds generally are more susceptible to the risk of default than higher rated bonds. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Portfolio. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. Some U.S. Government agency securities may be subject to varying degrees of credit risk, particularly those not backed by the full faith and credit of the U.S. Government. The value of convertible securities may fall when interest rates rise. The Portfolio's investments in mortgage-related securities may entail prepayment risk. Borrowers can pay off their mortgages sooner than scheduled and if interest rates are falling, the Portfolio will be forced to reinvest this money at lower yields. Slower than expected principal payments on amortgage-backed or asset-backed security may cause an increase in the security's duration, reduce the value of the security and lock in a below-market interest rate. 19 ING VP MONEY MARKET PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of fixed-income specialists led by Jennifer J. Thompson, CFA, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Money Market Portfolio (the "Portfolio ") seeks to provide high current return, consistent with preservation of capital and liquidity, through investment in high-quality money market instruments. PORTFOLIO SPECIFICS: The first six months of 2004 yielded varying and dramatic shifts in interest rate expectations and ended with the Federal Reserve Board's ("Fed") Federal Open Market Committee ("FOMC") raising the Federal Funds target rate 25 basis points to 1.25% on June 30, 2004. As market participants changed their views of the economy's strength throughout the period, the LIBOR yield curve flattened initially and then steepened dramatically. Specifically, the LIBOR yield curve (the difference between 1-month to 12-month LIBOR) steepened by 76 basis points to 109 basis points. The curve reached its flattest point of 19 basis points in mid-March, but a significant shift in Fed Funds expectations shortly thereafter caused yield levels to rise with the back-end of the LIBOR curve incurring the greatest change. Over the period, 12-month LIBOR increased by 100 basis points to 2.46% from 1.46%. Throughout the first quarter of 2004, the Portfolio utilized a barbell portfolio strategy that called for purchasing longer-dated paper (nine to thirteen months) balanced by the purchase of short-term commercial paper and floating rate notes. The strategy worked well and resulted in strong performance. The Portfolio's weighted average maturity remained significantly longer than competitors' funds early in the year. However, in early April, as the market priced in an earlier start to the tightening cycle beginning with the June 30, 2004 meeting, the Portfolio eased off its barbell strategy and limited investments solely to short commercial paper and floating rate notes. This better positioned the Portfolio to take advantage of the higher interest rate environment. Accordingly, the Portfolio's weighted average maturity significantly declined during the second half of the reporting period and finished the period at 53 days compared with 45 days for the benchmark, iMoneyNet First Tier Retail Index. MARKET OUTLOOK: The June 30 FOMC statement clearly signaled the Fed's intent to gradually raise the target interest rate. At the end of the period, the market priced in a year-end Fed Funds rate of roughly 2.00% to 2.25%, or 25 basis points per FOMC meeting. But some market observers believe inflation will accelerate, causing the Fed to move more aggressively than the market currently thinks it will. Given such high level of uncertainty, particularly in light of current market levels for longer term maturities, we believe that continuing our strategy of limiting purchases to short-term commercial paper or floating rate notes is most appropriate. PRINCIPAL RISK FACTOR(S): An investment in the Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Portfolio seeks to preserve the value of your investment, it is possible to lose money by investing in the Portfolio. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. Portfolio holdings are subject to change daily. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. 20 STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 2004 (Unaudited)
ING ING ING ING VP GLOBAL SCIENCE VP INTERNATIONAL ING VP SMALL VP VALUE AND TECHNOLOGY EQUITY VP GROWTH COMPANY OPPORTUNITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------- ---------------- -------------- -------------- -------------- ASSETS: Investments in securities at value+* $ 85,609,579 $ 43,493,216 $ 207,510,907 $ 431,511,442 $ 235,418,724 Short-term investments at amortized cost 12,041,461 -- 39,914,157 129,809,897 10,534,791 Repurchase agreement -- 2,054,000 8,012,000 60,724,000 5,224,000 Cash 1,506,587 69,757 -- 820 170 Cash collateral for futures -- -- 448,000 1,890,000 -- Foreign currencies at value** 151 113,505 -- -- -- Receivables: Investment securities sold 1,076,870 -- 1,819,363 10,201,453 -- Dividends and interest 19,563 99,154 119,382 300,067 352,165 Variation margin receivable -- 1,512 24,150 160,475 -- Prepaid expenses 3,474 955 2,569 10,849 2,883 ----------------- ---------------- -------------- -------------- -------------- Total assets 100,257,685 45,832,099 257,850,528 634,609,003 251,532,733 ----------------- ---------------- -------------- -------------- -------------- LIABILITIES: Payable for investment securities purchased 268,200 -- 2,555,791 11,391,724 -- Payable for futures variation margin -- 6,403 -- -- -- Payable upon receipt of securities loaned 12,041,461 -- 39,914,157 129,809,897 10,534,791 Payable to affiliates 71,173 35,544 114,527 317,432 129,515 Payable to custodian -- -- 41,751 -- -- Payable for director fees 917 470 5,662 4,202 2,045 Other accrued expenses and liabilities 49,306 134,359 77,720 59,897 52,183 ----------------- ---------------- -------------- -------------- -------------- Total liabilities 12,431,057 176,776 42,709,608 141,583,152 10,718,534 ----------------- ---------------- -------------- -------------- -------------- NET ASSETS $ 87,826,628 $ 45,655,323 $ 215,140,920 $ 493,025,851 $ 240,814,199 ================= ================ ============== ============== ============== NET ASSETS WERE COMPRISED OF: Paid-in capital $ 138,974,901 $ 68,689,305 $ 402,652,466 $ 443,241,791 $ 267,855,555 Undistributed net investment income (accumulated net investment loss) (429,047) 775,662 465,757 1,626,316 4,189,074 Accumulated net realized loss on investments, foreign currencies and futures (50,011,537) (26,859,812) (206,564,742) (14,859,940) (41,283,030) Net unrealized appreciation (depreciation) on investments foreign currencies and futures (707,689) 3,050,168 18,587,439 63,017,684 10,052,600 ----------------- ---------------- -------------- -------------- -------------- NET ASSETS $ 87,826,628 $ 45,655,323 $ 215,140,920 $ 493,025,851 $ 240,814,199 ================= ================ ============== ============== ============== + Including securities loaned at value $ 11,372,281 $ -- $ 39,180,149 $ 126,746,371 $ 10,289,939 * Cost of investments in securities $ 86,317,267 $ 40,447,433 $ 188,948,892 $ 368,949,010 $ 225,366,124 ** Cost of foreign currencies $ 151 $ 113,867 $ -- $ -- $ -- CLASS I: Net assets $ 87,826,628 $ 45,462,779 $ 214,813,231 $ 481,074,663 $ 237,820,321 Shares authorized 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 24,026,166 5,803,948 23,741,530 26,749,796 19,185,638 Net asset value and redemption price per share $ 3.66 $ 7.83 $ 9.05 $ 17.98 $ 12.40 CLASS S: Net assets n/a $ 192,544 $ 327,689 $ 11,951,188 $ 2,993,878 Shares authorized 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding n/a 24,684 36,458 664,976 242,752 Net asset value and redemption price per share n/a $ 7.80 $ 8.99 $ 17.97 $ 12.33
See Accompanying Notes to Financial Statements 21 STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 2004 (Unaudited)
ING ING ING VP GROWTH AND ING VP MONEY VP BALANCED INCOME VP BOND MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------------- ---------------- ---------------- ---------------- ASSETS: Investments in securities at value+* $ 1,416,090,991 $ 3,597,567,675 $ 1,335,748,331 $ -- Short-term investments at value** 395,607,785 643,061,669 327,923,351 898,477,634 Repurchase agreement 29,936,000 113,822,000 49,253,000 261,232,000 Cash 60,599 53,188 207,088 38,472 Cash collateral for futures 361,314 2,784,000 983,356 -- Foreign currencies at value*** -- -- 180 -- Receivables: Investment securities sold 49,024,049 24,200,817 12,998,757 -- Dividends and interest 4,986,599 3,078,688 9,564,620 1,564,964 Variation margin receivable 112,500 200,100 -- -- Prepaid expenses 16,741 46,174 16,256 17,357 ---------------- ---------------- ---------------- ---------------- Total assets 1,896,196,578 4,384,814,311 1,736,694,939 1,161,330,427 ---------------- ---------------- ---------------- ---------------- LIABILITIES: Payable for investment securities purchased 158,789,902 74,967,823 237,864,525 -- Payable for futures variation margin 133,000 -- 81,125 -- Payable upon receipt of securities loaned 326,812,169 643,061,669 246,144,339 23,715,619 Payable to affiliates 636,986 1,659,210 493,730 285,211 Payable for director fees 32,616 128,654 33,048 55,385 Other accrued expenses and liabilities 163,649 573,669 219,431 252,459 ---------------- ---------------- ---------------- ---------------- Total liabilities 486,568,322 720,391,025 484,836,198 24,308,674 ---------------- ---------------- ---------------- ---------------- NET ASSETS $ 1,409,628,256 $ 3,664,423,286 $ 1,251,858,741 $ 1,137,021,753 ================ ================ ================ ================ NET ASSETS WERE COMPRISED OF: Paid-in capital $ 1,440,920,979 $ 6,064,019,281 $ 1,228,037,752 $ 1,137,424,580 Undistributed net investment income 42,196,236 16,765,784 24,096,536 4,855,885 Accumulated net realized gain (loss) on investments, foreign currencies and futures (144,139,594) (2,785,440,950) 3,961,603 (4,752,109) Net unrealized appreciation (depreciation) on investments foreign currencies and futures 70,650,635 369,079,171 (4,237,150) (506,603) ---------------- ---------------- ---------------- ---------------- NET ASSETS $ 1,409,628,256 $ 3,664,423,286 $ 1,251,858,741 $ 1,137,021,753 ================ ================ ================ ================ + Including securities loaned at value $ 325,683,288 $ 659,243,749 $ 242,006,106 $ 30,296,992 * Cost of investments in securities $ 1,345,551,576 $ 3,228,921,230 $ 1,340,153,753 $ -- ** Cost of short-term investments $ 395,613,399 $ 643,061,669 $ 327,929,225 $ 898,984,237 *** Cost of foreign currencies $ -- $ -- $ 161 $ -- CLASS I: Net assets $ 1,407,343,261 $ 3,662,458,341 $ 1,086,747,283 $ 1,137,021,753 Shares authorized 2,000,000,000 unlimited unlimited unlimited Par value $ 0.001 $ 1.000 $ 1.000 $ 1.000 Shares outstanding 110,019,482 196,139,645 82,012,624 88,526,987 Net asset value and redemption price per share $ 12.79 $ 18.67 $ 13.25 $ 12.84 CLASS S: Net assets $ 2,284,995 $ 1,964,945 $ 165,111,458 n/a Shares authorized 2,000,000,000 unlimited unlimited n/a Par value $ 0.001 $ 1.000 $ 1.000 n/a Shares outstanding 179,085 105,414 12,489,837 n/a Net asset value and redemption price per share $ 12.76 $ 18.64 $ 13.22 n/a
See Accompanying Notes to Financial Statements 22 STATEMENTS OF OPERATIONS for the six months ended June 30, 2004 (Unaudited)
ING ING ING ING VP GLOBAL SCIENCE VP INTERNATIONAL ING VP SMALL VP VALUE AND TECHNOLOGY EQUITY VP GROWTH COMPANY OPPORTUNITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------- ---------------- -------------- -------------- -------------- INVESTMENT INCOME: Dividends, net of foreign taxes withheld* $ 76,253 $ 532,230 $ 877,274 $ 1,909,386 $ 2,974,189 Interest 966 71,940 29,730 176,284 27,204 Securities lending income 10,896 -- 10,154 81,137 2,963 ----------------- ---------------- -------------- -------------- -------------- Total investment income 88,115 604,170 917,158 2,166,807 3,004,356 ----------------- ---------------- -------------- -------------- -------------- EXPENSES: Investment management fees 455,843 186,507 659,393 1,799,173 756,367 Distribution and service fees: Class S -- 215 403 2,736 3,387 Transfer agent fees 4,487 5,204 4,691 5,027 5,000 Administrative service fees 26,390 12,068 60,443 131,937 69,332 Shareholder reporting expense 5,278 5,784 8,918 9,106 8,008 Registration fees 1,303 2,802 -- 3,159 1,371 Professional fees 13,860 15,430 15,263 18,721 15,627 Custody and accounting expense 5,132 50,271 13,286 19,528 13,468 Directors' fees 2,002 1,092 6,188 10,010 4,509 Miscellaneous expense 2,867 1,949 5,743 12,283 6,770 ----------------- ---------------- -------------- -------------- -------------- Total expenses 517,162 281,322 774,328 2,011,680 883,839 Less: Net waived and reimbursed fees -- 29,201 -- -- -- ----------------- ---------------- -------------- -------------- -------------- Net expenses 517,162 252,121 774,328 2,011,680 883,839 ----------------- ---------------- -------------- -------------- -------------- Net investment income (loss) (429,047) 352,049 142,830 155,127 2,120,517 ----------------- ---------------- -------------- -------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCIES AND FUTURES: Net realized gain (loss) on: Investments 12,743,707 4,606,960 12,728,932 29,866,473 (167,447) Foreign currencies 545 14,038 -- -- -- Futures (32,325) 51,763 390,715 971,034 -- ----------------- ---------------- -------------- -------------- -------------- Net realized gain (loss) on investments, foreign currencies, and futures 12,711,927 4,672,761 13,119,647 30,837,507 (167,447) ----------------- ---------------- -------------- -------------- -------------- Net change in unrealized appreciation or depreciation on: Investments (18,332,432) (3,491,706) (10,417,437) (18,224,277) 4,477,852 Foreign currencies -- (2,029) -- -- -- Futures -- (873) (22,864) 223,925 -- ----------------- ---------------- -------------- -------------- -------------- Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (18,332,432) (3,494,608) (10,440,301) (18,000,352) 4,477,852 ----------------- ---------------- -------------- -------------- -------------- Net realized and unrealized gain (loss) on investments, foreign currencies and futures (5,620,505) 1,178,153 2,679,346 12,837,155 4,310,405 ----------------- ---------------- -------------- -------------- -------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,049,552) $ 1,530,202 $ 2,822,176 $ 12,992,282 $ 6,430,922 ================= ================ ============== ============== ============== * Foreign taxes $ 2,542 $ 69,268 $ 4,549 $ 2,234 $ 64,166
See Accompanying Notes to Financial Statements 23 STATEMENTS OF OPERATIONS for the six months ended June 30, 2004 (Unaudited)
ING ING ING VP GROWTH AND ING VP MONEY VP BALANCED INCOME VP BOND MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------------- ---------------- ---------------- ---------------- INVESTMENT INCOME: Dividends, net of foreign taxes withheld* $ 5,910,713 $ 27,252,473 $ 275,755 $ -- Interest 11,425,729 327,388 26,043,464 6,898,324 Securities lending income 144,476 140,463 197,442 3,480 ---------------- ---------------- ---------------- ---------------- Total investment income 17,480,918 27,720,324 26,516,661 6,901,804 ---------------- ---------------- ---------------- ---------------- EXPENSES: Investment management fees 3,501,729 9,304,610 2,453,186 1,458,467 Distribution and service fees: Class S 2,183 2,333 139,957 -- Transfer agent fees 2,537 9,265 10,951 1,869 Administrative service fees 385,182 1,023,485 337,305 320,856 Shareholder reporting expense 34,540 155,850 24,392 37,856 Registration fees 634 1,967 5,281 2,581 Professional fees 41,400 93,565 32,988 36,650 Custody and accounting expense 75,996 143,293 69,000 93,080 Directors' fees 42,224 123,542 42,042 52,234 Miscellaneous expense 35,432 91,266 54,267 37,282 ---------------- ---------------- ---------------- ---------------- Total expenses 4,121,857 10,949,176 3,169,369 2,040,875 ---------------- ---------------- ---------------- ---------------- Net investment income 13,359,061 16,771,148 23,347,292 4,860,929 ---------------- ---------------- ---------------- ---------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCIES AND FUTURES: Net realized gain (loss) on: Investments 62,021,426 373,323,913 4,442,625 (244,961) Foreign currencies -- 40,007 -- -- Futures (44,179) 1,013,571 45,635 -- ---------------- ---------------- ---------------- ---------------- Net realized gain (loss) on investments, foreign currencies and futures 61,977,247 374,377,491 4,488,260 (244,961) ---------------- ---------------- ---------------- ---------------- Net change in unrealized appreciation or depreciation on: Investments (44,145,766) (277,984,949) (25,479,065) (748,257) Foreign currencies -- 16,066 19 -- Futures 399,632 356,054 935,832 -- ---------------- ---------------- ---------------- ---------------- Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (43,746,134) (277,612,829) (24,543,214) (748,257) ---------------- ---------------- ---------------- ---------------- Net realized and unrealized gain (loss) on investments, foreign currencies and futures 18,231,113 96,764,662 (20,054,954) (993,218) ---------------- ---------------- ---------------- ---------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 31,590,174 $ 113,535,810 $ 3,292,338 $ 3,867,711 ================ ================ ================ ================ * Foreign taxes $ 8,976 $ 4,059 $ -- $ --
See Accompanying Notes to Financial Statements 24 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP GLOBAL SCIENCE AND ING VP INTERNATIONAL TECHNOLOGY PORTFOLIO EQUITY PORTFOLIO -------------------------------- -------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 -------------- -------------- -------------- -------------- FROM OPERATIONS: Net investment income (loss) $ (429,047) $ (570,560) $ 352,049 $ 347,432 Net realized gain (loss) on investments, foreign currencies and futures 12,711,927 (4,912,495) 4,672,761 680,469 Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (18,332,432) 29,432,822 (3,494,608) 8,992,547 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations (6,049,552) 23,949,767 1,530,202 10,020,448 -------------- -------------- -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I -- -- -- (358,677) Class S -- -- -- (496) -------------- -------------- -------------- -------------- Total distributions -- -- -- (359,173) -------------- -------------- -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 14,159,690 71,880,902 12,244,747 72,160,848 Dividends reinvested -- -- -- 359,173 -------------- -------------- -------------- -------------- 14,159,690 71,880,902 12,244,747 72,520,021 Cost of shares redeemed (18,025,988) (43,653,684) (8,853,335) (70,372,573) -------------- -------------- -------------- -------------- Net increase (decrease) in net asset resulting from capital share transactions (3,866,298) 28,227,218 3,391,412 2,147,448 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets (9,915,850) 52,176,985 4,921,614 11,808,723 -------------- -------------- -------------- -------------- NET ASSETS: Beginning of period 97,742,478 45,565,493 40,733,709 28,924,986 -------------- -------------- -------------- -------------- End of period $ 87,826,628 $ 97,742,478 $ 45,655,323 $ 40,733,709 ============== ============== ============== ============== Undistributed net investment income (accumulated net investment loss) at end of period $ (429,047) $ -- $ 775,662 $ 423,613 ============== ============== ============== ==============
See Accompanying Notes to Financial Statements 25 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP GROWTH PORTFOLIO ING VP SMALL COMPANY PORTFOLIO -------------------------------- -------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 -------------- -------------- -------------- -------------- FROM OPERATIONS: Net investment income $ 142,830 $ 265,408 $ 155,127 $ 1,659,651 Net realized gain on investments and futures 13,119,647 12,843,906 30,837,507 27,374,998 Net change in unrealized appreciation or depreciation on investments and futures (10,440,301) 40,849,949 (18,000,352) 85,411,831 -------------- -------------- -------------- -------------- Net increase in net assets resulting from operations 2,822,176 53,959,263 12,992,282 114,446,480 -------------- -------------- -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I -- -- -- (922,009) Class S -- -- -- (698) -------------- -------------- -------------- -------------- Total distributions -- -- -- (922,707) -------------- -------------- -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 3,535,212 12,590,272 44,889,614 156,127,616 Dividends reinvested -- -- -- 922,707 -------------- -------------- -------------- -------------- 3,535,212 12,590,272 44,889,614 157,050,323 Cost of shares redeemed (15,838,812) (23,009,289) (29,924,639) (94,578,973) -------------- -------------- -------------- -------------- Net increase (decrease) in net asset resulting from capital share transactions (12,303,600) (10,419,017) 14,964,975 62,471,350 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets (9,481,424) 43,540,246 27,957,257 175,995,123 -------------- -------------- -------------- -------------- NET ASSETS: Beginning of period 224,622,344 181,082,098 465,068,594 289,073,471 -------------- -------------- -------------- -------------- End of period $ 215,140,920 $ 224,622,344 $ 493,025,851 $ 465,068,594 ============== ============== ============== ============== Undistributed net investment income at end of period $ 465,757 $ 265,408 $ 1,626,316 $ 1,457,156 ============== ============== ============== ==============
See Accompanying Notes to Financial Statements 26 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP VALUE OPPORTUNITY PORTFOLIO ING VP BALANCED PORTFOLIO ---------------------------------- -------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 -------------- -------------- -------------- -------------- FROM OPERATIONS: Net investment income $ 2,120,517 $ 2,072,095 $ 13,359,061 $ 25,882,905 Net realized gain (loss) on investments and futures (167,447) 37,412,990 61,977,247 46,751,111 Net change in unrealized appreciation or depreciation on investments and futures 4,477,852 12,066,267 (43,746,134) 148,117,399 -------------- -------------- -------------- -------------- Net increase in net assets resulting from operations 6,430,922 51,551,352 31,590,174 220,751,415 -------------- -------------- -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I -- (1,764,212) -- (25,549,004) Class S -- (9,646) -- (288) -------------- -------------- -------------- -------------- Total distributions -- (1,773,858) -- (25,549,292) -------------- -------------- -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 8,942,740 21,198,747 56,426,115 38,550,583 Dividends reinvested -- 1,773,858 -- 25,549,292 -------------- -------------- -------------- -------------- 8,942,740 22,972,605 56,426,115 64,099,875 Cost of shares redeemed (34,283,608) (25,587,631) (54,130,830) (106,333,010) -------------- -------------- -------------- -------------- Net increase (decrease) in net asset resulting from capital share transactions (25,340,868) (2,615,026) 2,295,285 (42,233,135) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets (18,909,946) 47,162,468 33,885,459 152,968,988 -------------- -------------- -------------- -------------- NET ASSETS: Beginning of period 259,724,145 212,561,677 1,375,742,797 1,222,773,809 -------------- -------------- -------------- -------------- End of period $ 240,814,199 $ 259,724,145 $1,409,628,256 $1,375,742,797 ============== ============== ============== ============== Undistributed net investment income at end of period $ 4,189,074 $ 2,068,557 $ 42,196,236 $ 28,837,175 ============== ============== ============== ==============
See Accompanying Notes to Financial Statements 27 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP GROWTH AND INCOME PORTFOLIO ING VP BOND PORTFOLIO ---------------------------------- ------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 -------------- -------------- -------------- -------------- FROM OPERATIONS: Net investment income $ 16,771,148 $ 33,181,040 $ 23,347,292 $ 48,262,109 Net realized gain on investments, foreign currencies and futures 374,377,491 89,606,751 4,488,260 39,308,980 Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (277,612,829) 694,994,792 (24,543,214) (10,863,858) -------------- -------------- -------------- --------------- Net increase in net assets resulting from operations 113,535,810 817,782,583 3,292,338 76,707,231 -------------- -------------- -------------- --------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I (33,180,765) -- (48,490,127) (9,725,157) Class S (15,555) -- (5,040,175) (564,795) Net realized gains: Class I -- -- (28,294,467) (10,936,141) Class S -- -- (2,991,690) (736,552) -------------- -------------- -------------- --------------- Total distributions (33,196,320) -- (84,816,459) (21,962,645) -------------- -------------- -------------- --------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 59,626,477 14,108,788 187,886,909 184,777,059 Dividends reinvested 33,178,022 -- 84,771,009 21,950,695 -------------- -------------- -------------- --------------- 92,804,499 14,108,788 272,657,918 206,727,754 Cost of shares redeemed (305,884,912) (559,975,741) (137,078,511) (319,226,990) -------------- -------------- -------------- --------------- Net increase (decrease) in net asset resulting from capital share transactions (213,080,413) (545,866,953) 135,579,407 (112,499,236) -------------- -------------- -------------- --------------- Net increase (decrease) in net assets (132,740,923) 271,915,630 54,055,286 (57,754,650) -------------- -------------- -------------- --------------- NET ASSETS: Beginning of period 3,797,164,209 3,525,248,579 1,197,803,455 1,255,558,105 -------------- -------------- -------------- --------------- End of period $3,664,423,286 $3,797,164,209 $1,251,858,741 $ 1,197,803,455 ============== ============== ============== =============== Undistributed net investment income at end of period $ 16,765,784 $ 33,190,956 $ 24,096,536 $ 54,279,546 ============== ============== ============== ===============
See Accompanying Notes to Financial Statements 28 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP MONEY MARKET PORTFOLIO ------------------------------------ SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, 2004 2003 ---------------- ---------------- FROM OPERATIONS: Net investment income $ 4,860,929 $ 12,932,100 Net realized loss on investments (244,961) (169) Net change in unrealized appreciation or depreciation on investments (748,257) (56,131) ---------------- ---------------- Net increase in net assets resulting from operations 3,867,711 12,875,800 ---------------- ---------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I (12,932,164) (24,741,578) ---------------- ---------------- Total distributions (12,932,164) (24,741,578) ---------------- ---------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 172,059,361 1,899,695,014 Dividends reinvested 12,932,164 24,741,578 ---------------- ---------------- 184,991,525 1,924,436,592 Cost of shares redeemed (276,488,945) (2,226,653,637) ---------------- ---------------- Net decrease in net asset resulting from capital share transactions (91,497,420) (302,217,045) ---------------- ---------------- Net decrease in net assets (100,561,873) (314,082,823) ---------------- ---------------- NET ASSETS: Beginning of period 1,237,583,626 1,551,666,449 ---------------- ---------------- End of period $ 1,137,021,753 $ 1,237,583,626 ================ ================ Undistributed net investment income at end of period $ 4,855,885 $ 12,927,120 ================ ================
See Accompanying Notes to Financial Statements 29 ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ----------------------------------------------------------------- SIX MONTHS MAY 1, ENDED YEAR ENDED DECEMBER 31, 2000(4) TO JUNE 30, ----------------------------------- DECEMBER 31, 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 3.87 2.66 4.53 5.88 10.00 Income (loss) from investment operations: Net investment loss $ (0.02) (0.02) (0.03) (0.02) (0.02) Net realized and unrealized gain (loss) on investments $ (0.19) 1.23 (1.84) (1.33) (4.10) Total from investment operations $ (0.21) 1.21 (1.87) (1.35) (4.12) Net asset value, end of period $ 3.66 3.87 2.66 4.53 5.88 TOTAL RETURN(1) % (5.43) 45.49 (41.28) (22.96) (41.20) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 87,827 97,742 45,559 62,878 44,621 Ratios to average net assets: Net expenses after expense reimbursement/recoupment(2)(3) % 1.08 1.11 1.11 1.11 1.15 Gross expenses prior to expense reimbursement/recoupment(2) % 1.08 1.10 1.12 1.11 1.20 Net investment loss after expense reimbursement/recoupment(2)(3) % (0.90) (0.88) (0.89) (0.49) (0.61) Portfolio turnover rate % 99 15 61 129 150
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) The Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (4) Commencement of operations of class. See Accompanying Notes to Financial Statements 30 ING VP INTERNATIONAL EQUITY PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 7.55 5.78 7.90 10.40 15.92 11.59 Income (loss) from investment operations: Net investment income (loss) $ 0.05 0.06 0.03 0.02 (0.02) (0.01) Net realized and unrealized gain (loss) on investments $ 0.23 1.78 (2.13) (2.51) (3.17) 5.78 Total from investment operations $ 0.28 1.84 (2.10) (2.49) (3.19) 5.77 Less distributions from: Net investment income $ -- 0.07 0.02 0.01 0.01 0.15 Net realized gains on investments $ -- -- -- -- 2.32 1.29 Total distributions $ -- 0.07 0.02 0.01 2.33 1.44 Net asset value, end of period $ 7.83 7.55 5.78 7.90 10.40 15.92 TOTAL RETURN(1) % 3.71 32.05 (26.68) (23.88) (20.33) 51.33 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 45,463 40,537 28,917 48,652 52,210 43,548 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 1.15 1.15 1.15 1.15 1.15 1.15 Gross expenses prior to expense reimbursement(2) % 1.28 1.38 1.46 1.26 1.34 1.62 Net investment income (loss) after expense reimbursement(2)(3) % 1.61 1.04 0.40 0.23 (0.18) 0.13 Portfolio turnover rate % 84 85 266 229 212 169
CLASS S --------------------------------------------------------------- SIX MONTHS NOVEMBER 1, ENDED YEAR ENDED DECEMBER 31, 2001(4) TO JUNE 30, ---------------------------- DECEMBER 31, 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 7.53 5.78 7.90 7.38 Income (loss) from investment operations: Net investment income $ 0.05 (0.01) 0.01 -- Net realized and unrealized gain (loss) on investments $ 0.22 1.82 (2.13) 0.52 Total from investment operations $ 0.27 1.81 (2.12) 0.52 Less distributions from: Net investment income $ -- 0.06 -- -- Total distributions $ -- 0.06 -- -- Net asset value, end of period $ 7.80 7.53 5.78 7.90 TOTAL RETURN(1) % 3.59 31.62 (26.84) 7.05 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 193 197 8 11 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 1.40 1.40 1.40 1.39 Gross expenses prior to expense reimbursement(2) % 1.53 1.63 1.71 1.49 Net investment income after expense reimbursement(2)(3) % 1.22 0.79 0.15 0.01 Portfolio turnover rate % 84 85 266 229
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) The Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (3) Annualized for periods less than one year. (4) Commencement of operations of class. See Accompanying Notes to Financial Statements 31 ING VP GROWTH PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.93 6.85 9.64 14.99 17.32 13.53 Income (loss) from investment operations: Net investment income (loss) $ 0.01 0.01 (0.01) (0.01) 0.01 0.03 Net realized and unrealized gain (loss) on investments $ 0.11 2.07 (2.78) (3.87) (2.02) 4.62 Total from investment operations $ 0.12 2.08 (2.79) (3.88) (2.01) 4.65 Less distributions from: Net investment income $ -- -- -- 0.01 0.01 0.02 Net realized gains on investments $ -- -- -- 1.46 0.31 0.84 Total distributions $ -- -- -- 1.47 0.32 0.86 Net asset value, end of period $ 9.05 8.93 6.85 9.64 14.99 17.32 TOTAL RETURN(1) % 1.34 30.36 (28.94) (27.06) (11.95) 34.97 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 214,813 224,330 181,029 305,624 460,578 369,845 Ratios to average net assets: Expenses(2) % 0.70 0.71 0.72 0.70 0.70 0.71 Net investment income (loss)(2) % 0.13 0.13 (0.06) (0.08) 0.06 0.20 Portfolio turnover rate % 59 162 241 216 179 138
CLASS S --------------------------------------------------------------- SIX MONTHS NOVEMBER 1, ENDED YEAR ENDED DECEMBER 31, 2001(3) TO JUNE 30, ---------------------------- DECEMBER 31, 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.88 6.83 9.63 8.96 Income (loss) from investment operations: Net investment income (loss) $ (0.01) 0.00* (0.01) 0.00* Net realized and unrealized gain (loss) on investments $ 0.12 2.05 (2.79) 0.67 Total from investment operations $ 0.11 2.05 (2.80) 0.67 Net asset value, end of period $ 8.99 8.88 6.83 9.63 TOTAL RETURN(1) % 1.24 30.01 (29.08) 7.48 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 328 292 53 11 Ratios to average net assets: Expenses(2) % 0.95 0.96 0.97 0.94 Net investment loss(2) % (0.11) (0.10) (0.31) (0.32) Portfolio turnover rate % 59 162 241 216
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. * Amount is less than $0.01 per share. See Accompanying Notes to Financial Statements 32 ING VP SMALL COMPANY PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 17.48 12.75 16.68 16.65 16.52 12.79 Income (loss) from investment operations: Net investment income $ 0.01 0.06 0.05 0.06 0.11 0.08 Net realized and unrealized gain (loss) on investments $ 0.49 4.71 (3.91) 0.58 1.09 3.84 Total from investment operations $ 0.50 4.77 (3.86) 0.64 1.20 3.92 Less distributions from: Net investment income $ -- 0.04 0.07 0.10 0.02 0.06 Net realized gains on investments $ -- -- -- 0.51 1.05 0.13 Total distributions $ -- 0.04 0.07 0.61 1.07 0.19 Net asset value, end of period $ 17.98 17.48 12.75 16.68 16.65 16.52 TOTAL RETURN(1) % 2.86 37.47 (23.23) 4.00 6.72 30.85 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 481,075 464,228 288,890 341,332 273,617 149,416 Ratios to average net assets: Expenses(2) % 0.84 0.85 0.87 0.86 0.87 0.88 Net investment income(2) % 0.07 0.47 0.39 0.50 0.80 0.64 Portfolio turnover rate % 54 178 371 240 330 256
CLASS S --------------------------------------------------------------- SIX MONTHS NOVEMBER 1, ENDED YEAR ENDED DECEMBER 31, 2001(3) TO JUNE 30, ---------------------------- DECEMBER 31, 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 17.49 12.72 16.68 14.90 Income (loss) from investment operations: Net investment income (loss) $ (0.05) 0.01 (0.04) 0.00* Net realized and unrealized gain (loss) on investments $ 0.53 4.79 (3.86) 1.78 Total from investment operations $ 0.48 4.80 (3.90) 1.78 Less distribution from: Net investment income $ -- 0.03 0.06 -- Total distribution $ -- 0.03 0.06 -- Net asset value, end of period $ 17.97 17.49 12.72 16.68 TOTAL RETURN(1) % 2.74 37.76 (23.45) 11.95 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 11,951 840 184 11 Ratios to average net assets: Expenses(2) % 1.11 1.10 1.12 1.10 Net investment income(2) % (0.01) 0.22 0.14 0.29 Portfolio turnover rate % 54 178 371 240
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. * Amount is less than $0.01 per share. See Accompanying Notes to Financial Statements 33 ING VP VALUE OPPORTUNITY PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.08 9.77 13.25 15.34 16.42 14.41 Income (loss) from investment operations: Net investment income $ 0.12 0.10 0.04 0.03 0.07 0.10 Net realized and unrealized gain (loss) on investments $ 0.20 2.29 (3.47) (1.43) 1.49 2.71 Total from investment operations $ 0.32 2.39 (3.43) (1.40) 1.56 2.81 Less distributions from: Net investment income $ -- 0.08 0.05 0.05 0.03 0.08 Net realized gains on investments $ -- -- -- 0.64 2.61 0.72 Total distributions $ -- 0.08 0.05 0.69 2.64 0.80 Net asset value, end of period $ 12.40 12.08 9.77 13.25 15.34 16.42 TOTAL RETURN(1) % 2.65 24.59 (25.96) (9.62) 10.19 19.58 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 237,820 257,448 211,470 219,287 116,029 85,030 Ratios to average net assets: Expenses(2) % 0.70 0.70 0.72 0.71 0.75 0.73 Net investment income(2) % 1.68 0.91 0.51 0.54 0.58 0.69 Portfolio turnover rate % 8 251 304 185 171 125
CLASS S --------------------------------------------------------------- SIX MONTHS JULY 16, ENDED YEAR ENDED DECEMBER 31, 2001(3) TO JUNE 30, ---------------------------- DECEMBER 31, 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.03 9.75 13.24 14.58 Income (loss) from investment operations: Net investment income $ 0.06 0.04 0.01 0.00* Net realized and unrealized gain (loss) on investments $ 0.24 2.31 (3.46) (1.34) Total from investment operations $ 0.30 2.35 (3.45) (1.34) Less distributions from: Net investment income $ -- 0.07 0.04 -- Total distributions $ -- 0.07 0.04 -- Net asset value, end of period $ 12.33 12.03 9.75 13.24 TOTAL RETURN(1) % 2.49 24.21 (26.12) (9.19) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 2,994 2,277 1,092 307 Ratios to average net assets: Expenses(2) % 0.95 0.95 0.97 0.96 Net investment income(2) % 1.46 0.64 0.26 0.29 Portfolio turnover rate % 8 251 304 185
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. * Amount is less than $0.01 per share. See Accompanying Notes to Financial Statements 34 ING VP BALANCED PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.50 10.73 12.09 13.40 15.57 15.73 Income (loss) from investment operations: Net investment income $ 0.12 0.25 0.25 0.31 0.43 0.44 Net realized and unrealized gain (loss) on investments $ 0.17 1.76 (1.49) (0.87) (0.49) 1.56 Total from investment operations $ 0.29 2.01 (1.24) (0.56) (0.06) 2.00 Less distributions from: Net investment income $ -- 0.24 0.12 0.28 0.46 0.40 Net realized gains on investments $ -- -- -- 0.47 1.65 1.76 Total distributions $ -- 0.24 0.12 0.75 2.11 2.16 Net asset value, end of period $ 12.79 12.50 10.73 12.09 13.40 15.57 TOTAL RETURN(1) % 2.32 18.87 (10.31) (4.21) (0.56) 13.60 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 1,407 1,375 1,223 1,591 1,777 1,988 Ratios to average net assets: Expenses(2) % 0.59 0.60 0.60 0.59 0.59 0.59 Net investment income(2) % 1.91 2.04 2.00 2.46 2.72 2.81 Portfolio turnover rate % 136 333 345 167 182 136
CLASS S ------------------------- SIX MONTHS MAY 29, ENDED 2003(3) TO JUNE 30, DECEMBER 31, 2004 2003 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.49 11.53 Income (loss) from investment operations: Net investment income $ 0.09* 0.34 Net realized and unrealized gain on investments $ 0.18 0.85 Total from investment operations $ 0.27 1.19 Less distributions from: Net investment income $ -- 0.23 Total distributions $ -- 0.23 Net asset value, end of period $ 12.76 12.49 TOTAL RETURN(1) % 2.16 10.51 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 2 1 Ratios to average net assets: Expenses(2) % 0.84 0.83 Net investment income(2) % 1.66 3.06 Portfolio turnover rate % 136 333
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. * Per share data calculated using average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 35 ING VP GROWTH AND INCOME PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 18.28 14.50 19.54 24.12 30.69 31.87 Income (loss) from investment operations: Net investment income $ 0.09 0.16 0.16 0.14 0.17 0.31 Net realized and unrealized gain (loss) on investments $ 0.46 3.62 (5.04) (4.58) (3.46) 4.86 Total from investment operations $ 0.55 3.78 (4.88) (4.44) (3.29) 5.17 Less distributions from: Net investment income $ 0.16 -- 0.16 0.14 0.16 0.34 Net realized gains on investments $ -- -- -- -- 3.12 6.01 Total distributions $ 0.16 -- 0.16 0.14 3.28 6.35 Net asset value, end of period $ 18.67 18.28 14.50 19.54 24.12 30.69 TOTAL RETURN(1): % 3.05 26.07 (24.99) (18.40) (10.97) 17.42 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 3,662 3,795 3,525 5,639 7,797 10,029 Ratios to average net assets: Expenses(2) % 0.59 0.60 0.59 0.59 0.58 0.58 Net investment income(2) % 0.90 0.95 0.83 0.62 0.55 0.89 Portfolio turnover rate % 78 150 246 185 149 133
CLASS S ------------------------- SIX MONTHS JUNE 11, ENDED 2003(3) TO JUNE 30, DECEMBER 31, 2004 2003 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 18.26 16.32 Income (loss) from investment operations: Net investment income $ 0.06 0.04 Net realized and unrealized gain on investments $ 0.47 1.90 Total from investment operations $ 0.53 1.94 Less distributions from: Net investment income $ 0.15 -- Total distributions $ 0.15 -- Net asset value, end of period $ 18.64 18.26 TOTAL RETURN(1): % 2.91 11.89 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 2 2 Ratios to average net assets: Expenses(2) % 0.84 0.84 Net investment income(2) % 0.66 0.57 Portfolio turnover rate % 78 150
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. See Accompanying Notes to Financial Statements 36 ING VP BOND PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.15 13.53 12.95 12.61 12.17 13.06 Income (loss) from investment operations: Net investment income $ 0.26 0.56 0.45 0.59 0.79 0.76 Net realized and unrealized gain (loss) on investments $ (0.19) 0.29 0.63 0.51 0.37 (0.86) Total from investment operations $ 0.07 0.85 1.08 1.10 1.16 (0.10) Less distributions from: Net investment income $ 0.61 0.11 0.43 0.65 0.72 0.75 Net realized gains on investments $ 0.36 0.12 0.07 0.11 0.04 Total distributions $ 0.97 0.23 0.50 0.76 0.72 0.79 Net asset value, end of period $ 13.25 14.15 13.53 12.95 12.61 12.17 TOTAL RETURN(1) % 0.37 6.30 8.33 8.75 9.64 (0.74) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 1,087 1,126 1,206 1,024 711 717 Ratios to average net assets: Expenses(2) % 0.50 0.50 0.49 0.50 0.50 0.49 Net investment income(2) % 3.83 3.77 3.50 5.06 6.29 5.77 Portfolio turnover rate % 213 521 565 219 334 201
CLASS S ---------------------------------------- SIX MONTHS YEAR MAY 3, ENDED ENDED 2002(3) TO JUNE 30, DECEMBER 31, DECEMBER 31, 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.13 13.53 13.05 Income (loss) from investment operations: Net investment income $ 0.01 0.49 0.16 Net realized and unrealized gain on investments $ 0.04 0.32 0.81 Total from investment operations $ 0.05 0.81 0.97 Less distributions from: Net investment income $ 0.60 0.09 0.42 Net realized gains on investments $ 0.36 0.12 0.07 Total distributions $ 0.96 0.21 0.49 Net asset value, end of period $ 13.22 14.13 13.53 TOTAL RETURN(1) % 0.23 6.04 7.45 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 165 71 50 Ratios to average net assets: Expenses(2) % 0.75 0.75 0.74 Net investment income(2) % 3.56 3.52 3.25 Portfolio turnover rate % 213 521 565
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. See Accompanying Notes to Financial Statements 37 ING VP MONEY MARKET PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 --------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.94 13.03 13.33 13.61 13.42 13.39 Income (loss) from investment operations: Net investment income $ 0.06 0.08 0.21 0.50 0.83 0.59 Net realized and unrealized gain(loss) on investments $ (0.02) 0.03 -- 0.01 (0.02) 0.06 Total from investment operations $ 0.04 0.11 0.21 0.51 0.81 0.65 Less distributions from: Net investment income $ 0.14 0.20 0.51 0.79 0.62 0.62 Total distributions $ 0.14 0.20 0.51 0.79 0.62 0.62 Net asset value, end of period $ 12.84 12.94 13.03 13.33 13.61 13.42 TOTAL RETURN(1) % 0.28 0.92 1.66 3.94 6.38 5.08 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 1,137 1,238 1,552 1,519 1,196 1,158 Ratios to average net assets: Expenses(2) % 0.35 0.35 0.34 0.34 0.34 0.34 Net investment income(2) % 0.83 0.91 1.63 4.07 6.20 5.04
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. (2) Annualized for periods less than one year. See Accompanying Notes to Financial Statements 38 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) NOTE 1 -- ORGANIZATION Organization. The ING Variable Product Portfolios are comprised of ING Variable Portfolios, Inc., ING VP Balanced Portfolio, Inc., ING Variable Funds, ING VP Bond Portfolio and ING VP Money Market Portfolio, all of which are open-end investment management companies registered under the Investment Company Act of 1940, as amended. ING Variable Portfolios, Inc. is a company incorporated under the laws of Maryland on June 4, 1996 and has eight separate portfolios. The five portfolios that are in this report are: ING VP Global Science and Technology ("Global Science and Technology", formerly, ING VP Technology Portfolio), ING VP International Equity Portfolio ("International"), ING VP Growth Portfolio ("Growth"), ING VP Small Company Portfolio ("Small Company"), and ING VP Value Opportunity Portfolio ("Value Opportunity"). ING VP Balanced Portfolio, Inc. ("Balanced") is a company incorporated under the laws of Maryland on December 14, 1988. ING Variable Funds is a business trust formed under the laws of Massachusetts on January 25, 1984 with one portfolio, ING VP Growth and Income Portfolio ("Growth and Income"). ING VP Bond Portfolio is a business trust formed under the laws of Massachusetts on January 25, 1984 with one portfolio, ING VP Bond Portfolio ("Bond"). ING VP Money Market Portfolio is a business trust under the laws of Massachusetts on January 25, 1984 with one portfolio, ING VP Money Market Portfolio ("Money Market"). Each Portfolio offers Class I shares (formerly, Class R). Global Science and Technology International, Growth, Small Company, Value Opportunity, Balanced, Growth and Income and Bond also offer Class S shares. The two classes differ principally in applicable distribution and service fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Portfolios and earn income and realized gains/losses from the Portfolio pro rata based on the average daily net assets of each class, without discrimination between share classes. No class has preferential dividend rights. Differences in per share dividend rates generally result from the relative weighting of pro rata income and realized gain allocations and from differences in separate class expenses, including distribution, and shareholder servicing fees. ING Investments, LLC ("ING Investments"), an Arizona limited liability company, serves as the investment adviser to the Portfolios. ING Investments has engaged ING Investment Management Co. (formerly, Aeltus Investment Management, Inc., "ING IM"), a Connecticut corporation, to serve as the Sub-Adviser to each Portfolio, with the exception of the Global Science and Technology Portfolio. ING Funds Distributor, LLC is the principal underwriter of the Portfolios. ING Funds Distributor, LLC, ING Investments and ING IM are indirect wholly-owned subsidiaries of ING Groep N.V. ING Groep N.V. is a global financial institution active in the field of insurance, banking and asset management. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Portfolios in the preparation of their financial statements. Such policies are in conformity with accounting principles generally accepted in the United States of America for investment companies. A. SECURITY VALUATION. Investments in equity securities traded on a national securities exchange are valued at the last reported sale price. Securities reported by NASDAQ will be valued at the NASDAQ official closing prices. Securities traded on an exchange or NASDAQ for which there has been no sale and securities traded in the over-the-counter-market are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at that time. Debt securities are valued at prices obtained from independent services or from one or more dealers making markets in the securities and may be adjusted based on the Portfolios' valuation procedures. U.S. Government obligations are valued by using market quotations or independent pricing services that use prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Securities and assets for which market quotations are not readily available (which may include certain restricted securities which are subject to limitations as to their sale) are valued at their fair values as determined in good faith by or under the supervision of the Portfolios' Board of Directors ("Board"), in accordance with methods that are specifically authorized by the Board. 39 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Securities traded on exchanges, including foreign exchanges, which close earlier than the time that a Portfolio calculates its net asset value may also be valued at their fair values as determined in good faith by or under the supervision of a Portfolio's Board, in accordance with methods that are specifically authorized by the Board. If a significant event which is likely to impact the value of one or more foreign securities held by a Portfolio occurs after the time at which the foreign market for such security(ies) closes but before the time that the Portfolio's net asset value is calculated on any business day, such event may be taken into account in determining the fair value of such security(ies) at the time the Portfolio calculates its net asset value. For these purposes, significant events after the close of trading on a foreign market may include, among others, securities trading in the U.S. and other markets, corporate announcements, natural and other disasters, and political and other events. Among other elements of analysis, the Board has authorized the use of one or more research services to assist with the determination of the fair value of foreign securities in light of significant events. Research services use statistical analyses and quantitative models to help determine fair value as of the time a Portfolio calculates its net asset value. Unlike the closing price of a security on an exchange, fair value determinations employ elements of judgment, and the fair value assigned to a security may not represent the actual value that a Portfolio could obtain if it were to sell the security at the time of the close of the NYSE. Investments in securities maturing in less than 60 days at the date of valuation are valued at amortized cost, which, when combined with accrued interest, approximates market value. B. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Securities transactions are accounted for on the trade date. Realized gains and losses are reported on the basis of identified cost of securities sold. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date, or for certain foreign securities, when the information becomes available to the Portfolios. Premium amortization and discount accretion are determined by the effective yield method. C. FOREIGN CURRENCY TRANSLATION. The books and records of the portfolios are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Market value of investment securities, other assets and liabilities -- at the exchange rates prevailing at the end of the day. (2) Purchases and sales of investment securities, income and expenses -- at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Portfolios do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities, which are subject to foreign withholding tax upon disposition, liabilities are recorded on the Statements of Assets and Liabilities for the estimated tax withholding based on the securities' current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Portfolio's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. Government securities. These risks include, but are not limited to, revaluation of currencies and future adverse political and economic developments, which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and U.S. Government securities. D. FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS. Certain Portfolios may enter into 40 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) foreign currency exchange transactions to convert to and from different foreign currencies and to and from the U.S. dollar in connection with the planned purchases or sales of securities. The Portfolios either enter into these transactions on a spot basis at the spot rate prevailing in the foreign currency exchange market or use forward foreign currency contracts to purchase or sell foreign currencies. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation. Risks may arise upon entering into forward contracts from the potential inability of counterparties to meet the terms of their forward contracts and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. Each Portfolio may enter into futures contracts involving foreign currency, interest rates, securities and securities indices. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of foreign currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Portfolio is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Portfolio agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margins and are recorded as unrealized gains or losses by the Portfolio. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. E. DISTRIBUTIONS TO SHAREHOLDERS. The Portfolios record distributions to their shareholders on the ex-dividend date. Global Science and Technology, International, Growth, Small Company, Value Opportunity, Balanced and Money Market Portfolios declare and pay dividends annually. Bond and Growth and Income Portfolios declare and pay dividends semi-annually. The Portfolios may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code. The characteristics of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America for investment companies. F. FEDERAL INCOME TAXES. It is the policy of the Portfolios to comply with subchapter M of the Internal Revenue Code and related excise tax provisions applicable to requlated investment companies and to distribute substantially all of their net investment income and any net realized capital gains to their shareholders. Therefore, no federal income tax provision is required. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired. G. USE OF ESTIMATES. Management of the Portfolios has made certain estimates and assumptions relating to the reporting of assets, liabilities, income, and expenses to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America for investment companies. Actual results could differ from these estimates. H. REPURCHASE AGREEMENTS. Each Portfolio may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase it at a mutually agreed upon time and price. The resale price is in excess of the purchase price and reflects an agreed upon interest rate for the period of time the agreement is outstanding. The period of the repurchase agreements is usually short, from overnight to one week, while the underlying securities generally have longer maturities. Each Portfolio will receive as collateral securities acceptable to it whose market value is equal to at least 100% of the carrying amount of the repurchase agreements, plus accrued interest, being invested by the Portfolio. The underlying collateral is valued daily on a mark-to-market basis to assure that the value, including accrued interest is at least equal to the repurchase price. If the seller defaults, a Portfolio might incur a loss or delay in the realization of proceeds if the value of the security collateralizing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. I. SECURITIES LENDING. Each Portfolio has the option to temporarily loan up to 30% of its total assets to brokers, dealers or other financial institutions in exchange for a negotiated lender's fee. The borrower is required to fully collateralize the loans with cash or U.S. Government securities. Generally, in the event of counterparty default, the Portfolio has the right to use collateral to offset losses incurred. There would be potential loss to the Portfolio in the event the Portfolio is delayed or prevented from exercising its right to dispose of the collateral. The Portfolio bears the 41 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) risk of loss with respect to the investment of collateral. Engaging in securities lending could have a leveraging effect, which may intensify the credit, market and other risks associated with investing in a Portfolio. J. ILLIQUID AND RESTRICTED SECURITIES. The Portfolios may not invest more than 15% (10% for Money Market) of their net assets in illiquid securities. Illiquid securities are not readily marketable. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the Portfolios to sell them promptly at an acceptable price. The Portfolios may also invest in restricted securities, which include those sold under Rule 144A of the Securities Act of 1933 (1933 Act) or securities offered pursuant to Section 4(2) of the 1933 Act, and/or are subject to legal or contractual restrictions on resale and may not be publicly sold without registration under the 1933 Act. Certain restricted securities may be considered liquid pursuant to guidelines approved by the Board or may be deemed to be illiquid because they may not be readily marketable. Illiquid and restricted securities are valued using market quotations when readily available. In the absence of market quotations, the securities are valued based upon their fair value determined under procedures approved by the Board. K. DELAYED DELIVERY TRANSACTIONS. Balanced, Growth and Income, and Bond Portfolios may purchase or sell securities on a when-issued or forward commitment basis. The price of the underlying securities and date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The market value of such is identified in the Portfolios' Portfolio of Investments. Losses may arise due to changes in the market value of the securities or from the inability of counterparties to meet the terms of the contract. In connection with such purchases, the Portfolios are required to hold liquid assets as collateral with the Portfolios' custodian sufficient to cover the purchase price. L. MORTGAGE DOLLAR ROLL TRANSACTIONS. In connection with a portfolio's ability to purchase or sell securities on a when-issued basis, Balanced, Growth and Income, and Bond Portfolios may engage in dollar roll transactions with respect to mortgage-backed securities issued by Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corp. In a dollar roll transaction, a Portfolio sells a mortgage-backed security to a financial institution, such as a bank or broker/dealer, and simultaneously agrees to repurchase a substantially similar (i.e., same type, coupon, and maturity) security from the institution on a delayed delivery basis at an agreed upon price. The mortgage-backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. The Portfolios account for dollar roll transactions as purchases and sales. M. OPTIONS CONTRACTS. Balanced, Growth and Income, and Bond may purchase put and call options and may write (sell) put options and covered call options. The Portfolios may engage in option transactions as a hedge against adverse movements in the value of portfolio holdings or to increase market exposure. Option contracts are valued daily and unrealized gains or losses are recorded based upon the last sales price on the principal exchange on which the options are traded. The Portfolios will realize a gain or loss upon the expiration or closing of the option contract. When an option is exercised, the proceeds on sales of the underlying security for a written call option, the purchase cost of the security for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Realized and unrealized gains or losses on option contracts are reflected in the accompanying financial statements. The risk in writing a call option is that the Portfolios give up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Portfolios may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolios pay a premium whether or not the option is exercised. Risks may also arise from an illiquid secondary market or from the inability of counterparties to meet the terms of the contract. N. SWAP CONTRACTS. The Balanced and Bond Portfolios may enter into interest rate swaps, currency swaps and other types of swap agreements, including swaps on securities and indices. A swap is an agreement between two parties pursuant to which each party agrees to make one or more payments to the other on regularly scheduled dates over a stated term, based on different interest rates, currency exchange rates, security prices, the prices or rates of other types of financial instruments or assets or the levels of specified indices. During the term of the swap, changes in the value of the swap are recognized by marking-to-market the value of the 42 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) swap. For each swap contract, a capital gain or loss is recognized on each contract's respective payment date. NOTE 3 -- INVESTMENT TRANSACTIONS For the six months ended June 30, 2004, the cost of purchases and proceeds from the sales of securities, excluding short-term securities, were as follows:
PURCHASES SALES --------------- --------------- Global Science and Technology $ 94,774,123 $ 99,122,962 International 39,243,494 35,136,137 Growth 125,794,753 142,477,939 Small Company 241,514,523 264,700,417 Value Opportunity 19,446,355 33,904,940 Balanced 883,456,289 909,481,517 Growth and Income 2,847,464,862 3,111,069,065 Bond 543,036,966 552,981,053
U.S. Government securities not included above were as follows:
PURCHASES SALES --------------- --------------- Balanced $ 1,044,433,062 $ 1,030,893,588 Bond 2,360,041,814 2,316,922,598
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES The Portfolios entered into Investment Management Agreements with ING Investments (the "Investment Manager"). The Investment Management Agreements compensate the Investment Manager with a fee, computed daily and payable monthly, based on the average daily net assets of each Portfolio, at the following annual rates: Global Science and Technology 0.95% International 0.85% Growth 0.60% Small Company 0.75% Value Opportunity 0.60% Balanced 0.50% Growth and Income 0.50% on first $10 billion; 0.45% on next $5 billion; and 0.425% over $15 billion Bond 0.40% Money Market 0.25%
The Investment Manager entered into Sub-Advisory Agreements with ING IM. ING IM acts as Sub-Adviser to all Portfolios except for the Global Science and Technology Portfolio. Subject to such policies as the Board or the Investment Manager may determine, ING IM manages the Portfolios' assets in accordance with the Portfolios' investment objectives, policies, and limitations. BlackRock Advisors, Inc., ("BlackRock"), a Delaware Corporation, serves as Sub-Adviser to the Global Science and Technology Portfolio pursuant to a Sub-Advisory Agreement effective April 1, 2004 between the Investment Manager and BlackRock through December 31, 2005. From January 1, 2004 to March 31, 2004, the Global Science and Technology Portfolio was sub-advised by BlackRock under an interim Sub-Advisory Agreement. Pursuant to Administration Agreements, ING Funds Services, LLC ("IFS") acts as administrator and provides certain administrative and shareholder services necessary for Portfolio operations and is responsible for the supervision of other service providers. IFS is entitled to receive from each Portfolio a fee at an annual rate of 0.055% on the first $5 billion of daily net assets and 0.03% thereafter. NOTE 5 -- DISTRIBUTION AND SERVICE FEES Class S shares of the Portfolios have adopted Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING Funds Distributor, LLC (the "Distributor") is reimbursed or compensated by the Portfolios for expenses incurred in the distribution of each Portfolio's shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled to a payment each month to reimburse or compensate expenses incurred in the distribution and promotion of each Portfolio's shares, including expenses incurred in printing prospectuses and reports used for sales purposes, expenses incurred in preparing and printing sales literature and other such distribution related expenses, including any distribution or shareholder servicing fees ("Service Fees") paid to securities dealers who have executed a distribution agreement with the Distributor. Under the 12b-1 Plans, Class S shares of the Portfolios pay the Distributor a fee calculated at an annual rate of 0.25% of average daily net assets. NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATED AND RELATED PARTIES At June 30, 2004, the Portfolios had the following amounts recorded in payable to affiliates on the accompanying Statements of Assets and Liabilities (see Notes 4 and 5):
ACCRUED ACCRUED INVESTMENT ACCRUED SHAREHOLDER MANAGEMENT ADMINISTRATIVE SERVICES AND FEES FEES DISTRIBUTION FEES TOTAL ----------- -------------- ----------------- ----------- Global Science and Technology $ 67,279 $ 3,894 $ -- $ 71,173 International 31,249 2,022 2,273 35,544 Growth 104,854 9,609 64 114,527 Small Company 294,392 21,583 1,457 317,432 Value Opportunity 118,088 10,821 606 129,515 Balanced 573,487 63,075 424 636,986 Growth and Income 1,494,464 164,364 382 1,659,210 Bond 406,425 55,864 31,441 493,730 Money Market 233,794 51,417 -- 285,211
43 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) The Portfolios have adopted a Deferred Compensation Plan (the "Plan"), which allows eligible non-affiliated directors as described in the Plan to defer the receipt of all or a portion of the directors' fees payable. Deferred fees are invested in various funds advised by ING Investments, LLC until distribution in accordance with the Plan. NOTE 7 -- EXPENSE LIMITATIONS ING Investments entered into written Expense Limitation Agreements with each of the following Portfolios whereby the Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the levels listed below:
CLASS I CLASS S ------- ------- Global Science and Technology 1.15% 1.40% International 1.15% 1.40% Growth 0.80% 1.05% Small Company 0.95% 1.20% Value Opportunity 0.80% 1.05%
The Investment Manager may at a later date recoup from a Portfolio management fees waived and other expenses assured by the Investment Manager during the previous 36 months, but only if, after such recoupment, the Portfolio's expense ratio does not exceed the percentage described above. Waived and reimbursed fees net of any recoupment by the Investment Manager of such waived and reimbursed fees are reflected on the accompanying Statements of Operations. Amounts payable by the Investment Manager are reflected on the accompanying Statements of Assets and Liabilities for each Portfolio. As of June 30, 2004, the amounts of reimbursed fees that are subject to possible recoupment by the Investment Manager, and the related expiration dates are as follows:
JUNE 30, --------------------------- 2005 2006 2007 TOTAL ------- --------- -------- ---------- International $ 7,643 $ 127,644 $ 56,488 $ 191,775
The Expense Limitation Agreements are contractual and shall renew automatically for one-year terms unless ING Investments provides written notice of the termination of an Expense Limitation Agreement within 90 days of the end of the then current term. NOTE 8 -- LINE OF CREDIT The Portfolios, in addition to certain other funds managed by the Investment Manager, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement ") with a syndicate of banks led by Citibank, N.A. for an aggregate amount of $150,000,000. The proceeds may be used only to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the funds; and (3) enable the funds to meet other emergency expenses as defined in the Credit Agreement. The funds to which the line of credit is available pay a commitment fee equal to 0.09% per annum on the daily unused portion of the committed line amount. Each of the Portfolios will pay its pro rata share of both the agent and commitment fee. Generally, borrowings under the Credit Agreement accrue interest at the Federal Funds Rate plus a specified margin. Repayments generally must be made within 30 days after the date of a revolving credit advance. The Value Opportunity Portfolio utilized the line of credit for five days during the six months ended June 30, 2004, with an approximate average daily balance of $5,808,000 and an approximate weighted average interest rate of 1.50%. NOTE 9 -- CAPITAL SHARES TRANSACTIONS Transactions in capital shares and dollars were as follows:
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004(1) 2003 ------------- ------------- ------------- ------------- GLOBAL SCIENCE AND TECHNOLOGY (NUMBER OF SHARES) Shares sold 3,570,055 22,057,248 -- -- Shares redeemed (4,795,050) (13,940,003) -- (2,551) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (1,224,995) 8,117,245 -- (2,551) ============= ============= ============= ============= GLOBAL SCIENCE AND TECHNOLOGY ($) Shares sold $ 14,159,690 $ 71,880,902 $ -- $ -- Shares redeemed (18,025,988) (43,644,308) -- (9,376) ------------- ------------- ------------- ------------- Net increase (decrease) $ (3,866,298) $ 28,236,594 $ -- $ (9,376) ============= ============= ============= =============
44 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 9 -- CAPITAL SHARES TRANSACTIONS (CONTINUED)
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- INTERNATIONAL (NUMBER OF SHARES) Shares sold 1,540,168 11,733,163 44,348 27,260 Dividends reinvested -- 58,321 -- 81 Shares redeemed (1,105,169) (11,428,928) (45,811) (2,549) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 434,999 362,556 (1,463) 24,792 ============= ============= ============= ============= INTERNATIONAL ($) Shares sold $ 11,904,823 $ 71,979,031 $ 339,924 $ 181,817 Dividends reinvested -- 358,677 -- 496 Shares redeemed (8,498,808) (70,356,174) (354,527) (16,399) ------------- ------------- ------------- ------------- Net increase (decrease) $ 3,406,015 $ 1,981,534 $ (14,603) $ 165,914 ============= ============= ============= =============
- ---------- (1) There was no capital share activity for Class S during the six months ended June 30, 2004.
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- GROWTH (NUMBER OF SHARES) Shares sold 383,518 2,152,470 4,800 32,996 Shares redeemed (1,756,286) (3,481,590) (1,249) (7,885) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (1,372,768) (1,329,120) 3,551 25,111 ============= ============= ============= ============= GROWTH ($) Shares sold $ 3,491,145 $ 12,336,815 $ 44,067 $ 253,457 Shares redeemed (15,827,526) (22,951,012) (11,286) (58,277) ------------- ------------- ------------- ------------- Net increase (decrease) $ (12,336,381) $ (10,614,197) $ 32,781 $ 195,180 ============= ============= ============= =============
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- SMALL COMPANY (NUMBER OF SHARES) Shares sold 1,872,544 10,395,221 624,125 40,070 Dividends reinvested -- 63,065 -- 48 Shares redeemed (1,680,285) (6,562,287) (7,194) (6,503) ------------- ------------- ------------- ------------- Net increase in shares outstanding 192,259 3,895,999 616,931 33,615 ============= ============= ============= ============= SMALL COMPANY ($) Shares sold $ 34,017,246 $ 155,510,623 $ 10,872,368 $ 616,993 Dividends reinvested -- 922,009 -- 698 Shares redeemed (29,799,135) (94,475,400) (125,504) (103,573) ------------- ------------- ------------- ------------- Net increase $ 4,218,111 $ 61,957,232 $ 10,746,864 $ 514,118 ============= ============= ============= =============
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- VALUE OPPORTUNITY (NUMBER OF SHARES) Shares sold 655,441 2,108,112 71,320 92,628 Dividends reinvested -- 164,266 -- 901 Shares redeemed (2,785,901) (2,598,835) (17,795) (16,336) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (2,130,460) (326,457) 53,525 77,193 ============= ============= ============= ============= VALUE OPPORTUNITY ($) Shares sold $ 8,071,730 $ 20,200,109 $ 871,010 $ 998,638 Dividends reinvested -- 1,764,212 -- 9,646 Shares redeemed (34,066,102) (25,416,002) (217,506) (171,629) ------------- ------------- ------------- ------------- Net increase (decrease) $ (25,994,372) $ (3,451,681) $ 653,504 $ 836,655 ============= ============= ============= =============
45 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 9 -- CAPITAL SHARES TRANSACTIONS (CONTINUED)
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS PERIOD ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003(1) ------------- ------------- ------------- ------------- BALANCED (NUMBER OF SHARES) Shares sold 4,352,581 3,154,493 88,844 101,813 Dividends reinvested -- 2,206,304 -- 25 Shares redeemed (4,257,695) (9,380,661) (8,117) (3,480) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 94,886 (4,019,864) 80,727 98,358 ============= ============= ============= ============= BALANCED ($) Shares sold $ 55,302,673 $ 37,356,123 $ 1,123,442 $ 1,194,460 Dividends reinvested -- 25,549,004 -- 288 Shares redeemed (54,028,576) (106,290,993) (102,254) (42,017) ------------- ------------- ------------- ------------- Net increase (decrease) $ 1,274,097 $ (43,385,866) $ 1,021,188 $ 1,152,731 ============= ============= ============= =============
- ---------- (1) Class S commenced operations on May 29, 2003.
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS PERIOD ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003(1) ------------- ------------- ------------- ------------- GROWTH AND INCOME (NUMBER OF SHARES) Shares sold 3,162,847 801,513 18,317 98,693 Dividends reinvested 1,799,374 -- 845 -- Shares redeemed (16,436,250) (36,272,651) (8,107) (4,334) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (11,474,029) (35,471,138) 11,055 94,359 ============= ============= ============= ============= GROWTH AND INCOME ($) Shares sold $ 59,284,079 $ 12,502,845 $ 342,398 $ 1,605,943 Dividends reinvested 33,162,467 -- 15,555 -- Shares redeemed (305,733,636) (559,904,868) (151,276) (70,873) ------------- ------------- ------------- ------------- Net increase (decrease) $(213,287,090) $(547,402,023) $ 206,677 $ 1,535,070 ============= ============= ============= =============
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- BOND (NUMBER OF SHARES) Shares sold 5,954,528 8,501,280 7,472,462 6,385,067 Dividends reinvested 5,675,974 1,474,950 595,394 93,017 Shares redeemed (9,220,246) (19,495,518) (629,585) (5,092,213) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 2,410,256 (9,519,288) 7,438,271 1,385,871 ============= ============= ============= ============= BOND ($) Shares sold $ 84,932,947 $ 103,976,909 $ 102,953,962 $ 80,800,150 Dividends reinvested 76,739,144 20,649,302 8,031,865 1,301,393 Shares redeemed (128,540,269) (256,344,288) (8,538,242) (62,882,702) ------------- ------------- ------------- ------------- Net increase (decrease) $ 33,131,822 $(131,718,077) $ 102,447,585 $ 19,218,841 ============= ============= ============= =============
CLASS I SHARES ---------------------------------- SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, 2004 2003 -------------- ---------------- MONEY MARKET (NUMBER OF SHARES) Shares sold 13,370,319 168,980,560 Dividends reinvested 1,009,615 1,928,116 Shares redeemed (21,511,895) (194,376,129) -------------- ---------------- Net decrease in shares outstanding (7,131,961) (23,467,453) ============== ================ MONEY MARKET ($) Shares sold $ 172,059,361 $ 1,899,695,014 Dividends reinvested 12,932,164 24,741,578 Shares redeemed (276,488,945) $ (2,226,653,637) -------------- ---------------- Net decrease $ (91,497,420) $ (302,217,045) ============== ================
- ---------- (1) Class S commenced operations on June 11, 2003. 46 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 10 -- ILLIQUID SECURITIES Pursuant to guidelines adopted by the Portfolios' Board, the following securities have been deemed to be illiquid. Each Portfolio currently limits investment in illiquid securities to 15% (10% for Money Market) of the Portfolios' net assets, at market value, at time of purchase.
INITIAL PERCENT PRINCIPAL ACQUISITION OF NET PORTFOLIO SECURITY AMOUNT DATE COST VALUE ASSETS - ---------- --------------------------------------------------- ------------ ----------- ------------ ------------ ------- Money Market Money Market Trust, LLY, 1.175%, due 06/03/05 $ 13,500,000 05/15/03 $ 13,500,000 $ 13,499,960 1.2% Newcastle CDO I Ltd., 1.321% due 09/24/38 13,900,000 10/23/03 13,900,000 13,900,000 1.2% Putnam Structured Product CDO, 1.259%, due 10/15/38 13,700,000 09/23/03 13,700,000 13,700,000 1.2% ------------ ------------ --- $ 41,100,000 $ 41,099,960 3.6% ============ ============ ===
NOTE 11 -- SECURITIES LENDING Under an agreement with The Bank of New York ("BNY"), the Portfolios can lend their securities to approved brokers, dealers and other financial institutions. Loans are collateralized by cash and U.S. Government securities. The collateral must be in an amount equal to at least 105% of the market value of non-U.S. securities loaned and 102% of the market value of U.S. securities loaned. The cash collateral received is invested in approved investments as defined in the Securities Lending Agreement with BNY (the "Agreement"). The securities purchased with cash collateral received are reflected in the Portfolio of Investments. Generally, in the event of counterparty default, the Portfolios have the right to use the collateral to offset losses incurred. The Agreement contains certain guarantees by BNY in the event of counterparty default and/or a borrower's failure to return a loaned security, however there would be a potential loss to the Portfolios in the event the Portfolios are delayed or prevented from exercising their right to dispose of the collateral. The Portfolios bear the risk of loss with respect to the investment of collateral. Engaging in securities lending could have a leveraging effect, which may intensify the credit, market and other risks associated with investing in a Portfolio. At June 30, 2004, the Portfolios had securities on loan with the following market values:
VALUE OF VALUE OF SECURITIES PURCHASED VALUE OF TOTAL VALUE SECURITIES LOANED WITH CASH COLLATERAL NON-CASH COLLATERAL* OF COLLATERAL ----------------- -------------------- -------------------- ------------- Global Science and Technology $ 11,372,281 $ 12,041,461 $ -- $ 12,041,461 Growth 39,180,149 39,914,157 -- 39,914,157 Small Company 126,746,371 129,809,897 -- 129,809,897 Value Opportunity 10,289,939 10,534,791 -- 10,534,791 Balanced 325,683,288 326,812,169 6,388,103 333,200,272 Growth and Income 659,243,749 643,061,669 38,706,834 681,768,503 Bond 242,006,106 246,144,339 -- 246,144,339 Money Market 30,296,992 23,715,619 7,388,059 31,103,678
- ---------- * Various U.S. Treasury obligations, 2.000%-8.750%, 01/15/14-11/15/27. NOTE 12 -- FEDERAL INCOME TAXES The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America for investment companies. These book/tax differences may be either temporary or permanent. Permanent differences are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences are not reclassified. Key differences include the treatment of short-term capital gains, foreign currency transactions, and wash sale deferrals. Distributions in excess of net investment income and/or net realized capital gains for tax purposes are reported as distributions of paid-in capital. The tax composition of dividends and distributions to shareholders was as follows:
SIX MONTHS ENDED LONG-TERM YEAR ENDED JUNE 30, 2004: ORDINARY INCOME CAPITAL GAINS DECEMBER 31, 2003: ORDINARY INCOME --------------- ------------- --------------- Growth and Income $ 33,196,320 $ -- International $ 359,173 Bond 53,530,302 31,286,157 Small Company 922,707 Money Market 12,932,164 -- Value Opportunity 1,773,858 Balanced 25,549,292 Growth and Income -- Bond 21,962,645 Money Market 24,741,578
Dividends paid by the Porfolios from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. 47 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 12 -- FEDERAL INCOME TAXES (CONTINUED) The tax-basis components of distributable earnings and the expiration dates of the capital loss carryforwards which may be used to offset future realized capital gains for federal income tax purposes at December 31, 2003 were as follows:
UNDISTRIBUTED UNREALIZED POST OCTOBER CAPITAL UNDISTRIBUTED LONG-TERM APPRECIATION/ CURRENCY LOSSES LOSS EXPIRATION ORDINARY INCOME CAPITAL GAINS (DEPRECIATION) DEFERRED CARRYFORWARDS DATES --------------- ------------- -------------- --------------- ---------------- ---------- Global Science and Technology $ -- $ -- $ 16,945,141 $ -- $ (5,550,749) 2008 (36,046,186) 2009 (15,534,432) 2010 (4,912,495) 2011 ---------------- (62,043,862) ================ International 545,405 -- 6,033,217 -- (21,861,016) 2009 (9,221,611) 2010 ---------------- (31,082,627) ================ Growth 265,408 -- 23,195,510 -- $ (150,586,967) 2009 (63,207,672) 2010 ---------------- (213,794,639) ================ Small Company 1,348,855 -- 80,538,898 -- $ (45,095,976) 2010 ================ Value Opportunity 2,068,557 -- 4,530,305 -- $ (40,071,141) 2010 ================ Balanced 28,837,555 -- 88,019,444 -- $ (179,731,625) 2010 ================ Growth and Income 33,190,956 -- 557,309,702 -- $ (602,830,008) 2009 (2,401,044,421) 2010 (63,082,574) 2011 ---------------- $ (3,066,957,003) ================ Bond 83,876,309 932,079 20,650,719 (91,082) -- 2012 Money Market 12,927,121 -- 241,654 -- $ (751,862) 2008 (3,715,968) 2009 (169) 2011 ---------------- $ (4,467,999) ================
NOTE 13 -- OTHER INFORMATION As with many financial services companies, ING Investments and affiliates of ING Investments (collectively, "ING") have received requests for information from various governmental and self-regulatory agencies in connection with investigations related to trading in investment company shares. In each case, full cooperation and responses are being provided. In addition to responding to regulatory requests, ING management initiated an internal review of trading in ING insurance, retirement, and mutual fund products. The goal of this review has been to identify whether there have been any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel. Additionally, ING reviewed its controls and procedures in a continuing effort to deter improper frequent trading in ING products. ING's internal reviews related to mutual fund trading are continuing. The internal review has identified several arrangements allowing third parties to engage in frequent trading of mutual funds within our variable insurance and mutual fund products, and identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat market timing. In addition, the review has identified five arrangements that allowed frequent trading in certain ING Funds. ING entities did not receive special benefits in return for any of these arrangements, which have all been terminated. The internal review also identified two investment professionals who engaged in improper frequent trading in ING Funds. ING will reimburse any ING Fund or its shareholders affected by inappropriate trading for any improper profits that accrued to any person who engaged in improper frequent trading for which ING is responsible. NOTE 14 -- SUBSEQUENT EVENTS On August 6, 2004, the ING VP Bond Portfolio changed its name to ING VP Intermediate Bond Portfolio. 48 ING VP GLOBAL SCIENCE AND PORTFOLIO OF INVESTMENTS TECHNOLOGY PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 97.5% BIOTECHNOLOGY: 6.5% 37,900 @ Arqule, Inc. $ 199,733 19,200 @ Corgentech, Inc. 309,504 32,000 @ Genentech, Inc. 1,798,400 12,700 @ Invitrogen Corp. 914,273 28,400 @,L Medimmune, Inc. 664,560 30,600 @ Nektar Therapeutics 610,776 32,200 @ Protein Design Labs, Inc. 615,986 257,500 @ ViroLogic, Inc. 630,875 ------------ 5,744,107 ------------ COMMERCIAL SERVICES: 1.2% 37,400 @,@@ Accenture Ltd. 1,027,752 ------------ 1,027,752 ------------ COMPUTERS: 3.8% 24,650 @ Dell, Inc. 882,963 79,500 @ EMC Corp. 906,300 39,400 Hewlett-Packard Co. 831,340 112,800 @,L Maxtor Corp. 747,864 ------------ 3,368,467 ------------ ELECTRICAL COMPONENTS AND EQUIPMENT: 1.1% 108,700 @,L General Cable Corp. 929,385 ------------ 929,385 ------------ ELECTRONICS: 1.1% 104,300 @,L Sanmina-SCI Corp. 949,130 ------------ 949,130 ------------ HEALTHCARE-PRODUCTS: 2.0% 103,900 @ Caliper Life Sciences, Inc. 483,135 8,000 @,@@ Given Imaging Ltd. 283,280 16,900 Guidant Corp. 944,372 ------------ 1,710,787 ------------ HEALTHCARE-SERVICES: 0.6% 18,100 @ Inveresk Research Group, Inc. 558,204 ------------ 558,204 ------------ INTERNET: 10.0% 105,610 @,L aQuantive, Inc. 1,043,427 92,300 @ Centillium Communications, Inc. 353,509 59,100 @,L Digitas, Inc. 651,873 16,000 @ eBay, Inc. 1,471,200 44,700 @ iVillage Inc 283,845 53,300 @ SonicWALL, Inc. 458,380 21,200 @ Symantec Corp. 928,136 109,800 @ TIBCO Software, Inc. 927,810 59,400 @,L Verisign, Inc. 1,182,060 40,700 @ Yahoo!, Inc. 1,478,631 ------------ 8,778,871 ------------ MEDIA: 2.4% 106,800 @ Mediacom Communications Corp. 835,176 140,000 @,L Sirius Satellite Radio, Inc. 431,200 114,400 @ UnitedGlobalCom, Inc. 830,544 ------------ 2,096,920 ------------ PHARMACEUTICALS: 9.5% 31,300 @,L Amylin Pharmaceuticals, Inc. 713,640 19,900 @ Andrx Corp. 555,807 39,300 @ Dendreon Corp. $ 481,425 14,000 @,L Eyetech Pharmaceuticals, Inc. 600,880 23,900 @,@@ Flamel Technologies ADR 588,657 10,600 @ Gilead Sciences, Inc. 710,200 14,700 @ Medco Health Solutions, Inc. 551,250 10,700 @ Neurocrine Biosciences, Inc. 554,795 67,100 @ NitroMed, Inc. 403,271 37,700 @ Noven Pharmaceuticals, Inc. 830,154 22,400 @ NPS Pharmaceuticals, Inc. 470,400 48,900 @ Nuvelo, Inc. 470,418 14,500 @ Onyx Pharmaceuticals, Inc. 614,220 16,100 @@,L Shire Pharmaceuticals PLC 430,514 31,900 @ Vicuron Pharmaceuticals, Inc. 400,664 ------------ 8,376,295 ------------ SEMICONDUCTORS: 30.1% 315,500 @,L Agere Systems, Inc. 725,650 57,600 @ Altera Corp. 1,279,872 26,950 @ Analog Devices, Inc. 1,268,806 68,900 @ Applied Materials, Inc. 1,351,818 16,800 @,L ATMI, Inc. 458,808 68,900 @ August Technology Corp. 864,006 396,200 @@ Bookham Technology PLC 380,352 48,100 @,L Brooks Automation, Inc. 969,215 46,900 @,L Emulex Corp. 671,139 50,900 @ Fairchild Semiconductor Intl., Inc. 833,233 77,850 Intel Corp. 2,148,660 30,100 @ International Rectifier Corp. 1,246,742 54,100 Intersil Corp. 1,171,806 27,900 @,L Kla-Tencor Corp. 1,377,702 35,250 @,L Lam Research Corp. 944,700 35,000 Linear Technology Corp. 1,381,450 67,500 @ LTX Corp. 729,675 20,100 Maxim Integrated Products 1,053,642 71,000 @,L MEMC Electronic Materials, Inc. 701,480 30,700 @ MKS Instruments, Inc. 700,574 110,000 @ ON Semiconductor Corp. 552,200 33,700 @,L PMC - Sierra, Inc. 483,595 19,000 @,L Qlogic Corp. 505,210 105,000 @ Skyworks Solutions, Inc. 916,650 107,478 @@,L Taiwan Semiconductor Manufacturing Co. Ltd. 893,142 51,050 Texas Instruments, Inc. 1,234,389 18,300 @,L Varian Semiconductor Equipment Associates, Inc. 705,648 26,800 @ Xilinx, Inc. 892,708 ------------ 26,442,872 ------------ SOFTWARE: 18.6% 19,600 Adobe Systems, Inc. 911,400 52,300 @,L Citrix Systems, Inc. 1,064,828 49,500 Computer Associates Intl., Inc. 1,388,970 140,400 @ Compuware Corp. 926,640 58,800 @ Digi Intl., Inc. 630,336 19,200 @ Electronic Arts, Inc. 1,047,360 16,650 @,L Intuit, Inc. 642,357 117,800 @ Lawson Software, Inc. 834,024 58,000 Microsoft Corp. 1,656,480 219,600 @ OpenTV Corp. 456,768 112,700 @ Oracle Corp. 1,344,511 75,900 @ Packeteer, Inc. 1,225,785 49,400 @ Peoplesoft, Inc. 913,900 33,800 @@ SAP AG 1,413,178 29,200 @ Seachange Intl., Inc. 492,896
See Accompanying Notes to Financial Statements 49 ING VP GLOBAL SCIENCE AND PORTFOLIO OF INVESTMENTS TECHNOLOGY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- SOFTWARE (CONTINUED) 60,900 @ Siebel Systems, Inc. $ 650,412 25,500 @ Veritas Software Corp. 706,350 ------------ 16,306,195 ------------ TELECOMMUNICATIONS: 10.6% 317,500 @ ADC Telecommunications, Inc. 901,700 58,900 @ Alamosa Holdings, Inc. 432,915 50,600 @ Avaya, Inc. 798,974 118,300 @ Cisco Systems, Inc. 2,803,710 36,400 @,L Juniper Networks, Inc. 894,348 5,300 @@ Mobile Telesystems 646,600 21,800 @ Safenet, Inc. 603,424 65,000 @,L Tekelec 1,181,050 33,678 @@ Telekomunikasi Indonesia Tbk PT 523,693 17,400 @@ Turkcell Iletisim Hizmet AS 534,180 ------------ 9,320,594 ------------ Total Common Stock (Cost $86,317,267) 85,609,579 ------------ PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 13.7% SECURITIES LENDING COLLATERAL: 13.7% $ 12,041,461 The Bank of New York Institutional Cash Reserve Fund, 1.250% 12,041,461 ------------ Total Short-Term Investments (Cost $12,041,461) 12,041,461 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $98,358,728)* 111.2% $ 97,651,040 OTHER ASSETS AND LIABILITIES-NET (11.2) (9,824,412) ----- ------------ NET ASSETS 100.0% $ 87,826,628 ===== ============
@ Non-income producing security @@ Foreign issuer ADR American Depositary Receipt L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $99,038,330. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 7,467,498 Gross Unrealized Depreciation (8,854,788) ------------ Net Unrealized Depreciation $ (1,387,290) ============
See Accompanying Notes to Financial Statements 50 PORTFOLIO OF INVESTMENTS ING VP INTERNATIONAL EQUITY PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- AUSTRALIA: 2.4% 50,400 BHP Billiton Ltd. $ 439,913 63,700 Boral Ltd. 286,653 40,400 Seven Network Ltd. 144,935 14,100 St. George Bank Ltd. 216,282 ------------ 1,087,783 ------------ AUSTRIA: 0.5% 13,500 Telekom Austria AG 206,131 ------------ 206,131 ------------ BELGIUM: 1.9% 1,500 Electrabel 480,880 18,000 Fortis 398,574 ------------ 879,454 ------------ DENMARK: 0.7% 11,800 Group 4 Falck A/S 303,245 ------------ 303,245 ------------ FINLAND: 0.4% 12,200 Stora Enso OYJ 165,501 ------------ 165,501 ------------ FRANCE: 9.8% 7,000 Aventis SA 528,451 20,300 AXA 447,033 7,900 Bouygues 264,509 10,900 @ Cap Gemini SA 437,496 18,100 Credit Agricole SA 440,427 2,200 Groupe Danone 191,914 3,400 Lafarge SA 303,213 6,000 Peugeot SA 334,116 2,800 Pinault-Printemps-Redoute 287,689 4,800 Total SA 915,114 12,400 @ Vivendi Universal SA 343,971 ------------ 4,493,933 ------------ GERMANY: 9.2% 5,600 Altana AG 337,255 3,600 Deutsche Boerse AG 183,738 37,600 @ Deutsche Telekom AG 661,029 5,600 E.ON AG 403,343 4,900 Fresenius Medical Care AG 363,060 7,700 Metro AG 365,360 8,800 RWE AG 414,342 2,500 SAP AG 416,702 9,600 Siemens AG 690,862 20,900 Thyssenkrupp AG 357,263 ------------ 4,192,954 ------------ GREECE: 1.1% 9,600 Alpha Bank A.E. 244,108 11,200 Public Power Corp. 267,079 ------------ 511,187 ------------ HONG KONG: 1.4% 48,000 Cheung Kong Holdings Ltd. 353,855 744,000 CITIC Intl. Financial Holdings Ltd. 271,853 ------------ 625,708 ------------ ITALY: 2.1% 185,700 Telecom Italia S.p.A. 577,255 80,100 Unicredito Italiano S.p.A. 395,661 ------------ 972,916 ------------ JAPAN: 25.9% 4,650 Aiful Corp. $ 485,392 23,000 Bridgestone Corp. 432,113 40,000 Calsonic Kansei Corp. 285,204 56,000 Chiba Bank Ltd/The 342,831 17,800 Chubu Electric Power Co., Inc. 376,016 19,000 Dai Nippon Printing Co. Ltd. 303,506 48,000 Daiwa Securities Group, Inc. 344,884 76 East Japan Railway Co. 426,266 13,200 Eisai Co. Ltd. 379,856 47,000 Hitachi Ltd. 323,484 82,000 @ Itochu Corp. 368,235 19,800 JFE Holdings, Inc. 485,405 23,000 Makita Corp 344,847 54,000 Mitsui OSK Lines Ltd 284,067 136 Mizuho Financial Group, Inc. 616,963 106 Nippon Telegraph & Telephone Corp. 566,357 68,000 OJI Paper Co. Ltd. 436,237 22,000 Onward Kashiyama Co. Ltd. 352,839 13,000 Sanken Electric Co. Ltd. 169,656 17,600 Sankyo Co. Ltd. 381,469 8,500 Secom Co. Ltd. 360,675 29,000 Sharp Corp. 463,246 13,300 Sony Corp. 500,966 62,000 The Sumitomo Trust & Banking Co. Ltd. 441,498 109,000 Toshiba Corp. 438,537 8,000 Trend Micro, Inc. 354,855 6,800 Uni-Charm Corp. 339,018 34,000 UNY Co Ltd. 435,302 28,200 Yamaha Corp. 462,613 23,000 Yamaha Motor Co. Ltd. 358,127 ------------ 11,860,464 ------------ NETHERLANDS: 2.4% 23,600 Aegon NV 284,545 12,800 ASML Holding NV 216,622 5,400 DSM NV 264,964 14,100 TPG NV 322,166 ------------ 1,088,297 ------------ NORWAY: 1.3% 8,900 Norsk Hydro ASA 578,439 ------------ 578,439 ------------ PORTUGAL: 1.2% 51,200 Portugal Telecom SGPS SA 552,534 ------------ 552,534 ------------ SINGAPORE: 0.3% 19,000 DBS Group Holdings Ltd. 158,844 ------------ 158,844 ------------ SPAIN: 4.0% 38,000 Banco Bilbao Vizcaya Argentaria SA 507,635 4,600 Banco Popular Espanol 259,793 21,300 Endesa SA 410,488 29,200 Repsol YPF SA 639,471 ------------ 1,817,387 ------------ SWEDEN: 1.7% 14,500 Electrolux AB 278,145 172,200 @ Telefonaktiebolaget LM Ericsson 507,482 ------------ 785,627 ------------
See Accompanying Notes to Financial Statements 51 ING VP INTERNATIONAL PORTFOLIO OF INVESTMENTS EQUITY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- SWITZERLAND: 6.3% 34,190 @ ABB Ltd. $ 187,002 20,060 Clariant AG 293,116 8,360 Roche Holding AG 827,723 4,610 Swiss Reinsurance 299,444 11,490 UBS AG 809,639 2,792 @ Zurich Financial Services AG 440,848 ------------ 2,857,772 ------------ UNITED KINGDOM: 22.7% 15,700 AstraZeneca PLC 704,396 84,500 BAE Systems PLC 335,980 195,133 BP PLC 1,723,365 30,300 British American Tobacco PLC 469,540 108,100 Dixons Group PLC 323,955 22,600 Enterprise Inns PLC 235,664 24,500 @ GlaxoSmithKline PLC 1,015,770 75,600 HSBC Holdings PLC 1,124,225 266,900 Legal & General Group PLC 459,822 37,800 Prudential PLC 325,271 47,900 Reed Elsevier PLC 465,605 21,103 Royal Bank of Scotland Group PLC 607,732 163,600 Shell Transport & Trading Co. PLC 1,200,105 92,200 Team Partners Group 904,577 45,200 WPP Group PLC 459,033 ------------ 10,355,040 ------------ Total Common Stock (Cost $40,447,433) 43,493,216 ------------ PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 4.5% REPURCHASE AGREEMENT: 4.5% $2,054,000 S Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $2,054,086 to be received upon repurchase (Collateralized by $1,995,000 Federal National Mortgage Association, 5.500%, Market Value plus accrued interest $2,079,169 due 05/02/06) 2,054,000 ------------ Total Short-Term Investments (Cost $2,054,000) 2,054,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $42,501,433)* 99.8% $ 45,547,216 OTHER ASSETS AND LIABILITIES-NET 0.2 108,107 ----- ------------ NET ASSETS 100.0% $ 45,655,323 ===== ============
@ Non-income producing security ADR American Depositary Receipt S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. * Cost for federal income tax purposes is $43,011,324. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 3,038,493 Gross Unrealized Depreciation (502,601) ------------ Net Unrealized Appreciation $ 2,535,892 ============
Information concerning open futures contracts at May 31, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE GAIN/(LOSS) - -------------- --------- ------------ ---------- ----------- Topix Index 3 $ 327,315 Sep-04 $ 598 FTSE 100 Index 4 324,326 Sep-04 (2,181) Dow Jones Euro Stoxx 50 Index 17 582,641 Sep-04 (5,274) ------------ --------- $ 1,234,282 $ (6,857) ============ =========
PERCENTAGE OF INDUSTRY NET ASSETS - ----------------------------------------------------------------------- Advertising 1.0% Aerospace/Defense 0.7 Agriculture 1.0 Apparel 0.8 Auto Manufacturers 0.7 Auto Parts and Equipment 1.6 Banks 15.0 Building Materials 1.3 Chemicals 1.2 Commercial Services 1.3 Computers 1.0 Cosmetics/Personal Care 0.7 Distribution/Wholesale 0.8 Diversified Financial Services 2.2 Electric 5.2 Electrical Components and Equipment 2.7 Electronics 0.8 Engineering and Construction 1.0 Food 3.2 Forest Products and Paper 1.3 Hand/Machine Tools 0.8 Healthcare-Products 0.8 Home Furnishings 2.7 Insurance 5.0 Internet 0.8 Iron/Steel 1.9 Leisure Time 0.8 Media 2.1 Mining 1.0 Miscellaneous Manufacturing 1.5 Oil and Gas 11.1 Pharmaceuticals 9.0 Real Estate 0.8 Retail 2.8 Semiconductors 0.8 Software 0.9 Telecommunications 6.7 Transportation 2.3 Repurchase Agreement 4.5 Other Assets and Liabilities, Net 0.2 ----- NET ASSETS 100.0% =====
See Accompanying Notes to Financial Statements 52 PORTFOLIO OF INVESTMENTS ING VP GROWTH PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 96.5% AEROSPACE/DEFENSE: 0.8% 53,400 L Goodrich Corp. $ 1,726,422 ------------ 1,726,422 ------------ APPAREL: 1.3% 37,100 Nike, Inc. 2,810,325 ------------ 2,810,325 ------------ AUTO MANUFACTURERS: 1.0% 37,550 Paccar, Inc. 2,177,525 ------------ 2,177,525 ------------ BIOTECHNOLOGY: 2.4% 49,572 @ Amgen, Inc. 2,705,144 33,200 @ Invitrogen Corp. 2,390,068 ------------ 5,095,212 ------------ COMMERCIAL SERVICES: 1.5% 117,500 @,@@,L Accenture Ltd. 3,228,900 ------------ 3,228,900 ------------ COMPUTERS: 5.7% 101,700 @ Dell, Inc. 3,642,894 251,400 @ EMC Corp. 2,865,960 47,100 International Business Machines Corp. 4,151,865 58,400 @,L Storage Technology Corp. 1,693,600 ------------ 12,354,319 ------------ COSMETICS/PERSONAL CARE: 2.8% 62,000 Estee Lauder Cos., Inc. 3,024,360 54,000 Procter & Gamble Co. 2,939,760 ------------ 5,964,120 ------------ DIVERSIFIED FINANCIAL SERVICES: 4.0% 49,000 L Capital One Financial Corp. 3,350,620 28,500 Goldman Sachs Group, Inc. 2,683,560 47,100 Morgan Stanley 2,485,467 ------------ 8,519,647 ------------ ENTERTAINMENT: 0.5% 24,400 GTECH Holdings Corp. 1,129,964 ------------ 1,129,964 ------------ HEALTHCARE-PRODUCTS: 8.8% 38,900 @@,L Alcon, Inc. 3,059,485 105,500 @ Boston Scientific Corp. 4,515,400 147,500 Johnson & Johnson 8,215,750 27,500 @ St. Jude Medical, Inc. 2,080,375 13,209 @,L Varian Medical Systems, Inc. 1,048,134 ------------ 18,919,144 ------------ HEALTHCARE-SERVICES: 5.2% 30,500 Aetna, Inc. 2,592,500 106,257 @ DaVita Inc 3,275,903 57,300 @,L Pacificare Health Systems 2,215,218 73,700 @,L Wellchoice, Inc. 3,051,180 ------------ 11,134,801 ------------ HOME FURNISHINGS: 1.3% 29,700 Harman Intl. Industries, Inc. 2,702,700 ------------ 2,702,700 ------------ INTERNET: 1.1% 25,200 @,L eBay, Inc. $ 2,317,140 ------------ 2,317,140 ------------ MACHINERY-DIVERSIFIED: 1.3% 40,100 Deere & Co. 2,812,614 ------------ 2,812,614 ------------ MEDIA: 3.7% 193,181 @,L DIRECTV Group, Inc. 3,303,395 181,000 L Walt Disney Co. 4,613,690 ------------ 7,917,085 ------------ MINING: 1.2% 77,300 Alcoa, Inc. 2,553,219 ------------ 2,553,219 ------------ MISCELLANEOUS MANUFACTURING: 9.9% 65,414 3M Co. 5,887,914 52,594 L Danaher Corp. 2,726,999 29,300 Eaton Corp. 1,896,882 177,560 S General Electric Co. 5,752,944 151,200 @@ Tyco Intl. Ltd. 5,010,768 ------------ 21,275,507 ------------ OIL AND GAS: 1.5% 14,100 Amerada Hess Corp. 1,116,579 40,800 Pogo Producing Co. 2,015,520 ------------ 3,132,099 ------------ OIL AND GAS SERVICES: 1.9% 137,300 L Halliburton Co. 4,154,698 ------------ 4,154,698 ------------ PHARMACEUTICALS: 12.8% 106,800 @,L Andrx Corp. 2,982,924 161,300 @ Caremark Rx, Inc. 5,313,222 90,900 @,L Gilead Sciences, Inc. 6,090,300 352,480 Pfizer, Inc. 12,083,015 67,700 L Valeant Pharmaceuticals Intl. 1,354,000 ------------ 27,823,461 ------------ RETAIL: 6.8% 49,100 Federated Department Stores 2,410,810 129,900 Home Depot, Inc. 4,572,480 115,100 Limited Brands 2,152,370 59,700 McDonald's Corp. 1,552,200 74,300 Wal-Mart Stores, Inc. 3,920,068 ------------ 14,607,928 ------------ SEMICONDUCTORS: 6.7% 47,600 @,L Altera Corp. 1,057,672 328,800 Intel Corp. 9,074,880 44,300 L Maxim Integrated Products 2,322,206 55,700 @,L Xilinx, Inc. 1,855,367 ------------ 14,310,125 ------------ SOFTWARE: 5.7% 351,200 Microsoft Corp. 10,030,272 189,800 @ Oracle Corp. 2,264,314 ------------ 12,294,586 ------------
See Accompanying Notes to Financial Statements 53 PORTFOLIO OF INVESTMENTS ING VP GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 8.6% 441,900 @ Cisco Systems, Inc. $ 10,473,030 150,400 @,L Crown Castle Intl. Corp. 2,218,400 116,800 @,L Nextel Communications, Inc. 3,113,888 37,600 Qualcomm, Inc. 2,744,048 ------------ 18,549,366 ------------ Total Common Stock (Cost $188,948,892) 207,510,907 ------------ PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 22.2% REPURCHASE AGREEMENT: 3.7% $ 8,012,000 S Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $8,012,325 to be received upon repurchase (Collateralized by Federal National Mortgage Association, 6.000%, Market Value plus accrued interest $8,153,101, due 12/15/05) 8,012,000 ------------ Total Repurchase Agreement (Cost $8,012,000) 8,012,000 ------------ SECURITIES LENDING COLLATERAL(cc): 18.5% 39,914,157 The Bank of New York Institutional Cash Reserve Fund, 1.250% 39,914,157 ------------ Total Securities Lending Collateral (Cost $39,914,157) 39,914,157 ------------ Total Short-Term Investments (Cost $47,926,157) 47,926,157 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $236,875,049)* 118.7% $ 255,437,064 OTHER ASSETS AND LIABILITIES-NET (18.7) (40,296,144) ----- ------------ NET ASSETS 100.0% $ 215,140,920 ===== =============
@ Non-income producing security @@ Foreign issuer S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $242,658,991. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 15,982,266 Gross Unrealized Depreciation (3,204,193) ------------ Net Unrealized Appreciation $ 12,778,073 ============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE GAIN - -------------- --------- ------------ ---------- ---------- S&P 500 Index 21 $ 587,100 Sep-04 $ 25,423 ========== ========
See Accompanying Notes to Financial Statements 54 PORTFOLIO OF INVESTMENTS ING VP SMALL COMPANY PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 87.6% AEROSPACE/DEFENSE: 2.4% 80,600 Engineered Support Systems, Inc. $ 4,715,906 116,800 @,L Teledyne Technologies, Inc. 2,338,336 134,100 @,L United Defense Industries, Inc. 4,693,500 ------------ 11,747,742 ------------ AIRLINES: 0.9% 233,500 @,L Northwest Airlines Corp. 2,596,520 131,800 @,L Republic Airways Holdings, Inc. 1,878,150 ------------ 4,474,670 ------------ APPAREL: 1.7% 201,200 @ Quiksilver, Inc. 4,790,572 168,800 @,L Warnaco Group, Inc. 3,590,376 ------------ 8,380,948 ------------ BANKS: 3.5% 116,950 L Chittenden Corp. 4,110,793 167,900 L Greater Bay BanCorp. 4,852,310 167,900 Hudson United BanCorp. 6,259,311 33,627 IBERIABANK Corp. 1,990,046 ------------ 17,212,460 ------------ BIOTECHNOLOGY: 0.8% 201,700 @ Ariad Pharmaceuticals, Inc. 1,510,733 107,500 @,L Telik, Inc. 2,566,025 ------------ 4,076,758 ------------ COMMERCIAL SERVICES: 1.3% 93,247 L Bowne & Co., Inc. 1,477,965 20,000 @ Exponent, Inc. 537,400 160,900 Gevity HR, Inc. 4,213,971 ------------ 6,229,336 ------------ COMPUTERS: 4.5% 159,526 Agilysys, Inc. 2,199,864 91,200 @ Brooktrout, Inc. 985,872 181,400 @ Covansys Corp. 1,873,862 167,900 @ Electronics For Imaging 4,744,854 166,800 @,L InterVoice, Inc. 1,913,196 121,200 @,L Komag, Inc. 1,693,164 303,560 @,L Lexar Media, Inc. 2,027,781 114,269 @,L Manhattan Associates, Inc. 3,528,627 150,400 MTS Systems Corp. 3,526,880 6,773 @ SI Intl., Inc. 138,101 ------------ 22,632,201 ------------ DISTRIBUTION/WHOLESALE: 0.4% 134,600 @,L Brightpoint, Inc. 1,850,750 ------------ 1,850,750 ------------ DIVERSIFIED FINANCIAL SERVICES: 1.1% 536,500 @,L Knight Trading Group, Inc. 5,375,730 ------------ 5,375,730 ------------ ELECTRICAL COMPONENTS AND EQUIPMENT: 1.5% 186,700 Ametek, Inc. 5,769,030 174,000 @ Artesyn Technologies, Inc. 1,566,000 ------------ 7,335,030 ------------ ELECTRONICS: 3.6% 148,473 @ Benchmark Electronics, Inc. 4,320,564 208,600 @,L Checkpoint Systems, Inc. $ 3,740,198 87,950 @ Itron, Inc. 2,017,573 39,100 @,L NVE Corp. 1,562,045 55,751 @ SBS Technologies, Inc. 895,919 187,450 @ Trimble Navigation Ltd. 5,209,235 ------------ 17,745,534 ------------ ENERGY-ALTERNATE SOURCES: 1.0% 183,600 @,L Headwaters, Inc. 4,760,748 ------------ 4,760,748 ------------ ENGINEERING AND CONSTRUCTION: 1.7% 176,500 @ URS Corp. 4,836,100 92,200 @,L Washington Group Intl., Inc. 3,309,058 ------------ 8,145,158 ------------ FOOD: 2.3% 83,200 L Cal-Maine Foods, Inc. 1,164,800 125,800 Corn Products Intl., Inc. 5,855,990 80,600 L Pilgrim's Pride Corp. 2,332,564 142,500 @,L Wild Oats Markets, Inc. 2,004,975 ------------ 11,358,329 ------------ FOREST PRODUCTS AND PAPER: 2.9% 251,500 L,@ Louisiana-Pacific Corp. 5,947,975 134,300 Pope & Talbot, Inc. 2,655,111 134,300 L Potlatch Corp. 5,592,252 ------------ 14,195,338 ------------ HEALTHCARE-PRODUCTS: 1.0% 134,100 @ Wright Medical Group, Inc. 4,773,960 ------------ 4,773,960 ------------ HEALTHCARE-SERVICES: 3.3% 233,800 @,L Kindred Healthcare, Inc. 6,160,630 419,200 Select Medical Corp. 5,625,664 84,000 @,L Sierra Health Services 3,754,800 ------------ 15,541,094 ------------ HOUSEHOLD PRODUCTS/WARES: 0.7% 92,700 @ Central Garden And Pet Co. 3,315,879 ------------ 3,315,879 ------------ INSURANCE: 1.4% 167,800 L AmerUs Group Co. 6,946,920 ------------ 6,946,920 ------------ INTERNET: 1.6% 161,000 @,L 1-800-FLOWERS.COM, Inc. 1,310,540 52,100 @,L Equinix, Inc. 1,768,274 156,350 @ Netegrity, Inc. 1,322,721 292,100 @,L Valueclick, Inc. 3,499,358 ------------ 7,900,893 ------------ INVESTMENT COMPANIES: 0.3% 103,200 Apollo Investment Corp. 1,421,064 ------------ 1,421,064 ------------ IRON/STEEL: 0.6% 80,600 Carpenter Technology 2,744,430 ------------ 2,744,430 ------------ LEISURE TIME: 0.5% 168,850 @,L K2, Inc. 2,650,945 ------------ 2,650,945 ------------
See Accompanying Notes to Financial Statements 55 PORTFOLIO OF INVESTMENTS ING VP SMALL COMPANY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- LODGING: 1.0% 235,400 @ Interstate Hotels& Resorts, Inc. $ 1,268,806 419,300 @ La Quinta Corp. 3,522,120 ------------ 4,790,926 ------------ MACHINERY-CONSTRUCTION AND MINING: 1.4% 204,400 @,L Terex Corp. 6,976,172 ------------ 6,976,172 ------------ MACHINERY-DIVERSIFIED: 3.1% 114,200 L Briggs & Stratton 10,089,570 42,723 L Middleby Corp. 2,333,530 147,900 Wabtec Corp. 2,668,116 ------------ 15,091,216 ------------ MEDIA: 2.7% 161,000 @,L 4Kids Entertainment, Inc. 3,851,120 268,700 @,L Cumulus Media, Inc. 4,516,847 80,600 L Liberty Corp. 3,784,170 130,000 Sinclair Broadcast Group, Inc. 1,335,100 ------------ 13,487,237 ------------ MISCELLANEOUS MANUFACTURING: 0.9% 126,838 @,L Ceradyne, Inc. 4,536,995 ------------ 4,536,995 ------------ OIL AND GAS: 6.0% 234,800 @,L Denbury Resources, Inc. 4,919,060 336,500 @ KCS Energy, Inc. 4,482,180 125,100 @ Newfield Exploration Co. 6,973,075 166,800 L Patina Oil & Gas Corp. 4,982,316 149,670 @ Plains Exploration & Production Co. 2,746,445 208,244 @,L Southwestern Energy Co. 5,970,355 ------------ 30,073,431 ------------ OIL AND GAS SERVICES: 0.2% 32,500 @ Hydril Co. 1,023,750 ------------ 1,023,750 ------------ PHARMACEUTICALS: 4.5% 210,400 @,L Alkermes, Inc. 2,861,440 62,300 @,L American Pharmaceutical Partners, Inc. 1,892,674 131,500 @,L Amylin Pharmaceuticals, Inc. 2,998,200 183,400 @@,L Angiotech Pharmaceuticals, Inc. 3,695,510 156,300 L Critical Therapeutics, Inc. 1,094,100 33,400 @,L Eon Labs, Inc. 1,367,062 22,700 @,L Eyetech Pharmaceuticals, Inc. 974,284 108,400 @,L MGI Pharma, Inc. 2,927,884 80,700 @,L Nabi Biopharmaceuticals 1,147,554 45,500 @,L OSI Pharmaceuticals, Inc. 3,205,020 ------------ 22,163,728 ------------ REAL ESTATE: 0.4% 93,700 @,L CB Richard Ellis Group Inc 1,789,670 ------------ 1,789,670 ------------ REAL ESTATE INVESTMENT TRUST: 38.6% 106,500 Alexandria Real Estate Equities, Inc. 6,047,070 62,550 CBL& Associates Properties, Inc. 3,440,250 114,100 Corporate Office Properties Trust Sbi MD 2,835,385 268,400 @ Felcor Lodging Trust, Inc. $ 3,247,640 118,000 LaSalle Hotel Properties 2,879,200 216,900 @,L Meristar Hospitality Corp. 1,483,596 133,500 Newcastle Investment Corp. 3,998,325 317,350 Reckson Associates Realty Corp. 8,714,431 95,900 SL Green Realty Corp. 4,488,120 65,200 Washington Real Estate Investment Trust 1,915,576 ------------ 39,049,593 ------------ RETAIL: 3.1% 201,550 @,L Aeropostale, Inc. 5,423,711 335,900 Claire's Stores, Inc. 7,289,030 99,400 @,L Electronics Boutique Holdings Corp. 2,618,196 ------------ 15,330,937 ------------ SAVINGS AND LOANS: 1.0% 268,700 First Niagara Financial Group, Inc. 3,224,400 33,800 WSFS Financial Corp. 1,645,046 ------------ 4,869,446 ------------ SEMICONDUCTORS: 4.2% 436,300 @ Cirrus Logic, Inc. 2,622,163 117,600 @,L Cree, Inc. 2,737,728 247,700 @,L Cypress Semiconductor Corp. 3,514,863 235,200 @ Pericom Semiconductor Corp. 2,518,992 150,100 @,L Photronics, Inc. 2,842,894 102,700 @,L Varian Semiconductor Equipment Associates, Inc. 3,960,112 100,600 @,L Veeco Instruments, Inc. 2,596,486 ------------ 20,793,238 ------------ SOFTWARE: 5.7% 419,250 @ Activision, Inc. 6,666,075 187,500 @,L Aspen Technology, Inc. 1,361,250 201,100 @,L,S Avid Technology, Inc. 10,974,027 117,500 @ Progress Software Corp. 2,546,225 72,000 @,L Take-Two Interactive Software, Inc. 2,206,080 211,850 @,L THQ, Inc. 4,851,365 ------------ 28,605,022 ------------ TELECOMMUNICATIONS: 4.1% 500,500 @,L Adaptec, Inc. 4,234,230 134,300 @,L Anixter Intl., Inc. 4,570,229 120,700 @,L Aspect Communications Corp. 1,713,940 89,656 @ Comtech Telecommunications 2,022,639 100,600 @ Intrado, Inc. 1,618,654 65,100 @,L Plantronics, Inc. 2,740,710 456,700 @,L RF Micro Devices, Inc. 3,425,250 ------------ 20,325,652 ------------ TRANSPORTATION: 2.4% 94,300 @ Landstar System, Inc. 4,985,641 66,700 Overseas Shipholding Group 2,943,471 167,800 @ Sirva, Inc. 3,859,400 ------------ 11,788,512 ------------ Total Common Stock (Cost $368,949,010) 431,511,442 ------------
See Accompanying Notes to Financial Statements 56 PORTFOLIO OF INVESTMENTS ING VP SMALL COMPANY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 38.6% REPURCHASE AGREEMENT: 12.3% $ 60,724,000 Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $8,012,325 to be received upon repurchase (Collateralized by Federal National Mortgage Association, 6.000%, Market Value plus accrued interest $8,153,101, due 12/15/05) $ 60,724,000 ------------- Total Repurchase Agreement (Cost $60,724,000) 60,724,000 ------------- SECURITIES LENDING COLLATERAL(cc): 26.3% 129,809,897 The Bank of New York Institutional Cash Reserve Fund, 1.250% 129,809,897 ------------- Total Securities Lending Collateral (Cost $129,809,897) 129,809,897 ------------- Total Short-Term Investments (Cost $190,444,375) 190,533,897 ------------- TOTAL INVESTMENTS IN SECURITIES (COST $559,482,907)* 126.2% $ 622,045,339 OTHER ASSETS AND LIABILITIES-NET (26.2) (129,019,488) ----- ------------- NET ASSETS 100.0% $ 493,025,851 ===== =============
@ Non-income producing security @@ Foreign issuer S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $559,730,718. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 75,167,700 Gross Unrealized Depreciation (12,853,079) ------------- Net Unrealized Appreciation $ 62,314,621 =============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE GAIN - -------------- --------- ------------ ---------- ---------- Russell 2000 Index 35 $ 10,366,125 Sep-04 $ 455,252 ============ ==========
See Accompanying Notes to Financial Statements 57 PORTFOLIO OF INVESTMENTS ING VP VALUE OPPORTUNITY PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 97.7% AEROSPACE/DEFENSE: 3.2% 77,700 General Dynamics Corp. $ 7,715,610 ------------ 7,715,610 ------------ AGRICULTURE: 3.0% 143,200 Altria Group, Inc. 7,167,160 ------------ 7,167,160 ------------ APPAREL: 1.8% 56,800 Nike, Inc. 4,302,600 ------------ 4,302,600 ------------ BANKS: 6.5% 96,100 Bank of America Corp. 8,131,982 131,200 Wells Fargo & Co. 7,508,576 ------------ 15,640,558 ------------ BUILDING MATERIALS: 1.6% 126,100 Masco Corp. 3,931,798 ------------ 3,931,798 ------------ CHEMICALS: 4.1% 155,300 Dow Chemical Co. 6,320,710 88,700 Praxair, Inc. 3,540,017 ------------ 9,860,727 ------------ COMPUTERS: 2.3% 266,000 Hewlett-Packard Co. 5,612,600 ------------ 5,612,600 ------------ COSMETICS/PERSONAL CARE: 2.8% 103,900 Kimberly-Clark Corp. 6,844,932 ------------ 6,844,932 ------------ DIVERSIFIED FINANCIAL SERVICES: 13.3% 118,500 Citigroup, Inc. 5,510,250 121,200 Fannie Mae 8,648,831 79,400 Freddie Mac 5,026,020 141,500 Merrill Lynch & Co., Inc. 7,638,170 99,200 Morgan Stanley 5,234,784 ------------ 32,058,055 ------------ ELECTRICAL COMPONENTS AND EQUIPMENT: 2.8% 107,300 Emerson Electric Co. 6,818,915 ------------ 6,818,915 ------------ ELECTRONICS: 2.9% 258,800 @@ Koninklijke Philips Electronics NV 7,039,360 ------------ 7,039,360 ------------ FOOD: 4.4% 107,300 @@ Nestle SA ADR 7,153,906 51,500 @@,L Unilever NV 3,528,265 ------------ 10,682,171 ------------ FOREST PRODUCTS AND PAPER: 2.2% 120,500 L Iternational Paper Co. 5,386,350 ------------ 5,386,350 ------------ HEALTHCARE-PRODUCTS: 2.6% 102,300 Beckman Coulter, Inc. $ 6,240,300 ------------ 6,240,300 ------------ HEALTHCARE-SERVICES: 2.6% 72,300 Quest Diagnostics 6,141,885 ------------ 6,141,885 ------------ INSURANCE: 5.7% 104,700 American Intl. Group 7,463,016 172,800 Metlife, Inc. 6,194,880 ------------ 13,657,896 ------------ MEDIA: 2.3% 65,400 Gannett Co., Inc. 5,549,190 ------------ 5,549,190 ------------ MISCELLANEOUS MANUFACTURING: 3.5% 234,700 Honeywell Intl., Inc. 8,597,061 ------------ 8,597,061 ------------ OIL AND GAS: 13.2% 146,600 Apache Corp. 6,384,430 175,400 @@ BP PLC ADR 9,396,178 91,400 ChevronTexaco Corp. 8,601,654 165,000 Exxon Mobil Corp. 7,327,650 ------------ 31,709,912 ------------ OIL AND GAS SERVICES: 2.1% 166,130 L Halliburton Co. 5,027,094 ------------ 5,027,094 ------------ PHARMACEUTICALS: 3.6% 167,200 Bristol-Myers Squibb Co. 4,096,400 97,600 Merck & Co., Inc. 4,636,000 ------------ 8,732,400 ------------ RETAIL: 2.3% 210,300 L McDonald's Corp. 5,467,800 ------------ 5,467,800 ------------ SAVINGS AND LOANS: 5.1% 213,400 L Sovereign Bancorp, Inc. 4,716,140 192,900 Washington Mutual, Inc. 7,453,656 ------------ 12,169,796 ------------ TELECOMMUNICATIONS: 3.8% 177,400 SBC Communications, Inc. 4,301,950 131,600 Verizon Communications, Inc. 4,762,604 ------------ 9,064,554 ------------ Total Common Stock (Cost $225,366,124) 235,418,724 ------------
See Accompanying Notes to Financial Statements 58 PORTFOLIO OF INVESTMENTS ING VP VALUE OPPORTUNITY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 6.6% REPURCHASE AGREEMENT: 2.2% $ 5,224,000 Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $5,224,218 to be received upon repurchase (Collateralized by $5,070,000 Federal National Mortgage Association, 5.500%, Market Value plus accrued interest $5,283,903, due 05/02/06) $ 5,224,000 ------------- Total Repurchase Agreement (Cost $5,224,000) 5,224,000 ------------- SECURITIES LENDING COLLATERAL(cc): 4.4% 10,534,791 The Bank of New York Institutional Cash Reserve Fund, 1.25% 10,534,791 ------------- Total Securities Lending Collateral (Cost $10,534,791) 10,534,791 ------------- Total Short-Term Investments (Cost $15,758,791) 15,758,791 ------------- TOTAL INVESTMENTS IN SECURITIES (COST $241,124,915)* 104.3% $ 251,177,515 OTHER ASSETS AND LIABILITIES-NET (4.3) (10,363,316) ----- ------------- NET ASSETS 100.0% $ 240,814,199 ===== =============
@@ Foreign issuer L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $242,169,358. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 13,820,993 Gross Unrealized Depreciation (4,812,836) ------------- Net Unrealized Appreciation $ 9,008,157 =============
See Accompanying Notes to Financial Statements 59 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 58.6% AEROSPACE/DEFENSE: 1.1% 137,800 L Boeing Co. $ 7,040,202 47,200 General Dynamics Corp. 4,686,960 33,550 United Technologies Corp. 3,069,154 ------------ 14,796,316 ------------ AGRICULTURE: 0.6% 127,900 Altria Group, Inc. 6,401,395 61,825 L Bunge Ltd. 2,407,466 ------------ 8,808,861 ------------ AIRLINES: 0.1% 123,850 @,L Expressjet Holdings, Inc. 1,503,539 ------------ 1,503,539 ------------ APPAREL: 0.8% 41,750 L Jones Apparel Group, Inc. 1,648,290 59,650 L Nike, Inc. 4,518,488 101,050 L Reebok Intl. Ltd. 3,635,779 32,300 L VF Corp. 1,573,010 ------------ 11,375,567 ------------ AUTO MANUFACTURERS: 0.7% 353,150 L Ford Motor Co. 5,526,798 33,300 L General Motors Corp. 1,551,447 57,400 Paccar, Inc. 3,328,626 ------------ 10,406,871 ------------ AUTO PARTS AND EQUIPMENT: 0.2% 90,425 L Cooper Tire & Rubber Co. 2,079,775 42,750 @ Dura Automotive Systems, Inc. 391,163 ------------ 2,470,938 ------------ BANKS: 3.3% 209,500 L Bank of America Corp. 17,727,889 68,200 Bank One Corp. 3,478,200 109,475 Hibernia Corp. 2,660,243 118,500 L KeyCorp 3,541,965 118,200 US Bancorp 3,257,592 43,850 W Holding Co., Inc. 752,905 190,150 Wachovia Corp. 8,461,674 102,550 Wells Fargo & Co. 5,868,937 ------------ 45,749,405 ------------ BEVERAGES: 1.4% 266,650 Coca-Cola Co. 13,460,492 104,350 PepsiCo, Inc. 5,622,378 ------------ 19,082,870 ------------ BIOTECHNOLOGY: 0.7% 77,950 @,L Amgen, Inc. 4,253,731 167,950 @ Applera Corp - Celera Genomics Group 1,933,105 144,075 @,L Intermune, Inc. 2,221,636 27,925 @,L Invitrogen Corp. 2,010,321 ------------ 10,418,793 ------------ BUILDING MATERIALS: 0.4% 129,850 Masco Corp. 4,048,723 109,175 @,L USG Corp. 1,919,297 ------------ 5,968,020 ------------ CHEMICALS: 0.9% 56,250 Dow Chemical Co. $ 2,289,375 40,768 Engelhard Corp. 1,317,214 73,300 Georgia Gulf Corp. 2,628,538 130,400 @,L Hercules, Inc. 1,589,576 54,650 PPG Industries, Inc. 3,415,078 47,850 L Sherwin-Williams Co. 1,988,168 ------------ 13,227,949 ------------ COMMERCIAL SERVICES: 1.0% 209,650 L Cendant Corp. 5,132,232 29,775 L Corporate Executive Board Co. 1,720,697 103,100 Paychex, Inc. 3,493,028 83,575 @ Rent-A-Center, Inc. 2,501,400 50,400 L Robert Half Intl., Inc. 1,500,408 ------------ 14,347,765 ------------ COMPUTERS: 2.0% 312,200 @ Dell, Inc. 11,183,004 193,350 Hewlett-Packard Co. 4,079,685 102,500 International Business Machines Corp. 9,035,375 56,150 @,L PalmOne, Inc. 1,952,336 93,450 @,L Unisys Corp. 1,297,086 ------------ 27,547,486 ------------ COSMETICS/PERSONAL CARE: 1.6% 29,350 Alberto-Culver Co. 1,471,609 166,150 L Gillette Co. 7,044,760 93,550 Kimberly-Clark Corp. 6,163,074 157,200 Procter & Gamble Co. 8,557,968 ------------ 23,237,411 ------------ DISTRIBUTION/WHOLESALE: 0.1% 32,000 L WW Grainger, Inc. 1,840,000 ------------ 1,840,000 ------------ DIVERSIFIED FINANCIAL SERVICES: 4.7% 67,425 @,L Affiliated Managers Group 3,396,197 77,450 American Express Co. 3,979,381 322,100 Citigroup, Inc. 14,977,649 65,800 L Countrywide Financial Corp. 4,622,450 40,025 L Doral Financial Corp. 1,380,863 103,600 @,L E*TRADE Group, Inc. 1,155,140 60,100 Fannie Mae 4,288,736 75,650 Goldman Sachs Group, Inc. 7,123,204 125,750 JP Morgan Chase & Co. 4,875,328 144,450 L Merrill Lynch & Co., Inc. 7,797,411 161,450 Morgan Stanley 8,519,716 283,425 @,L Providian Financial Corp. 4,157,845 ------------ 66,273,920 ------------ ELECTRIC: 1.0% 180,650 @,L AES Corp. 1,793,855 97,550 L Centerpoint Energy, Inc. 1,121,825 101,850 Edison Intl. 2,604,304 42,150 L Exelon Corp. 1,403,174 53,575 L Great Plains Energy, Inc. 1,591,178 49,550 L Southern Co. 1,444,383 92,700 L TXU Corp. 3,755,276 ------------ 13,713,995 ------------
See Accompanying Notes to Financial Statements 60 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- ELECTRICAL COMPONENTS AND EQUIPMENT: 0.1% 89,525 @,L Artesyn Technologies, Inc. $ 805,725 ------------ 805,725 ------------ ELECTRONICS: 0.7% 128,275 @,L Arrow Electronics, Inc. 3,440,335 80,075 @ Benchmark Electronics, Inc. 2,330,183 87,650 @,L Itron, Inc. 2,010,691 39,250 Parker Hannifin Corp. 2,333,805 ------------ 10,115,014 ------------ ENGINEERING AND CONSTRUCTION: 0.2% 33,575 Granite Construction, Inc. 612,072 259,625 @,L Shaw Group, Inc. 2,630,002 ------------ 3,242,074 ------------ ENTERTAINMENT: 0.1% 35,125 GTECH Holdings Corp. 1,626,639 ------------ 1,626,639 ------------ FOOD: 0.4% 189,050 Sara Lee Corp. 4,346,260 46,800 Supervalu, Inc. 1,432,548 ------------ 5,778,808 ------------ FOREST PRODUCTS AND PAPER: 0.8% 83,550 Georgia-Pacific Corp. 3,089,679 29,450 L International Paper Co. 1,316,415 122,450 L Louisiana-Pacific Corp. 2,895,943 62,100 Weyerhaeuser Co. 3,919,752 ------------ 11,221,789 ------------ GAS: 0.3% 60,400 L Oneok, Inc. 1,328,196 71,750 Sempra Energy 2,470,353 ------------ 3,798,549 ------------ HAND/MACHINE TOOLS: 0.2% 25,000 L Black & Decker Corp. 1,553,250 28,950 L Stanley Works 1,319,541 ------------ 2,872,791 ------------ HEALTHCARE-PRODUCTS: 2.0% 75,650 L Bausch & Lomb, Inc. 4,922,546 70,350 L Becton Dickinson and Co. 3,644,130 30,000 CR Bard, Inc. 1,699,500 184,550 Johnson & Johnson 10,279,435 73,100 Medtronic, Inc. 3,561,432 53,600 @ Zimmer Holdings, Inc. 4,727,520 ------------ 28,834,563 ------------ HEALTHCARE-SERVICES: 2.1% 43,900 Aetna, Inc. 3,731,500 67,025 @,L Amerigroup Corp. 3,297,630 39,450 @,L Anthem, Inc. 3,533,142 90,875 @ Humana, Inc. 1,535,788 47,625 Oxford Health Plans 2,621,280 101,550 @,L Pacificare Health Systems 3,925,923 117,702 L UnitedHealth Group, Inc. 7,326,949 37,650 @ WellPoint Health Networks 4,217,176 ------------ 30,189,388 ------------ HOME FURNISHINGS: 0.2% 28,600 L Harman Intl. Industries, Inc. $ 2,602,600 ------------ 2,602,600 ------------ HOUSEHOLD PRODUCTS/WARES: 0.1% 24,800 Blyth, Inc. 855,352 ------------ 855,352 ------------ INSURANCE: 3.2% 83,850 @@ ACE Ltd. 3,545,178 158,750 American Intl. Group, Inc. 11,315,699 52,750 Chubb Corp. 3,596,495 43,150 L Cigna Corp. 2,969,152 49,802 Fidelity National Financial, Inc. 1,859,607 92,850 First American Corp. 2,403,887 67,150 Hartford Financial Services Group, Inc. 4,615,891 58,400 L Landamerica Financial Group, Inc. 2,273,512 54,900 Loews Corp 3,291,804 51,100 Progressive Corp. 4,358,830 129,400 L St Paul Travelers Cos., Inc. 5,245,875 ------------ 45,475,930 ------------ INTERNET: 0.8% 176,550 @,L Autobytel, Inc. 1,603,074 36,600 @,L eBay, Inc. 3,365,370 133,400 @,L GoRemote Internet Communications, Inc. 245,456 86,725 @,L Priceline.com, Inc. 2,335,504 86,150 @,L Symantec Corp. 3,771,647 ------------ 11,321,051 ------------ IRON/STEEL: 0.1% 33,100 L United States Steel Corp. 1,162,472 ------------ 1,162,472 ------------ LEISURE TIME: 0.1% 37,250 L Carnival Corp. 1,750,750 ------------ 1,750,750 ------------ MACHINERY-CONSTRUCTION & MINING: 0.1% 45,525 @,L Terex Corp. 1,553,768 ------------ 1,553,768 ------------ MACHINERY-DIVERSIFIED: 0.3% 42,825 L Briggs & Stratton 3,783,588 17,850 L Tecumseh Products Co. 735,242 ------------ 4,518,830 ------------ MEDIA: 1.4% 51,750 McGraw-Hill Cos., Inc. 3,962,498 735,500 @,L Sirius Satellite Radio, Inc. 2,265,340 282,900 @ Time Warner, Inc. 4,973,381 159,775 @,L UnitedGlobalCom, Inc. 1,159,967 102,850 L Viacom, Inc. 3,673,802 127,900 Walt Disney Co. 3,260,171 ------------ 19,295,159 ------------ METAL FABRICATE/HARDWARE: 0.3% 51,075 L Quanex Corp. 2,487,353 78,925 Worthington Industries 1,620,330 ------------ 4,107,683 ------------
See Accompanying Notes to Financial Statements 61 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- MINING: 0.3% 55,150 Alcoa, Inc. $ 1,821,605 28,450 @,L Phelps Dodge Corp 2,205,159 ------------ 4,026,764 ------------ MISCELLANEOUS MANUFACTURING: 3.1% 107,200 L 3M Co 9,649,071 657,700 General Electric Co. 21,309,479 53,550 Honeywell Intl., Inc. 1,961,537 19,950 Illinois Tool Works, Inc. 1,913,006 277,200 @@ Tyco International Ltd 9,186,408 ------------ 44,019,501 ------------ OFFICE/BUSINESS EQUIPMENT: 0.1% 78,175 L IKON Office Solutions, Inc. 896,667 ------------ 896,667 ------------ OIL AND GAS: 4.5% 87,600 L Burlington Resources, Inc. 3,169,368 103,000 ChevronTexaco Corp. 9,693,329 82,450 ConocoPhillips 6,290,111 49,450 Devon Energy Corp. 3,263,700 473,650 Exxon Mobil Corp. 21,034,796 80,100 @,L Giant Industries, Inc. 1,762,200 42,875 @,L Houston Exploration Co. 2,222,640 79,000 Marathon Oil Corp. 2,989,360 74,300 Occidental Petroleum Corp. 3,596,863 55,950 Pogo Producing Co. 2,763,930 20,450 L Sunoco, Inc. 1,301,029 103,350 @,L Tesoro Petroleum Corp. 2,852,460 32,250 L Valero Energy Corp. 2,378,760 ------------ 63,318,546 ------------ PACKAGING AND CONTAINERS: 0.1% 87,050 @ Owens-Illinois, Inc. 1,458,958 ------------ 1,458,958 ------------ PHARMACEUTICALS: 2.0% 70,950 L Eli Lilly and Co. 4,960,115 135,100 Merck & Co., Inc. 6,417,250 474,250 Pfizer, Inc. 16,257,290 ------------ 27,634,655 ------------ PIPELINES: 0.1% 42,275 National Fuel Gas Co. 1,056,875 ------------ 1,056,875 ------------ REAL ESTATE: 0.4% 56,675 Chelsea Property Group, Inc. 3,696,344 41,225 L LNR Property Corp. 2,236,456 ------------ 5,932,800 ------------ RETAIL: 4.2% 78,950 Best Buy Co., Inc. 4,005,923 50,950 Federated Department Stores 2,501,645 184,700 L Gap, Inc. 4,478,974 137,450 Home Depot, Inc. 4,838,239 84,900 JC Penney Co., Inc. 3,205,824 141,600 Limited Brands 2,647,920 46,750 Lowe's Cos., Inc. 2,456,713 78,000 L McDonald's Corp. 2,028,000 39,150 Nordstrom, Inc. 1,668,182 89,250 @,L Office Depot, Inc. 1,598,468 47,100 L RadioShack Corp. 1,348,473 128,400 Staples, Inc. $ 3,763,404 100,300 @,L Starbucks Corp. 4,361,044 55,500 Target Corp. 2,357,085 171,375 @,L Toys R US, Inc. 2,730,004 262,600 Wal-Mart Stores, Inc. 13,854,775 35,200 Wendy's Intl., Inc. 1,226,368 ------------ 59,071,041 ------------ SAVINGS AND LOANS: 0.2% 18,325 @ FirstFed Financial Corp. 762,320 126,800 Flagstar Bancorp, Inc. 2,520,784 ------------ 3,283,104 ------------ SEMICONDUCTORS: 1.5% 27,275 @,L Advanced Micro Devices, Inc. 433,673 525,025 @,L Applied Micro Circuits Corp. 2,793,133 304,500 @,L Cirrus Logic, Inc. 1,830,045 394,250 Intel Corp. 10,881,300 274,250 @,L LSI Logic Corp. 2,089,785 114,300 Texas Instruments, Inc. 2,763,774 ------------ 20,791,710 ------------ SOFTWARE: 3.4% 229,800 @ Activision, Inc. 3,653,820 33,200 Autodesk, Inc. 1,421,292 25,600 @,L Avid Technology, Inc. 1,396,992 195,500 @ BMC Software, Inc. 3,616,750 122,600 @,L Compuware Corp. 809,160 20,300 @ D&B Corp. 1,094,373 59,350 First Data Corp. 2,642,262 77,600 L IMS Health, Inc. 1,818,944 970,250 L Microsoft Corp. 27,710,339 325,650 @ Oracle Corp. 3,885,005 ------------ 48,048,937 ------------ TELECOMMUNICATIONS: 3.5% 159,775 @,L Adaptec, Inc. 1,351,697 88,800 Alltel Corp. 4,495,056 317,200 Bellsouth Corp. 8,316,983 418,350 @ Cisco Systems, Inc. 9,914,894 387,850 L Motorola, Inc. 7,078,262 50,550 Qualcomm, Inc. 3,689,139 65,125 @ Safenet, Inc. 1,802,660 46,950 L Scientific-Atlanta, Inc. 1,619,775 157,625 @ Sycamore Networks, Inc. 666,754 221,800 @,L Tellabs, Inc. 1,938,532 186,850 Verizon Communications, Inc. 6,762,102 248,100 @,L Zhone Technologies, Inc. 967,590 ------------ 48,603,444 ------------ TOYS/GAMES/HOBBIES: 0.1% 57,200 L Hasbro, Inc. 1,086,800 ------------ 1,086,800 ------------ TRANSPORTATION: 1.0% 40,550 L CH Robinson Worldwide, Inc. 1,858,812 64,350 FedEx Corp. 5,256,751 68,650 L United Parcel Service, Inc. 5,160,421 52,200 @,L Yellow Roadway Corp. 2,080,692 ------------ 14,356,676 ------------ Total Common Stock (Cost $754,104,457) 825,485,119 ------------
See Accompanying Notes to Financial Statements 62 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - --------------------------------------------------------------------------------------------------- PREFERRED STOCK: 0.2% BANKS: 0.2% 272 #,XX DG Funding Trust $ 2,924,000 ---------------- Total Preferred Stock (Cost $2,957,509) 2,924,000 ---------------- WARRANTS: 0.0% DISTRIBUTION/WHOLESALE: 0.0% 2,978 Timco Aviation Services -- ---------------- SOVEREIGN: 0.0% 250 @@ Central Bank of Nigeria -- ---------------- Total Warrants (Cost $210) -- ---------------- PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CORPORATE BONDS: 10.3% AIRLINES: 0.1% $ 421,000 # American Airlines, Inc., 7.250%, due 02/05/09 402,581 1,930,000 American Airlines, Inc., 7.324%, due 10/15/09 1,589,117 ---------------- 1,991,698 ---------------- AUTO MANUFACTURERS: 0.0% 421,000 L Ford Motor Co., 6.625%, due 10/01/28 369,706 ---------------- 369,706 ---------------- BANKS: 2.5% 580,000 @@ Australia & New Zealand Banking Group Ltd., 1.494%, due 10/29/49 493,972 940,000 #,@@ Banco Bradesco SA, 8.750%, due 10/24/13 947,050 2,188,000 @@ Banco Santander Chile SA, 7.375%, due 07/18/12 2,411,611 590,000 @@ Bank of Ireland, 1.800%, due 12/29/49 497,888 475,000 # Bank of New York Institutional Capital Trust A, 7.780%, due 12/01/26 508,739 163,000 # BankAmerica Institutional Capital B, 7.700%, due 12/31/26 174,687 320,000 Barnett Capital I, 8.060%, due 12/01/26 350,767 200,000 Barnett Capital II, 7.950%, due 12/01/26 219,887 310,000 BNY Capital I, 7.970%, due 12/31/26 337,155 929,000 L,@@,# Danske Bank A/S, 5.914%, due 12/29/49 943,389 2,710,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 3,027,505 112,000 FBS Capital I, 8.090%, due 11/15/26 123,795 448,000 First Union Capital I, 7.935%, due 01/15/27 490,317 587,000 First Union Institutional Capital II, 7.850%, due 01/01/27 631,308 $ 335,000 Fleet Capital Trust II, 7.920%, due 12/11/26 $ 358,152 1,016,000 L,@@,# HBOS Capital Funding LP, 6.071%, due 06/30/49 1,021,950 320,000 @@ Hongkong & Shanghai Banking Corp. Ltd., 1.313%, due 07/29/49 271,779 1,890,000 @@ HSBC Bank PLC, 1.975%, due 06/29/49 1,599,985 1,020,000 @@ HSBC Bank PLC, 2.125%, due 06/29/49 864,450 1,350,000 @@ Lloyds TSB Bank PLC, 1.270%, due 08/29/49 1,162,910 1,210,000 @@ Lloyds TSB Bank PLC, 2.188%, due 06/29/49 1,057,121 1,439,000 M&T Bank Corp., 3.850%, due 04/01/13 1,412,707 1,770,000 Mellon Capital I, 7.720%, due 12/01/26 1,919,448 500,000 @@ National Westminster Bank PLC, 1.375%, due 08/29/49 431,537 1,510,000 @@ National Westminster Bank PLC, 1.438%, due 11/29/49 1,277,093 250,000 NB Capital Trust, 7.830%, due 12/15/26 271,830 925,000 NB Capital Trust IV, 8.250%, due 04/15/27 1,028,441 737,000 #,@@ Northern Rock PLC, 5.600%, due 04/30/49 717,414 1,211,000 # Rabobank Capital Funding II, 5.260%, due 12/29/49 1,174,017 630,000 @@ Royal Bank of Canada, 1.750%, due 06/29/85 541,550 280,000 @@ Royal Bank of Scotland Group PLC, 2.063%, due 12/29/49 241,653 390,000 @@ Societe Generale, 1.688%, due 11/29/49 326,103 870,000 @@ Standard Chartered PLC, 1.315%, due 01/29/49 682,231 790,000 @@ Standard Chartered PLC, 1.375%, due 07/29/49 619,623 2,060,000 @@ Standard Chartered PLC, 1.800%, due 11/29/49 1,626,840 1,980,000 @@ Standard Chartered PLC, 2.070%, due 12/29/49 1,559,250 180,000 # Wells Fargo Capital A, 7.730%, due 12/01/26 196,049 690,000 @@ Westpac Banking Corp., 1.338%, due 09/29/49 582,688 2,138,000 L,# Westpac Capital Trust IV, 5.256%, due 12/29/49 1,973,802 ---------------- 34,076,693 ---------------- BEVERAGES: 0.3% 1,915,000 #,@@ Cia Brasileira de Bebidas, 8.750%, due 09/15/13 2,029,900 201,000 L,@@ Cia Brasileira de Bebidas, 10.500%, due 12/15/11 231,150 1,624,000 # Miller Brewing Co., 4.250%, due 08/15/08 1,617,585 ---------------- 3,878,635 ----------------
See Accompanying Notes to Financial Statements 63 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CHEMICALS: 0.1% $ 386,000 Dow Chemical Co., 5.750%, due 11/15/09 $ 403,276 365,000 @,#,@@ Sociedad Quimica y Minera de Chile SA, 7.700%, due 09/15/06 390,753 ---------------- 794,029 ---------------- DISTRIBUTION/WHOLESALE: 0.0% 2,985 X Timco Aviation Services, 8.000%, due 01/02/07 -- ---------------- -- ---------------- DIVERSIFIED FINANCIAL SERVICES: 1.6% 812,000 #,@@ Arcel Finance Ltd., 6.361%, due 05/01/12 807,213 480,000 #,@@ Arcel Finance Ltd., 7.048%, due 09/01/11 477,600 1,372,000 L Boeing Capital Corp., 7.375%, due 09/27/10 1,553,335 2,061,000 #,@@ Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 2,004,323 930,000 CitiCorp Capital I, 7.933%, due 02/15/27 1,017,692 212,000 Citigroup Capital II, 7.750%, due 12/01/36 228,536 195,000 # Corestates Capital Trust I, 8.000%, due 12/15/26 213,631 360,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 346,486 1,760,000 # Farmers Exchange Capital, 7.200%, due 07/15/48 1,706,352 520,000 @@ Financiere CSFB NV, 1.250%, due 03/29/49 416,638 858,000 L Ford Motor Credit Co, 7.000%, due 10/01/13 867,583 853,000 L General Motors Acceptance Corp, 6.875%, due 08/28/12 869,064 577,000 General Motors Acceptance Corp, 8.000%, due 11/01/31 592,847 1,140,000 General Motors Acceptance Corp., 7.750%, due 01/19/10 1,238,952 7,652 # Hollinger Participation Trust, 12.125%, due 11/15/10 8,953 232,000 JPM Capital Trust I, 7.540%, due 01/15/27 246,391 2,343,000 XX,# Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 2,319,147 621,000 # Mizuho JGB Investment LLC, 9.870%, due 12/29/49 703,056 416,000 # Mizuho Preferred Capital Co LLC, 8.790%, due 12/29/49 457,600 1,163,000 #,@@ PF Export Receivables Master Trust, 3.748%, due 06/01/13 1,109,322 1,548,465 #,@@ PF Export Receivables Master Trust, 6.436%, due 06/01/15 1,527,925 $ 645,000 L,# SB Treasury Co LLC, 9.400%, due 12/29/49 $ 728,850 2,235,000 #,L Tokai Preferred Capital Co. LLC, 9.980%, due 12/29/49 2,517,905 15,000 Universal City Development Partners, 11.750%, due 04/01/10 17,438 510,000 #,L Wachovia Capital Trust V, 7.965%, due 06/01/27 560,185 ---------------- 22,537,024 ---------------- ELECTRIC: 1.7% 1,022,000 @@,#,L AES Gener SA, 7.500%, due 03/25/14 970,900 934,951 # Allegheny Energy Supply Statutory Trust 2001, 10.250%, due 11/15/07 1,012,084 97,807 # Allegheny Energy Supply Statutory Trust 2001, 13.000%, due 11/15/07 100,252 680,000 L Consumers Energy Co., 4.250%, due 04/15/08 674,491 963,000 L Consumers Energy Co., 4.800%, due 02/17/09 964,768 1,344,000 DTE Energy Co, 2.324%, due 06/01/07 1,343,445 2,549,000 @@,L Empresa Nacional de Electricidad SA/Chile, 7.750%, due 07/15/08 2,722,375 3,331,000 Enserch Capital I, 2.460%, due 07/01/28 3,117,180 1,523,000 Enterprise Capital Trust II, 2.806%, due 06/30/28 1,441,087 1,007,000 L FirstEnergy Corp., 6.450%, due 11/15/11 1,045,540 1,459,000 # Monongahela Power Co, 6.700%, due 06/15/14 1,480,218 2,103,000 Ohio Power Co., 6.375%, due 07/15/33 2,064,679 3,801,000 # PG&E Corp., 6.875%, due 07/15/08 3,991,051 268,029 # Power Contract Financing LLC, 5.200%, due 02/01/06 269,781 2,112,000 #,L Power Contract Financing LLC, 6.256%, due 02/01/10 2,153,199 331,905 PPL Montana LLC, 8.903%, due 07/02/20 361,984 538,000 # Tenaska Virginia Partners LP, 6.119%, due 03/30/24 533,164 ---------------- 24,246,198 ---------------- FOOD: 0.4% 739,000 Kroger Co., 7.250%, due 06/01/09 821,815 1,308,000 Safeway, Inc., 4.800%, due 07/16/07 1,337,948 881,000 Supervalu, Inc., 7.875%, due 08/01/09 996,132 1,743,000 Tyson Foods, Inc., 7.250%, due 10/01/06 1,878,287 ---------------- 5,034,182 ----------------
See Accompanying Notes to Financial Statements 64 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- GAS: 0.1% $ 1,604,000 # Williams Gas Pipelines Central, Inc., 7.375%, due 11/15/06 $ 1,722,295 ---------------- 1,722,295 ---------------- HOME BUILDERS: 0.0% 50,000 Technical Olympic USA, Inc., 9.000%, due 07/01/10 51,500 ---------------- 51,500 ---------------- INSURANCE: 0.3% 1,459,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 1,638,286 1,105,000 # Monumental Global Funding II, 3.850%, due 03/03/08 1,103,396 758,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 839,696 ---------------- 3,581,378 ---------------- LODGING: 0.0% 621,000 Caesars Entertainment, Inc., 9.375%, due 02/15/07 676,114 ---------------- 676,114 ---------------- MEDIA: 0.0% 540,000 L Time Warner, Inc., 6.875%, due 05/01/12 584,409 ---------------- 584,409 ---------------- MINING: 0.2% 578,000 @@,# Corp Nacional del Cobre de Chile - CODELCO, 6.375%, due 11/30/12 612,935 204,000 @@ Vale Overseas Ltd., 8.250%, due 01/17/34 178,500 1,623,000 @@ Vale Overseas Ltd., 8.625%, due 03/08/07 1,744,725 ---------------- 2,536,160 ---------------- MISCELLANEOUS MANUFACTURING: 0.2% 2,667,000 @@,#,L Bombardier, Inc., 6.300%, due 05/01/14 2,269,148 ---------------- 2,269,148 ---------------- MULTI-NATIONAL: 0.2% 1,655,000 @@ Corp. Andina de Fomento CAF, 5.200%, due 05/21/13 1,594,859 1,628,000 @@ Corp. Andina de Fomento CAF, 6.875%, due 03/15/12 1,753,262 ---------------- 3,348,121 ---------------- OIL AND GAS: 0.8% 985,000 L Amerada Hess Corp., 6.650%, due 08/15/11 1,043,809 1,372,000 Amerada Hess Corp., 7.875%, due 10/01/29 1,486,406 1,326,000 @@,# Empresa Nacional de Petroleo ENAP, 4.875%, due 03/15/14 1,237,137 20,000 Energy Partners Ltd., 8.750%, due 08/01/10 21,000 2,955,000 @@ Husky Oil Co., 8.900%, due 08/15/28 3,348,925 $ 3,023,000 L,# Pemex Project Funding Master Trust, 2.820%, due 06/15/10 $ 3,044,161 606,000 L Pemex Project Funding Master Trust, 7.375%, due 12/15/14 621,150 851,000 Valero Energy Corp., 8.750%, due 06/15/30 1,064,826 ---------------- 11,867,414 ---------------- PACKAGING AND CONTAINERS: 0.2% 541,000 # Sealed Air Corp., 5.375%, due 04/15/08 559,944 1,677,000 # Sealed Air Corp., 6.950%, due 05/15/09 1,832,600 ---------------- 2,392,544 ---------------- REAL ESTATE: 0.2% 1,409,000 EOP Operating LP, 7.750%, due 11/15/07 1,564,841 360,000 Liberty Property LP, 6.375%, due 08/15/12 378,645 1,116,000 Liberty Property LP, 7.750%, due 04/15/09 1,268,787 ---------------- 3,212,273 ---------------- REAL ESTATE INVESTMENT TRUSTS: 0.4% 1,120,000 # iStar Financial, Inc., 5.700%, due 03/01/14 1,056,873 2,096,000 # iStar Financial, Inc., 5.125%, due 04/01/11 2,003,869 1,011,000 Simon Property Group LP, 4.875%, due 03/18/10 1,001,944 1,946,000 Simon Property Group LP, 6.375%, due 11/15/07 2,084,522 ---------------- 6,147,208 ---------------- RETAIL: 0.0% 40,000 L Dollar General Corp., 8.625%, due 06/15/10 44,650 ---------------- 44,650 ---------------- SAVINGS AND LOANS: 0.3% 1,177,000 Great Western Financial, 8.206%, due 02/01/27 1,281,729 1,704,000 Sovereign Bancorp, Inc., 10.500%, due 11/15/06 1,953,271 1,632,000 L Washington Mutual, Inc., 4.375%, due 01/15/08 1,643,710 ---------------- 4,878,710 ---------------- TELECOMMUNICATIONS: 0.6% 710,000 @@,# Brasil Telecom SA, 9.375%, due 02/18/14 692,250 1,309,000 @@,L Cia de Telecomunicaciones de Chile SA, 7.625%, due 07/15/06 1,411,844 1,906,000 L Sprint Capital Corp., 4.780%, due 08/17/06 1,943,859 594,000 L Sprint Capital Corp., 8.750%, due 03/15/32 694,161 1,185,000 L Sprint Capital Corp., 6.875%, due 11/15/28 1,142,360
See Accompanying Notes to Financial Statements 65 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) $ 1,336,000 Verizon Florida Inc., 6.125%, due 01/15/13 $ 1,375,528 950,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 888,610 -------------- 8,148,612 -------------- TRANSPORTATION: 0.1% 830,000 @@,# MISC Capital Ltd, 5.000%, due 07/01/09 832,207 -------------- 832,207 -------------- Total Corporate Bonds (Cost $145,731,456) 145,220,908 -------------- COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET-BACKED SECURITIES: 10.5% AUTOMOBILE ASSET BACKED SECURITIES: 0.2% 300,000 Capital Auto Receivables Asset Trust, 2.750%, due 04/16/07 299,641 500,000 Household Automotive Trust, 2.310%, due 04/17/08 495,651 1,590,000 Nissan Auto Receivables Owner Trust, 2.610%, due 07/15/08 1,573,263 ---------------- 2,368,555 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES: 1.4% 877,000 Bear Stearns Commercial Mortgage Securities, 1.400%, due 06/25/34 876,452 1,412,000 Bear Stearns Commercial Mortgage Securities, 4.170%, due 01/12/41 1,398,832 2,060,000 Chase Manhattan Bank-First Union National Bank, 7.439%, due 08/15/31 2,321,385 1,311,578 CS First Boston Mortgage Securities Corp., 3.727%, due 03/15/35 1,270,581 3,120,000 JP Morgan Chase Commercial Mortgage Securities Corp., 6.244%, due 04/15/35 3,328,850 3,150,000 LB-UBS Commercial Mortgage Trust, 6.226%, due 03/15/26 3,382,748 3,000,000 LB-UBS Commercial Mortgage Trust, 7.370%, due 08/15/26 3,391,219 3,120,000 Mortgage Capital Funding, Inc., 6.663%, due 03/18/30 3,363,898 198,842 Prudential Commercial Mortgage Trust, 3.669%, due 02/11/36 192,229 ---------------- 19,526,194 ---------------- CREDIT CARD ASSET BACKED SECURITIES: 0.1% 775,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 812,695 1,270,000 Fleet Credit Card Master Trust II, 2.400%, due 07/15/08 1,262,692 ---------------- 2,075,387 ---------------- HOME EQUITY ASSET BACKED SECURITIES: 1.6% $ 916,313 Argent Securities, Inc., 1.620%, due 03/25/34 $ 917,169 1,051,715 Asset Backed Funding Certificates, 1.580%, due 11/25/33 1,052,081 3,103,862 XX Bayview Financial Acquisition Trust, 1.820%, due 12/28/34 3,109,681 240,000 Equity One ABS, Inc., 2.976%, due 09/25/33 240,316 2,485,849 Merrill Lynch Mortgage Investors, Inc., 1.660%, due 07/25/34 2,493,193 2,906,000 New Century Home Equity Loan Trust, 1.570%, due 04/25/34 2,906,000 800,073 Residential Asset Mortgage Products, Inc., 1.610%, due 06/25/33 799,652 524,000 Residential Asset Securities Corp., 1.580%, due 02/25/34 524,305 6,743,483 Residential Asset Securities Corp., 1.610%, due 12/25/33 6,760,936 940,000 Residential Funding Mortgage Securities II, 3.450%, due 01/25/16 942,478 2,625,000 Saxon Asset Securities Trust, 3.960%, due 06/25/33 2,571,209 ---------------- 22,317,020 ---------------- OTHER ASSET-BACKED SECURITIES: 0.6% 904,122 XX Amortizing Residential Collateral Trust, 1.550%, due 05/25/32 904,051 941,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 1.600%, due 07/25/33 942,404 5,290,000 PP&L Transition Bond Co. LLC, 7.050%, due 06/25/09 5,734,197 1,190,000 Residential Asset Mortgage Products, Inc., 2.140%, due 02/25/30 1,177,897 ---------------- 8,758,549 ---------------- WHOLE LOAN COLLATERALLIZED MORTGAGE: 5.7% 330,865 Bank of America Alternative Loan Trust, 1.750%, due 12/25/33 330,115 5,851,602 Bank of America Mortgage Securities, 1.750%, due 12/25/33 5,859,785 1,789,330 Bank of America Mortgage Securities, 4.413%, due 03/25/33 1,792,006 2,441,848 Bank of America Mortgage Securities, 5.000%, due 06/25/33 2,463,858
See Accompanying Notes to Financial Statements 66 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- WHOLE LOAN COLLATERALLIZED MORTGAGE (CONTINUED) $ 2,116,247 CitiCorp. Mortgage Securities, Inc., 1.800%, due 10/25/33 $ 2,116,995 1,293,767 Countrywide Alternative Loan Trust, 1.700%, due 07/25/18 1,296,658 5,530,000 CS First Boston Mortgage Securities Corp., 4.187%, due 10/25/33 5,569,551 7,025,788 XX First Horizon Alternative Mortgage Securities, 4.875%, due 06/25/34 7,073,976 5,679,000 First Horizon Asset Securities, Inc., 1.750%, due 10/25/32 5,679,000 2,707,741 GMAC Mortgage Corp Loan Trust, 5.250%, due 04/25/34 2,744,965 4,000,000 GMAC Mortgage Corp. Loan Trust, 5.500%, due 01/25/34 4,030,823 572,283 GSR Mortgage Loan Trust, 6.500%, due 01/25/34 594,728 1,773,882 MASTR Alternative Loans Trust, 6.500%, due 05/25/33 1,817,534 1,756,030 MASTR Asset Securitization Trust, 1.750%, due 11/25/33 1,753,598 845,351 MASTR Asset Securitization Trust, 8.000%, due 06/25/33 893,452 5,156,227 MLCC Mortgage Investors, Inc., 1.620%, due 01/25/29 5,163,085 401,671 Prime Mortgage Trust, 1.700%, due 02/25/34 401,693 2,721,952 Residential Accredit Loans, Inc., 1.750%, due 03/25/18 2,730,035 706,001 Residential Funding Mtg Sec I, 1.600%, due 12/25/33 706,506 9,221,609 Sequoia Mortgage Trust, 1.600%, due 01/20/34 9,201,013 4,600,000 Structured Asset Securities Corp., 6.000%, due 03/25/34 4,710,570 3,036,000 Thornburg Mortgage Securities Trust, 1.610%, due 05/25/44 3,036,000 4,631,863 Washington Mutual, 1.900%, due 01/25/34 4,572,000 3,581,617 Washington Mutual, 5.000%, due 06/25/18 3,565,710 611,893 Wells Fargo Mortgage Backed Securities Trust, 1.800%, due 02/25/34 611,771 2,225,000 Wells Fargo Mortgage Backed Securities Trust, 4.500%, due 08/25/18 2,066,984 ---------------- 80,782,411 ---------------- WHOLE LOAN COLLATERALIZED PLANNED AMORTIZATION CLASS: 0.8% 3,095,605 GSR Mortgage Loan Trust, 1.700%, due 10/25/32 3,096,667 $ 888,173 MASTR Alternative Loans Trust, 1.700%, due 11/25/33 $ 889,534 2,609,765 MASTR Alternative Loans Trust, 8.500%, due 05/25/33 2,678,303 3,138,000 Residential Funding Securities Corp., 4.750%, due 02/25/33 3,176,079 885,183 Residential Funding Securities Corp., 8.500%, due 05/25/33 942,060 739,796 Washington Mutual, 1.700%, due 03/25/34 740,012 ---------------- 11,522,655 ---------------- WHOLE LOAN COLLATERALIZED SUPPORT CMO: 0.1% 1,231,039 Bank of America Mortgage Securities, 5.500%, due 11/25/33 1,217,463 ---------------- 1,217,463 ---------------- Total Collateralized Mortgage Obligations and Asset-Backed Securities (Cost $148,630,608) 148,568,234 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 14.0% AGENCY COLLATERAL CMO: 0.9% 9,037,470 1.890%, due 04/15/32 9,136,778 3,209,735 6.000%, due 01/15/29 3,269,185 ---------------- 12,405,963 ---------------- AGENCY COLLATERAL PAC CMO: 0.4% 3,441,000 6.000%, due 01/15/28 3,581,384 2,276,000 6.000%, due 01/15/29 2,325,903 ---------------- 5,907,287 ---------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 2.9% 11,120,000 L 2.700%, due 03/16/07 10,938,665 5,330,000 2.750%, due 02/09/07 5,258,733 561 5.500%, due 05/01/23 569 6,800,000 5.500%, due 07/15/34 6,770,250 3,661,946 6.000%, due 01/15/29 3,697,946 9,930,000 6.000%, due 07/15/33 10,141,013 859,685 6.500%, due 11/01/28 898,680 2,490,000 6.500%, due 08/15/34 2,585,711 ---------------- 40,291,567 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 9.0% 240,000 2.859%, due 12/26/29 238,594 5,345,000 L 2.875%, due 05/19/08 5,150,298 8,382,000 4.500%, due 07/01/17 8,190,790 2,403,000 4.750%, due 12/25/42 2,409,572 11,393,000 5.000%, due 07/01/18 11,407,240 3,103,000 5.000%, due 08/15/19 3,096,211 34,534,000 5.000%, due 07/15/34 33,357,702 2,705,000 L 5.250%, due 08/01/12 2,707,429 109,980 5.500%, due 07/15/19 112,489 4,075,000 5.500%, due 08/15/19 4,152,678 8,115,000 5.500%, due 07/15/34 8,076,957
See Accompanying Notes to Financial Statements 67 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 187,511 6.000%, due 06/01/16 $ 195,720 823,672 6.000%, due 07/01/16 859,729 168,593 6.000%, due 07/01/16 175,974 127,305 6.000%, due 08/01/16 132,878 191,516 6.000%, due 08/01/16 199,899 138,433 6.000%, due 10/01/16 144,493 4,807 6.000%, due 10/01/16 5,017 135,905 6.000%, due 10/01/16 141,854 1,128,607 6.000%, due 03/01/17 1,177,524 217,702 6.000%, due 04/01/17 227,137 179,892 6.000%, due 04/01/17 187,689 129,483 6.000%, due 04/01/17 135,096 597,910 6.000%, due 06/01/17 623,826 154,264 6.000%, due 09/01/17 160,950 118,129 6.000%, due 10/01/17 123,249 654,309 6.000%, due 11/01/17 682,951 659,713 6.000%, due 12/01/17 688,307 691,195 6.000%, due 12/01/18 721,191 3,844,223 6.000%, due 07/25/29 3,900,682 1,633,458 6.000%, due 07/25/29 1,657,975 2,316,472 6.000%, due 04/25/31 2,347,629 5,605,000 6.000%, due 08/01/33 5,699,584 3,675,000 6.000%, due 07/15/34 3,751,947 4,923,750 6.500%, due 04/01/30 5,139,455 5,182,000 6.500%, due 07/15/33 5,395,758 2,320,000 L 6.625%, due 11/15/10 2,579,274 16,734 7.000%, due 06/01/29 17,721 158,764 7.000%, due 06/01/29 168,123 71,032 7.000%, due 06/01/29 75,308 1,637 7.000%, due 08/01/29 1,733 14,991 7.000%, due 10/01/29 15,875 448,387 7.000%, due 11/01/29 474,821 1,014 7.000%, due 01/01/30 1,074 277,269 7.000%, due 01/01/30 293,615 430,225 7.000%, due 03/01/30 455,589 308,613 7.000%, due 01/01/31 326,713 2,265,437 7.000%, due 06/01/31 2,400,429 16,692 7.000%, due 08/01/31 17,671 587,694 7.000%, due 08/01/31 621,667 74,047 7.000%, due 10/01/31 78,327 64,431 7.000%, due 01/01/32 68,155 64,930 7.000%, due 01/01/32 68,683 17,309 7.000%, due 04/01/32 18,274 41,000 7.000%, due 05/01/32 43,285 73,945 7.000%, due 07/01/32 78,065 2,591,000 7.000%, due 07/15/33 2,732,697 154,585 7.500%, due 10/01/30 165,766 217,097 7.500%, due 10/01/30 232,800 74,975 7.500%, due 11/01/30 80,398 190,653 7.500%, due 11/01/30 204,443 1,314,791 7.500%, due 06/25/32 1,409,699 1,678,085 7.500%, due 01/25/48 1,790,364 ---------------- 127,797,043 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 0.8% 90,060 4.000%, due 12/20/29 91,220 339,936 4.375%, due 04/20/28 340,913 443,464 6.500%, due 10/15/31 464,149 1,171,877 7.000%, due 09/15/24 1,251,834 1,217,927 7.000%, due 10/15/24 1,301,031 523,377 7.000%, due 10/15/24 559,089 $ 313,674 7.000%, due 11/15/24 $ 335,105 3,058,125 7.500%, due 12/15/23 3,317,198 2,521,426 8.000%, due 12/15/17 2,777,792 195,280 8.000%, due 07/15/24 215,529 ---------------- 10,653,860 ---------------- Total U.S. Government Agency Obligations (Cost $196,329,374) 197,055,720 ---------------- U.S. TREASURY OBLIGATIONS: 6.2% U.S. TREASURY BONDS: 4.4% 10,287,000 L,S 4.000%, due 02/15/14 9,807,214 11,429,000 W,L,S 4.750%, due 05/15/14 11,551,782 6,104,000 L 5.290%, due 05/15/16 3,310,712 12,583,000 L 5.375%, due 02/15/31 12,694,586 5,186,000 L 5.500%, due 08/15/28 5,255,487 5,010,000 L 6.250%, due 08/15/23 5,549,362 5,019,000 L,S 10.375%, due 11/15/12 6,130,242 5,173,000 L 13.250%, due 05/15/14 7,327,477 ---------------- 61,626,862 ---------------- U.S. TREASURY NOTES: 1.8% 12,500,000 L,S 1.625%, due 01/31/05 12,496,587 5,653,000 L,S 2.500%, due 05/31/06 5,635,781 4,927,000 L,S 3.125%, due 05/15/07 4,928,542 2,145,000 L,S 4.000%, due 06/15/09 2,164,022 ---------------- 25,224,932 ---------------- Total U.S. Treasury Obligations (Cost $87,502,562) 86,851,794 ---------------- OTHER BONDS: 0.7% SOVEREIGN: 0.7% 518,588 @@ Brazilian Government Intl. Bond, 2.188%, due 04/15/12 436,708 606,000 @@ Brazilian Government Intl. Bond, 10.000%, due 08/07/11 590,850 1,078,000 @@ Colombia Government Intl. Bond, 10.000%, due 01/23/12 1,121,120 989,000 @@ Dominican Republic Intl. Bond, 9.040%, due 01/23/13 613,180 455,000 @@ Ecuador Government Intl. Bond, 7.000%, due 08/15/30 322,481 106,000 @@ Panama Government International Bond, 9.375%, due 07/23/12 116,335 304,000 @@ Panama Government Intl. Bond, 9.375%, due 01/16/23 311,600 1,059,000 @@ Peru Government Intl. Bond, 4.500%, due 03/07/17 860,069 276,000 @@,L Philippine Government Intl. Bond, 9.875%, due 01/15/19 276,000 2,206,000 @@ Russia Government Intl. Bond, 5.000%, due 03/31/30 2,019,593
See Accompanying Notes to Financial Statements 68 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- SOVEREIGN (CONTINUED) $ 979,000 @@,L Turkey Government Intl. Bond, 12.375%, due 06/15/09 $ 1,124,626 464,000 #,@@ Ukraine Government Intl. Bond, 7.650%, due 06/11/13 444,280 823,729 @@,XX Uruguay Government Intl. Bond, 10.500%, due 10/20/06 906,036 853,000 @@,L Venezuela Government Intl. Bond, 10.750%, due 09/19/13 842,338 ---------------- Total Other Bonds (Cost $10,295,400) 9,985,216 ---------------- Total Long-Term Investments (Cost $1,345,551,576) 1,416,090,991 ---------------- SHORT-TERM INVESTMENTS: 31.9% COMMERCIAL PAPER: 4.9% 3,000,000 Concord Minutemen Cap., 1.160%, due 07/07/05 2,999,955 4,000,000 S DaimlerChrystler Holdings Corp., 1.450%, due 07/14/04 3,997,744 6,300,000 S DaimlerChrystler Holdings Corp., 1.250%, due 07/07/04 6,298,469 4,315,000 S Ford Motor Credit Co., 1.410%, due 07/19/04 4,311,789 6,000,000 S General Motors Corp., 1.270%, due 07/01/04 5,999,788 6,000,000 S General Motors Corp., 1.280%, due 07/06/04 5,998,720 9,600,000 S Hertz Corp., 1.520%, due 07/08/04 9,596,753 10,000,000 S Kraft Foods, 1.180%, due 07/01/04 9,999,673 6,000,000 Royal Bank of Scotland, 1.400%, due 10/21/04 5,996,700 8,000,000 S St. Germain Holdings Ltd., 1.230%, due 07/06/04 7,998,360 2,550,000 S St. Germain Holdings Ltd., 1.230%, due 07/13/04 2,548,867 3,049,000 S Thunder Bay Funding Corp., 1.190%, due 07/02/04 3,048,798 ---------------- Total Commercial Paper (Cost $68,801,230) 68,795,616 ---------------- REPURCHASE AGREEMENT: 2.1% 29,936,000 S Goldman Sachs Repurchase Agreement dated, 1.500%, due 07/01/04, $29,937,247 to be received upon repurchase (Collateralized by $30,065,000 Federal National Mortgage Association, 5.250%, Market Value plus accrued interest $30,539,701 due 08/01/12) 29,936,000 ---------------- Total Repurchase Agreement (Cost $29,936,000) 29,936,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 24.9% $ 326,812,169 The Bank of New York Institutional Cash Reserve Fund, 1.250% $ 326,812,169 ---------------- Total Securities Lending Collateral (Cost $326,812,169) 326,812,169 ---------------- Total Short-Term Investments (Cost $425,549,399) 425,543,785 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $1,771,100,975)* 130.6% $ 1,841,634,776 OTHER ASSETS AND LIABILITIES-NET (30.6) (432,006,520) ----- ---------------- NET ASSETS 100.0% $ 1,409,628,256 ===== ================
@ Non-income producing security @@ Foreign issuer # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Funds' Board of Directors/Trustees. L Loaned security, a portion or all of the security is on loan at June 30, 2004. S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. W When-issued or delayed delivery security. X Fair value determined by ING Funds Valuation Committee appointed by the Funds' Board of Directors/Trustees. XX Value of securities obtained from one or more dealers making markets in the securities in accordance with the Fund's valuation procedures. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $1,797,761,098. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 63,450,963 Gross Unrealized Depreciation (19,577,285) -------------- Net Unrealized Appreciation $ 43,873,678 ==============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED SHORT CONTRACTS CONTRACTS MARKET VALUE DATE GAIN/(LOSS) - --------------- --------- ------------ ---------- ----------- U.S. 2 Year Treasury Note 116 $(24,423,438) Sep-04 $ (27,128) U.S. 5 Year Treasury Note 150 (16,303,125) Sep-04 (122,625) ------------ ----------- $(40,726,563) $ (149,753) ============ =========== LONG CONTRACTS - -------------- U.S. Long Bond 120 $ 12,765,000 Sep-04 $ 266,588 ============ ===========
See Accompanying Notes to Financial Statements 69 PORTFOLIO OF INVESTMENTS ING VP GROWTH AND INCOME PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - --------------------------------------------------------------------------------------------------- COMMON STOCK: 98.2% AEROSPACE/DEFENSE: 5.6% 1,386,400 L Boeing Co. $ 70,831,176 1,413,600 L Northrop Grumman Corp. 75,910,320 650,300 United Technologies Corp. 59,489,444 ---------------- 206,230,940 ---------------- AGRICULTURE: 2.0% 1,486,500 Altria Group, Inc. 74,399,325 ---------------- 74,399,325 ---------------- APPAREL: 1.0% 963,500 Jones Apparel Group, Inc. 38,038,980 ---------------- 38,038,980 ---------------- BANKS: 6.4% 1,375,000 L Bank of America Corp. 116,352,500 162,709 City National Corp. 10,689,981 1,254,700 Mellon Financial Corp. 36,800,351 1,218,200 Wells Fargo & Co. 69,717,586 ---------------- 233,560,418 ---------------- BEVERAGES: 1.2% 900,000 Coca-Cola Co. 45,432,000 ---------------- 45,432,000 ---------------- BIOTECHNOLOGY: 1.2% 785,000 @,L Amgen, Inc. 42,837,450 ---------------- 42,837,450 ---------------- BUILDING MATERIALS: 0.7% 600,000 @,L American Standard Cos., Inc. 24,186,000 ---------------- 24,186,000 ---------------- COMPUTERS: 2.1% 3,566,400 L Hewlett-Packard Co. 75,251,040 ---------------- 75,251,040 ---------------- DIVERSIFIED FINANCIAL SERVICES: 12.9% 331,400 Bear Stearns Cos., Inc. 27,940,334 526,400 L Capital One Financial Corp. 35,995,232 2,859,700 L Citigroup, Inc. 132,976,050 760,500 L Countrywide Financial Corp. 53,425,125 2,413,000 @,L E*Trade Financial Corp. 26,904,950 509,800 Fannie Mae 36,379,328 721,000 Franklin Resources, Inc. 36,107,680 1,078,000 JP Morgan Chase & Co. 41,794,060 599,800 Lehman Brothers Holdings, Inc. 45,134,950 673,100 @ Morgan Stanley 35,519,487 ---------------- 472,177,196 ---------------- ELECTRIC: 0.8% 2,193,200 @,L Calpine Corp. 9,474,624 700,000 Edison Intl. 17,899,000 ---------------- 27,373,624 ---------------- ELECTRONICS: 0.8% 975,000 @,L Agilent Technologies, Inc. 28,548,000 ---------------- 28,548,000 ---------------- ENGINEERING AND CONSTRUCTION: 0.6% 575,082 @ Jacobs Engineering Group, Inc. 22,646,729 ---------------- 22,646,729 ---------------- ENTERTAINMENT: 2.1% 1,950,000 International Game Technology $ 75,270,000 ---------------- 75,270,000 ---------------- FOOD: 1.0% 2,198,000 Archer-Daniels-Midland Co. 36,882,440 ---------------- 36,882,440 ---------------- HEALTHCARE-PRODUCTS: 3.4% 314,200 Guidant Corp. 17,557,496 1,950,100 L Johnson & Johnson 108,620,570 ---------------- 126,178,066 ---------------- HEALTHCARE-SERVICES: 1.9% 500,000 Aetna, Inc. 42,500,000 1,236,400 L Health Management Associates, Inc. 27,720,088 ---------------- 70,220,088 ---------------- INSURANCE: 1.5% 816,600 L Hartford Financial Services Group, Inc. 56,133,084 ---------------- 56,133,084 ---------------- INTERNET: 2.2% 880,200 @,L eBay, Inc. 80,934,390 ---------------- 80,934,390 ---------------- LODGING: 1.1% 2,726,200 @,L Caesars Entertainment, Inc. 40,893,000 ---------------- 40,893,000 ---------------- MEDIA: 2.5% 2,662,800 @,L Time Warner, Inc. 46,812,024 1,204,300 L Viacom, Inc. 43,017,596 ---------------- 89,829,620 ---------------- MISCELLANEOUS MANUFACTURING: 7.7% 1,390,000 L Danaher Corp. 72,071,500 2,425,300 General Electric Co. 78,579,720 555,000 ITT Industries, Inc. 46,065,000 2,524,200 @@ Tyco Intl. Ltd. 83,651,988 ---------------- 280,368,208 ---------------- OIL AND GAS: 8.1% 660,000 L Burlington Resources, Inc. 23,878,800 900,000 L ChevronTexaco Corp. 84,699,000 2,618,500 Exxon Mobil Corp. 116,287,585 1,410,000 @@,L Royal Dutch Petroleum Co. ADR 72,854,700 ---------------- 297,720,085 ---------------- OIL AND GAS SERVICES: 0.7% 894,000 L Halliburton Co. 27,052,440 ---------------- 27,052,440 ---------------- PHARMACEUTICALS: 5.1% 1,600,000 Bristol-Myers Squibb Co. 39,200,000 3,555,200 Pfizer, Inc. 121,872,256 408,000 @@,L Teva Pharmaceutical Industries ADR 27,454,320 ---------------- 188,526,576 ----------------
See Accompanying Notes to Financial Statements 70 PORTFOLIO OF INVESTMENTS ING VP GROWTH AND INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - --------------------------------------------------------------------------------------------------- RETAIL: 5.6% 750,000 L CVS Corp. $ 31,515,000 3,360,000 L Gap, Inc. 81,480,000 500,000 Limited Brands 9,350,000 220,282 L RadioShack Corp. 6,306,674 1,425,000 L Wal-Mart Stores, Inc. 75,183,000 ---------------- 203,834,674 ---------------- SEMICONDUCTORS: 4.9% 1,442,800 @ Applied Materials, Inc. 28,307,736 2,566,900 Intel Corp. 70,846,440 596,100 @,L Kla-Tencor Corp. 29,435,418 2,250,000 @,L LSI Logic Corp. 17,145,000 1,417,800 Texas Instruments, Inc. 34,282,404 ---------------- 180,016,998 ---------------- SOFTWARE: 7.5% 725,800 @,L Electronic Arts, Inc. 39,592,390 6,886,600 L,S Microsoft Corp. 196,681,296 272,100 @,L Pixar, Inc. 18,913,671 1,700,000 @,L Siebel Systems, Inc. 18,156,000 ---------------- 273,343,357 ---------------- TELECOMMUNICATIONS: 7.6% 4,950,000 @ Cisco Systems, Inc. 117,315,000 8,300,000 @,L JDS Uniphase Corp. 31,457,000 1,969,000 Motorola, Inc. 35,934,250 1,559,700 @,L Nextel Communications, Inc. 41,581,602 1,510,000 L Scientific-Atlanta, Inc. 52,095,000 ---------------- 278,382,852 ---------------- Total Common Stock (Cost $3,227,963,988) 3,596,267,580 ---------------- PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CORPORATE BONDS: 0.0% OIL AND GAS: 0.0% $ 532,000 L,S Devon Energy Corp., 4.90%, due 08/15/08 551,285 727,000 S Devon Energy Corp., 4.95%, due 08/15/08 748,810 ---------------- Total Corporate Bonds (Cost $957,242) 1,300,095 ---------------- Total Long-Term Investments (Cost $3,228,921,230) 3,597,567,675 ---------------- SHORT-TERM INVESTMENTS: 20.6% REPURCHASE AGREEMENT: 3.1% 113,822,000 Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $113,826,743 to be received upon repurchase (Collateralized by $110,985,000 Various U.S. Government Agencies, 4.750%-6.250%, Market Value plus accrued interest $116,831,216, due 01/02/07-08/01/12) 113,822,000 ---------------- Total Repurchase Agreement (Cost $113,822,000) 113,822,000 ---------------- SECURITIES LENDING COLLATERAL: 17.5% $ 21,013,568 Allstate Financial, 1.400%, due 11/15/04 $ 21,013,568 622,048,101 The Bank of New York Institutional Cash Reserve Fund, 1.250% 622,048,101 ---------------- Total Securities Lending Collateral (Cost $643,061,669) 643,061,669 ---------------- Total Short-Term Investments (Cost $756,883,669) 756,883,669 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $3,985,804,899)* 118.8% $ 4,354,451,344 OTHER ASSETS AND LIABILITIES-NET (18.8) (690,028,058) ----- ---------------- NET ASSETS 100.0% $ 3,664,423,286 ===== ================
@ Non-income producing security @@ Foreign issuer S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. * Cost for federal income tax purposes is $4,075,187,197. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 334,891,770 Gross Unrealized Depreciation (55,627,623) -------------- Net Unrealized Appreciation $ 279,264,147 ==============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE GAIN - -------------- --------- ------------ ---------- ---------- S&P 500 Index 174 $ 49,607,400 Sep-04 $ 416,660 ============ =========
See Accompanying Notes to Financial Statements 71 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CORPORATE BONDS: 26.1% AIRLINES: 0.4% $ 1,065,000 # American Airlines, Inc., 7.250%, due 02/05/09 $ 1,018,406 4,447,000 American Airlines, Inc., 7.324%, due 10/15/09 3,661,556 ---------------- 4,679,962 ---------------- AUTO MANUFACTURERS: 0.1% 951,000 L Ford Motor Co., 6.625%, due 10/01/28 835,132 ---------------- 835,132 ---------------- BANKS: 6.5% 1,410,000 @@ Australia & New Zealand Banking Group Ltd., 1.494%, due 10/29/49 1,200,862 2,242,000 #,@@,L Banco Bradesco SA, 8.750%, due 10/24/13 2,258,815 5,031,000 @@ Banco Santander Chile SA, 7.375%, due 07/18/12 5,545,163 1,370,000 @@ Bank of Ireland, 1.800%, due 12/29/49 1,156,113 569,000 # BankAmerica Institutional Capital B, 7.700%, due 12/31/26 609,796 777,000 Barnett Capital I, 8.060%, due 12/01/26 851,706 695,000 Barnett Capital II, 7.950%, due 12/01/26 764,107 810,000 BNY Capital I, 7.970%, due 12/31/26 880,953 2,136,000 #,L Danske Bank A/S, 5.914%, due 12/29/49 2,169,085 6,412,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 7,163,235 289,000 FBS Capital I, 8.090%, due 11/15/26 319,434 1,180,000 First Union Capital I, 7.935%, due 01/15/27 1,291,460 1,560,000 First Union Institutional Capital II, 7.850%, due 01/01/27 1,677,752 885,000 Fleet Capital Trust II, 7.920%, due 12/11/26 946,161 2,312,000 #,@@,L HBOS Capital Funding LP, 6.071%, due 06/30/49 2,325,539 735,000 @@ Hongkong & Shanghai Banking Corp. Ltd., 1.313%, due 07/29/49 624,243 4,450,000 @@ HSBC Bank PLC, 1.975%, due 06/29/49 3,767,161 2,300,000 @@ HSBC Bank PLC, 2.125%, due 06/29/49 1,949,250 3,180,000 @@ Lloyds TSB Bank PLC, 1.270%, due 08/29/49 2,739,300 2,850,000 @@ Lloyds TSB Bank PLC, 2.188%, due 06/29/49 2,489,914 3,363,000 M&T Bank Corp., 3.850%, due 04/01/13 3,301,551 4,770,000 Mellon Capital I, 7.720%, due 12/01/26 5,172,750 1,190,000 @@ National Westminster Bank PLC, 1.375%, due 08/29/49 1,027,057 $ 3,560,000 @@ National Westminster Bank PLC, 1.438%, due 11/29/49 $ 3,010,895 500,000 NB Capital Trust, 7.830%, due 12/15/26 543,660 2,415,000 NB Capital Trust IV, 8.250%, due 04/15/27 2,685,065 1,792,000 #,@@ Northern Rock PLC, 5.600%, due 04/30/49 1,744,378 2,773,000 # Rabobank Capital Funding II, 5.260%, due 12/29/49 2,688,315 1,520,000 @@ Royal Bank of Canada, 1.750%, due 06/29/85 1,306,597 650,000 @@ Royal Bank of Scotland Group PLC, 2.063%, due 12/29/49 560,981 890,000 @@ Societe Generale, 1.688%, due 11/29/49 744,183 2,510,000 @@ Standard Chartered PLC, 1.315%, due 01/29/49 1,968,274 1,850,000 @@ Standard Chartered PLC, 1.375%, due 07/29/49 1,451,016 4,710,000 @@ Standard Chartered PLC, 1.800%, due 11/29/49 3,719,619 4,240,000 @@ Standard Chartered PLC, 2.070%, due 12/29/49 3,339,000 470,000 # Wells Fargo Capital A, 7.730%, due 12/01/26 511,906 1,620,000 @@ Westpac Banking Corp., 1.338%, due 09/29/49 1,368,050 5,028,000 #,L Westpac Capital Trust IV, 5.256%, due 12/29/49 4,641,850 ---------------- 80,515,196 ---------------- BEVERAGES: 0.7% 4,358,000 #,@@ Cia Brasileira de Bebidas, 8.750%, due 09/15/13 4,619,480 482,000 @@ Cia Brasileira de Bebidas, 10.500%, due 12/15/11 554,300 3,762,000 # Miller Brewing Co., 4.250%, due 08/15/08 3,747,140 ---------------- 8,920,920 ---------------- CHEMICALS: 0.1% 901,000 Dow Chemical Co., 5.750%, due 11/15/09 941,324 874,000 # Sociedad Quimica y Minera de Chile SA, 7.700%, due 09/15/06 935,667 ---------------- 1,876,991 ---------------- DIVERSIFIED FINANCIAL SERVICES: 4.3% 1,918,000 # Arcel Finance Ltd., 6.361%, due 05/01/12 1,906,693 1,127,000 # Arcel Finance Ltd., 7.048%, due 09/01/11 1,121,365 3,163,000 L Boeing Capital Corp., 7.375%, due 09/27/10 3,581,047 4,840,000 #,@@ Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 4,706,900 444,000 CitiCorp Capital I, 7.933%, due 02/15/27 485,866 487,000 Citigroup Capital II, 7.750%, due 12/01/36 524,987
See Accompanying Notes to Financial Statements 72 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (CONTINUED) $ 1,119,000 # Corestates Capital Trust I, 8.000%, due 12/15/26 $ 1,225,916 708,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 681,422 4,087,000 # Farmers Exchange Capital, 7.200%, due 07/15/48 3,962,420 1,225,000 @@ Financiere CSFB NV, 1.250%, due 03/29/49 981,502 2,053,000 L Ford Motor Credit Co, 7.000%, due 10/01/13 2,075,930 2,043,000 L General Motors Acceptance Corp, 6.875%, due 08/28/12 2,081,474 1,382,000 General Motors Acceptance Corp, 8.000%, due 11/01/31 1,419,957 2,735,000 General Motors Acceptance Corp., 7.750%, due 01/19/10 2,972,398 20,089 # Hollinger Participation Trust, 12.125%, due 11/15/10 23,504 600,000 JPM Capital Trust I, 7.540%, due 01/15/27 637,218 5,426,000 XX,# Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 5,370,763 1,231,000 L,S Merrill Lynch & Co., Inc., 6.150%, due 01/26/06 1,297,542 1,480,000 # Mizuho JGB Investment LLC, 9.870%, due 12/29/49 1,675,560 985,000 #,L Mizuho Preferred Capital Co LLC, 8.790%, due 12/29/49 1,083,500 2,801,000 #,@@ PF Export Receivables Master Trust, 3.748%, due 06/01/13 2,671,720 3,716,676 #,@@ PF Export Receivables Master Trust, 6.436%, due 06/01/15 3,667,375 1,530,000 #,L SB Treasury Co LLC, 9.400%, due 12/29/49 1,728,900 5,257,000 # Tokai Preferred Capital Co. LLC, 9.980%, due 12/29/49 5,922,430 50,000 Universal City Development Partners, 11.750%, due 04/01/10 58,125 1,340,000 # Wachovia Capital Trust V, 7.965%, due 06/01/27 1,471,857 ---------------- 53,336,371 ---------------- ELECTRIC: 4.6% 2,405,000 #,L AES Gener SA, 7.500%, due 03/25/14 2,284,750 2,291,484 # Allegheny Energy Supply Statutory Trust 2001, 10.250%, due 11/15/07 2,480,531 241,216 # Allegheny Energy Supply Statutory Trust 2001, 13.000%, due 11/15/07 247,246 1,700,000 L Consumers Energy Co., 4.250%, due 04/15/08 1,686,227 2,287,000 L Consumers Energy Co., 4.800%, due 02/17/09 2,291,199 3,047,000 DTE Energy Co., 2.324%, due 06/01/07 3,045,742 5,863,000 @@,L Empresa Nacional de Electricidad SA/Chile, 7.750%, due 07/15/08 6,261,784 7,810,000 Enserch Capital I, 2.460%, due 07/01/28 7,308,668 $ 3,494,000 Enterprise Capital Trust II, 2.806%, due 06/30/28 $ 3,306,079 2,330,000 L FirstEnergy Corp., 6.450%, due 11/15/11 2,419,174 3,337,000 # Monongahela Power Co., 6.700%, due 06/15/14 3,385,530 4,868,000 Ohio Power Co., 6.375%, due 07/15/33 4,779,295 9,040,000 # PG&E Corp., 6.875%, due 07/15/08 9,492,000 624,237 #,L,S Power Contract Financing LLC, 5.200%, due 02/01/06 628,317 4,900,000 #,L Power Contract Financing LLC, 6.256%, due 02/01/10 4,995,584 747,660 PPL Montana LLC, 8.903%, due 07/02/20 815,417 1,273,000 # Tenaska Virginia Partners LP, 6.119%, due 03/30/24 1,261,558 ---------------- 56,689,101 ---------------- FOOD: 0.9% 1,728,000 Kroger Co., 7.250%, due 06/01/09 1,921,645 3,042,000 Safeway, Inc., 4.800%, due 07/16/07 3,111,650 2,073,000 L Supervalu, Inc., 7.875%, due 08/01/09 2,343,906 4,036,000 Tyson Foods, Inc., 7.250%, due 10/01/06 4,349,266 ---------------- 11,726,467 ---------------- GAS: 0.3% 3,728,000 # Williams Gas Pipelines Central, Inc., 7.375%, due 11/15/06 4,002,940 ---------------- 4,002,940 ---------------- HOME BUILDERS: 0.0% 117,000 Technical Olympic USA, Inc., 9.000%, due 07/01/10 120,510 ---------------- 120,510 ---------------- INSURANCE: 0.7% 3,353,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 3,765,027 2,582,000 # Monumental Global Funding II, 3.850%, due 03/03/08 2,578,251 1,727,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 1,913,134 ---------------- 8,256,412 ---------------- LODGING: 0.1% 1,494,000 Caesars Entertainment, Inc., 9.375%, due 02/15/07 1,626,593 ---------------- 1,626,593 ---------------- MEDIA: 0.1% 1,218,000 L Time Warner, Inc., 6.875%, due 05/01/12 1,318,166 ---------------- 1,318,166 ---------------- MINING: 0.5% 1,350,000 #,@@ Corp Nacional del Cobre de Chile - CODELCO, 6.375%, due 11/30/12 1,431,595
See Accompanying Notes to Financial Statements 73 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- MINING (CONTINUED) $ 474,000 L Vale Overseas Ltd., 8.250%, due 01/17/34 $ 414,750 3,763,000 L Vale Overseas Ltd., 8.625%, due 03/08/07 4,045,225 ---------------- 5,891,570 ---------------- MISCELLANEOUS MANUFACTURING: 0.4% 6,078,000 #,L Bombardier, Inc., 6.300%, due 05/01/14 5,171,308 ---------------- 5,171,308 ---------------- MULTI-NATIONAL: 0.6% 4,113,000 @@ Corp. Andina de Fomento CAF, 5.200%, due 05/21/13 3,963,538 3,588,000 @@ Corp. Andina de Fomento CAF, 6.875%, due 03/15/12 3,864,068 ---------------- 7,827,606 ---------------- OIL AND GAS: 2.2% 2,328,000 Amerada Hess Corp., 6.650%, due 08/15/11 2,466,993 3,271,000 Amerada Hess Corp., 7.875%, due 10/01/29 3,543,756 3,125,000 #,@@ Empresa Nacional de Petroleo ENAP, 4.875%, due 03/15/14 2,915,575 50,000 Energy Partners Ltd., 8.750%, due 08/01/10 52,500 7,101,000 @@ Husky Oil Co., 8.900%, due 08/15/28 8,047,620 6,943,000 #,L Pemex Project Funding Master Trust, 2.820%, due 06/15/10 6,991,601 1,416,000 Pemex Project Funding Master Trust, 7.375%, due 12/15/14 1,451,400 1,947,000 Valero Energy Corp., 8.750%, due 06/15/30 2,436,211 ---------------- 27,905,656 ---------------- PACKAGING AND CONTAINERS: 0.4% 1,357,000 # Sealed Air Corp., 5.375%, due 04/15/08 1,404,517 3,796,000 # Sealed Air Corp., 6.950%, due 05/15/09 4,148,212 ---------------- 5,552,729 ---------------- REAL ESTATE: 0.6% 3,262,000 EOP Operating LP, 7.750%, due 11/15/07 3,622,791 548,000 Liberty Property LP, 6.375%, due 08/15/12 576,381 2,884,000 Liberty Property LP, 7.750%, due 04/15/09 3,278,837 ---------------- 7,478,009 ---------------- RETAIL: 0.0% 115,000 L Dollar General Corp., 8.625%, due 06/15/10 128,369 ---------------- 128,369 ---------------- SAVINGS AND LOANS: 0.9% 2,843,000 L Great Western Financial, 8.206%, due 02/01/27 3,095,970 3,909,000 Sovereign Bancorp, Inc., 10.500%, due 11/15/06 4,480,832 $ 3,779,000 L Washington Mutual, Inc., 4.375%, due 01/15/08 $ 3,806,114 ---------------- 11,382,916 ---------------- TELECOMMUNICATIONS: 1.5% 1,720,000 # Brasil Telecom SA, 9.375%, due 02/18/14 1,677,000 3,063,000 S Cia de Telecomunicaciones de Chile SA, 7.625%, due 07/15/06 3,303,651 4,543,000 L,S Sprint Capital Corp., 4.780%, due 08/17/06 4,633,238 1,425,000 L Sprint Capital Corp., 8.750%, due 03/15/32 1,665,285 2,695,000 L Sprint Capital Corp., 6.875%, due 11/15/28 2,598,026 3,220,000 Verizon Florida, Inc., 6.125%, due 01/15/13 3,315,270 2,080,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 1,945,588 ---------------- 19,138,058 ---------------- TRANSPORTATION: 0.2% 1,910,000 # MISC Capital Ltd., 5.000%, due 07/01/09 1,915,079 ---------------- 1,915,079 ---------------- Total Corporate Bonds (Cost $327,320,764) 326,296,061 ---------------- COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET-BACKED SECURITIES: 28.2% AGENCY COLLATERAL CMO: 0.3% 4,145,247 Vendee Mortgage Trust, 5.840%, due 09/15/23 4,106,924 ---------------- 4,106,924 ---------------- AUTOMOBILE ASSET BACKED SECURITIES: 1.1% 9,200,000 Capital Auto Receivables Asset Trust, 2.750%, due 04/16/07 9,188,998 4,320,000 Nissan Auto Receivables Owner Trust, 2.610%, due 07/15/08 4,274,525 ---------------- 13,463,523 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES: 4.3% 5,078,000 Bear Stearns Commercial Mortgage Securities, 1.400%, due 06/25/34 5,074,826 3,372,000 Bear Stearns Commercial Mortgage Securities, 4.170%, due 01/12/41 3,340,553 6,167,579 Chase Manhattan Bank-First Union National Bank, 7.439%, due 08/15/31 6,950,158 3,639,033 CS First Boston Mortgage Securities Corp., 3.727%, due 03/15/35 3,525,285 9,380,000 JP Morgan Chase Commercial Mortgage Securities Corp., 6.244%, due 04/15/35 10,007,888 5,220,000 LB-UBS Commercial Mortgage Trust, 6.226%, due 03/15/26 5,605,697
See Accompanying Notes to Financial Statements 74 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO As of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED) $ 4,500,000 L LB-UBS Commercial Mortgage Trust, 7.370%, due 08/15/26 $ 5,086,829 9,380,000 Mortgage Capital Funding, Inc., 6.663%, due 03/18/30 10,113,257 4,336,658 Prudential Commercial Mortgage Trust, 3.669%, due 02/11/36 4,192,416 ---------------- 53,896,909 ---------------- CREDIT CARD ASSET BACKED SECURITIES: 1.0% 8,800,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 9,228,022 3,460,000 Fleet Credit Card Master Trust II, 2.400%, due 07/15/08 3,440,090 ---------------- 12,668,112 ---------------- HOME EQUITY ASSET BACKED SECURITIES: 3.8% 2,748,940 Argent Securities, Inc., 1.620%, due 03/25/34 2,751,506 2,377,792 Asset Backed Funding Certificates, 1.580%, due 11/25/33 2,378,619 7,164,525 Bayview Financial Acquisition Trust, 1.820%, due 12/28/34 7,177,958 3,766,167 Centex Home Equity, 1.580%, due 01/25/34 3,769,209 695,000 Equity One ABS, Inc., 2.976%, due 09/25/33 695,914 5,689,154 Merrill Lynch Mortgage Investors, Inc., 1.660%, due 07/25/34 5,705,962 3,542,000 New Century Home Equity Loan Trust, 1.570%, due 04/25/34 3,542,000 1,831,636 Residential Asset Mortgage Products, Inc., 1.610%, due 06/25/33 1,830,671 2,373,000 Residential Asset Securities Corp., 1.580%, due 02/25/34 2,374,379 7,347,025 Residential Asset Securities Corp., 1.610%, due 12/25/33 7,366,042 2,602,000 Residential Funding Mortgage Securities II, 3.450%, due 01/25/16 2,608,860 7,465,000 Saxon Asset Securities Trust, 3.960%, due 06/25/33 7,312,029 ---------------- 47,513,149 ---------------- OTHER ASSET-BACKED SECURITIES: 0.7% 856,489 Ameriquest Mortgage Securities, Inc., 1.600%, due 02/25/34 857,688 2,069,714 Amortizing Residential Collateral Trust, 1.550%, due 05/25/32 2,069,552 2,154,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 1.600%, due 07/25/33 2,157,214 3,256,000 Residential Asset Mortgage Products, Inc., 2.140%, due 02/25/30 3,222,884 ---------------- 8,307,338 ---------------- WHOLE LOAN COLLATERALIZED MORTGAGE: 14.4% $ 3,643,985 Bank of America Alternative Loan Trust, 1.750%, due 12/25/33 $ 3,635,725 1,195,797 Bank of America Alternative Loan Trust, 5.500%, due 02/25/33 1,218,073 6,123,702 Bank of America Mortgage Securities, 1.750%, due 12/25/33 6,132,265 2,182,982 Bank of America Mortgage Securities, 4.413%, due 03/25/33 2,186,248 5,548,405 Bank of America Mortgage Securities, 5.000%, due 06/25/33 5,598,417 3,297,076 Bear Stearns Asset Backed Securities, Inc., 5.625%, due 11/25/32 3,360,642 4,892,072 CitiCorp. Mortgage Securities, Inc., 1.800%, due 10/25/33 4,893,801 2,949,183 Countrywide Alternative Loan Trust, 1.700%, due 07/25/18 2,955,773 7,810,000 CS First Boston Mortgage Securities Corp., 4.187%, due 10/25/33 7,865,858 10,317,016 First Horizon Alternative Mortgage Securities, 4.875%, due 06/25/34 10,387,778 6,523,574 GMAC Mortgage Corp. Loan Trust, 5.250%, due 04/25/34 6,613,254 9,269,000 GMAC Mortgage Corp. Loan Trust, 5.500%, due 01/25/34 9,340,424 6,928,715 GSR Mortgage Loan Trust, 6.500%, due 01/25/34 7,200,458 5,225,482 MASTR Alternative Loans Trust, 6.500%, due 05/25/33 5,354,071 4,058,008 MASTR Asset Securitization Trust, 1.750%, due 11/25/33 4,052,388 2,169,461 MASTR Asset Securitization Trust, 8.000%, due 06/25/33 2,292,906 11,905,434 MLCC Mortgage Investors, Inc., 1.620%, due 01/25/29 11,921,268 3,531,036 Prime Mortgage Trust, 1.700%, due 02/25/34 3,531,231 6,290,157 Residential Accredit Loans, Inc., 1.750%, due 03/25/18 6,308,836 1,765,002 Residential Funding Mtg Sec I, 1.600%, due 12/25/33 1,766,266 2,342,860 Residential Funding Mtg Sec I, 1.750%, due 05/25/33 2,340,056 9,221,609 Sequoia Mortgage Trust, 1.600%, due 01/20/34 9,201,012 9,947,295 Structured Asset Mortgage Investments, Inc., 1.580%, due 07/19/34 9,936,019 4,351,909 Structured Asset Securities Corp., 5.500%, due 07/25/33 4,309,427 11,900,000 Structured Asset Securities Corp., 6.000%, due 03/25/34 12,186,039 4,588,000 Thornburg Mortgage Securities Trust, 1.610%, due 05/25/44 4,588,000 6,564,012 Thornburg Mortgage Securities Trust, 1.650%, due 12/25/33 6,565,561
See Accompanying Notes to Financial Statements 75 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- WHOLE LOAN COLLATERALIZED MORTGAGE (CONTINUED) $ 6,871,013 Washington Mutual, 1.900%, due 01/25/34 $ 6,782,211 3,195,040 Washington Mutual, 5.000%, due 06/25/18 3,180,850 1,223,786 Wells Fargo Mortgage Backed Securities Trust, 1.800%, due 02/25/34 1,223,543 5,950,000 Wells Fargo Mortgage Backed Securities Trust, 4.500%, due 08/25/18 5,527,439 9,021,964 Wells Fargo Mortgage Backed Securities Trust, 5.000%, due 12/25/33 8,867,989 ---------------- 181,323,828 ---------------- WHOLE LOAN COLLATERALIZED PLANNED AMORTIZATION CLASS: 2.3% 7,146,204 GSR Mortgage Loan Trust, 1.700%, due 10/25/32 7,148,655 3,330,649 MASTR Alternative Loans Trust, 1.700%, due 11/25/33 3,335,754 6,697,182 MASTR Alternative Loans Trust, 8.500%, due 05/25/33 6,873,065 7,610,000 Residential Funding Securities Corp., 4.750%, due 02/25/33 7,702,345 2,270,522 Residential Funding Securities Corp., 8.500%, due 05/25/33 2,416,414 1,479,592 Washington Mutual, 1.700%, due 03/25/34 1,480,024 ---------------- 28,956,257 ---------------- WL COLLATERALIZED SUPPORT CMO: 0.3% 3,226,514 Bank of America Mortgage Securities, 5.500%, due 11/25/33 3,190,932 ---------------- 3,190,932 ---------------- Total Collateralized Mortgage Obligations and Asset-Backed (Cost $355,626,761) 353,426,972 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 34.6% AGENCY COLLATERAL CMO: 2.3% 20,687,932 1.890%, due 04/15/32 20,915,259 7,571,434 6.000%, due 01/15/29 7,711,671 ---------------- 28,626,930 ---------------- AGENCY COLLATERAL PAC CMO: 1.1% 7,875,000 6.000%, due 01/15/28 8,196,280 5,136,000 6.000%, due 01/15/29 5,248,610 614,529 10.000%, due 02/25/19 694,461 ---------------- 14,139,351 ---------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 7.7% 25,560,000 2.700%, due 03/16/07 25,143,193 12,325,000 2.750%, due 02/09/07 12,160,202 4,563,103 4.500%, due 04/01/14 4,478,054 4,275,000 5.500%, due 07/15/34 4,256,297 8,394,266 6.000%, due 01/15/29 8,476,788 35,130,000 6.000%, due 07/15/33 35,876,513 4,000,000 6.500%, due 07/15/34 4,168,752 $ 1,198,518 7.500%, due 11/01/28 $ 1,294,204 ---------------- 95,854,003 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 21.7% 695,000 2.859%, due 12/26/29 690,930 12,455,000 L 2.875%, due 05/19/08 12,001,302 20,090,000 4.500%, due 07/01/17 19,631,707 6,167,000 4.750%, due 12/25/42 6,183,866 32,826,000 5.000%, due 07/01/18 32,867,034 72,167,000 5.000%, due 07/15/34 69,708,849 6,140,000 L 5.250%, due 08/01/12 6,145,514 44,221 5.500%, due 11/01/16 45,397 246,504 5.500%, due 12/01/16 253,063 26,101 5.500%, due 04/01/17 26,780 81,713 5.500%, due 02/01/18 83,837 20,771 5.500%, due 06/01/18 21,303 122,374 5.500%, due 10/01/18 125,555 2,861,270 5.500%, due 07/15/19 2,926,541 6,975,000 5.500%, due 08/15/19 7,107,957 12,327,000 5.500%, due 07/15/34 12,269,211 315,669 6.000%, due 06/01/16 329,487 32,642 6.000%, due 08/01/16 34,071 11,034 6.000%, due 08/01/16 11,517 268,058 6.000%, due 10/01/16 279,792 372,028 6.000%, due 10/01/16 388,313 281,755 6.000%, due 01/01/17 294,089 422,008 6.000%, due 01/01/17 440,299 256,841 6.000%, due 02/01/17 267,974 17,848 6.000%, due 02/01/17 18,622 6,007 6.000%, due 02/01/17 6,268 272,590 6.000%, due 04/01/17 284,405 453,570 6.000%, due 04/01/17 473,229 399,193 6.000%, due 04/01/17 416,495 405,715 6.000%, due 04/01/17 423,300 260,122 6.000%, due 05/01/17 271,397 277,638 6.000%, due 05/01/17 289,672 268,447 6.000%, due 05/01/17 280,082 365,668 6.000%, due 05/01/17 381,517 126,741 6.000%, due 06/01/17 132,234 290,553 6.000%, due 06/01/17 303,147 481,697 6.000%, due 07/01/17 502,575 425,611 6.000%, due 07/01/17 444,058 323,364 6.000%, due 08/01/17 337,380 393,622 6.000%, due 08/01/17 410,683 258,392 6.000%, due 08/01/17 269,591 241,575 6.000%, due 08/01/17 252,230 910,610 6.000%, due 09/01/17 950,078 3,175,141 6.000%, due 09/01/17 3,312,761 20,637 6.000%, due 10/01/17 21,532 1,014,891 6.000%, due 11/01/17 1,059,318 22,387 6.000%, due 02/01/18 23,357 925,336 6.000%, due 04/01/18 965,547 278,077 6.000%, due 09/01/18 290,145 246,383 6.000%, due 11/01/18 257,075 394,509 6.000%, due 12/01/18 411,778 1,349,290 6.000%, due 07/01/29 1,384,709 8,836,317 6.000%, due 07/25/29 8,966,094 3,756,548 6.000%, due 07/25/29 3,812,933 5,262,170 6.000%, due 04/25/31 5,332,946 12,630,000 6.000%, due 07/15/34 12,894,447 5,923,436 6.500%, due 08/01/29 6,182,936 470,799 6.500%, due 01/01/32 491,123 534,744 6.500%, due 09/01/32 557,364
See Accompanying Notes to Financial Statements 76 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 861,785 6.500%, due 10/01/32 $ 898,238 372,045 6.500%, due 10/01/32 387,783 15,090,000 6.500%, due 07/15/33 15,712,463 5,560,000 L 6.625%, due 11/15/10 6,181,363 49,300 7.000%, due 08/01/25 52,341 51,907 7.000%, due 10/01/25 55,108 15,141 7.000%, due 11/01/25 16,075 47,092 7.000%, due 12/01/25 49,996 43,480 7.000%, due 12/01/25 46,161 80,983 7.000%, due 12/01/25 85,978 69,849 7.000%, due 02/01/26 74,157 148,508 7.000%, due 02/01/26 157,668 49,923 7.000%, due 03/01/26 52,958 133,592 7.000%, due 03/01/26 141,712 100,241 7.000%, due 03/01/26 106,423 47,753 7.000%, due 03/01/26 50,655 67,868 7.000%, due 03/01/26 72,054 404,580 7.000%, due 01/01/30 428,432 5,011,746 7.000%, due 06/01/31 5,310,384 7,545,000 7.000%, due 07/15/33 7,957,621 270,179 7.500%, due 10/01/30 289,722 178,613 7.500%, due 11/01/30 191,533 336,115 7.500%, due 11/01/30 360,426 3,255,173 7.500%, due 06/25/32 3,490,147 4,154,408 7.500%, due 01/25/48 4,432,376 ---------------- 271,147,190 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 1.8% 253,095 4.000%, due 12/20/29 256,357 362,737 4.375%, due 04/20/28 363,780 7,784,726 6.500%, due 10/15/31 8,147,824 263,884 7.000%, due 04/15/26 281,481 237,788 7.000%, due 04/15/26 253,645 367,098 7.000%, due 04/15/26 391,579 230,877 7.000%, due 04/15/26 246,273 657,271 7.000%, due 05/15/32 698,640 72,750 7.500%, due 04/15/22 78,912 14,725 7.500%, due 05/15/22 15,972 6,773 7.500%, due 06/15/22 7,347 6,749 7.500%, due 06/15/22 7,321 9,209 7.500%, due 08/15/22 9,989 7,837 7.500%, due 06/15/24 8,486 7,736 7.500%, due 06/15/24 8,377 45,087 7.500%, due 01/15/26 48,721 3,687 7.500%, due 07/15/26 3,984 68,340 7.500%, due 03/15/29 73,789 159,819 7.500%, due 04/15/29 172,562 237,448 7.500%, due 08/15/29 256,380 2,016 7.500%, due 08/15/29 2,176 82,155 7.500%, due 09/15/29 88,706 72,208 7.500%, due 10/15/29 77,965 113,371 7.500%, due 12/15/29 122,409 87,451 7.500%, due 01/15/30 94,389 1,764 7.500%, due 02/15/30 1,904 271,542 7.500%, due 02/15/30 293,085 156,823 7.500%, due 05/15/30 169,265 31,231 7.500%, due 06/15/30 33,709 19,490 7.500%, due 06/15/30 21,037 3,279 7.500%, due 07/15/30 3,539 94,402 7.500%, due 07/15/30 101,891 4,670 7.500%, due 07/15/30 5,040 44,217 7.500%, due 08/15/30 47,725 $ 2,294 7.500%, due 08/15/30 $ 2,476 2,593 7.500%, due 08/15/30 2,799 141,409 7.500%, due 10/15/30 152,628 2,895 7.500%, due 11/15/30 3,121 2,389 7.500%, due 11/15/30 2,578 3,913 7.500%, due 11/15/30 4,223 2,489 7.500%, due 11/15/30 2,687 4,561 7.500%, due 12/15/30 4,922 40,108 7.500%, due 12/15/30 43,290 471 7.500%, due 01/15/31 508 3,008 7.500%, due 01/15/31 3,243 2,138 7.500%, due 01/15/31 2,305 645 7.500%, due 02/15/31 695 2,226 7.500%, due 02/15/31 2,403 45,288 7.500%, due 02/15/31 48,825 2,774 7.500%, due 02/15/31 2,991 5,562 7.500%, due 02/15/31 5,997 4,866 7.500%, due 03/15/31 5,246 62,031 7.500%, due 03/15/31 66,875 51,690 7.500%, due 04/15/31 55,726 14,375 7.500%, due 09/15/31 15,497 1,582,404 7.500%, due 12/15/31 1,707,600 233,611 7.500%, due 01/15/32 252,160 153,280 7.500%, due 02/15/32 165,257 200,387 7.500%, due 03/15/32 216,297 44,870 7.500%, due 03/15/32 48,376 8,860 7.500%, due 04/15/32 9,552 103,915 7.500%, due 05/15/32 112,035 204,027 7.500%, due 06/15/32 219,970 38,524 7.500%, due 06/15/32 41,534 110,505 7.500%, due 07/15/32 119,140 499,558 7.500%, due 08/15/32 538,594 1,740,221 7.500%, due 09/15/32 1,876,206 4,242,980 8.000%, due 12/15/17 4,674,383 ---------------- 22,804,398 ---------------- Total U.S. Government Agency Obligations (Cost $431,319,567) 432,571,872 ---------------- U.S. TREASURY OBLIGATIONS: 14.3% U.S. TREASURY BONDS: 11.3% 24,123,000 L,S 4.000%, due 02/15/14 22,997,903 26,265,000 L,S 4.750%, due 05/15/14 26,547,165 13,879,000 L,S 5.290%, due 05/15/16 7,527,748 22,285,000 L,S 5.375%, due 02/15/31 22,482,623 6,855,000 L,S 5.500%, due 08/15/28 6,946,850 20,180,000 L,S 6.250%, due 08/15/23 22,352,518 11,955,000 L,S 10.375%, due 11/15/12 14,601,921 12,394,000 L,S 13.250%, due 05/15/14 17,555,915 ---------------- 141,012,643 ---------------- U.S. TREASURY NOTES: 3.0% 2,000,000 L,S 1.625%, due 01/31/05 1,999,454 9,378,000 L,S 2.500%, due 05/31/06 9,349,435 16,489,000 L,S 3.125%, due 05/15/07 16,494,161 10,028,000 L,S 4.000%, due 06/15/09 10,116,928 ---------------- 37,959,978 ---------------- Total U.S. Treasury Obligations (Cost $180,635,764) 178,972,621 ----------------
See Accompanying Notes to Financial Statements 77 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- OTHER BONDS: 1.9% SOVEREIGN: 1.9% $ 1,182,118 @@ Brazilian Government Intl. Bond, 2.188%, due 04/15/12 995,472 1,474,000 @@ Brazilian Government Intl. Bond, 10.000%, due 08/07/11 1,437,150 2,615,000 @@ Colombia Government Intl. Bond, 10.000%, due 01/23/12 2,719,600 2,322,000 @@ Dominican Republic Intl. Bond, 9.040%, due 01/23/13 1,439,640 1,096,000 @@ Ecuador Government Intl. Bond, 7.000%, due 08/15/30 776,790 260,000 @@ Panama Government Intl. Bond, 9.375%, due 07/23/12 285,350 722,000 @@ Panama Government Intl. Bond, 9.375%, due 01/16/23 740,050 2,423,000 @@ Peru Government Intl. Bond, 4.500%, due 03/07/17 1,967,844 658,000 @@,L Philippine Government Intl. Bond, 9.875%, due 01/15/19 658,000 5,260,000 @@ Russia Government Intl. Bond, 5.000%, due 03/31/30 4,815,529 2,244,000 @@ Turkey Government Intl. Bond, 12.375%, due 06/15/09 2,577,795 1,107,000 #,@@,XX Ukraine Government Intl. Bond, 7.650%, due 06/11/13 1,059,953 1,918,644 @@ Uruguay Government Intl. Bond, 10.500%, due 10/20/06 2,110,355 1,953,000 @@,L Venezuela Government Intl. Bond, 10.750%, due 09/19/13 1,928,588 ---------------- Total Other Bonds (Cost $24,253,417) 23,512,116 ---------------- SHARES VALUE - --------------------------------------------------------------------------------------------------- COMMON STOCK: 1.1% REAL ESTATE INVESTMENT TRUSTS: 1.1% 2,546,000 # iStar Financial, Inc., 5.700%, due 03/01/14 2,402,500 4,766,000 # iStar Financial, Inc., 5.125%, due 04/01/11 4,556,506 2,478,000 Simon Property Group LP, 4.875%, due 03/18/10 2,455,805 4,564,000 L Simon Property Group LP, 6.375%, due 11/15/07 4,888,878 ---------------- 14,303,689 ---------------- Total Common Stock (Cost $14,255,526) 14,303,689 ---------------- PREFERRED STOCK: 0.5% BANKS: 0.5% 620 #,XX DG Funding Trust 6,665,000 Total Preferred Stock ---------------- (Cost $6,741,324) 6,665,000 ---------------- WARRANTS: 0.0% SOVEREIGN: 0.0% 750 XX Central Bank of Nigeria -- ---------------- Total Warrants (Cost $630) -- ---------------- Total Long-Term Investments (Cost $1,340,153,753) 1,335,748,331 ---------------- PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 30.1% COMMERCIAL PAPER: 6.6% $ 3,000,000 S Concord Minutemen Cap., 1.160%, due 07/07/05 $ 2,999,955 ---------------- 8,300,000 S DaimlerChrystler Holdings Corp., 1.450%, due 07/14/04 8,295,320 4,000,000 S Ford Motor Credit Co., 5.280%, due 07/19/04 3,997,023 5,500,000 S Ford Motor Credit Corp., 1.350%, due 07/06/04 5,498,763 11,000,000 S General Motors Corp., 1.270%, due 07/01/04 10,999,611 3,600,000 S Hertz Corp., 5.300%, due 07/08/04 3,598,782 6,000,000 S Jupiter Securities Corp., 1.170%, due 07/09/04 5,998,110 7,400,000 S Kraft Foods, 1.180%, due 07/01/04 7,399,758 5,000,000 S Kraft Foods, 1.270%, due 07/08/04 4,998,589 6,000,000 S Royal Bank of Scotland, 1.400%, due 10/21/04 5,996,700 10,000,000 S St. Germain Holdings Ltd., 1.230%, due 07/06/04 9,997,950 2,000,000 S St. Germain Holdings Ltd., 1.230%, due 07/13/04 1,999,112 10,000,000 S Thunder Bay Funding Corp., 1.190%, due 07/02/04 9,999,339 ---------------- Total Commercial Paper (Cost $81,784,886) 81,779,012 ---------------- REPURCHASE AGREEMENT: 3.9% 49,253,000 S Goldman Sachs Repurchase Agreement dated, 1.500%, due 07/01/04, $49,255,052 to be received upon repurchase (Collateralized by $49,460,000 Federal National Mortgage Association, 5.250%, Market Value plus accrued interest $50,240,932 due 08/01/12), 1.500%, due 07/01/04 49,253,000 ---------------- Total Repurchase Agreement (Cost $49,253,000) 49,253,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 19.6% 2,001,292 Allstate Financial, 1.400%, due 11/15/04 2,001,292 4,004,099 Nationwide Global Funding, 1.500%, due 11/15/04 4,004,099 240,138,948 The Bank of New York Institutional Cash Reserve Fund, 1.250% 240,138,948 ---------------- Total Securities Lending Collateral (Cost $246,114,339) 246,144,339 ---------------- Total Short-Term Investments (Cost $377,152,226) 377,176,351 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $1,717,305,978)* 136.8% $ 1,712,894,682 OTHER ASSETS AND LIABILITIES-NET (36.8) (461,035,941) ----- ---------------- NET ASSETS 100.0% $ 1,251,858,741 ===== ================
See Accompanying Notes to Financial Statements 78 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued) # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Funds' Board of Directors/Trustees. L Loaned security, a portion or all of the security is on loan at June 30, 2004. @@ Foreign issuer XX Value of securities obtained from one or more dealers making markets in the securities in accordance with the Fund's valuation procedures. S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. ## Restricted securities (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $1,717,723,028. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 10,264,474 Gross Unrealized Depreciation (15,092,820) -------------- Net Unrealized Depreciation $ (4,828,346) ==============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED SHORT CONTRACTS CONTRACTS MARKET VALUE DATE GAIN/(LOSS) - --------------- --------- ------------ ---- ----------- U.S. 2 Year Treasury Note 231 $ (48,636,329) Sep-04 $ (54,267) U.S. 5 Year Treasury Note 400 (43,475,000) Sep-04 (327,000) ------------- ----------- $ (92,111,329) $ (381,267) ============= =========== LONG CONTRACTS U.S. Long Bond 250 $ 26,593,750 Sep-04 $ 555,391 ============= ===========
See Accompanying Notes to Financial Statements 79 PORTFOLIO OF INVESTMENTS ING VP MONEY MARKET PORTFOLIO(1) as of June 30, 2004 (Unaudited)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CORPORATE NOTES: 26.2% $ 11,400,000 ABN Amro Bank NV/Chicago, 1.189%, due 03/18/05 $ 11,398,378 12,900,000 # American Honda Finance, 1.491%, due 09/16/04 12,900,039 9,500,000 # Bank of New York Co., Inc., 1.340%, due 07/28/05 9,500,000 18,100,000 Bank One Delaware NA, 1.400%, due 08/06/04 18,102,394 9,500,000 # Concord Minutemen Cap, 1.160%, due 07/07/05 9,499,858 9,500,000 First Union, 1.891%, due 03/31/05 9,526,980 3,750,000 Fleet National Bank, 1.280%, due 11/22/04 3,750,934 11,500,000 Fleet National Bank, 1.800%, due 09/21/04 11,501,633 16,000,000 L General Electric Capital Corp., 1.250%, due 07/08/05 16,020,000 16,007,000 L General Electric Capital Corp., 1.645%, due 03/15/05 16,027,008 7,800,000 HBOS Treasury Services PLC, 1.100%, due 08/01/05 7,804,282 14,000,000 # HBOS Treasury Services PLC, 1.315%, due 08/23/04 14,002,144 19,500,000 # HBOS Treasury Services PLC, 1.579%, due 07/22/05 19,500,585 5,700,000 HSBC Bank USA, 1.555%, due 04/22/05 5,672,583 23,900,000 KeyBank National Association, 1.199%, due 08/03/04 23,898,679 3,800,000 PNC Bank NA, 1.460%, due 05/18/05 3,804,750 11,500,000 Royal Bank of Canada/ New York, 1.270%, due 03/30/05 11,498,656 9,900,000 Toyota Motor Credit Corp., 1.170%, due 02/07/05 9,900,000 9,600,000 Toyota Motor Credit Corp., 4.100%, due 09/08/04 9,636,000 9,800,000 Wachovia Bank NA/Charlotte, 1.449%, due 07/30/04 9,800,000 31,200,000 Wal-Mart Stores, 1.238%, due 02/22/05 31,200,000 14,100,000 Washington Mutual Bank, 1.160%, due 07/29/04 14,099,182 10,800,000 Wells Fargo/Old, 1.134%, due 08/02/05 10,786,500 7,800,000 Westpac Bank, 1.408%, due 07/11/05 7,799,072 ---------------- Total Corporate Notes (Cost $297,692,655) 297,629,657 ---------------- COMMERCIAL PAPER: 28.7% 11,364,000 # Barton Capital Corp., 1.050%, due 07/01/04 11,363,669 11,600,000 Blue Ridge Asset Funding, 1.070%, due 07/02/04 11,599,310 10,000,000 # Concord Minutemen Cap, 1.210%, due 07/11/05 9,999,730 9,000,000 # Concord Minutemen Cap, 1.210%, due 07/12/05 8,999,640 26,000,000 # Concord Minutemen Cap, 1.270%, due 07/15/05 25,998,804 $ 11,900,000 Crown Point Capital Co., 1.600%, due 10/06/04 $ 11,848,354 11,500,000 Edison Asset Securitization, 1.050%, due 07/07/04 11,497,704 11,500,000 Galaxy Funding 1.040%, due 07/08/04 11,497,345 10,300,000 Goldman Sachs Group, 1.180%, due 07/12/04 10,300,036 12,300,000 Goldman Sachs Group, 1.280%, due 10/27/04 12,284,625 11,600,000 Household Financial, 1.100%, due 07/01/04 11,599,646 11,600,000 HSBC USA, Inc., 1.180%, due 08/10/04 11,584,484 22,800,000 Jupiter Securities Corp., 1.160%, due 07/09/04 22,793,388 11,500,000 Lasalle Bank, 1.160%, due 12/17/04 11,461,705 12,000,000 Lasalle Bank Note, 1.210%, due 11/05/04 11,985,000 31,400,000 Money Market Trust Series A, 1.645%, due 07/08/05 31,400,000 13,500,000 Royal Bank of Scotland, 1.400%, due 10/21/04 13,492,575 20,000,000 # St. Germain Holdings, 1.500%, due 07/01/04 19,999,167 19,588,000 # St. Germain Holdings, 1.170%, due 07/08/04 19,582,911 11,500,000 # St. Germain Holdings, 1.230%, due 07/13/04 11,494,892 11,300,000 # Tulip Funding Corp., 1.210%, due 07/12/04 11,295,442 24,600,000 # Verizon Global Funding, 1.630%, due 07/13/05 24,599,016 ---------------- Total Commercial Paper (Cost $326,775,368) 326,677,443 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 11.3% FEDERAL HOME LOAN BANK: 7.0% 11,600,000 1.240%, due 03/01/05 11,600,000 12,100,000 1.400%, due 02/25/05 12,065,999 11,700,000 1.425%, due 04/04/05 11,653,727 7,900,000 1.470%, due 02/28/05 7,880,613 12,700,000 1.500%, due 12/07/04 12,700,000 7,900,000 1.500%, due 03/01/05 7,881,767 7,800,000 L 1.510%, due 12/08/04 7,800,000 7,200,000 1.600%, due 05/16/05 7,164,000 ---------------- 78,746,106 ---------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 1.0% 11,900,000 1.219%, due 02/14/05 11,900,000 ---------------- 11,900,000 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 3.3% 13,300,000 L 1.400%, due 02/25/05 13,262,627 11,500,000 1.550%, due 05/04/05 11,450,389 5,400,000 1.610%, due 05/13/05 5,379,750 8,000,000 1.630%, due 01/03/05 7,990,000 ---------------- 38,082,766 ---------------- Total U.S. Government Agency Obligations (Cost $129,000,000) 128,728,872 ----------------
See Accompanying Notes to Financial Statements 80 PORTFOLIO OF INVESTMENTS ING VP MONEY MARKET PORTFOLIO(1) as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT: 4.1% $ 11,700,000 Dexia Bank, 1.508%, due 12/07/04 $ 11,685,609 11,700,000 UBS AG Stanford, 1.195%, due 12/06/04 11,670,282 11,000,000 Washington Mutual Bank, 1.120%, due 07/14/04 10,999,957 12,200,000 Washington Mutual Bank, 1.300%, due 12/27/04 12,171,940 ---------------- Total Certificates Of Deposit (Cost $46,600,595) 46,527,788 ---------------- COLLATERALIZED MORTGAGE OBLIGATIONS: 5.4% 11,000,000 #,XX Blue Heron Funding Ltd., 1.310%, due 05/18/05 10,999,450 11,500,000 XX Blue Ridge Asset Funding, 1.310%, due 03/18/05 11,499,425 11,600,000 XX Blue Ridge Asset Funding, 1.330%, due 02/23/05 11,599,420 13,900,000 #,I,XX Newcastle CDO I Ltd., 1.321%, due 09/24/38 13,900,000 13,700,000 #,I,XX Putnam Structured Product CDO, 1.259%, due 10/15/38 13,700,000 ---------------- Total Collateralized Mortgage Obligations (Cost $61,700,000) 61,698,295 ---------------- INVESTMENT COMPANY: 1.2% 13,500,000 #,I,XX Money Market Trust LLY, 1.175%, due 06/03/05 13,499,960 ---------------- Total Investment Company (Cost $13,500,000) 13,499,960 ---------------- REPURCHASE AGREEMENT: 23.0% 261,232,000 Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500% due 07/01/04, $261,242,885 to be received upon repurchase (Collateralized by $265,947,000 various U.S. Government Agency Obligations, 2.500%-7.125%, Market Value plus accrued interest $266,457,599, 1.500%, due 07/01/04 261,232,000 ---------------- Total Repurchase Agreement (Cost $261,232,000) 261,232,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 2.7% 23,715,619 The Bank of New York Institutional Cash Reserve Fund, 1.250% 23,715,619 ---------------- Total Securities Lending Collateral (Cost $23,715,619) 23,715,619 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $1,160,216,237)* 102.0% $ 1,159,709,634 OTHER ASSETS AND LIABILITIES-NET (2.0) (22,687,881) ----- ---------------- NET ASSETS 100.0% $ 1,137,021,753 ===== ================
(1) All securities with a maturity date greater than one year have either a variable rate, a demand feature, are prerefunded, or an optional or mandatory put resulting in an effective maturity of one year or less. Rate shown reflects current rate. # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Funds' Board of Directors/Trustees. I Illiquid security L Loaned security, a portion or all of the security is on loan at June 30, 2004. X Fair value determined by ING Funds Valuation Committee appointed by the Funds' Board of Directors/Trustees. XX Value of securities obtained from one or more dealers making markets in the securities in accordance with the Fund's valuation procedures. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 25,408 Gross Unrealized Depreciation (532,011) -------------- Net Unrealized Depreciation $ (506,603) ==============
PERCENTAGE OF INDUSTRY NET ASSETS - -------------------------------------------------------------- Consumer Banks - Central U.S. 2.6% Consumer Banks - Eastern U.S. 2.4 Consumer Banks - Southern U.S. 4.2 Diversified Financial Services 3.8 Fiduciary Banks 0.8 Finance - Auto Loans 2.9 Finance - Consumer Loans 1.4 Finance - Investment Banker/Broker 2.0 Finance - Other Services 2.0 Money Center Banks 8.4 Other ABS 6.2 S&L/Thrifts - Western U.S. 3.3 Sovereign Agency 12.7 Special Purpose Entity 20.0 Super-Regional Banks - U.S. 2.0 Telecom Services 2.2 Repurchase Agreement 23.0 Securities Lending Collateral 2.7 Other Assets and Liabilities, Net (2.6) ----- NET ASSETS 100.0% =====
See Accompanying Notes to Financial Statements 81 DIRECTOR AND OFFICER INFORMATION (Unaudited) The business and affairs of the Funds are managed under the direction of the Fund's Board of Directors. A director who is not an interested person of the Funds, as defined in the 1940 Act, is an independent director ("Non-Interested Director"). The Directors of the Funds are listed below. The Statement of Additional Information includes additional information about directors of the Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE THE COMPANY SERVED(1) PAST FIVE YEARS BY DIRECTOR DIRECTOR ------- ----------- --------- --------------- ----------- -------- NON-INTERESTED DIRECTORS: Albert E. DePrince, Jr. Director June 1998 - Director, Business and 53 Director, International 7337 E. Doubletree Ranch Rd. present Economic Research Center Atlantic Economic Society Scottsdale, Arizona 85258 (August 1999 - present) and (October 2002 - Present); Born: 1941 Professor of Economics and Academy of Economics and Finance, Middle Tennessee Finance (February 2001 - State University (1991 to Present). present). Maria T. Fighetti Director April Retired. Formerly, Attorney, 53 None 7337 E. Doubletree Ranch Rd. 1994 - New York City Department of Scottsdale, Arizona 85258 present Mental Health (June 1973 Born: 1943 - October 2002) and Associate Commissioner (1995 - 2002). Sidney Koch Director April Financial Adviser, 53 Director, Northwest 7337 E. Doubletree Ranch Rd. 1994 - Self-Employed (January 1993 - Center for the Arts, Scottsdale, Arizona 85258 present present). Torrington, CT. Born: 1935 Corine T. Norgaard Director June 1991 - Retired. Formerly, Dean, 53 Director/Trustee, Mass 7337 E. Doubletree Ranch Rd. present Barney School of Business, Mutual Corporate and Scottsdale, Arizona 85258 University of Hartford Participation Investors Born: 1937 (August 1996 - June 2004). (April 1997 - Present) Director, Advest Trust Company (1998 - Present); Director, Connecticut Health Foundation (2002 - Present). Edward T. O'Dell Director June 2002 - Retired. Formerly, 53 None 7337 E. Doubletree Ranch Rd. present Partner/Chairman of Financial Scottsdale, Arizona 85258 Service Group, Goodwin Procter Born: 1935 LLP (June 1966 - September 2000); Joseph E. Obermeyer(2) Director January President, Obermeyer & 53 None 7337 E. Doubletree Ranch Rd. 2003 - Associates, Inc. (Consulting Scottsdale, Arizona 85258 present firm) (Novemeber 1999 - Born: 1957 present) and Senior Manager, Arthur Andersen LLP (1995 - October 1999).
82 DIRECTOR AND OFFICER INFORMATION (Unaudited) (continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE THE COMPANY SERVED(1) PAST FIVE YEARS BY DIRECTOR DIRECTOR ------- ----------- --------- --------------- ----------- -------- DIRECTORS WHO ARE "INTERESTED PERSONS" J. Scott Fox(3) Director December Vice Chairman and Chief 53 Director of IPC Financial Aeltus Investment 1997 - Operating Officer, ING Network, Inc. (January Management, Inc. present Investment Management 2001 - present); 10 State House Square (September 2002 - present); Director, Metro Hartford Hartford, Connecticut President and Chief Executive Chamber of Commmerce and Born: 1955 Officer (April 2001 - The Greater Hartford Arts present), Managing Director Council. and Chief Operating Officer (April 1994 - April 2001), Aeltus Investment Management, Inc. Thomas J. McInerney(4) Director March Chief Executive Officer, ING 171 Director, Equitable Life 7337 E. Doubletree Ranch Rd. 2002 - U.S. Financial Services Insurance Co., Golden Scottsdale, Arizona 85258 present (September 2001 - present); American Life Insurance Born: 1956 Member, ING Americas Co., Life Insurance Executive Committee (2001 - Company of Georgia, present); ING Aeltus Holding Midwestern United Life Company, Inc. (2000 - Insurance Co., ReliaStar present), ING Retail Holding Life Insurance Co., Company (1998 - present), and Security Life of Denver, ING Retirement Holdings, Inc. Security Connecticut Life (1997 - present). Formerly, Insurance Co., Southland President, ING Life Insurance Life Insurance Co., USG Annuity Company (September Annuity and Life Company, 1997 - November 2002); and United Life and President, Chief Executive Annuity Insurance Co., Officer and Director of Inc. (March 2001 - Northern Life Insurance Present); Member of the Company (March 2001 - October Board, Bushnell 2002); General Manager and Performing Arts Center; Chief Executive Officer, ING St. Francis Hospital; Worksite Division (December National Conference for 2000 - October 2001), Community Justice; and President, ING-SCI, Inc. Metro Atlanta Chamber of (August 1997 - December Commerce. 2000); President, Aetna Financial Services (August 1997 - December 2000).
- ---------------- (1) Directors serve until their successors are duly elected and qualified, subject to the Board's retirement policy. (2) Mr. Obermeyer was elected to the Board on January 1, 2003. (3) Mr. Fox is an "interested person," as defined under the 1940 Act, because of his relationship with ING Aeltus, an affiliate of ING Investments. (4) Mr. McInerney is an "interested person," as defined under the 1940 Act, because of his affiliation with ING Groep N.V., the parent corporation of the Investment Manager, ING Investments, LLC and the Distributor, ING Funds Distributor, LLC. 83 DIRECTOR AND OFFICER INFORMATION (Unaudited) (continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE COMPANY TIME SERVED(1) PAST FIVE YEARS ------- --------------------- -------------- --------------- James M. Hennessy President, Chief March 2002 - present President and Chief Executive 7337 E. Doubletree Ranch Rd. Executive Officer and Officer, ING Investments, LLC Scottsdale, Arizona 85258 Chief Operating (December 2001 - Present). Born: 1949 Officer Formerly, Senior Executive Vice President and Chief Operating Officer, ING Investments, LLC (April 1995 - December 2000); and Executive Vice President, ING Investments, LLC (May 1998 - June 2000). Stanley D. Vyner Executive Vice March 2002 - present Executive Vice President, ING 7337 E. Doubletree Ranch Rd. President Investments, LLC and certain of its Scottsdale, Arizona 85258 affiliates (July 2000 - Present) and Born: 1950 Chief Investment Risk Officer (June 2003 - Present); Formerly, Chief Investment Officer the International Portfolios, ING Investments, LLC (July 1996 - June 2003); and President and Chief Executive Officer, ING Investments, LLC (August 1996 - August 2000). Michael J. Roland Executive Vice April 2002 - present Executive Vice President, Chief 7337 E. Doubletree Ranch Rd. President and Financial Officer and Treasurer, Scottsdale, Arizona 85258 Assistant Secretary ING Investments, LLC (December Born: 1958 2001 - Present). Formerly, Senior Principal Financial March 2002 - present Vice President, ING Investments, Officer LLC (June 1998 - December 2001). Robert S. Naka Senior Vice President March 2002 - present Senior Vice President and Assistant 7337 E. Doubletree Ranch Rd. and Assistant Secretary, ING Funds Services, LLC Scottsdale, Arizona 85258 Secretary (October 2001 - Present). Born: 1963 Formerly, Senior Vice President and Assistant Secretary, ING Funds Services, LLC (February 1997 - August 1999). Kimberly A. Anderson Senior Vice President December 2003 - present Senior Vice President, ING 7337 E. Doubletree Ranch Rd. Investments, LLC (October 2003 - Scottsdale, Arizona 85258 Present). Formerly, Vice President Born: 1964 and Assistant Secretary, ING Investments, LLC (October 2001 - October 2003); Assistant Vice President, ING Funds Services, LLC (November 1999 - January 2001); and has held various other positions with ING Funds Services, LLC for more than the last five years. Robyn L. Ichilov Vice President and March 2002 - present Vice President, ING Funds Services, 7337 E. Doubletree Ranch Rd. Treasurer LLC (October 2001 - Present) and Scottsdale, Arizona 85258 ING Investments, LLC (August Born: 1967 1997 - Present). Lauren D. Bensinger Vice President March 2003 - present Vice President and Chief 7337 E. Doubletree Ranch Rd. Compliance Officer, ING Funds Scottsdale, Arizona 85258 Distributor, LLC (July 1995 - Born: 1954 Present); Vice President (February 1996 - Present) and Chief Compliance Officer (October 2001 - Present), ING Investments, LLC. Theresa Kelety Secretary September 2003 - present Counsel, ING U.S. Financial Services 7337 E. Doubletree Ranch Rd. (April 2003 - Present). Formerly, Scottsdale, Arizona 85258 Senior Associate with Shearman & Born: 1963 Sterling (February 2000 - April 2003); and Associate with Sutherland Asbill & Brennan (1996 - February 2000).
84 DIRECTOR AND OFFICER INFORMATION (Unaudited) (continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE COMPANY TIME SERVED(1) PAST FIVE YEARS ------- --------------------- -------------- --------------- Todd Modic Vice President September 2003 - present Vice President of Financial 7337 E. Doubletree Ranch Rd. Reporting - Fund Accounting of Scottsdale, Arizona 85258 ING Funds Services, LLC Born: 1967 (September 2002 - Present). Formerly, Director of Financial Reporting, ING Investments, LLC (March 2001 - September 2002); Director of Financial Reporting, Axient Communications, Inc. (May 2000 - January 2001); and Director of Finance, Rural/Metro Corporation (March 1995 - May 2000). Susan P. Kinens Assistant Vice March 2003 - present Assistant Vice President and 7337 E. Doubletree Ranch Rd. President and Assistant Secretary, ING Funds Scottsdale, Arizona 85258 Assistant Secretary Services, LLC (December 2002 - Born: 1976 Present); and has held various other positions with ING Funds Services, LLC for more than the last five years. Huey P. Falgout, Jr. Assistant Secretary September 2003 - present Chief Counsel, ING U.S. Financial 7337 E. Doubletree Ranch Rd. Services (September 2003 - Scottsdale, Arizona 85258 Present). Formerly, Counsel, ING Born: 1963 U.S. Financial Services (November 2002 - September 2003); and Associate General Counsel of AIG American General (January 1999 - November 2002). Maria M. Anderson Assistant Vice April 2002 - present Assistant Vice President of ING 7337 E. Doubletree Ranch Rd. President Funds Services, LLC (October 2001 - Scottsdale, Arizona 85258 Present). Formerly, Manager of Born: 1958 Fund Accounting and Fund Compliance, ING Investments, LLC (September 1999 - November 2001); and Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 - August 1999).
- ---------- (1) The officers hold office until the next annual meeting of the Trustees and until their successors have been elected and qualified. 85 INVESTMENT MANAGER ING Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 ADMINISTRATOR ING Funds Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 DISTRIBUTOR ING Funds Distributor, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 1-800-334-3444 TRANSFER AGENT DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141 CUSTODIAN The Bank of New York 100 Colonial Center Parkway, Suite 300 Lake Mary, FL 32746 LEGAL COUNSEL Goodwin Procter LLP Exchange Place 53 State Street Boston, MA 02109 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 99 High Street Boston, MA 02110 BEFORE INVESTING, CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE VARIABLE ANNUITY CONTRACT AND THE UNDERLYING VARIABLE INVESTMENT OPTIONS. THIS AND OTHER INFORMATION IS CONTAINED IN THE PROSPECTUS FOR THE VARIABLE ANNUITY CONTRACT AND THE UNDERLYING VARIABLE INVESTMENT OPTIONS. OBTAIN THESE PROSPECTUSES FROM YOUR AGENT/REGISTERED REPRESENTATIVE AND READ THEM CAREFULLY BEFORE INVESTING. THE PORTFOLIOS' PROXY VOTING RECORD WILL BE AVAILABLE WITHOUT CHARGE ON OR ABOUT AUGUST 31, 2004 ON THE PORTFOLIOS' WEBSITE AT www.ingfunds.com AND ON THE SEC'S WEBSITE AT www.sec.gov. [ING FUNDS LOGO] PRESORTED STANDARD U.S. POSTAGE PAID BOSTON MA PERMIT NO. 57842 VPSAR-CAPAPP (0604-081804) ITEM 2. CODE OF ETHICS. As of the end of the period covered by this report, Registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to the Registrant's principal executive officer and principal financial officer. There were no amendments to the Code during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code during the period covered by this report. The code of ethics is filed herewith pursuant to Item 11(a)(1), Exhibit 99.CODE ETH. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees has determined that Corine Norgaard and Joseph Obermeyer are each audit committee financial experts, as defined in Item 3 of Form N-CSR. Ms. Norgaard and Mr. Obermeyer are both "independent" for purposes of Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Schedule is included as part of the report to shareholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's Board during the period covered by the N-CSR filing. The Board has a Nominating Committee for the purpose of considering and presenting to the Board candidates it proposes for nomination to fill Independent Trustee vacancies on the Board. The Committee currently consists of all Independent Trustees of the Board (6 individuals). Currently, there is no written charter for the Nominating Committee and neither the Committee nor the Board has adopted a formal policy regarding the consideration of nominees recommended by shareholders. It is anticipated that these matters will be considered by the Committee and the Board during the upcoming year and that a formal charter containing policies with respect to the consideration of nominees recommended by shareholders will be approved by the Board. ITEM 10. CONTROLS AND PROCEDURES. (a) Based on our evaluation conducted within 90 days of the filing date, hereof, the design and operation of the registrant's disclosure controls and procedures are effective to ensure that material information relating to the registrant is made known to the certifying officers by others within the appropriate entities, particularly during the period in which Forms N-CSR are being prepared, and the registrant's disclosure 2 controls and procedures allow timely preparation and review of the information for the registrant's Form N-CSR and the officer certifications of such Form N-CSR. (b) There were no significant changes in the registrant's internal controls that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT. (b) The officer certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX-99.906CERT (3) Not applicable. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): ING VP BALANCED PORTFOLIO, INC. By /s/ James M. Hennessy ---------------------------------------- James M. Hennessy President and Chief Executive Officer Date: August 30, 2004 ------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James M. Hennessy ---------------------------------------- James M. Hennessy President and Chief Executive Officer Date: August 30, 2004 ------------------------------------- By /s/ Michael J. Roland ---------------------------------------- Michael J. Roland Executive Vice President and Chief Financial Officer Date: August 30, 2004 ------------------------------------- 4 EX-99.CODEETH 2 a2142243zex-99_codeeth.txt EX-99.CODEETH Exhibit 99.CODE ETH ING FUNDS SARBANES-OXLEY ACT CODE OF ETHICS A. ADOPTION The Boards of Directors/Trustees (collectively, the "Board") of the ING Funds (each a "Fund," and collectively, the "Funds") set forth on EXHIBIT A hereto, as such exhibit may be amended from time to time, have adopted this code of ethics (the "Code") in connection with the requirements of Section 406 of the Sarbanes-Oxley Act of 2002 (the "Act") concerning disclosure of a code of ethics for the principal executive officer, the principal financial officer, the principal accounting officer or controller, and persons performing similar functions (regardless of whether they are employed by a Fund or a third party) of the Funds (the "Covered Officers"). For the purposes of this Code, the chief executive officer and the chief financial officer of the Funds are the Covered Officers for the Funds. B. POLICY AND PURPOSE; CONFLICTS WITH LAW AND POLICY 1. POLICY AND PURPOSE It is the policy of the Funds to conduct their affairs in an honest and ethical manner, and to comply with all applicable laws, rules and regulations. The purpose of this Code is to assist in the accomplishment of the foregoing policy, to deter wrongdoing and to promote: a. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. b. Full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by a Fund. c. Compliance with applicable laws and governmental rules and regulations. d. The prompt internal reporting of violations of this Code to an appropriate person or persons identified in this Code. e. Accountability for adherence to this Code. 2. CONFLICTS WITH LAW AND POLICY If any part of this Code, or if compliance with any part of this Code, violates or is in conflict with any applicable law, the provisions of such applicable law shall control. If any part of this Code, or if compliance with any part of this Code, violates or is in conflict with any policy or practice of the Funds or of any service provider to the Funds, the provisions of this Code shall control. C. COVERED OFFICER DUTIES Each Covered Officer shall adhere to a high standard of business ethics in his or her dealings with and on behalf of a Fund. Specifically, each Covered Officer shall: 5 1. Conduct himself or herself in an honest and ethical manner when dealing with or on behalf of a Fund. 2. Refrain from engaging in any activity that would compromise his or her professional ethics or otherwise prejudice his or her ability faithfully to carry out his or her duties to the Funds. 3. Refrain from using or appearing to use material non-public information acquired in the course of his or her work for the Funds for unethical or illegal advantage, either directly or indirectly through others. 4. Place the interests of the Funds and their shareholders before his or her personal interests, and handle actual or apparent conflicts of interest between his or her personal interests and the interests of a Fund in an ethical manner. 5. Be familiar with the disclosure requirements generally applicable to the Funds and take all reasonable actions, consistent with his or her position(s) with a Fund and/or a Fund's service provider(s) to ensure full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the SEC or other governmental authorities, and in other public communications made by a Fund. 6. Comply with applicable laws and governmental rules and regulations in his or her dealings with or on behalf of a Fund, and take all reasonable actions, consistent with his or her position(s) with a Fund and/or a Fund's service provider(s), to ensure compliance by the Fund with applicable laws and governmental rules and regulations. 7. Take all reasonable actions, consistent with his or her position(s) with a Fund and/or a Fund's service provider(s), to ensure prompt internal reporting of violations of this Code to an appropriate person or persons identified in this Code. 8. Not knowingly misrepresent, or knowingly cause or permit others to misrepresent, facts about a Fund to a Fund's shareholders, directors, counsel or auditors, to governmental regulators or self-regulatory organizations, or to the public. 9. Consult with other officers and employees of a Fund, and its adviser(s), administrator and principal underwriter, with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Funds. 10. Promote compliance by the Funds with the standards and restrictions imposed by applicable laws, rules and regulations. 11. Not influence investment decisions or financial or other reporting by the Fund whereby the Covered Officer would benefit personally. 12. Not cause a Fund to take an action, or fail to take an action, whereby the Covered Officer would benefit personally. 13. Not retaliate or take any adverse action against, or cause or permit any retaliation or adverse action to be taken against, any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations of this Code or of applicable laws and governmental rules and regulations that are made in good faith. D. DEFINITIONS 1. CONFLICTS OF INTEREST For the purposes of this Code (i) an "actual conflict of interest" is a situation in which a Covered Officer, a member of a Covered Officer's immediate family, or an entity other than a Fund on whose behalf a Covered Officer is acting or from which a Covered Officer may receive compensation or other personal benefit, has an interest in a transaction or the results of a transaction in which a Fund is involved that is different from the interests of the Fund with regard to that 6 same transaction, and (ii) an "apparent conflict of interest" is a situation in which a Covered Officer, a member of a Covered Officer's immediate family, or an entity other than a Fund on whose behalf a Covered Officer is acting or from which a Covered Officer may receive compensation or other personal benefit, appears to have an actual conflict of interest, without regard to whether an actual conflict of interest in fact exists. (1) Notwithstanding the foregoing, an actual conflict of interest shall not include situations that are covered by law or by the Funds' and an investment adviser's code of ethics required under Rule 17j-1 of the Investment Company Act of 1940.(2) 2. WAIVER AND IMPLICIT WAIVER The term "waiver" means the approval by a Fund of a material departure from a provision of this Code. The term "implicit waiver" means a failure by a Fund to take action within a reasonable period of time regarding a material departure from a provision of this Code that has been made known to an executive officer(3) of the Fund. 3. BENEFIT PERSONALLY; IMMEDIATE FAMILY With regard to a Covered Officer, the term "benefit personally" means the direct or indirect receipt by the Covered Officer, by a member of the Covered Officer's immediate family, or by any entity (other than a Fund's investment adviser or any affiliate thereof) of which the Covered Officer or any member of the Covered Officer's immediate family owns 5% - ---------- (1) Certain actual conflicts of interest are inherent in the relationship between a Fund and a Covered Officer who is employed by the Fund's investment adviser, administrator or principal underwriter. As a result, this Code recognizes that Covered Officers will, in the normal course of their duties (whether acting on behalf of a Fund or on behalf of the adviser, administrator or principal underwriter, or for a combination thereof), be involved in recommending actions that may have different effects on the respective parties or may redound to the benefit of the adviser, the administrator or the principal underwriter at the expense of the Fund. For example, the negotiation of the underlying advisory, administrative and underwriting agreements necessarily places such Covered Officers in an actual conflict of interest position as to a Fund. These inherent conflicts of interest are known to and understood by the Funds and the Board, and the Board has determined that the existence of these conflicts of interest is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Therefore, the fact that a Covered Officer acts primarily or exclusively on behalf of a party other than a Fund with regard to a transaction that is covered by such inherent conflicts of interest shall not IPSO FACTO cause such conduct to be in violation of the requirements of this Code. Absent specific dishonest or unethical conduct in such a transaction, the actions by a Covered Officer in such regard shall be deemed to be honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. (2) These inherent conflicts of interest are already subject to prohibitions in the Investment Company Act of 1940 (the "Investment Company Act") and the Investment Advisers Act of 1940 (the "Investment Advisers Act"). For example, a Covered Officer may not individually engage in certain transactions (such as the purchase of sale or securities or other property) with a Fund because of his or her status as an "affiliated person" of the Fund. The Funds' and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat and replace those programs and procedures, and such actual and apparent conflicts of interest fall outside of the coverage of this Code. All other actual and apparent conflicts of interest, even if such actual and apparent conflicts of interest are not subject to provisions in the Investment Company Act or the Investment Advisers Act, are covered by this Code. (3) The term "executive officer," when used with reference to a registrant, means its president, any vice president of the registrant in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function or any other person who performs similar policy making functions for the registrant. 7 or more of the beneficial ownership interest or by which the Covered Officer or any member of the Covered Officer's immediate family is employed, or from which the Covered Officer or any member of the Covered Officer's immediate family receives any compensation or other benefit, of any compensation or other personal benefit. For the purposes of this Code, the term "member of the immediate family" means a Covered Officer's parent, spouse of a parent, child, spouse of a child, spouse, brother, or sister, and includes step and adoptive relationships. E. ACTIVITIES REQUIRING PRIOR APPROVAL A Covered Officer and his or her immediate family shall not engage in any of the following activities without the prior written approval of the Funds' Chief Legal Officer (the "Chief Legal Officer") and the Funds' Chief Executive Officer, except that in the case of the Chief Executive Officer or a member of the Chief Executive Officer's immediate family, such approval shall be from the Chief Legal Officer and the Qualified Legal Compliance Committee of the Board (the "QLCC"). To obtain such approval, the Covered Officer shall submit a written statement to the Chief Legal Officer describing in detail the proposed activity and the reasons for it. 1. Service as a director, partner, officer, manager or managing member on the board of any public or private company(4) other than a Fund's investment adviser, administrator, principal underwriter, or an affiliate of any of the foregoing, if such company has current or prospective business dealings with a Fund or if any Fund may invest in securities issued by such company. 2. Receipt of any entertainment(5) or meals from any company with which the Fund has current or prospective business dealings unless such entertainment or meals are business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety. For the purposes of this Code, entertainment and meals that are incidental to a business conference, seminar or meeting shall be deemed business-related, reasonable in cost, and appropriate as to time and place. 3. Having any ownership interest in, or any consulting, employment or compensation relationship with, any of a Fund's service providers, other than its investment adviser(s), administrator, principal underwriter, or any affiliated person thereof. 4. Exploit for his or her own personal gain any opportunity which a Fund may exploit. This prohibition shall not apply to securities trading undertaken in conformance with the Funds' and an investment adviser's code of ethics adopted pursuant to Rule 17j-1 of the Investment Company Act. F. PROHIBITED ACTIVITIES A Covered Officer and his or her immediate family shall not engage in any of the following activities: 1. Have a direct or indirect financial interest, such as compensation or equity ownership, in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment with the Fund's investment adviser, administrator, principal underwriter, or any affiliated person thereof. 2. Receive any gifts in excess of $500 in any calendar year from any entity or person that directly or indirectly currently or prospectively does or will do business with or receives compensation or other benefits from a Fund. For the purposes of this restriction, gifts from different persons employed by the - ---------- (4) For the purposes of this Code, "company" includes any legal or business entity such as a corporation, limited liability company, partnership, limited partnership, trust, association, sole proprietorship, ETC. (5) For the purposes of this Code, "entertainment" means activities or events, such as golfing, theater, sporting events, ETC., at which a representative of the entertaining company is present along with the Covered Officer or his or her immediate family member. If a representative of the entertaining company is not present, such activities or events shall be treated as gifts hereunder. 8 same entity shall be aggregated, along with any gifts from the entity itself, in order to determine whether the $500 limit has been exceeded. 3. Accept employment from any company, other than a Fund's investment adviser(s), administrator or principal underwriter (or any affiliate thereof), with which the Fund has current or prospective business dealings within one year after the latest to occur of such Covered Officer's termination of employment at the Fund or at the Fund's investment adviser(s), administrator or principal underwriter (or any affiliate thereof). 4. Borrow money from any Fund, or borrow money from or have any other financial transactions with any company, other than a Fund's investment adviser(s), administrator or principal underwriter (or any affiliate thereof), with which the Fund has current or prospective business dealings, other than routine retail transactions that are effected on the same terms and conditions as are available to the general public. 5. Engage in a transaction directly as a principal with a Fund, except that this prohibition shall not apply to the purchase or redemption of the shares of any Fund on the same terms and conditions as all other shareholders. 6. Any other activity that would cause them to benefit personally at the expense of a Fund. G. REPORTING AND ACCOUNTABILITY 1. REPORTING Each Covered Officer must: a. Upon adoption of this Code (or thereafter, as applicable, upon becoming a Covered Officer), affirm in writing to the Chief Legal Officer and the Board that he or she has received, read and understands this Code. Such affirmation shall be substantially in the form attached hereto as EXHIBIT B. b. Annually thereafter affirm to the Chief Legal Officer and the Board that he or she has complied with the requirements of this Code. Such affirmation shall be substantially in the form attached hereto as EXHIBIT C. c. Report at least annually all employment, ownership, affiliations or other relationships related to conflicts of interest that the Fund's Directors and Officers Questionnaire covers. d. Notify the Chief Legal Officer promptly if he or she knows of any violation of this Code or of any applicable laws and governmental rules and regulations. Failure to do so is itself a violation of this Code. 2. INTERPRETATIONS The Chief Legal Officer has the authority and shall be responsible for applying this Code to specific situations and for making interpretations of this Code in any particular situation. In making interpretations of this Code, the Chief Legal Officer may consult with the Funds' outside counsel. 3. INVESTIGATIONS The Funds will follow these procedures in investigating and enforcing this Code: a. The Chief Legal Officer will take all appropriate action to investigate any potential violations reported to him or her. b. If, after such investigation, the Chief Legal Officer believes that no violation has occurred, the Chief Legal Officer is not required to take any further action. 9 c. If, after such investigation, the Chief Legal Officer believes that a violation has occurred, the Chief Legal Officer shall report such potential violation to the QLCC. d. If the QLCC concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; and a recommendation to discipline or dismiss the Covered Officer or to require reimbursement or disgorgement by the Covered Officer of any personal benefits received. 4. WAIVERS The QLCC and the Chief Legal Officer, as applicable, may grant a waiver to compliance with this Code by a Covered Officer or his or her immediate family if the QLCC or the Chief Legal Officer determines that the proposed activity will not have an adverse impact on any Fund or on the ability of a Covered Officer faithfully to perform his or her duties to the Funds. To obtain a waiver, a Covered Officer shall submit a written statement to the Chief Legal Officer describing in detail the proposed activity, and the reasons for it, and the provision(s) of this Code as to which a waiver is requested. Any waivers of the provisions of this Code shall be disclosed to the extent required by law and SEC rules. H. RELATIONSHIP TO OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' adviser(s), administrator, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying to the Covered Officers and others, and are not part of this Code. I. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board or committee thereof or the Funds' outside counsel. J. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund or any Covered Officer or his or her immediate family, as to any fact, circumstance, or legal conclusion. K. AMENDMENTS Any amendments to this Code must be approved or ratified by a majority vote of the Board, including a majority of the independent directors. Any amendments to this Code shall be disclosed to the extent required by law and SEC rules. Date: ----------------------------------- 10 EXHIBIT A ING VP BALANCED PORTFOLIO, INC. ING STRATEGIC ALLOCATION PORTFOLIOS, INC. ING GET FUND ING VP BOND PORTFOLIO ING VP MONEY MARKET PORTFOLIO ING VARIABLE FUNDS ING VARIABLE PORTFOLIOS, INC. ING SERIES FUND, INC. 11 EXHIBIT B INITIAL ACKNOWLEDGEMENT Covered Officer Name and Title: ----------------------------------------------- (PLEASE PRINT) I acknowledge that I have received and read a copy of the ING Funds Sarbanes-Oxley Act Code of Ethics (the "Code") and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code. I also acknowledge my responsibility to report any violation of the Code to the Chief Legal Officer of the Funds. I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Funds have the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in their sole discretion, with or without notice. - ------------------------------------------------- -------------------------- Signature Date 12 EXHIBIT C ANNUAL ACKNOWLEDGEMENT Covered Officer Name and Title: ---------------------------------------------- (PLEASE PRINT) I acknowledge that I have received and read a copy of the ING Funds Sarbanes-Oxley Act Code of Ethics (the "Code") and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code. I also acknowledge that I have fully complied with the terms and provisions of the Code during the period of time since the most recent Initial or Annual Acknowledgement provided by me. I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Funds have the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in their sole discretion, with or without notice. - ------------------------------------------------- -------------------------- Signature Date 13 EX-99.CERT 3 a2142243zex-99_cert.txt EX-99.CERT Exhibit 99.Cert CERTIFICATION I, James M. Hennessy, certify that: 1. I have reviewed this report on Form N-CSR of ING VP BALANCED PORTFOLIO, INC.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 30, 2004 --------------- /s/ James M. Hennessy ---------------------------------------- James M. Hennessy President and Chief Executive Officer 14 CERTIFICATION I, Michael J. Roland, certify that: 1. I have reviewed this report on Form N-CSR of ING VP BALANCED PORTFOLIO, INC.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 30, 2004 /s/ Michael J. Roland --------------- -------------------------------- Michael J. Roland Executive Vice President and Chief Financial Officer 15 EX-99.906CERT 4 a2142243zex-99_906cert.txt EX-99.906CERT Exhibit 99.906 Cert CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING VP BALANCED PORTFOLIO, INC. Date of Form N-CSR: JUNE 30, 2004 The undersigned, the principal executive officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING VP BALANCED PORTFOLIO, INC. and will be retained by ING VP BALANCED PORTFOLIO, INC. and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 30th day of August, 2004. /s/ James M. Hennessy ------------------------------ James M. Hennessy 16 CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING VP BALANCED PORTFOLIO, INC. Date of Form N-CSR: JUNE 30, 2004 The undersigned, the principal executive officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING VP BALANCED PORTFOLIO, INC. and will be retained by ING VP BALANCED PORTFOLIO, INC. and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 30th day of August, 2004. /s/ Michael J. Roland --------------------------- Michael J. Roland 17 -----END PRIVACY-ENHANCED MESSAGE-----