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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-5410
ING Prime Rate Trust
(Exact name of registrant as specified in charter)
7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258
(Address of principal executive offices) (Zip code)
C T Corporation System, 101 Federal Street, Boston, MA 02110
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-992-0180
Date of fiscal year end: February 28
Date of reporting period: February 28, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
The following is a copy of the report transmitted to stockholders pursuant to
Rule 30e-1 under the Act (17 CFR 270.30e-1):
ANNUAL REPORT
February 28, 2003 ING PRIME RATE TRUST
[GRAPHIC]
[LION LOGO]
ING FUNDS
ING Prime Rate Trust
ANNUAL REPORT
February 28, 2003
Table of Contents
Portfolio Managers' Report ............................................... 2
Statistics and Performance ............................................... 6
Additional Notes and Information ......................................... 9
Report of Independent Auditor's .......................................... 10
Statement of Assets and Liabilities ...................................... 11
Statement of Operations .................................................. 12
Statements of Changes in Net Assets ...................................... 13
Statement of Cash Flows .................................................. 14
Financial Highlights ..................................................... 15
Notes to Financial Statements ............................................ 16
Portfolio of Investments ................................................. 23
Shareholder Meeting Information .......................................... 41
Trustee and Officer Information .......................................... 43
ING Prime Rate Trust
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PORTFOLIO MANAGERS' REPORT
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PERFORMANCE OF THE TRUST
The Trust declared $0.45 of dividends during the fiscal year ended February 28,
2003. Based on the average month-end net asset value ("NAV") per share of $6.90,
this resulted in an annualized distribution rate of 6.4%(1) for the year. The
Trust's total return (based on NAV) for the fiscal year was 0.4%, reflective of
the difficult market conditions experienced during most of calendar 2002.
For the fiscal quarter ended February 28, 2003, the Trust's annualized
distribution rate was 6.5%(1). The quarterly annualized distribution rate was
down slightly from the previous fiscal quarter 6.9% due primarily to improvement
in the average month-end NAV. During the fiscal quarter ended February 28, 2003,
the Trust posted a 2.5% total market return, representing the second quarter of
significant sequential improvement.
A steady rise in underlying values, coupled with a generally healthier investor
sentiment towards floating rate senior loan funds since the beginning of the
year, has also had a decidedly positive impact on the Trust's common shares.
Total return based on market value (assuming full dividend reinvestment) was
11.3% for the three-month period ended February 28, 2003, versus -9.7% for the
S&P 500 Index. For the full fiscal year, the Trust's common shares returned 2.5%
(dividends reinvested), versus -22.7% for the S&P 500 Index.
The Trust's recent performance has been driven by a stronger overall tone to the
loan market, made manifest by generally rising indicative loan prices. Several
of the Trust's larger holdings benefited from credit-specific improvements. As
an example, Nextel Communications ("Nextel"), the Trust's largest single
position at period-end, accounting for approximately 4.1% of total assets,
continues to exceed analysts' operational and financial expectations, thereby
driving prices for the company's term loans to near-par levels. By way of its
bellwether standing, Nextel's string of success has also had a tangible positive
effect on prices across the cellular communications sector, historically one of
the Trust's largest.
Moreover, indicative pricing for term loans issued by Charter Communications
Operating LLC ("Charter"), the Trust's second largest individual holding
(roughly 2.6% of total assets at period-end), also improved during the fiscal
quarter. The average bid now lies several percentage points off a low reached
during the fourth quarter of 2002, and continues to slowly edge upward.
Consistently underpinned by stable valuation levels of cable television systems,
recent interest in Charter's term loans appears to have been driven by a renewed
investor confidence in the ability of cable television operators to both defend
and grow their higher margin subscriber base.
Also contributing to fiscal fourth quarter results was, again, consistent
performance across several of the Trust's other material sector concentrations
(e.g., Healthcare, Containers & Packaging and Beverage & Food), offset to a
degree by disappointing recoveries on a small number of existing non-performing
loans, particularly the Trust's older, illiquid positions. We continue to
dedicate significant time and resources in an effort to maximize recovery values
in this area, typically under very difficult circumstances.
The Trust utilizes financial leverage to seek to increase the yield to the
holders of common shares. As of February 28, 2003, the Trust had $617 million of
borrowings outstanding, consisting of $450 million of "aaa/AAA" rated cumulative
auction rate preferred shares, and $167 million outstanding under $540 million
in available credit facilities. Total leverage, as a percentage of total assets
(including preferred shares), was 39.9% at quarter end. The weighted average
leverage cost including all borrowings and preferred shares as of quarter ended
February 28, 2003 was 1.38%. While the use of leverage for investment purposes
increases both investment opportunity and investment risk, we continue to deploy
leverage only when it is in the best interest of the Trust's common
shareholders.
2
OUTLOOK
In our view, the Trust, and the non-investment grade loan market at large,
appears to be reasonably well positioned to meet the expected challenges of the
coming months. Overall credit conditions continue to slowly improve, as
evidenced by another quarter-over-quarter decline in the trailing loan default
rate (by principal amount) for the industry to approximately 5.5%, after peaking
at 7.4% in June of last year.(2) Further, the supply of new transactions, an
important barometer of market health, has been fairly generous. Institutional
M&A-related loan volume closed out at $6.2 billion during the first quarter of
2003, the highest level since the first quarter of 2000.(2) Understandably, the
forward calendar looks less robust at this point, effectively capped by
uncertainty surrounding the outcome of military action in the Middle East.
Nonetheless, we maintain a cautious view of the economic outlook, both as it
appears today and once hostilities in Iraq come to an end. Several indicators,
not the least being a chronically anemic labor market, point to significantly
slower growth than originally anticipated. Whether such weakness is a
continuation of the unwinding of the excesses of the 1990s, or a by-product of
caution on the part of companies and consumers alike, remains to be seen. If
macro economic conditions were to deteriorate, it could further pressure a good
portion of the non-investment grade issuer universe and increase the prospects
for a further rate cut on the part of the Federal Reserve. An additional
reduction in already historically low short-term interest rates could continue
to depress returns, even if underlying loan values continue to rise. As stated
in our prior report, we will remain in a relatively defensive posture while
seeking to take advantage of selective buying opportunities.
We thank you for your investment in ING Prime Rate Trust.
/s/ Jeffrey A. Bakalar /s/ Daniel A. Norman
Jeffrey A. Bakalar Daniel A. Norman
SENIOR VICE PRESIDENT SENIOR VICE PRESIDENT
CO-SENIOR PORTFOLIO MANAGER CO-SENIOR PORTFOLIO MANAGER
ING Prime Rate Trust
April 7, 2003
3
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PORTFOLIO MANAGERS' FOOTNOTES
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1. The distribution rate is calculated by annualizing dividends declared
during the quarter and dividing the resulting annualized dividend by the
Trust's average month-end net asset value (in the case of NAV) or the
average month-end NYSE Composite closing price (in the case of Market). The
distribution rate is based solely on the actual dividends and
distributions, which are made at the discretion of management. The
distribution rate may or may not include all investment income and
ordinarily will not include capital gains or losses, if any.
2. Source: As tracked by S&P Leveraged Commentary & Data Group, a leading data
provider to the Loan Market.
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE TRUST
WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
SENIOR LOANS ARE SUBJECT TO CREDIT RISKS AND THE POTENTIAL FOR NON-PAYMENT OF
SCHEDULED PRINCIPAL OR INTEREST PAYMENTS, WHICH MAY RESULT IN A REDUCTION OF THE
TRUST'S NAV.
THIS LETTER CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING STATEMENTS."
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
"FORWARD-LOOKING STATEMENTS."
THE VIEWS EXPRESSED IN THIS LETTER REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
4
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INDEX DESCRIPTIONS
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The S&P 500 INDEX is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization companies whose securities
are traded on major U.S. stock markets.
The LSTA LEVERAGED LOAN INDEX (LLI) is a weekly return index that uses market to
market pricing to calculate market value change. The LLI tracks the current
outstanding balance and spread over LIBOR for fully funded term loans.
All indices are unmanaged.
An investor cannot invest directly in an index.
5
ING Prime Rate Trust
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STATISTICS AND PERFORMANCE as of February 28, 2003
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PORTFOLIO CHARACTERISTICS
Net Assets $ 922,383,342
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Assets Invested in Senior Loans* $1,476,322,899
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Total Number of Senior Loans 268
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Average Amount Outstanding per Loan $ 5,508,668
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Total Number of Industries 35
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Average Loan Amount per Industry $ 42,180,654
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Portfolio Turnover Rate 48%
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Weighted Average Days to Interest Rate Reset 46 days
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Average Loan Final Maturity 50 months
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Total Leverage as a Percentage of Total Assets
(including Preferred Shares) 39.9%
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* INCLUDES LOANS AND OTHER DEBT RECEIVED THROUGH RESTRUCTURINGS
TOP TEN SENIOR LOAN INDUSTRY SECTORS AS A PERCENTAGE OF:
NET ASSETS TOTAL ASSETS
Cable Television 12.6% 7.5%
Cellular 12.2% 7.3%
Healthcare, Education and Childcare 11.5% 6.9%
Leisure, Amusement and Entertainment 9.8% 5.9%
Containers, Packaging and Glass 9.7% 5.8%
Automobile 8.4% 5.0%
Beverage, Food and Tobacco 7.6% 4.6%
Lodging 7.1% 4.2%
Printing and Publishing 7.0% 4.2%
Chemicals, Plastics and Rubber 6.6% 3.9%
TOP TEN SENIOR LOAN ISSUERS AS A PERCENTAGE OF:
NET ASSETS TOTAL ASSETS
Nextel Communications (1) 6.9% 4.1%
Charter Communications Operating, LLC 4.4% 2.6%
SC International Services 2.7% 1.6%
Wyndham International, Inc. 2.0% 1.2%
Safelite Glass Corporation. 1.9% 1.2%
Broadwing, Inc. 1.9% 1.1%
Mandalay Resort Group 1.8% 1.1%
Olympus Cable Holdings, LLC 1.8% 1.1%
Extended Stay America, Inc. 1.7% 1.0%
Western Wireless Corporation 1.7% 1.0%
(1) COMBINATION OF NEXTEL FINANCE COMPANY AND NEXTEL OPERATIONS, INC.
6
ING Prime Rate Trust
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STATISTICS AND PERFORMANCE as of February 28, 2003
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YIELDS AND DISTRIBUTION RATES
NET ASSET AVERAGE AVERAGE
VALUE ("NAV") MARKET ANNUALIZED ANNUALIZED
PRIME 30-DAY SEC 30-DAY SEC DISTRIBUTION DISTRIBUTION
QUARTER ENDED RATE YIELD A YIELD A RATE AT NAV B RATE AT MARKET B
- -------------------------------------------------------------------------------------------------------
February 28, 2003 4.25% 6.93% 7.23% 6.52% 6.93%
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November 30, 2002 4.25% 8.02% 9.10% 6.86% 7.87%
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August 31, 2002 4.75% 7.39% 8.53% 6.34% 7.33%
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May 31, 2002 4.75% 7.32% 7.94% 6.09% 6.52%
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AVERAGE ANNUAL TOTAL RETURNS
NAV MARKET
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1 Year 0.44% 2.53%
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3 Years -0.81% 0.98%
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5 Years 2.15% -0.67%
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10 Years 5.99% 5.22%
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Since Trust Inception F,H 6.29% N/A
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Since Initial Trading on NYSE G N/A 5.28%
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ASSUMES RIGHTS WERE EXERCISED AND EXCLUDES SALES CHARGES AND COMMISSIONS C,D,E
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE TRUST
WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
See statistics and performance footnotes on page 8.
7
ING Prime Rate Trust
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STATISTICS AND PERFORMANCE FOOTNOTES
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(A) Yield is calculated by dividing the Trust's net investment income per share
for the most recent thirty days by the net asset value (in the case of NAV)
or the NYSE Composite closing price (in the case of market) at quarter-end.
Yield calculations do not include any commissions or sales charges, and are
compounded for six months and annualized for a twelve-month period to
derive the Trust's yield consistent with the SEC standardized yield formula
for open-end investment companies.
(B) The distribution rate is calculated by annualizing each monthly dividend,
then averaging the annualized dividends declared for each month during the
quarter and dividing the resulting average annualized dividend amount by
the Trust's average net asset value (in the case of NAV) or the NYSE
Composite closing price (in the case of Market) at the end of the period.
(C) Calculation of total return assumes a hypothetical initial investment at
the net asset value (in the case of NAV) or the NYSE Composite closing
price (in the case of Market) on the last business day before the first day
of the stated period, with all dividends and distributions reinvested at
the actual reinvestment price.
(D) On December 27, 1994, the Trust issued to its shareholders transferable
rights which entitled the holders to subscribe for 17,958,766 shares of the
Trust's common stock at the rate of one share of common stock for each four
rights held. On January 27, 1995, the offering expired and was fully
subscribed. The Trust issued 17,958,766 shares of its common stock to
exercising rights holders at a subscription price of $8.12. Offering costs
of $4,470,955 were charged against the offering proceeds.
(E) On October 18, 1996, the Trust issued to its shareholders non-transferable
rights which entitled the holders to subscribe for 18,122,963 shares of the
Trust's common stock at the rate of one share of common stock for each five
rights held. On November 12, 1996, the offering expired and was fully
subscribed. The Trust issued 18,122,963 shares of its common stock to
exercising rights holders at a subscription price of $9.09. Offering costs
of $6,972,203 were charged against the offering proceeds.
(F) Inception Date -- May 12, 1988.
(G) Initial Trading on NYSE -- March 9, 1992.
(H) Reflects partial waiver of fees.
8
ING Prime Rate Trust
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ADDITIONAL NOTES AND INFORMATION
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SHAREHOLDER INVESTMENT PROGRAM
The Trust offers a Shareholder Investment Program (the "Program," formerly known
as the Dividend Reinvestment and Cash Purchase Plan) which allows holders of the
Trust's common shares a simple way to reinvest dividends and capital gains
distributions, if any, in additional common shares of the Trust. The Program
also offers holders of the Trust's common shares the ability to make optional
cash investments in any amount from $100 to $5,000 on a monthly basis. Amounts
in excess of $5,000 require prior approval of the Trust. DST Systems, Inc., the
Trust's Transfer Agent, is the administrator for the Program.
For dividend reinvestment purposes, DST Systems, Inc. will purchase shares of
the Trust on the open market when the market price plus estimated commissions is
less than the net asset value on the valuation date. The Trust may issue new
shares when the market price plus estimated commissions is equal to or exceeds
the net asset value on the valuation date. New shares may be issued at the
greater of (i) net asset value or (ii) the market price of the shares during the
pricing period, minus a discount of 5%.
For optional cash investments, shares will be purchased on the open market by
the DST Systems, Inc. when the market price plus estimated commissions is less
than the net asset value on the valuation date. New shares may be issued by the
Trust when the market price plus estimated commissions is equal to or exceeds
the net asset value on the valuation date.
There is no charge to participate in the Program. Participants may elect to
discontinue participation in the Program at any time. Participants will share,
on a pro-rata basis, in the fees or expenses of any shares acquired in the open
market.
Participation in the Program is not automatic. If you would like to receive more
information about the Program or if you desire to participate, please contact
your broker or our Shareholder Services Department at (800) 992-0180.
KEY FINANCIAL DATES -- CALENDAR 2003 DIVIDENDS:
DECLARATION DATE EX-DIVIDEND DATE PAYABLE DATE
---------------- ---------------- ------------
January 31 February 6 February 25
February 28 March 6 March 24
March 31 April 8 April 23
April 30 May 8 May 22
May 30 June 6 June 23
June 30 July 8 July 22
July 31 August 7 August 22
August 29 September 8 September 22
September 30 October 8 October 22
October 31 November 6 November 24
November 28 December 8 December 22
December 19 December 29 January 13, 2004
RECORD DATE WILL BE TWO BUSINESS DAYS AFTER EACH EX-DIVIDEND DATE.
THESE DATES ARE SUBJECT TO CHANGE.
STOCK DATA
The Trust's shares are traded on the New York Stock Exchange (Symbol: PPR).
Effective March 1, 2002, the Trust's name changed to ING Prime Rate Trust and
its CUSIP number changed to 44977W106. The Trust's NAV and market price are
published daily under the "Closed-End Funds" feature in Barron's, The New York
Times, The Wall Street Journal and many other regional and national
publications.
9
ING Prime Rate Trust
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REPORT OF INDEPENDENT AUDITORS
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To the Shareholders and the Board of Trustees
ING Prime Rate Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the ING Prime Rate Trust (the "Trust") as of
February 28, 2003, and the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of investments owned as of February 28, 2003 by
confirmation with the custodian and other appropriate auditing procedures. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
ING Prime Rate Trust as of February 28, 2003 and the results of its operations
and its cash flows for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended, and financial highlights
for each of the years in the five-year period then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
Los Angeles, California
April 11, 2003
See Accompanying Notes to Financial Statements
10
ING Prime Rate Trust
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STATEMENT OF ASSETS AND LIABILITIES as of February 28, 2003
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ASSETS:
Investments in securities at value (Cost $1,667,758,669) $ 1,535,926,872
Cash 1,341,722
Receivables:
Interest 7,378,577
Other 80,982
Prepaid expenses 203,777
---------------
Total assets 1,544,931,930
---------------
LIABILITIES:
Notes payable 167,000,000
Deferred arrangement fees on senior loans 3,092,567
Accrued auction preferred shares dividends payable 46,414
Payable to affiliates 1,232,567
Accrued trustees' fees 29,375
Other accrued expenses 1,147,665
---------------
Total liabilities 172,548,588
---------------
Preferred shares, $25,000 stated value per share
at liquidation value (18,000 shares outstanding) 450,000,000
---------------
NET ASSETS $ 922,383,342
===============
Net asset value per common share outstanding (net assets
less preferred shares at liquidation value, divided by 136,972,914 shares
of beneficial interest authorized and outstanding, no par value) $ 6.73
NET ASSETS CONSIST OF:
Paid-in capital $ 1,287,948,209
Undistributed net investment income 11,723,349
Accumulated net realized loss on investments (245,456,419)
Net unrealized depreciation of investments (131,831,797)
---------------
NET ASSETS $ 922,383,342
===============
See Accompanying Notes to Financial Statements
11
ING Prime Rate Trust
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STATEMENT OF OPERATIONS for the Year Ended February 28, 2003
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INVESTMENT INCOME:
Interest $ 88,756,974
Arrangement fees earned 2,531,760
Dividends 12,011
Other 3,467,200
-------------
Total investment income 94,767,945
-------------
EXPENSES:
Investment management fees 12,698,403
Administration fees 3,968,231
Transfer agent and registrar fees 643,931
Interest 4,330,327
Shareholder reporting expense 170,485
Custodian fees 485,375
Revolving credit facility fees 260,923
Professional fees 878,332
Preferred shares -- Dividend disbursing agent fees 1,182,556
Insurance expense 27,337
Pricing expense 72,933
ICI fees 104,853
Postage expense 305,500
Trustees' fees 73,000
Miscellaneous expense 56,921
NYSE Registration fees 79,755
-------------
Total expenses 25,338,862
-------------
Net investment income 69,429,083
-------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS:
Net realized loss on investments (115,778,026)
Net change in unrealized depreciation of investments 51,893,096
-------------
Net loss on investments (63,884,930)
-------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
From net investment income (7,499,067)
-------------
Net decrease in net assets resulting from operations $ (1,954,914)
=============
See Accompanying Notes to Financial Statements
12
ING Prime Rate Trust
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STATEMENTS OF CHANGES IN NET ASSETS
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YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28,
2003 2002
--------------- ---------------
CHANGE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 69,429,083 $ 101,753,746
Net realized loss on investments (115,778,026) (53,063,828)
Net change in unrealized appreciation (depreciation)
on investments 51,893,096 (69,951,020)
Distributions to preferred shareholders from net
investment income (7,499,067) (15,273,093)
--------------- ---------------
Net decrease in net assets resulting from operations (1,954,914) (36,534,195)
--------------- ---------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Distributions from net investment income: (61,643,423) (85,728,945)
--------------- ---------------
Decrease in net assets from distributions to common
shareholders (61,643,423) (85,728,945)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Common shares issued from dividend reinvestment -- 919,219
Common shares sold in connection with shelf offerings -- 87,513
Offering costs of preferred shares -- (194,010)
--------------- ---------------
Net increase from capital share transactions -- 812,722
--------------- ---------------
Net decrease in net assets (63,598,337) (121,450,418)
NET ASSETS:
Beginning of period 985,981,679 1,107,432,097
--------------- ---------------
End of period (including undistributed net investment
income of $11,723,349 and $8,856,756, respectively) $ 922,383,342 $ 985,981,679
=============== ===============
SUMMARY OF COMMON SHARE TRANSACTIONS:
Shares issued in payment of distributions from net
investment income -- 114,904
Shares sold in connection with shelf offering -- 10,939
--------------- ---------------
Net increase in shares outstanding -- 125,843
=============== ===============
See Accompanying Notes to Financial Statements
13
ING Prime Rate Trust
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STATEMENT OF CASH FLOWS for the Year Ended February 28, 2003
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 85,837,758
Dividends received 12,011
Facility fees paid 9,887
Dividends paid to preferred shareholders (7,530,264)
Arrangement fees received 5,006,105
Other income received 3,528,097
Interest paid (4,847,393)
Other operating expenses paid (20,105,511)
Purchases of securities (765,856,229)
Proceeds from sale of securities 881,063,596
-------------
Net cash provided by operating activities 177,118,057
=============
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to common shareholders (61,643,423)
Net repayment of notes payable (115,000,000)
-------------
Net cash flows used in financing activities (176,643,423)
-------------
Net change in cash 474,634
Cash at beginning of period 867,088
-------------
Cash at end of period $ 1,341,722
=============
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations $ (1,954,914)
-------------
Adjustments to reconcile net increase in net assets resulting
from operations to net cash used for operating activities:
Change in net unrealized depreciation of securities (51,893,096)
Net accretion of discounts on securities (4,532,794)
Net realized loss on sale of securities 115,778,026
Purchase of securities (765,856,229)
Proceeds on sale of securities 881,063,596
Decrease in interest receivable 1,613,578
Decrease in other receivables 60,897
Decrease in prepaid arrangement fees on notes payable 270,810
Decrease in prepaid expenses 123,617
Increase in deferred arrangement fees on senior loans 2,474,345
Decrease in accrued interest payable (517,066)
Decrease in preferred shareholders dividend payable (31,197)
Decrease in payable to affiliates (145,795)
Increase in accrued trustees' fees 27,227
Increase in accrued expenses 637,052
-------------
Total adjustments 179,072,971
-------------
Net cash provided by operating activities $ 177,118,057
=============
See Accompanying Notes to Financial Statements
14
ING Prime Rate Trust
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FINANCIAL HIGHLIGHTS
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For a common share outstanding throughout the period
YEARS ENDED FEBRUARY 28 OR FEBRUARY 29,
------------------------------------------------------------------------
2003 2002 2001 2000 1999(5)
---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $ 7.20 $ 8.09 $ 8.95 $ 9.24 $ 9.34
Net investment income 0.50 0.74 0.88 0.79 0.79
Net realized and unrealized gain (loss) on
investments (0.47) (0.89) (0.78) (0.30) (0.10)
Distribution to Preferred Shareholders (0.05) (0.11) (0.06) -- --
---------- ---------- ---------- ---------- ----------
Increase (decrease) in net asset value from
investment operations (0.02) (0.26) 0.04 0.49 0.69
Distributions to Common Shareholders from net invest-
ment income (0.45) (0.63) (0.86) (0.78) (0.82)
Increase in net asset value from share offerings -- -- -- -- 0.03
Reduction in net asset value from
Preferred Shares offerings -- -- (0.04) -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 6.73 $ 7.20 $ 8.09 $ 8.95 $ 9.24
========== ========== ========== ========== ==========
Closing market price at end of year $ 6.46 $ 6.77 $ 8.12 $ 8.25 $ 9.56
TOTAL RETURN(1)
Total investment return at closing
market price(2) 2.53% (9.20)% 9.10% (5.88)% 1.11%
Total investment return at net asset value(3) 0.44% (3.02)% 0.19% 5.67% 7.86%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (000's) $ 922,383 $ 985,982 $1,107,432 $1,217,339 $1,202,565
Preferred Rate Shares
Aggregate amount outstanding (000's) $ 450,000 $ 450,000 $ 450,000 -- --
Liquidation and market value Per Share $ 25,000 $ 25,000 $ 25,000 -- --
Asset coverage Per Share** 250% 235% 215% -- --
Average borrowings (000's) $ 190,671 $ 365,126 $ 450,197 $ 524,019 $ 490,978
Ratios to average net assets including preferred*
Expenses (before interest and other fees related to
revolving credit facility) 1.49% 1.57% 1.62% -- --
Expenses 1.81% 2.54% 3.97% -- --
Net investment income 4.97%(A) 6.83% 9.28% -- --
Ratios to average net assets plus borrowing
Expenses (before interest and other fees related to
revolving credit facility) 1.82% 1.66% 1.31% 1.00%(4) 1.05%(4)
Expenses 2.23% 2.70% 3.21% 2.79%(4) 2.86%(4)
Net investment income 6.10%(B) 7.24% 7.50% 6.12% 6.00%
Ratios to average net assets
Expenses (before interest and other fees related to
revolving credit facility) 2.19% 2.25% 1.81% 1.43%(4) 1.50%(4)
Expenses 2.68% 3.64% 4.45% 4.00%(4) 4.10%(4)
Net investment income 7.33%(C) 9.79% 10.39% 8.77% 8.60%
Portfolio turnover rate 48% 53% 46% 71% 68%
Common shares outstanding at end of period (000's) 136,973 136,973 136,847 136,036 130,206
- ----------
(1) Total return calculations are attributable to common shareholders.
(2) Total investment return measures the change in the market value of your
investment assuming reinvestment of dividends and capital gain
distributions, if any, in accordance with the provisions of the dividend
reinvestment plan.
(3) Total investment return at net asset value has been calculated assuming a
purchase at net asset value at the beginning of each period and a sale at
net asset value at the end of each period and assumes reinvestment of
dividends and capital gain distributions in accordance with the provisions
of the dividend reinvestment plan. This calculation differs from total
investment return because it excludes the effects of changes in the market
values of the Trust's shares.
(4) Calculated on total expenses before impact on earnings credits.
(5) The Manager agreed to reduce its fee for a period of three years from the
Expiration Date of the November 12, 1996 Rights Offering to 0.60% of the
average daily net assets, plus the proceeds of any outstanding borrowings,
over $1.15 billion.
* Ratios do not reflect the effect of dividend payments to Preferred
Shareholders; income ratios reflect income earned on assets attributable to
preferred shares.
** Asset coverage represents the total assets available for settlement of
Preferred Stockholder's interest and notes payables in relation to the
Preferred Shareholder interest and notes payable balance outstanding. The
Preferred Shares were first offered November 2, 2000.
(A) Had the Trust not amortized premiums and accreted discounts, the ratio of
net investment income to average net assets including preferred shares
would have been 4.88% for the year ended February 28, 2003.
(B) Had the Trust not amortized premiums and accreted discounts, the ratio of
net investment income to average net assets plus borrowings applicable to
common shares would have been 5.99% for the year ended February 28, 2003.
(C) Had the Trust not amortized premiums and accreted discounts, the ratio of
net investment income to average net assets applicable to common shares
would have been 7.20% for the year ended February 28, 2003.
See Accompanying Notes to Financial Statements
15
ING Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003
- --------------------------------------------------------------------------------
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
ING Prime Rate Trust (the "Trust"), is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as a diversified, closed-end,
investment management company. The Trust invests in senior loans which are
exempt from registration under the Securities Act of 1933 as amended (the "`33
Act"), but contain certain restrictions on resale and cannot be sold publicly.
These loans bear interest (unless otherwise noted) at rates that float
periodically at a margin above the Prime Rate of a U.S. bank specified in the
credit agreement, the London Inter-Bank Offered Rate ("LIBOR"), the certificate
of deposit rate, or in some cases another base lending rate. The following is a
summary of the significant accounting policies consistently followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with accounting principles generally accepted in the United States of
America.
A. SENIOR LOAN AND OTHER SECURITY VALUATION. Loans are normally valued at the
mean of the means of one or more bid and asked quotations obtained from a
pricing service or other sources determined by the Board of Trustees to be
independent and believed to be reliable. Loans for which reliable
quotations are not available may be valued with reference to another loan
or a group of loans for which quotations are more readily available and
whose characteristics are comparable to the loan being valued. Under this
approach, the comparable loan or loans serve as a proxy for changes in
value. The Trust has engaged an independent pricing service to provide
quotations from dealers in loans and to calculate values under the proxy
procedure described above. As of February 28, 2003, 91.8% of total
investments were valued based on these procedures. It is expected that most
of the loans held by the Trust will be valued with reference to quotations
from the independent pricing service or with reference to the proxy
procedure described above.
Prices from a pricing source may not be available for all loans and ING
Investments, LLC (the "Investment Manager") may believe that the price for
a loan derived from market quotations or the proxy procedure described
above is not reliable or accurate. Among other reasons, this may be the
result of information about a particular loan or borrower known to the
Investment Manager that the Investment Manager believes may not be known to
the pricing service or reflected in a price quote. In this event, the loan
is valued at fair value as determined in good faith under procedures
established by the Trust's Board of Trustees and in accordance with the
provisions of the 1940 Act. Under these procedures, fair value is
determined by the Investment Manager and monitored by the Trust's Board of
Trustees through its Valuation Committee. In fair valuing a loan,
consideration is given to several factors, which may include, among others,
the following: (i) the characteristics of and fundamental analytical data
relating to the loan, including the cost, size, current interest rate,
period until the next interest rate reset, maturity and base lending rate
of the loan, the terms and conditions of the loan and any related
agreements, and the position of the loan in the borrower's debt structure;
(ii) the nature, adequacy and value of the collateral, including the
Trust's rights, remedies and interests with respect to the collateral;
(iii) the creditworthiness of the borrower and the cash flow coverage of
outstanding principal and interest, based on an evaluation of its financial
condition, financial statements and information about the borrower's
business, cash flows, capital structure and future prospects; (iv)
information relating to the market for the loan, including price quotations
for, and trading in, the loan and interests in similar loans; (v) the
reputation and financial condition of the agent for the loan and any
intermediate participants in the loan; (vi) the borrower's management; and
(vii) the general economic and market conditions affecting the fair value
of the loan. Securities for which the primary market is a national
securities exchange or the NASDAQ National Market System are stated at the
last reported sale price on the day of valuation. Debt and equity
securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the mean between the
last reported bid and asked price. Securities other than senior loans for
which reliable quotations are not readily available and all other assets
will be valued at their respective fair
16
ING Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
values as determined in good faith by, or under procedures established by,
the Board of Trustees of the Trust. Investments in securities maturing in
less than 60 days from the date of acquisition are valued at amortized
cost, which, when combined with accrued interest, approximates market
value.
B. FEDERAL INCOME TAXES. It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to "regulated
investment companies" and to distribute all of its taxable income to its
shareholders. Therefore, no provision for Federal income taxes is required.
In addition, by distributing during each calendar year substantially all of
its net investment income and net realized capital gains (if any), the
Trust intends not to be subject to any federal excise tax.
C. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Loans are booked on a
settlement date basis and security transactions are accounted for on trade
date (date the order to buy or sell is executed). Realized gains or losses
are reported on the basis of identified cost of securities delivered.
Dividend income is recognized on the ex-dividend date. Interest income is
recorded on an accrual basis at the then-current interest rate of the loan.
The accrual of interest on loans is discontinued when, in the opinion of
management, there is an indication that the borrower may be unable to meet
payments as they become due. Upon such discontinuance, all unpaid accrued
interest is reversed. Cash collections on nonaccrual senior loans are
generally applied as a reduction to the recorded investment of the loan.
Senior loans are returned to accrual status only after all past due amounts
have been received and the borrower has demonstrated sustained performance.
For all loans acquired prior to March 1, 2001, arrangement fees, which
represent non-refundable fees associated with the acquisition of loans, are
deferred and recognized over the shorter of 2.5 years or the actual terms
of the loan. For all loans, except revolving credit facilities, acquired
subsequent to February 28, 2001, arrangement fees are treated as discounts
and accreted as described in Note 1.H. Arrangement fees associated with
revolving credit facilities acquired subsequent to February 28, 2001 are
deferred and recognized over the shorter of 4 years or the actual term of
the loan.
D. DISTRIBUTIONS TO COMMON SHAREHOLDERS. The Trust records distributions to
its shareholders on the ex-dividend date. Distributions from income are
declared by the Trust on a monthly basis. Distributions from capital gains,
if any, are declared on an annual basis.
E. DIVIDEND REINVESTMENTS. Pursuant to the Shareholder Investment Program
(formerly known as the Automatic Dividend Reinvestment Plan), DST Systems,
Inc., the Plan Agent, purchases, from time to time, shares of beneficial
interest of the Trust on the open market to satisfy dividend reinvestments.
Such shares are purchased only when the closing sale or bid price plus
commission is less than the net asset value per share of the stock on the
valuation date. If the market price plus commissions is equal to or exceeds
the net asset value, new shares are issued at the greater of (i) net asset
value or (ii) the market price of the shares during the pricing period,
minus a discount of 5%.
F. USE OF ESTIMATES. Management of the Trust has made certain estimates and
assumptions relating to the reporting of assets, liabilities, revenues,
expenses and contingencies to prepare these financial statements in
conformity with generally accepted accounting principles in the United
States of America. Actual results could differ from these estimates.
G. SHARE OFFERINGS. During the year ended February 28, 1999, the Trust began
issuing shares under various shelf registration statements, whereby the net
proceeds received by the Trust from share sales may not be less than the
greater of (i) the NAV per share or (ii) 94% of the average daily market
price over the relevant pricing period.
17
ING Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
H. CHANGE IN ACCOUNTING PRINCIPLE. In November 2000 the American Institute of
Certified Public Accountants (the "AICPA") issued a revised version of the
AICPA Audit and Accounting Guide for Investment Companies (the "Guide").
Effective March 1, 2001, the Fund adopted the provisions of the Guide and
began amortizing premiums and accreting discounts on debt securities. Prior
to March 1, 2001, the Trust had not amortized premiums nor accreted
discounts. The cumulative effect of this accounting change had no impact on
net assets of the Trust, but resulted in a $3,653,000 increase in the cost
of securities and a corresponding $3,653,000 increase in net unrealized
depreciation of investments, based on securities held by the Trust on March
1, 2001.
I. RECLASSIFICATION. Under EITF Topic D-98, CLASSIFICATION AND MEASUREMENT OF
REDEEMABLE SECURITIES, which was issued on July 19, 2001, preferred
securities that are redeemable for cash or other assets are to be
classified outside of permanent equity to the extent that the redemption is
at a fixed or determinable price and at the option of the holder or upon
the occurrence of an event that is not solely within the control of the
issuer. Subject to the guidance of the EITF, the Trust's preferred stock,
which was previously classified as a component of net assets, has been
reclassified outside of permanent equity (net assets) in the accompanying
financial statements. Prior year amounts have also been reclassified to
conform with this presentation. The impact of this reclassification creates
no change to the net assets available to common shareholders.
NOTE 2 -- INVESTMENTS
For the year ended February 28, 2003, the cost of purchases and the proceeds
from principal repayment and sales of investments, excluding short-term notes,
totaled $764,209,674 and $880,505,551, respectively. At February 28, 2003, the
Trust held senior loans valued at $1,476,322,899 representing 96.1% of its total
investments. The market value of these assets is established as set forth in
Note 1.
The senior loans acquired by the Trust may take the form of a direct lending
relationship with the borrower, an assignment of a lender's interest in a loan,
or a participation interest in a lender's interest in a loan. The lead lender in
a typical corporate loan syndicate administers the loan and monitors collateral.
In the event that the lead lender becomes insolvent, enters FDIC receivership
or, if not FDIC insured, enters into bankruptcy, the Trust may incur certain
costs and delays in realizing payment, or may suffer a loss of principal and/or
interest. Additionally, certain situations may arise where the Trust acquires a
participation in a lender's interest in a loan and the Trust does not have
privity with or direct recourse against the borrower. Accordingly, the Trust may
incur additional credit risk as a participant because it must assume the risk of
insolvency or bankruptcy of the lender from which the participation was
acquired.
Common and preferred shares, and stock purchase warrants held in the portfolio
were acquired in conjunction with senior loans held by the Trust. Certain of
these stocks and warrants are restricted and may not be publicly sold without
registration under the '33 Act, or without an exemption under the '33 Act. In
some cases, these restrictions expire after a designated period of time after
issuance of the shares or warrant.
18
ING Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
The Fund values portfolio securities by using the market value of the securities
when market quotations for the securities are readily available. When market
quotations are not readily available, the Fund determines, in good faith, the
fair value of the securities in accordance with the Trust's fair valuation
procedures as established by the Board of Trustees. Dates of acquisition and
cost or assigned basis of restricted securities are as follows:
DATE OF COST OR
ACQUISITION ASSIGNED BASIS
----------- --------------
360Networks, Inc. -- Common Shares 11/26/02 $ --
Allied Digital Technologies Corporation -- Residual Interest in
Bankruptcy Estate 06/05/02 186,961
AM Cosmetics Corporation -- Common Shares 06/08/99 385,610
AM Cosmetics Corporation -- Preferred Shares 06/02/99 --
Autotote Systems, Inc. -- Option 02/26/97 --
Block Vision Holdings Corporation -- Common Shares 09/30/02 --
Boston Chicken Inc. -- Residual Interest in Boston Chicken Plan Trust 12/26/00 8,014,961
Breed Technologies, Inc. -- Common Shares 12/27/00 3,343,665
Capital Tool & Design, Ltd. -- Warrants 07/26/96 --
Cedar Chemical -- Residual Interest in Bankruptcy Estate 12/31/02 --
Covenant Care, Inc. -- Warrants 12/22/95 --
Covenant Care, Inc. -- Warrants 01/18/02 --
Decision One Corporation -- Common Shares 06/16/00 --
Electro Mechanical Solutions -- Residual Interest in Bankruptcy Estate 10/01/02 11,356
Enterprise Profit Solutions -- Liquidation Interest 10/21/02 --
Euro United Corporation -- Residual Interest in Bankruptcy Estate 06/21/02 4,466,250
Exide Technologies -- Warrants 11/30/01 --
Gevity HR -- Common Shares 07/21/97 34,325
Grand Union Company -- Residual Interest in Bankruptcy Estate 07/01/02 8,198
Holmes Group -- Warrants 10/24/01 --
Humphreys, Inc. -- Residual Interest in Bankruptcy Estate 5/15/02 25,000
IHDG Realty -- Common Shares 05/02/01 1
Imperial Home D-cor Group, Inc. -- Common Shares 05/02/01 1,654,378
Interra Group, Inc. -- Common Shares 11/29/02 --
Kevco, Inc. -- Residual Interest in Bankruptcy Estate 06/05/02 400,069
Morris Material Handling, Inc. -- Common Shares 01/10/01 3,009,059
MP Holdings, Inc. -- Common Shares 03/14/01 6
Murray's Discount Auto Stores, Inc. -- Common Shares 3/25/02 --
Murray's Discount Auto Stores, Inc. -- Warrants 02/16/99 --
New World Restaurant Group, Inc. -- Warrants 9/27/01 40
Safelite Glass Corporation -- Common Shares 09/12/00 --
Safelite Realty -- Common Shares 09/12/00 --
Sarcom Corporation -- Common Shares 12/11/02 --
Sarcom Corporation -- Preferred Shares 12/11/02 2,782,654
Scientific Games Corporation -- Warrants 5/11/01 --
Soho Publishing -- Common Shares 03/14/01 176
Stellex Aerostructures, Inc. -- Common Shares 10/17/01 275,767
Tartan Textile Services, Inc. -- Series D Preferred Shares 07/17/01 2,227,655
Tartan Textile Services, Inc. -- Series E Preferred Shares 07/17/01 2,333,852
Telinget, Inc. -- Residual Interest in Bankruptcy Estate 09/18/02 --
Tembec, Inc. -- Common Shares 01/10/01 1,442,942
Transtar Metals -- Residual Interest in Bankruptcy Estate 01/09/03 160,918
TSR Wireless, LLC -- Residual Interest in Bankruptcy Estate 10/14/02 --
U.S. Office Products Company -- Residual Interest in
Bankruptcy Estate 11/28/00 --
-----------
Total restricted securities excluding senior loans (market value of
$37,043,248 was 4.0% of net assets at February 28, 2003) $30,763,843
===========
19
ING Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 3 -- MANAGEMENT AND ADMINISTRATION AGREEMENTS
The Trust has entered into an Investment Management Agreement with the
Investment Manager, a wholly-owned subsidiary of ING Funds Services, LLC (the
"Administrator"), to provide advisory and management services. The Investment
Management Agreement compensates the Investment Manager with a fee, computed
daily and payable monthly, at an annual rate of 0.80% of the Trust's average
daily net assets (inclusive of preferred stock) plus borrowings ("Managed
Assets").
The Trust has also entered into an Administration Agreement with the
Administrator to provide administrative services and also to furnish facilities.
The Administrator is compensated with a fee, computed daily and payable monthly,
at an annual rate of 0.25% of the Trust's average daily Managed Assets.
At February 28, 2003, the Trust had the following amounts recorded in payable to
affiliates on the accompanying Statement of Assets and Liabilities:
ACCRUED INVESTMENT ACCRUED
MANAGEMENT FEES ADMINISTRATIVE FEES TOTAL
------------------ ------------------- ------------------
$ 939,138 $ 293,429 $1,232,567
The Trust has adopted a Retirement Policy covering all independent trustees of
the Trust who will have served as a independent trustee for at least five years
at the time of retirement. Benefits under this plan are based on an annual rate
as defined in the plan agreement, as amended May 24, 2002.
NOTE 4 -- COMMITMENTS
The Trust has entered into both a $90 million 364-day revolving credit agreement
which matures on August 27, 2003 and a $450 million five-year revolving credit
agreement which matures on July 15, 2003, collateralized by assets of the Trust.
Borrowing rates under these agreements are based on a fixed spread over LIBOR,
the federal funds rate, or a commercial paper-based rate. Prepaid arrangement
fees for any unborrowed amounts are amortized over the term of the agreements.
The amount of borrowings outstanding at February 28, 2003, was $167 million, at
a weighted average interest rate of 1.8%. The amount of borrowings represented
10.8% of total assets at February 28, 2003. Average borrowings for the year
ended February 28, 2003 were $190,671,233 and the average annualized interest
rate was 2.4%.
As of February 28, 2003, the Trust had unfunded loan commitments pursuant to the
terms of the following loan agreements:
Airgate PCS, Inc. $ 644,951
Aurora Foods, Inc. 244,571
Block Vision Holdings Corp. 118,771
Citadel Broadcasting Company 2,180,500
Doshi Diagnostics 1,287,031
Express Scripts, Inc. 3,092,006
Fleming Companies, Inc. 692,691
Hercules Incorporated 1,500,000
Hilton Hawaiian Village, LLC 1,838,235
Insight Health Services Corporation 4,950,000
Lamar Media Corporation 6,843,750
Levi Strauss & Co. 2,500,000
Lyondell Chemical Company 9,000,000
Murray's Discount Auto Stores, Inc. 1,788,332
Owens -- Illinois, Inc. 2,779,385
Packaging Corporation of America 2,753,595
Park Place Entertainment Corporation 1,579,724
Peabody Energy Corporation 10,000,000
Relizon Company (The) 7,265,918
Riverwood International Corporation 5,000,000
Six Flags Theme Parks, Inc. 1,700,000
Waste Connections, Inc. 5,160,920
Western Wireless Corporation 6,000,000
-----------
$78,920,380
===========
20
ING Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 5 -- RIGHTS AND OTHER OFFERINGS
As of February 28, 2003, share offerings pursuant to shelf registrations were as
follows:
REGISTRATION SHARES SHARES
DATE REGISTERED REMAINING
------------ ------------ ------------
6/11/98 15,000,000 --
6/19/98 10,000,000 9,730,800
9/15/98 25,000,000 19,170,354
3/04/99 5,000,000 3,241,645
On November 2, 2000, the Trust issued 3,600 shares each of Series M, Series W
and Series F Auction Rate Cumulative Preferred Shares, $.01 Par Value, $25,000
liquidation preference, for a total issuance of $270 million. Also, on November
16, 2000, the Trust issued 3,600 shares of Series T and Series Th Auction Rate
Cumulative Preferred Shares, $.01 Par Value, $25,000, liquidation preference,
for a total issuance of $180 million. Costs associated with the offering of
approximately $5,438,664 were charged against the proceeds received. The Trust
used the net proceeds of the offering to partially pay down the then existing
indebtedness. The Trust may reborrow amounts in the future to increase its use
of leverage which will be consistent with the limitations imposed by the 1940
Act. Preferred Shares pay dividends based on a rate set at auctions, normally
held every 7 days. In most instances dividends are also payable every 7 days, on
the first business day following the end of the rate period.
NOTE 6 -- CUSTODIAL AGREEMENT
State Street Bank and Trust Company ("SSB") serves as the Trust's custodian and
recordkeeper. Custody fees paid to SSB are reduced by earnings credits based on
the cash balances held by SSB for the Trust. There were no earnings credits for
the year ended February 28, 2003.
NOTE 7 -- SUBORDINATED LOANS AND UNSECURED LOANS
The primary risk arising from investing in subordinated loans or in unsecured
loans is the potential loss in the event of default by the issuer of the loans.
The Trust may acquire a subordinated loan only if, at the time of acquisition,
it acquires or holds a Senior Loan from the same borrower. The Trust will
acquire unsecured loans only where the Investment Manager believes, at the time
of acquisition, that the Trust would have the right to payment upon default that
is not subordinate to any other creditor. The Trust may invest up to 5% of its
total assets, measured at the time of investment, in subordinated loans and
unsecured loans. As of February 28, 2003, the Trust held 3.6% of its total
assets in subordinated loans and unsecured loans.
NOTE 8 -- FEDERAL INCOME TAXES
Dividends paid by the Trust from net investment income and distributions of net
realized short-term capital gains (if any) are, for federal income tax purposes,
taxable as ordinary income to shareholders. The tax composition of dividends and
distributions to common shareholders for years ended February 28, 2003 and 2002
were as follows:
ORDINARY LONG-TERM TAX RETURN
INCOME CAPITAL GAINS OF CAPITAL
----------- ------------- ----------
2003 $61,643,423 $ -- $ --
2002 $85,728,945 $ -- $ --
21
ING Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
The amount of distributions from net investments income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. Key
differences are the treatment of short-term capital gains, amortization of
discounts and other temporary differences. To the extent that these differences
are permanent in nature, such amounts are reclassified within the capital
accounts based on their federal tax-basis treatment; temporary differences do
not require reclassifications. To the extent distributions exceed net investment
income and/or net realized capital gains for tax purposes, they are reported as
distributions of paid-in capital.
Accordingly, the following amounts represent current year permanent tax
differences that have been reclassified as of February 28, 2003:
ACCUMULATED NET
UNDISTRIBUTED NET REALIZED GAINS
INVESTMENT INCOME ON INVESTMENTS
----------------- ---------------
$ 2,580,000 $(2,580,000)
Capital loss carryforwards, which may be used to offset future realized capital
gains for federal income tax purposes were as follows at February 28, 2003.
AMOUNT EXPIRATION DATES
------------ ----------------
$209,579,956 2004-2011
The following represents the tax-basis components of distributable earnings as
of February 28, 2003:
CAPITAL POST OCTOBER
UNDISTRIBUTED UNREALIZED LOSS LOSSES
ORDINARY INCOME DEPRECIATION CARRYFORWARDS DEFERRED
--------------- ------------ ------------- ------------
$ 9,433,349 $(131,116,264) $(215,654,956) $ (28,226,996)
NOTE 9 -- SUBSEQUENT EVENTS
Subsequent to February 28, 2003, the Trust paid to Common Shareholders the
following dividends from net investment income:
PER SHARE AMOUNT DECLARATION DATE RECORD DATE PAYABLE DATE
---------------- ---------------- ----------- ------------
$ 0.0330 2/28/03 3/10/03 3/24/03
$ 0.0355 3/31/03 4/10/03 4/23/03
Subsequent to February 28, 2003, the Trust paid to Preferred Shareholders the
following dividends from net investment income:
TOTAL
PREFERRED PER SHARE AUCTION RECORD PAYABLE
SHARES AMOUNT DATES DATES DATES
- --------- --------- -------------------- -------------------- --------------------
Series M $ 35.49 03/03/03 to 04/07/03 03/10/03 to 04/14/03 03/11/03 to 04/15/03
Series T $ 33.97 03/04/03 to 04/08/03 03/11/03 to 04/15/03 03/12/03 to 04/16/03
Series W $ 35.34 03/05/03 to 04/09/03 03/12/03 to 04/15/03 03/13/03 to 04/17/03
Series Th $ 37.69 03/06/03 to 04/10/03 03/13/03 to 04/17/03 03/14/03 to 04/21/03
Series F $ 34.85 03/07/03 to 04/11/03 03/14/03 to 04/17/03 03/17/03 to 04/21/03
22
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003
- --------------------------------------------------------------------------------
SENIOR LOANS*: 160.1%
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ---------------- ---------------------------- ------- --- -----
AEROSPACE AND DEFENSE: 3.3%
ALLIANT TECHSYSTEMS, INC. Ba2 BB-
$ 2,638,955 Term Loan, maturing April 20, 2009 $ 2,645,883
DRS TECHNOLOGIES, INC. Ba3 BB-
1,975,018 Term Loan, maturing September 30, 2008 1,988,185
NEW PIPER AIRCRAFT, INC. NR NR
8,329,141 (3) Term Loan, maturing April 15, 2005 6,746,604
PIEDMONT AVIATION SERVICES NR NR
5,458,754 Term Loan, maturing July 23, 2006 5,404,167
5,458,755 Term Loan, maturing July 23, 2007 5,404,167
TITAN CORPORATION Ba3 BB-
2,985,000 Term Loan, maturing June 30, 2009 2,985,000
TRANSDIGM HOLDING CORPORATION B1 B+
437,986 Term Loan, maturing May 15, 2006 440,792
1,146,201 Term Loan, maturing May 15, 2007 1,153,544
UNITED DEFENSE INDUSTRIES, INC. Ba3 BB-
3,309,888 Term Loan, maturing August 13, 2009 3,320,824
--------------
30,089,166
--------------
AUTOMOBILE: 8.4%
AFTERMARKET TECHNOLOGY CORPORATION Ba2 BB-
1,726,710 Term Loan, maturing February 8, 2008 1,729,639
1,255,777 Term Loan, maturing February 8, 2008 1,257,907
AMERICAN AXLE & MANUFACTURING, INC. Ba1 BB+
5,453,298 Term Loan, maturing April 30, 2006 5,452,022
BREED TECHNOLOGIES, INC. NR NR
1,140,679 Term Loan, maturing December 20, 2004 1,077,942
CAPITAL TOOL & DESIGN, LTD. NR NR
6,683,524 Term Loan, maturing May 31, 2003 6,603,987
COLLINS & AIKMAN PRODUCTS Ba3 BB-
4,436,108 Term Loan, maturing December 31, 2005 4,450,431
DURA OPERATING CORPORATION Ba3 BB
3,184,000 Term Loan, maturing December 31, 2008 3,184,000
(2) EXIDE TECHNOLOGIES NR D
1,612,012 (3) Revolver, maturing December 18, 2003 981,312
371,195 (3) Term Loan, maturing December 18, 2003 225,965
3,227,260 (3) Term Loan, maturing March 18, 2005 1,976,697
FORD MOTOR CREDIT COMPANY A3 BBB
15,000,000 Floating Rate Note, maturing
October 25, 2004 14,778,420
(2) HAYES LEMMERZ INTERNATIONAL, INC. Caa2 NR
3,478,750 (3) Term Loan, maturing December 31, 2005 2,888,813
METALDYNE COMPANY, LLC B1 BB-
3,995,000 Term Loan, maturing December 31, 2009 3,851,847
POLYPORE, INC. Ba3 B+
5,458,750 Term Loan, maturing December 31, 2007 5,474,673
SAFELITE GLASS CORPORATION. B3 B+
10,889,049 Term Loan, maturing September 30, 2007 10,725,714
7,289,144 Term Loan, maturing September 30, 2007 7,179,807
STONERIDGE, INC. Ba3 BB
985,000 Term Loan, maturing April 30, 2008 984,384
See Accompanying Notes to Financial Statements
23
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
AUTOMOBILE (CONTINUED)
TENNECO AUTOMOTIVE, INC. B2 B
$ 2,430,281 Term Loan, maturing November 4, 2007 $ 2,246,275
2,430,281 Term Loan, maturing May 4, 2008 2,250,613
--------------
77,320,448
--------------
BANKING: 0.5%
OUTSOURCING SOLUTIONS, INC. Caa1 D
12,055,854 (3) Term Loan, maturing June 10, 2006 4,279,828
--------------
4,279,828
--------------
BEVERAGE, FOOD AND TOBACCO: 7.6%
AURORA FOODS, INC. B3 CCC
1,755,429 Revolver, maturing June 30, 2005 1,524,297
3,765,462 Term Loan, maturing June 30, 2005 3,421,864
BIRDS EYE FOODS, INC. Ba3 B+
4,488,750 Term Loan, maturing June 30, 2008 4,499,038
COMMONWEALTH BRANDS, INC. Ba3 BB-
12,025,000 Term Loan, maturing August 28, 2007 12,017,484
COTT BEVERAGES, INC. Ba3 BB-
1,176,363 Term Loan, maturing December 31, 2006 1,181,509
CP KELCO APS B3 B+
4,004,613 Term Loan, maturing March 31, 2008 3,872,961
1,349,872 Term Loan, maturing September 30, 2008 1,306,844
DEAN FOODS COMPANY Ba1 BB+
15,416,882 Term Loan, maturing July 15, 2008 15,433,270
DEL MONTE CORPORATION Ba3 BB-
5,000,000 Term Loan, maturing December 20, 2010 5,042,500
EMPIRE KOSHER POULTRY, INC. NR NR
13,545,000 (3) Term Loan, maturing July 31, 2004 5,553,450
FLEMING COMPANIES, INC. Ba3 B
854,545 Revolver, maturing June 18, 2007 766,243
1,741,087 Term Loan, maturing June 18, 2008 1,705,395
FLOWERS FOODS, INC. Ba2 BBB-
2,462,500 Term Loan, maturing March 26, 2007 2,472,761
INTERSTATE BRANDS CORPORATION Ba1 BBB-
2,955,000 Term Loan, maturing July 19, 2007 2,958,324
995,000 Term Loan, maturing July 19, 2007 994,068
MAFCO WORLDWIDE CORPORATION B1 B
2,655,031 Term Loan, maturing March 31, 2006 2,628,481
NATIONAL DAIRY HOLDINGS, L.P. Ba2 BB+
2,481,250 Term Loan, maturing April 30, 2009 2,480,215
NUTRASWEET ACQUISITION CORPORATION Ba3 NR
598,232 Term Loan, maturing May 25, 2007 599,230
SOUTHERN WINE & SPIRITS OF AMERICA, INC. Ba3 BBB-
1,990,000 Term Loan, maturing July 2, 2008 1,994,975
--------------
70,452,909
--------------
BUILDINGS AND REAL ESTATE: 2.2%
ASSOCIATED MATERIALS, INC. Ba3 BB-
612,000 Term Loan, maturing April 19, 2009 615,442
(2) HQ GLOBAL WORKPLACES, INC. NR NR
3,865,243 (3) Term Loan, maturing November 6, 2005 2,009,927
See Accompanying Notes to Financial Statements
24
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
BUILDINGS AND REAL ESTATE (CONTINUED)
JDN REALTY CORPORATION Ba3 BB-
$ 10,000,000 Term Loan, maturing December 31, 2004 $ 10,025,000
MACERICH PARTNERSHIP, L.P. Ba2 NR
4,915,200 Term Loan, maturing July 26, 2005 4,921,344
(2) U.S. AGGREGATES, INC. NR NR
1,555,139 (3) Term Loan, maturing March 31, 2006 388,074
VENTAS REALTY, L.P. Ba3 BB-
1,990,000 Term Loan, maturing April 17, 2007 1,982,538
--------------
19,942,325
--------------
CABLE TELEVISION: 12.6%
(2) ADELPHIA COMMUNICATIONS CORPORATION NR BBB
3,000,000 Debtor in Possession Term Loan, maturing
June 25, 2004 3,007,500
CC VI OPERATING, LLC B2 CCC+
8,000,000 Term Loan, maturing November 12, 2008 6,171,431
CC VIII OPERATING, LLC B2 B-
4,455,000 Term Loan, maturing February 2, 2008 3,760,497
(2) CENTURY CABLE HOLDINGS, LLC Caa1 D
1,230,000 Revolver, maturing March 31, 2009 852,390
11,000,000 Term Loan, maturing June 30, 2009 7,929,163
5,000,000 Term Loan, maturing December 31, 2009 3,530,555
CHARTER COMMUNICATIONS OPERATING, LLC B2 B
28,838,328 Term Loan, maturing March 18, 2008 24,283,170
19,850,000 Term Loan, maturing September 18, 2008 16,627,133
(2) FRONTIERVISION OPERATING PARTNERS, L.P. B2 D
2,593,939 Revolver, maturing October 31, 2005 2,282,667
2,000,000 Term Loan, maturing September 30, 2005 1,760,000
2,400,000 Term Loan, maturing March 31, 2006 2,112,000
INSIGHT MIDWEST HOLDINGS, LLC Ba3 BB+
14,500,000 Term Loan, maturing December 31, 2009 14,005,188
MCC IOWA MEDIACOM BROADBAND Ba3 BB+
13,500,000 Term Loan, maturing September 30, 2010 13,221,563
(2) OLYMPUS CABLE HOLDINGS, LLC B2 D
2,000,000 Term Loan, maturing June 30, 2010 1,587,142
18,250,000 Term Loan, maturing September 30, 2010 14,803,232
--------------
115,933,631
--------------
CARGO TRANSPORT: 2.3%
(2) AMERICAN COMMERCIAL LINES, LLC Caa1 D
1,258,356 Term Loan, maturing June 30, 2006 1,012,977
1,804,934 Term Loan, maturing June 30, 2007 1,452,972
EVERGREEN INTERNATIONAL AVIATION, INC. Ba2 B+
1,993,058 Term Loan, maturing May 7, 2003 1,704,064
337,411 Term Loan, maturing May 7, 2003 288,487
GEMINI LEASING, INC. B1 NR
4,117,116 (3) Term Loan, maturing August 12, 2005 1,749,774
NEOPLAN USA CORPORATION NR NR
9,562,848 (3) Term Loan, maturing May 29, 2005 7,363,393
OMNITRAX RAILROADS, LLC NR NR
3,811,673 Term Loan, maturing May 13, 2005 3,802,144
See Accompanying Notes to Financial Statements
25
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
CARGO TRANSPORT (CONTINUED)
TEREX CORPORATION B1 BB-
$ 3,488,750 Term Loan, maturing December 31, 2009 $ 3,378,271
--------------
20,752,082
--------------
CELLULAR: 12.2%
AIRGATE PCS, INC. B3 CCC-
931,148 Term Loan, maturing June 6, 2007 675,083
9,387,622 Term Loan, maturing September 30, 2008 6,806,026
AMERICAN CELLULAR CORPORATION B3 CC
2,499,241 Term Loan, maturing March 31, 2008 1,883,803
4,382,505 Term Loan, maturing March 31, 2009 3,303,313
INDEPENDENT WIRELESS ONE CORPORATION Caa1 CCC
10,000,000 Term Loan, maturing June 20, 2008 7,200,000
MICROCELL CONNEXIONS, INC. Ca D
2,250,000 (3) Term Loan, maturing March 1, 2006 1,632,500
5,000,000 (3) Term Loan, maturing February 22, 2007 3,780,000
NEXTEL FINANCE COMPANY Ba3 BB-
5,000,000 Term Loan, maturing December 31, 2007 4,587,500
3,740,625 Term Loan, maturing June 30, 2008 3,575,136
3,740,625 Term Loan, maturing December 31, 2008 3,575,136
45,500,000 Term Loan, maturing March 31, 2009 42,446,615
NEXTEL OPERATIONS, INC. Ba3 BB-
6,784,146 Term Loan, maturing March 15, 2005 6,656,009
2,353,577 Term Loan, maturing February 10, 2007 2,251,258
RURAL CELLULAR CORPORATION B2 B+
4,911,130 Term Loan, maturing October 3, 2008 4,251,634
4,911,130 Term Loan, maturing April 3, 2009 4,251,634
WESTERN WIRELESS CORPORATION B3 B
4,000,000 Revolver, maturing March 31, 2008 3,191,000
8,000,000 Term Loan, maturing March 31, 2008 6,378,000
8,000,000 Term Loan, maturing September 30, 2008 6,372,000
--------------
112,816,647
--------------
CHEMICALS, PLASTICS AND RUBBER: 6.6%
ACADIA ELASTOMERS CORPORATION NR NR
9,306,569 Term Loan, maturing March 31, 2004 9,042,388
EQUISTAR CHEMICALS, L.P. Ba2 BB+
7,929,924 Term Loan, maturing August 24, 2007 7,952,231
FMC CORPORATION Ba1 BBB-
4,000,000 Term Loan, maturing October 21, 2007 4,050,000
FOAMEX, L.P. B2 B+
1,682,653 Term Loan, maturing June 30, 2005 1,543,834
1,529,690 Term Loan, maturing June 30, 2006 1,403,491
GEO SPECIALTY CHEMICALS, INC. B1 B+
2,757,857 Term Loan, maturing December 31, 2007 2,546,421
HERCULES, INC. Ba1 BB
5,000,000 Term Loan, maturing May 15, 2007 5,007,815
HUNTSMAN COMPANY, LLC B3 B+
7,700,916 Term Loan, maturing March 31, 2007 6,334,004
3,694,203 Term Loan, maturing March 31, 2007 3,038,482
See Accompanying Notes to Financial Statements
26
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
CHEMICALS, PLASTICS AND RUBBER (CONTINUED)
HUNTSMAN INTERNATIONAL, LLC B2 B+
$ 904,712 Term Loan, maturing June 30, 2005 $ 880,285
3,940,128 Term Loan, maturing June 30, 2007 3,877,744
3,940,128 Term Loan, maturing June 30, 2008 3,877,744
JOHNSONDIVERSEY, INC. Ba3 BB-
3,980,000 Term Loan, maturing November 3, 2009 4,003,633
LYONDELL CHEMICAL COMPANY Ba3 BB
819,698 Term Loan, maturing May 17, 2006 822,132
MILLENNIUM AMERICA, INC. Baa3 BBB-
780,000 Term Loan, maturing June 18, 2006 782,340
NOVEON, INC. B1 BB-
4,663,901 Term Loan, maturing September 30, 2008 4,678,891
OM GROUP, INC. B2 B+
992,506 Term Loan, maturing April 1, 2006 951,565
--------------
60,793,000
--------------
CONTAINERS, PACKAGING AND GLASS: 9.7%
BERRY PLASTICS CORPORATION B1 B+
2,985,000 Term Loan, maturing July 22, 2010 3,001,791
BLUE RIDGE PAPER PRODUCTS, INC. B3 B+
8,681,294 Term Loan, maturing May 14, 2006 8,464,261
CONSTAR INTERNATIONAL, INC. B1 BB-
2,992,500 Term Loan, maturing November 20, 2009 3,007,463
GRAPHIC PACKAGING CORPORATION Ba3 BB
1,980,000 Term Loan, maturing February 28, 2009 1,989,900
GREIF BROS. CORPORATION Ba3 BB
2,985,000 Term Loan, maturing August 23, 2009 2,997,313
IMPAXX, INC. NR NR
4,234,970 Term Loan, maturing April 30, 2005 3,769,123
JEFFERSON SMURFIT CORPORATION Ba3 B+
2,989,091 Term Loan, maturing March 31, 2007 2,984,819
(2) LINCOLN PULP & EASTERN FINE NR NR
92,280 Term Loan, maturing December 31, 2001 65,519
14,881,108 Term Loan, maturing August 31, 2004 10,565,587
NEXPAK CORPORATION B1 B+
2,271,860 Term Loan, maturing March 31, 2004 1,783,410
2,271,860 Term Loan, maturing March 31, 2004 1,783,410
OWENS-BROCKWAY GLASS CONTAINER, INC. B1 BB
9,628,331 Revolver, maturing March 31, 2004 9,506,773
PACKAGING CORPORATION OF AMERICA Baa3 BBB
1,002,633 Term Loan, maturing June 29, 2006 1,000,126
PLIANT CORPORATION B2 B+
2,708,730 Term Loan, maturing May 31, 2008 2,679,104
RIVERWOOD INTERNATIONAL CORPORATION B1 B
550,000 Revolver, maturing December 31, 2006 522,156
15,000,000 Term Loan, maturing December 31, 2006 14,985,945
SILGAN HOLDINGS, INC. Ba2 BB-
1,990,000 Term Loan, maturing November 30, 2008 1,988,342
SMURFIT-STONE CONTAINER CANADA, INC. Ba3 B+
4,307,692 Term Loan, maturing June 30, 2009 4,260,579
See Accompanying Notes to Financial Statements
27
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
CONTAINERS, PACKAGING AND GLASS (CONTINUED)
STONE CONTAINER CORPORATION Ba3 B+
$ 11,692,308 Term Loan, maturing June 30, 2009 $ 11,567,165
TEKNI-PLEX, INC. B1 B+
2,925,000 Term Loan, maturing June 21, 2008 2,881,581
--------------
89,804,367
--------------
DATA & INTERNET SERVICES: 0.6%
360NETWORKS, INC. NR NR
1,353,721 Term Loan, maturing November 12, 2007 825,770
ARCH WIRELESS HOLDINGS, INC. Caa3 NR
773,116 Senior Note, maturing May 15, 2007 757,654
ICG COMMUNICATIONS, INC. NR NR
4,880,493 Term Loan, maturing May 31, 2005 3,440,748
MCLEODUSA, INC. Caa2 NR
1,329,412 Term Loan, maturing May 30, 2008 666,921
--------------
5,691,093
--------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING: 6.4%
BARJAN PRODUCTS, LLC NR NR
4,826,250 Term Loan, maturing May 31, 2006 4,541,926
BRAND SERVICES, INC. B1 B+
4,000,000 Term Loan, maturing October 16, 2009 4,015,000
DRESSER, INC. Ba3 BB-
5,219,136 Term Loan, maturing April 10, 2009 5,232,648
FLOWSERVE CORPORATION Ba3 BB-
1,553,145 Term Loan, maturing June 30, 2006 1,540,526
4,788,900 Term Loan, maturing June 30, 2009 4,788,043
GENERAL CABLE CORPORATION B1 BB-
2,567,281 Term Loan, maturing May 25, 2007 2,207,862
MANITOWOC COMPANY, INC. Ba2 BB
1,970,000 Term Loan, maturing May 9, 2007 1,973,201
MUELLER GROUP, INC. B1 B+
3,980,000 Term Loan, maturing May 31, 2008 3,975,025
NEPTUNE TECHNOLOGY GROUP, INC. Ba3 BB-
3,881,919 Term Loan, maturing November 1, 2008 3,901,328
REXNORD CORPORATION B1 B+
6,805,556 Term Loan, maturing November 25, 2009 6,867,234
SPX CORPORATION Ba2 BB+
6,495,625 Term Loan, maturing September 30, 2009 6,485,882
7,627,211 Term Loan, maturing March 31, 2010 7,615,770
UNITED PET GROUP NR NR
6,055,561 Term Loan, maturing March 31, 2006 5,966,043
--------------
59,110,488
--------------
DIVERSIFIED/CONGLOMERATE SERVICE: 1.4%
IRON MOUNTAIN, INC. Ba3 BB
1,996,000 Term Loan, maturing February 15, 2008 2,002,238
PRIVATE BUSINESS, INC. NR NR
3,549,793 Term Loan, maturing August 19, 2006 3,496,546
See Accompanying Notes to Financial Statements
28
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
DIVERSIFIED/CONGLOMERATE SERVICE (CONTINUED)
URS CORPORATION Ba3 BB-
$ 2,992,500 Term Loan, maturing August 22, 2008 $ 2,827,912
US INVESTIGATIONS SERVICES, LLC B1 BB-
5,000,000 Term Loan, maturing January 10, 2009 4,965,625
--------------
13,292,321
--------------
ECOLOGICAL: 1.6%
ALLIED WASTE NORTH AMERICA, INC. Ba3 BB
2,220,129 Term Loan, maturing July 21, 2005 2,213,191
435,739 Term Loan, maturing July 21, 2006 434,961
522,885 Term Loan, maturing July 21, 2007 521,951
AMERICAN REF-FUEL COMPANY, LLC Baa2 BBB
3,558,140 Term Loan, maturing April 30, 2005 3,504,767
CASELLA WASTE SYSTEMS, INC. B1 BB-
3,000,000 Term Loan, maturing May 11, 2007 3,015,000
(2) IT GROUP, INC. Caa1 NR
4,154,605 (3) Term Loan, maturing June 11, 2007 401,613
WASTE CONNECTIONS, INC. Ba3 BB
4,839,080 Revolver, maturing May 16, 2005 4,693,908
--------------
14,785,391
--------------
ELECTRONICS: 2.2%
ACTERNA, LLC Caa1 CCC+
6,098,973 Term Loan, maturing September 30, 2007 1,626,395
DECISION ONE CORPORATION B3 CCC
1,882,236 Term Loan, maturing April 18, 2005 1,599,901
9,492,004 Term Loan, maturing April 18, 2005 8,068,204
(2) INSILCO TECHNOLOGIES, INC. Caa2 D
4,925,016 (3) Term Loan, maturing March 25, 2007 1,083,503
KNOWLES ELECTRONICS, INC. B3 CCC+
3,357,724 Term Loan, maturing June 29, 2007 2,837,277
SARCOM, INC. NR NR
1,003,670 Term Loan, maturing June 30, 2007 1,003,670
TRANSACTION NETWORK SERVICES, INC. Ba3 BB-
3,777,368 Term Loan, maturing April 3, 2007 3,772,645
--------------
19,991,595
--------------
FINANCE: 2.8%
ALLIANCE DATA SYSTEMS CORPORATION B1 B+
8,710,638 Term Loan, maturing July 25, 2005 8,688,862
ANTHONY CRANE RENTAL, L.P. Caa2 CCC+
14,475,000 Term Loan, maturing July 20, 2006 8,443,745
RENT-A-CENTER, INC. Ba2 BB
1,441,705 Term Loan, maturing January 31, 2006 1,439,363
3,174,077 Term Loan, maturing January 31, 2007 3,168,919
1,250,713 Term Loan, maturing December 31, 2007 1,250,582
UNITED RENTALS (NORTH AMERICA), INC. Ba3 BB
1,725,660 Term Loan, maturing August 31, 2007 1,707,109
VALUE ASSET MANAGEMENT, INC. B1 B+
750,000 Term Loan, maturing April 28, 2003 726,562
--------------
25,425,142
--------------
See Accompanying Notes to Financial Statements
29
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
GAMING: 4.4%
(2) ALADDIN GAMING, LLC Caa1 NR
$ 2,968,421 (3) Term Loan, maturing August 26, 2006 $ 2,463,789
4,455,000 (3) Term Loan, maturing February 26, 2008 3,697,650
ALLIANCE GAMING CORPORATION B1 BB-
4,962,500 Term Loan, maturing December 31, 2006 4,991,446
AMERISTAR CASINOS, INC. Ba3 BB-
2,929,258 Term Loan, maturing December 20, 2006 2,945,003
ARGOSY GAMING COMPANY Ba2 BB
4,432,500 Term Loan, maturing July 31, 2008 4,460,203
BOYD GAMING CORPORATION Ba1 BB+
995,000 Term Loan, maturing June 24, 2008 998,421
ISLE OF CAPRI CASINOS, INC. Ba2 BB-
992,500 Term Loan, maturing April 26, 2008 995,292
MANDALAY RESORT GROUP Ba2 BB+
17,000,000 Term Loan, maturing August 22, 2006 16,847,714
PARK PLACE ENTERTAINMENT CORPORATION Ba1 BBB-
3,420,276 Revolver, maturing December 31, 2003 3,360,422
--------------
40,759,940
--------------
GROCERY: 0.2%
GIANT EAGLE, INC. Ba2 BB+
1,990,000 Term Loan, maturing August 2, 2009 1,993,731
--------------
1,993,731
--------------
HEALTHCARE, EDUCATION AND CHILDCARE: 11.5%
ALLIANCE IMAGING, INC. B1 B+
1,038,168 Term Loan, maturing November 2, 2006 1,021,297
6,217,331 Term Loan, maturing June 10, 2008 6,139,615
APRIA HEALTHCARE GROUP INC. Ba1 BBB-
4,925,000 Term Loan, maturing July 20, 2008 4,926,542
BROWN SCHOOLS B3 B
7,908,931 Term Loan, maturing June 30, 2003 7,908,931
CAREMARK RX, INC. Ba2 BB+
2,476,275 Term Loan, maturing March 31, 2006 2,478,338
COMMUNITY HEALTH SYSTEMS, INC. Ba3 BB-
12,967,500 Term Loan, maturing July 16, 2010 12,926,977
CONCENTRA OPERATING CORPORATION B1 B+
2,995,019 Term Loan, maturing June 30, 2006 2,948,221
1,497,509 Term Loan, maturing June 30, 2007 1,474,111
COVENANT CARE, INC. NR NR
5,393,557 Term Loan, maturing June 30, 2003 5,326,138
DAVITA, INC. Ba3 BB-
8,913,441 Term Loan, maturing March 31, 2009 8,935,172
EXPRESS SCRIPTS, INC. Ba1 BBB-
3,692,308 Term Loan, maturing March 31, 2008 3,693,954
(2) FOUNTAIN VIEW, INC. NR NR
9,939,548 Term Loan, maturing March 31, 2004 9,507,089
FRESENIUS MEDICAL CARE HOLDING, INC. Ba1 BB+
4,000,000 Term Loan, maturing June 30, 2006 4,000,000
See Accompanying Notes to Financial Statements
30
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
HEALTHCARE, EDUCATION AND CHILDCARE (CONTINUED)
GENESIS HEALTH VENTURES, INC. Ba3 B+
$ 162,366 Term Loan, maturing March 31, 2007 $ 162,366
396,335 Term Loan, maturing March 31, 2007 390,390
1,539,950 Floating Rate Note, maturing April 2, 2007 1,455,253
HCA, INC. Ba1 BBB-
9,514,286 Term Loan, maturing April 30, 2006 9,389,411
IASIS HEALTHCARE CORPORATION B1 B
4,000,000 Term Loan, maturing February 7, 2009 4,021,668
KINETIC CONCEPTS, INC. Ba3 B+
2,639,967 Term Loan, maturing March 31, 2006 2,642,443
MAGELLAN HEALTH SERVICES, INC. Caa1 CCC
1,231,415 Term Loan, maturing February 12, 2005 1,079,028
1,231,415 Term Loan, maturing February 12, 2006 1,083,645
MARINER HEALTH CARE, INC. B1 NR
988,381 Floating Rate Note, maturing May 13, 2009 973,555
SYBRON DENTAL MANAGEMENT, INC. Ba3 BB-
1,442,001 Term Loan, maturing June 6, 2009 1,447,588
TRIAD HOSPITALS, INC. Ba3 B+
1,972,727 Term Loan, maturing September 30, 2008 1,984,688
VANGUARD HEALTH SYSTEMS, INC. Ba3 B+
5,500,000 Term Loan, maturing January 3, 2010 5,517,188
VICAR OPERATING, INC. B1 B+
4,979,987 Term Loan, maturing September 30, 2008 5,006,964
--------------
106,440,572
--------------
HOME AND OFFICE FURNISHING, HOUSEWARES: 1.7%
(2) DESA INTERNATIONAL, INC. Caa2 NR
7,136,217 (3) Term Loan, maturing November 26, 2004 7,136,217
HOLMES PRODUCTS CORPORATION B2 B
3,577,773 Term Loan, maturing February 5, 2007 3,363,107
IDENTITY GROUP, INC. NR NR
4,525,000 Term Loan, maturing May 11, 2007 2,262,500
IMPERIAL HOME D-COR GROUP, INC. NR NR
833,725 (3) Term Loan, maturing April 4, 2006 625,294
SEALY MATTRESS COMPANY B1 B+
756,640 Term Loan, maturing December 15, 2004 748,127
545,722 Term Loan, maturing December 15, 2005 539,583
697,638 Term Loan, maturing December 15, 2006 689,790
--------------
15,364,618
--------------
INSURANCE: 0.7%
FUND AMERICAN COMPANIES, INC. Baa2 BBB+
4,421,250 Term Loan, maturing March 31, 2007 4,407,986
USI HOLDINGS CORPORATION B1 B+
2,361,668 Term Loan, maturing September 17, 2004 2,178,639
--------------
6,586,625
--------------
LEISURE, AMUSEMENT AND ENTERTAINMENT: 9.8%
AMF BOWLING WORLDWIDE, INC. B1 B
1,864,763 Term Loan, maturing February 28, 2008 1,859,323
See Accompanying Notes to Financial Statements
31
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
LEISURE, AMUSEMENT AND ENTERTAINMENT (CONTINUED)
BALLY TOTAL FITNESS HOLDING CORPORATION Ba3 B+
$ 5,901,906 Term Loan, maturing November 10, 2004 $ 5,665,830
FITNESS HOLDINGS WORLDWIDE, INC. B1 B
8,578,059 Term Loan, maturing November 2, 2006 8,345,739
7,669,125 Term Loan, maturing November 2, 2007 7,461,422
KERASOTES THEATRES, INC. B1 B+
2,000,000 Term Loan, maturing December 31, 2008 2,005,000
LODGENET ENTERTAINMENT CORPORATION Ba3 B+
4,982,450 Term Loan, maturing June 30, 2006 4,950,273
LOEWS CINEPLEX ENTERTAINMENT CORPORATION NR NR
9,883,703 Term Loan, maturing February 29, 2008 9,714,859
METRO-GOLDWYN-MAYER STUDIOS, INC. Ba3 BB-
14,500,000 Term Loan, maturing June 30, 2008 14,429,762
PANAVISION, INC. Caa1 CCC
13,992,568 Term Loan, maturing March 31, 2005 12,033,608
REGAL CINEMAS, INC. Ba2 BB-
2,375,000 Term Loan, maturing December 31, 2007 2,383,906
SIX FLAGS THEME PARKS, INC. Ba2 BB-
1,300,000 Revolver, maturing June 30, 2008 1,261,000
11,000,000 Term Loan, maturing June 30, 2009 10,890,000
WASHINGTON FOOTBALL, INC. Baa3 NR
3,000,000 Term Loan, maturing October 16, 2007 3,016,876
XANTERRA PARKS & RESORTS, LLC NR NR
3,418,661 Term Loan, maturing September 30, 2004 3,410,114
3,418,661 Term Loan, maturing September 30, 2005 3,410,114
--------------
90,837,826
--------------
LODGING: 7.1%
EXTENDED STAY AMERICA, INC. Ba3 BB-
16,227,853 Term Loan, maturing January 15, 2008 15,974,293
HILTON HAWAIIAN VILLAGE, LLC Ba1 BBB-
13,786,765 Revolver, maturing June 1, 2003 13,579,963
KSL RECREATIONAL GROUP, INC. Ba3 B+
1,513,611 Term Loan, maturing April 30, 2005 1,502,890
1,513,611 Term Loan, maturing April 30, 2006 1,505,570
5,518,687 Term Loan, maturing December 22, 2006 5,504,890
MERISTAR INVESTMENT PARTNERS Ba3 B-
6,022,138 Term Loan, maturing March 31, 2003 6,037,193
2,500,000 Term Loan, maturing March 31, 2003 2,506,250
WYNDHAM INTERNATIONAL, INC. NR CCC+
7,176,801 Term Loan, maturing June 30, 2004 5,443,159
18,084,136 Term Loan, maturing June 30, 2006 13,140,386
--------------
65,194,594
--------------
MACHINERY: 1.0%
ALLIANCE LAUNDRY HOLDINGS, LLC B1 B
3,861,048 Term Loan, maturing August 2, 2007 3,830,480
MORRIS MATERIAL HANDLING, INC. NR NR
258,831 Term Loan, maturing September 28, 2004 245,889
NATIONAL WATERWORKS, INC. B1 BB-
2,000,000 Term Loan, maturing November 22, 2009 2,018,750
See Accompanying Notes to Financial Statements
32
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
MACHINERY (CONTINUED)
VUTEK, INC. B1 NR
$ 985,842 Term Loan, maturing July 31, 2005 $ 956,266
1,704,172 Term Loan, maturing July 31, 2007 1,653,046
634,785 Term Loan, maturing December 30, 2007 614,135
--------------
9,318,566
--------------
MINING, STEEL, IRON AND NON-PRECIOUS METALS: 0.1%
(2) NATIONAL REFRACTORIES & MINERALS CORPORATION NR NR
493,969 Term Loan, maturing March 30, 2002 469,270
--------------
469,270
--------------
OIL AND GAS 2.1%
PACIFIC ENERGY GROUP, LLC Ba2 BBB-
4,000,000 Term Loan, maturing July 26, 2009 4,023,752
PLAINS MARKETING, L.P. Ba1 BBB-
3,465,000 Term Loan, maturing September 21, 2007 3,482,325
PMC COMPANY Ba1 BBB-
2,970,000 Term Loan, maturing May 5, 2006 2,977,425
TESORO PETROLEUM CORPORATION Ba3 BB
6,216,279 Term Loan, maturing December 31, 2007 5,911,681
W-H ENERGY SERVICES, INC. B2 B+
3,438,750 Term Loan, maturing April 16, 2007 3,387,169
--------------
19,782,352
--------------
OTHER TELECOMMUNICATIONS: 2.4%
BROADWING, INC. B1 B-
11,279,000 Term Loan, maturing November 9, 2004 10,865,433
6,310,798 Term Loan, maturing December 30, 2006 5,995,258
757,845 Term Loan, maturing June 28, 2007 720,711
GCI HOLDINGS, INC. Ba3 BB+
1,500,000 Term Loan, maturing October 15, 2004 1,496,250
INTERA GROUP, INC. NR NR
2,905,339 Term Loan, maturing December 31, 2005 2,760,071
1,591,423 (3) Term Loan, maturing December 31, 2005 --
909,384 (3) Term Loan, maturing December 31, 2005 --
--------------
21,837,723
--------------
PERSONAL AND NON DURABLE CONSUMER PRODUCTS: 5.8%
AM COSMETICS CORPORATION NR NR
2,292,689 (3) Revolver, maturing May 30, 2004 1,375,613
1,305,151 (3) Term Loan, maturing May 30, 2004 --
2,610,303 (3) Term Loan, maturing December 31, 2004 --
AMSCAN HOLDINGS, INC. B1 BB-
2,000,000 Term Loan, maturing June 15, 2007 1,985,000
ARMKEL, LLC Ba3 B+
1,975,000 Term Loan, maturing March 28, 2009 1,988,225
BUHRMANN U.S., INC. B1 B+
2,535,153 Term Loan, maturing October 26, 2005 2,349,770
4,088,253 Term Loan, maturing October 26, 2007 3,882,308
(2) CENTIS, INC. B2 B
3,900,000 (3) Term Loan, maturing September 30, 2005 1,014,000
3,421,250 (3) Term Loan, maturing September 30, 2006 889,525
See Accompanying Notes to Financial Statements
33
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
PERSONAL AND NON DURABLE CONSUMER PRODUCTS (CONTINUED)
CHURCH & DWIGHT CO., INC. Ba2 BB
$ 2,987,494 Term Loan, maturing September 30, 2007 $ 3,006,476
JOSTENS, INC. B1 BB-
1,758,052 Term Loan, maturing May 31, 2006 1,728,751
4,486,364 Term Loan, maturing December 31, 2009 4,494,776
NORWOOD PROMOTIONAL PRODUCTS, INC. NR NR
10,197,523 Term Loan, maturing February 1, 2005 10,197,523
7,132,826 (3) Term Loan, maturing February 1, 2005 3,174,108
1,998,167 (3) Term Loan, maturing February 1, 2005 --
PAINT SUNDRY BRANDS CORPORATION B2 B+
894,245 Term Loan, maturing August 11, 2005 831,648
875,811 Term Loan, maturing August 11, 2006 814,505
PLAYTEX PRODUCTS, INC. Ba3 BB-
11,275,083 Term Loan, maturing May 31, 2009 11,258,171
RAYOVAC CORPORATION Ba3 BB-
4,558,333 Term Loan, maturing September 30, 2009 4,572,577
--------------
53,562,976
--------------
PERSONAL, FOOD AND MISCELLANEOUS SERVICES: 5.9%
AFC ENTERPRISES, INC. Ba2 BB
1,592,000 Term Loan, maturing May 23, 2009 1,595,814
COINMACH CORPORATION B1 BB-
4,900,000 Term Loan, maturing July 25, 2009 4,915,312
DOMINO'S, INC. Ba3 BB-
2,985,000 Term Loan, maturing June 30, 2008 2,994,328
GATE GOURMET BORROWER, LLC B1 BB
1,000,000 Term Loan, maturing December 31, 2008 970,000
1,000,000 Term Loan, maturing December 31, 2009 990,000
NEW WORLD RESTAURANT GROUP, INC. Caa2 CCC+
4,000,000 Secured Floating Rate Note, maturing
June 15, 2003 3,600,000
OTIS SPUNKMEYER, INC. B1 B+
6,920,455 Term Loan, maturing January 21, 2009 6,916,129
PAPA GINO'S, INC. NR NR
1,943,182 Term Loan, maturing August 31, 2006 1,908,686
4,839,844 Term Loan, maturing August 31, 2007 4,790,046
RELIZON COMPANY Ba3 BB-
1,112,147 Revolver, maturing August 4, 2006 1,000,933
SC INTERNATIONAL SERVICES Ba1 BB
25,057,291 Term Loan, maturing March 1, 2007 24,806,719
--------------
54,487,967
--------------
PRINTING AND PUBLISHING: 7.0%
ADAMS OUTDOOR ADVERTISING, L.P. B1 B+
1,780,000 Term Loan, maturing February 8, 2008 1,786,305
ADVANSTAR COMMUNICATIONS, INC. B2 B
10,136,771 Term Loan, maturing April 11, 2007 9,401,855
AMERICAN MEDIA OPERATIONS, INC. Ba3 B+
4,000,000 Term Loan, maturing April 1, 2007 4,012,500
BELL ACTIMEDIA, INC. Ba3 BB-
2,000,000 Term Loan, maturing November 29, 2010 2,014,250
See Accompanying Notes to Financial Statements
34
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
PRINTING AND PUBLISHING (CONTINUED)
CANWEST MEDIA, INC. Ba3 B+
$ 4,222,181 Term Loan, maturing May 15, 2008 $ 4,226,872
4,521,976 Term Loan, maturing May 15, 2009 4,527,000
DEX MEDIA EAST, LLC Ba3 BB-
5,500,000 Term Loan, maturing May 8, 2009 5,559,010
HOLLINGER INTERNATIONAL PUBLISHING, INC. Ba2 BB-
2,500,000 Term Loan, maturing September 30, 2009 2,512,500
LAMAR MEDIA CORPORATION Ba2 BB-
5,150,000 Term Loan, maturing March 1, 2006 5,089,915
PRIMEDIA, INC. B3 B
3,743,351 Term Loan, maturing June 30, 2009 3,570,221
R.H. DONNELLEY, INC. Ba3 BB
8,000,000 Term Loan, maturing June 30, 2010 8,057,000
READER'S DIGEST ASSOCIATIONS, INC. Baa3 BB+
6,965,000 Term Loan, maturing May 20, 2008 6,854,305
TRANSWESTERN PUBLISHING COMPANY Ba3 BB-
2,955,000 Term Loan, maturing June 27, 2008 2,953,153
VERTIS, INC. B1 B+
2,457,389 Term Loan, maturing December 7, 2008 2,386,739
ZIFF DAVIS MEDIA, INC. B3 CCC-
1,694,296 Term Loan, maturing March 31, 2007 1,457,095
--------------
64,408,720
--------------
RADIO AND TV BROADCASTING: 5.8%
BLOCK COMMUNICATIONS, INC. Ba2 BB-
2,985,000 Term Loan, maturing November 15, 2009 2,996,194
CITADEL BROADCASTING COMPANY Ba2 B+
1,260,000 Revolver, maturing April 2, 2008 1,174,950
750,000 Term Loan, maturing April 2, 2008 748,125
3,600,000 Term Loan, maturing June 26, 2009 3,614,400
CUMULUS MEDIA, INC. Ba3 B+
3,000,000 Term Loan, maturing March 28, 2010 3,021,564
EMMIS OPERATING COMPANY Ba2 B+
10,982,904 Term Loan, maturing August 31, 2009 11,030,954
FISHER BROADCASTING, INC. Ba3 B+
2,000,000 Term Loan, maturing February 28, 2010 2,002,500
GRAY TELEVISION, INC. Ba3 B+
4,000,000 Term Loan, maturing December 31, 2010 4,020,832
LIN TELEVISION CORPORATION Ba2 BB
1,897,143 Term Loan, maturing December 31, 2007 1,899,514
2,102,857 Term Loan, maturing December 31, 2007 2,105,486
PAXSON COMMUNICATIONS CORPORATION Ba3 BB
4,925,000 Term Loan, maturing June 30, 2006 4,903,453
PEGASUS MEDIA & COMMUNICATIONS, INC. B3 B-
5,884,937 Term Loan, maturing April 30, 2005 5,319,324
SINCLAIR BROADCAST GROUP, INC. Ba2 BB
5,000,000 Term Loan, maturing December 31, 2009 5,011,385
3,000,000 Term Loan, maturing December 31, 2009 3,007,635
SUSQUEHANNA MEDIA COMPANY Ba1 BB-
2,481,250 Term Loan, maturing June 30, 2008 2,493,656
--------------
53,349,972
--------------
See Accompanying Notes to Financial Statements
35
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
RETAIL STORES: 5.3%
ADVANCE STORES COMPANY, INC. Ba3 BB-
$ 5,000,000 Term Loan, maturing November 30, 2007 $ 5,009,375
CH OPERATING, LLC B2 B+
2,431,034 Term Loan, maturing June 30, 2007 2,412,802
HERBALIFE INTERNATIONAL, INC. B1 BB-
1,500,000 Term Loan, maturing July 31, 2008 1,494,375
(2) K MART CORPORATION Ba1 BBB
3,500,000 Debtor in Possession Term Loan, maturing
April 22, 2004 3,466,460
MURRAY'S DISCOUNT AUTO STORES, INC. NR B
1,911,667 Revolver, maturing June 30, 2003 1,888,439
13,314,994 Term Loan, maturing June 30, 2003 13,228,635
PETCO ANIMAL SUPPLIES, INC. Ba3 BB-
3,481,912 Term Loan, maturing October 2, 2008 3,493,883
RITE AID CORPORATION B2 BB-
14,694,891 Term Loan, maturing June 27, 2005 14,547,942
SHOPPERS DRUG MART CORPORATION Ba1 BBB+
882,353 Term Loan, maturing February 4, 2009 884,449
TRAVELCENTERS OF AMERICA, INC. Ba3 BB
2,475,000 Term Loan, maturing November 14, 2008 2,487,375
--------------
48,913,735
--------------
TELECOMMUNICATIONS EQUIPMENT: 5.0%
AMERICAN TOWER, L.P. B2 B
9,973,468 Term Loan, maturing June 30, 2007 9,251,638
1,667,986 Term Loan, maturing December 31, 2007 1,580,504
CROWN CASTLE OPERATING COMPANY Ba3 B-
13,000,000 Term Loan, maturing March 15, 2008 12,328,329
PINNACLE TOWERS, INC. B3 D
8,586,031 Term Loan, maturing October 31, 2005 7,963,544
SPECTRASITE COMMUNICATIONS, INC. B3 CC
7,654,927 Term Loan, maturing December 31, 2007 6,793,747
TRIPOINT GLOBAL COMMUNICATIONS, INC. NR NR
3,181,948 Term Loan, maturing May 31, 2006 3,022,851
TSI TELECOMMUNICATION SERVICES, INC. Ba3 B+
5,693,182 Term Loan, maturing December 31, 2006 5,440,547
--------------
46,381,160
--------------
TEXTILES AND LEATHER: 3.2%
ACCESSORY NETWORK GROUP, INC. NR NR
8,194,791 Term Loan, maturing June 30, 2003 3,277,917
(2) GALEY & LORD, INC. Caa2 NR
2,692,043 Term Loan, maturing April 2, 2005 1,938,271
1,927,515 Term Loan, maturing April 1, 2006 1,387,811
LEVI STRAUSS & COMPANY B1 BB
5,000,000 Term Loan, maturing July 31, 2006 5,013,540
(2) MALDEN MILLS INDUSTRIES, INC. NR NR
8,958,296 (3) Term Loan, maturing October 28, 2006 4,755,010
See Accompanying Notes to Financial Statements
36
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
TEXTILES AND LEATHER (CONTINUED)
(2) POLYMER GROUP, INC. B3 NR
$ 4,779,769 Term Loan, maturing December 20, 2005 $ 4,380,319
5,462,500 Term Loan, maturing December 20, 2006 5,020,950
TARGUS GROUP, INC. NR NR
3,315,240 Term Loan, maturing August 31, 2006 2,933,987
WILLIAM CARTER COMPANY Ba3 BB
987,500 Term Loan, maturing September 30, 2008 994,905
--------------
29,702,710
--------------
UTILITIES: 0.7%
CALPINE CORPORATION Ba3 BBB-
1,899,130 Term Loan, maturing March 8, 2004 1,735,092
MICHIGAN ELECTRIC TRANSMISSION COMPANY Baa2 BB+
2,985,000 Term Loan, maturing May 1, 2007 2,985,934
PIKE ELECTRIC, INC. Ba3 BB-
1,717,647 Term Loan, maturing April 18, 2010 1,728,383
--------------
6,449,409
--------------
TOTAL SENIOR LOANS
(COST $1,606,963,991) $1,476,322,899
--------------
OTHER CORPORATE DEBT: 2.0%
AUTOMOBILE: 0.5%
CAPITAL TOOL & DESIGN, LTD. NR NR
$ 6,000,000 Subordinated Note, maturing July 10, 2004 4,800,000
DATA AND INTERNET SERVICES: 0.1%
ARCH WIRELESS HOLDINGS, INC. Ca NR
739,789 (3) Subordinated Note, maturing May 15, 2009 584,433
FINANCE: 1.1%
VALUE ASSET MANAGEMENT, INC. B3 B
10,000,000 Senior Subordinated Bridge Note,
maturing August 31, 2005 9,687,500
HEALTHCARE, EDUCATION AND CHILDCARE: 0.0%
BLOCK VISION HOLDINGS CORPORATION NR NR
13,365 Junior Term Loan, maturing January 31, 2006 --
HOME AND OFFICE FURNISHINGS, HOUSEWARES, AND DURABLE CONSUMER PRODUCTS: 0.0%
MP HOLDINGS, INC. NR NR
38,060 Subordinated Note, maturing March 14, 2007 36,157
See Accompanying Notes to Financial Statements
37
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
---------------
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- ------------------------------------------------------------------------------------------------------------------
PERSONAL AND NONDURABLE CONSUMER PRODUCTS: 0.2%
AM COSMETICS CORPORATION NR NR
$ 3,626,611 (3) Subordinated Note, maturing March 31, 2006 $ --
PAINT SUNDRY BRANDS B2 B+
2,875,000 Subordinated Note, maturing August 11, 2008 2,328,750
TEXTILES AND LEATHER: 0.1%
TARTAN TEXTILE SERVICES, INC. NR NR
1,332,583 Subordinated Note, maturing April 1, 2011 1,265,954
--------------
TOTAL OTHER CORPORATE DEBT
(COST $23,414,543) $ 18,702,794
--------------
EQUITIES AND OTHER ASSETS: 4.4%
(@), (R) 360Networks, Inc. (76,029 Common Shares) --
(1), (@), (R) Allied Digital Technologies Corporation
(Residual Interest in Bankruptcy Estate) 186,961
(@), (R) AM Cosmetics Corporation (37,197 Common Shares) --
(@), (R) AM Cosmetics Corporation (415 Perferred Shares) --
(@) Arch Wireless Holdings, Inc. (102,124 Common
Shares) 214,460
(@), (R) Autotote Systems, Inc. (Option to Purchase 0.248%
of Common Shares Issued and Outstanding, Expires
October 31, 2002) --
(@), (R) Block Vision Holdings Corporation (571 Common
Shares) --
(2), (@), (R) Boston Chicken Inc.
(Residual Interest in Boston Chicken Plan Trust) 8,014,961
(@), (R) Breed Technologies, Inc. (212,171 Common Shares) 2,821,874
(@), (R) Capital Tool & Design, Ltd.
(Warrants for 121,159 Common Shares,
Expires July 10, 2006) --
(@), (R) Cedar Chemical (Residual Interest in Bankruptcy
Estate) --
(@), (R) Covenant Care, Inc.
(Warrants for 26,901 Common Shares, Expires
March 31, 2003) --
(@), (R) Covenant Care, Inc.
(Warrants for 19,000 Common Shares, Expires
January 13, 2005) --
(@) Dan River, Inc. (127,306 Common Shares) 477,398
(@), (R) Decision One Corporation (350,059 Common Shares) 941,659
(2), (@), (R) Electro Mechanical Solutions
(Residual Interest in Bankruptcy Estate) 51,870
(@), (R) Enterprise Profit Solutions (Liquidation Interest) --
(4), (@), (R) Euro United Corporation
(Residual Interest in Bankruptcy Estate) 4,466,250
(2), (@), (R) Exide Technologies
(Warrants for 16,501 Common Shares, Expires
March 16, 2006) 165
(@) Genesis Health Ventures, Inc. (190,605
Common Shares) 2,567,449
(@) Genesis Health Ventures, Inc. (2,223 Preferred
Shares) 200,070
(@), (R) Gevity HR (60,056 Common Shares) 323,702
(2), (@), (R) Grand Union Company (Residual Interest in
Bankruptcy Estate) 130,143
(@), (R) Holmes Products Corporation
(Warrants for 19,397 Common Shares, Expires
May 7, 2006) --
See Accompanying Notes to Financial Statements
38
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BORROWER/TRANCHE DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------------------------------
(2), (@), (R) Humphreys, Inc.
(Residual Interest in Bankruptcy Estate) $ --
(@), (R) Imperial Home Decor Group, Inc. (300,141 Common
Shares) 1
(@), (R) IHDG Realty (300,141 Common Shares) 1
(@), (R) Intera Group, Inc. (864 Common Shares) --
(2), (@), (R) Kevco, Inc. (Residual Interest in Bankruptcy
Estate) 147,443
(@) Mariner Health Care, Inc. (126,525 Common Shares) 398,554
(@), (R) Morris Material Handling, Inc. (481,373 Common
Shares) 750,942
(@), (R) MP Holdings, Inc. (590 Common Shares) 6
(@), (R) Murray's Discount Auto Stores, Inc. (17 Common
Shares) 67,756
(@), (R) Murray's Discount Auto Stores, Inc.
(Warrants for 955 Common Shares, Expires
January 22, 2007) 3,814,105
(@), (R) New World Restaurant Group, Inc.
(Warrants for 4,489 Common Shares, Expires
June 15, 2006) 37,173
(@), (R) Safelite Glass Corporation (660,808 Common Shares) 6,601,472
(@), (R) Safelite Realty (44,605 Common Shares) 1
(@), (R) Sarcom Corporation (462,983 Common Shares) --
(@), (R) Sarcom Corporation (4,015 Preferred Shares) 2,782,654
(@), (R) Scientific Games Corporation
(48,930 Warrants for Class B Non-Voting
Common Shares, Expires October 2003) 60,471
(@), (R) Soho Publishing (17,582 Common Shares) 176
(@), (R) Stellex Aerostructures, Inc.
(11,130 Common Shares) --
(@), (R) Tartan Textile Services, Inc.
(23,449 Shares of Series D Preferred Stock) 2,227,655
(@), (R) Tartan Textile Services, Inc.
(36,775 Shares of Series E Preferred Stock) 2,333,852
(2), (@), (R) Telinget, Inc. (Residual Interest in Bankruptcy
Estate) --
(@), (R) Tembec, Inc. (167,239 Common Shares) 1,121,036
(1), (@), (R) Transtar Metals (Residual Interest in
Bankruptcy Estate) 160,919
(1), (@), (R) TSR Wireless, LLC (Residual Interest in
Bankruptcy Estate) --
(2), (@), (R) U.S. Office Products Company
(Residual Interest in Bankruptcy Estate) --
--------------
TOTAL FOR EQUITIES AND OTHER ASSETS
(COST $37,380,135) 40,901,179
--------------
TOTAL INVESTMENTS (COST $1,667,758,669)(5) 166.5% $1,535,926,872
PREFERRED SHARES AND LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS, NET (66.5) (613,543,530)
------ --------------
NET ASSETS 100.0% $ 922,383,342
====== ==============
See Accompanying Notes to Financial Statements
39
ING Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
- ----------
(@) Non-income producing security. (R) Restricted security.
* Senior loans, while exempt from registration under the Security Act of
1933, as amended contain certain restrictions on resale and cannot be sold
publicly. These senior loans bear interest (unless otherwise noted) at
rates that float periodically at a margin above the London Inter-Bank
Offered Rate ("LIBOR") and other short-term rates.
NR Not Rated
+ Bank Loans rated below Baa by Moody's Investor Services, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
(1) The borrower filed for protection under Chapter 7 of the U.S. Federal
bankruptcy code.
(2) The borrower filed for protection under Chapter 11 of the U.S. Federal
bankruptcy code.
(3) Loan is on non-accrual basis.
(4) The borrower filed for protection under the Canadian Bankruptcy and
Insolvency Act.
(5) For federal income tax purposes, the cost of investment is $1,667,043,136
and net unrealized depreciation consists of the following:
Gross Unrealized Appreciation $ 11,009,275
Gross Unrealized Depreciation (142,125,539)
--------------
Net Unrealized Depreciation $ (131,116,264)
==============
See Accompanying Notes to Financial Statements
40
ING Prime Rate Trust
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING AND ADDITIONAL INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
A special meeting of shareholders of the ING Prime Rate Trust held August 1,
2002, at the offices of ING, 7337 East Doubletree Ranch Road, Scottsdale, AZ
85258.
A brief description of each matter voted upon as well as the results are
outlined below:
SHARES VOTED
SHARES AGAINST OR SHARES BROKER TOTAL
VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED
------------ ------------ ------------ ------------ ------------
1. To elect ten (10) members of the Board of Trustees to represent the
interests of the holders of Common Shares of the Trust until the election
and qualification of their successors.
Paul S. Doherty 110,359,707 3,388,734 -- -- 113,748,441
J. Michael Earley 110,479,938 3,268,503 -- -- 113,748,441
R. Barbara Gitenstein 110,365,051 3,383,390 -- -- 113,748,441
R. Glenn Hilliard 110,399,149 3,349,292 -- -- 113,748,441
Thomas J. McInerney 110,341,886 3,406,555 -- -- 113,748,441
David W.C. Putnam 110,446,047 3,302,394 -- -- 113,748,441
Blaine E. Rieke 110,433,012 3,315,429 -- -- 113,748,441
John G. Turner 110,476,871 3,271,570 -- -- 113,748,441
Roger B. Vincent 110,458,645 3,289,796 -- -- 113,748,441
Richard A. Wedemeyer 110,448,814 3,299,627 -- -- 113,748,441
2. To Confirm KPMG LLP as the current independent auditor of the Trust.
110,364,705 2,068,675 1,315,061 -- 113,748,441
3.To transact such other business as may properly come before the Annual Meeting
or any ad- journment(s) or postponement(s) thereof.
108,508,381 2,871,397 2,368,663 -- 113,748,441
41
ING Prime Rate Trust
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING AND ADDITIONAL INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
MANAGEMENT'S ADDITIONAL OPERATING INFORMATION (UNAUDITED)
APPROVAL OF CHANGES IN INVESTMENT POLICIES
At a Special Meeting of Trust Shareholders, held August 6, 1998, Shareholders
approved changes in the Trust's fundamental investment policies which make
available certain additional investment opportunities to the Trust, including
(i) investing in loans in any form of business entity, as long as the loans
otherwise meet the Trust's requirements regarding the quality of loans in which
it may invest; (ii) the treatment of lease participations as Senior Loans which
would constitute part of the 80% of the Trust's assets normally invested in
Senior Loans; (iii) investing in all types of hybrid loans that meet credit
standards established by the Investment Manager constituting part of the 20% of
the Trust's assets that may be invested in Other Investments; and (iv) the
ability to invest up to 5% of its total assets in both subordinated loans and
unsecured loans which would constitute part of the 20% of the Trust's assets
that may be invested in Other Investments.
Additionally, another policy change approved by the Board of Trustees of the
Trust, which does not require shareholder approval, permits the Trust to accept
guarantees and expanded forms of intangible assets as collateral, including
copyrights, patent rights, franchise value, and trademarks. Another policy
change approved by the Board, that does not require shareholder approval,
provides that 80% of the Trust's managed assets, as opposed to 80% of its net
assets, may normally be invested in Senior Loans.
The Trust's Manager considered the evolving nature of the syndicated loan market
and the potential benefits to the Trust and its shareholders of revising the
restriction to permit the Trust to invest in loans other than Senior Loans and
the increase in the number of attractive investment opportunities available to
the Trust due to the change.
REPURCHASE OF SECURITIES BY CLOSED-END COMPANIES
In accordance with Section 23(c) of the 1940 Act, and Rule 23c-1 under the 1940
Act the Trust may from time to time purchase shares of beneficial interest of
the Trust in the open market, in privately negotiated transactions and/or
purchase shares to correct erroneous transactions.
SHAREHOLDER INVESTMENT PROGRAM
The Trust offers a Shareholder Investment Program (the "Program") which enables
investors to conveniently add to their holdings at reduced costs. Should you
desire further information concerning this Program, please contact the
Shareholder Servicing Agent at (800) 992-0180.
NUMBER OF SHAREHOLDERS
The approximate number of record holders of Common Stock as of March 31, 2003
was 8,100, which does not include approximately 48,100 beneficial owners of
shares held in the name of brokers of other nominees.
42
ING Prime Rate Trust
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
The business and affairs of the Trust are managed under the direction of the
Trust's Board of Trustees. A Trustee who is not an interested person of the
Trust, as defined in the 1940 Act, is an independent trustee ("Independent
Trustee"). The Trustees of the Trust are listed below. The Statement of
Additional Information includes additional information about trustees of the
Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
INDEPENDENT TRUSTEES
Paul S. Doherty(2) Trustee October Mr. Doherty is 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1999 - President and Partner, (February 2002 -
Scottsdale, Arizona 85258 Present Doherty, Wallace, Present).
Born: 1934 Pillsbury and Murphy,
P.C., Attorneys (1996 -
Present); Director,
Tambrands, Inc. (1993 -
1998); and Trustee of
each of the funds
managed by Northstar
Investment Manage-
ment Corporation
(1993 - 1999).
J. Michael Earley(3) Trustee February President and Chief 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - Executive Officer, (1997 - Present).
Scottsdale, Arizona 85258 Present Bankers Trust Company,
Born: 1945 N.A. (1992 - Present).
R. Barbara Gitenstein(2) Trustee February President, College of 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - New Jersey (1999 - (1997 - Present).
Scottsdale, Arizona 85258 Present Present). Formerly,
Born: 1948 Executive Vice
President and Provost,
Drake University (1992
- 1998).
Walter H. May(2) Trustee October Retired. Formerly, 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1999 - Managing Director and (February 2002 -
Scottsdale, Arizona 85258 Present Director of Marketing, Present) and Best Prep
Born: 1936 Piper Jaffray, Inc.; Charity (1991 -
Trustee of each of the Present).
funds managed by
Northstar Investment
Management Corporation
(1996 - 1999).
Jock Patton(2) Trustee August Private Investor (June 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1995 - 1997 - Present). (February 2002 -
Scottsdale, Arizona 85258 Present Formerly, Director and Present); Director,
Born: 1945 Chief Executive Officer, Hypercom, Inc. (January
Rainbow Multimedia 1999 - Present); JDA
Group, Inc. (January Software Group, Inc.
1999 - December 2001); (January 1999 -
Director of Stuart Present); Buick of
Entertainment, Inc.; Scottsdale, Inc.; Na-
Director of Artisoft, Inc. tional Airlines, Inc.; BG
(1994 - 1998). Associates, Inc.; BK En-
tertainment, Inc.; and
Arizona Rotorcraft, Inc.
43
ING Prime Rate Trust
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
David W.C. Putnam(3) Trustee October President and Director, 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1999 - F.L. Putnam Securities (February 2002 -
Scottsdale, Arizona 85258 Present Company, Inc. and its Present), Anchor
Born: 1939 affiliates; President, International Bond
Secretary and Trustee, (December 2000 -
The Principled Equity Present); Progressive
Marke Fund. Formerly, Capital Accumulation
Trustee, Trust Realty Trust (August 1998 -
Trust (December Corp.; Present); Principled
Anchor Investment Equity Market Fund
Trust; Bow 2000 - (November 1996 -
Present); Ridge Mining Present), Mercy
Company and each of Endowment
the F.L. Putnam funds Foundation (1995 -
managed by Northstar Present); Director, F.L.
Investment Foundation Putnam Investment
Management Management Company
Corporation (1994 - (December 2001 -
1999). Present); Asian
American Bank and
Trust Company (June
1992 - Present); and
Notre Dame Health
Care Center (1991 -
Present) F.L. Putnam
Securities Company,
Inc. (June 1978 -
Present); and an
Honorary Trustee,
Mercy Hospital (1973 -
Present).
Blaine E. Rieke(3) Trustee February General Partner, 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - Huntington Partners (February 2002 -
Scottsdale, Arizona 85258 Present (January 1997 - Present) and Morgan
Born: 1933 Present). Chairman of Chase Trust Co.
the Board and Trustee (January 1998 -
of each of the funds Present).
managed by ING
Investment
Management Co. LLC
(November 1998 -
February 2001).
Roger B. Vincent(3) Trustee February President, Springwell 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - (1994 - Present); and
Scottsdale, Arizona 85258 Present Present). Formerly, Director, AmeriGas
Born: 1945 Director, Tatham Propane, Inc. (1998 -
Offshore, Inc. (1996 - Present).
2000).
Richard A. Wedemeyer(2) Trustee February Retired. Mr. 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - Wedemeyer was (February 2002 -
Scottsdale, Arizona 85258 Present formerly Vice President Present) and
Born: 1936 - Finance and Touchstone Consulting
Administration, Group (1997 - Present).
Channel Corporation
(June 1996 - April
2002). Formerly, Vice
President, Operations
and Administration,
Jim Henson
Productions. (1979 -
1997); Trustee, First
Choice Funds (1997 -
2001); and of each of
the funds managed by
ING Investment
Management Co. LLC
(1998 - 2001).
44
ING Prime Rate Trust
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TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
TRUSTEES WHO ARE "INTERESTED PERSONS"
R. Glenn Hilliard(4) Trustee February Chairman and CEO, ING 103 Trustee, GCG Trust
ING Americas 2002 - Americas and Member, (February 2002 -
5780 Powers Ferry Road, NW Present Americas Executive Present) and Woodruff
Atlanta, GA 30327 Committee (1999 - Arts Center; Member of
Born: 1943 Present). Formerly, the Board of Directors,
Chairman and CEO, ING Clemson University
North America (1994 - Foundation, the Board
1999). of Councilors, Carter
Center, and the High
Museum of Art.
Thomas J. McInerney(5) Trustee February Chief Executive Officer, 157 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial (February 2002 -
Scottsdale, Arizona 85258 Present Services (September Present); Equitable Life
Born: 1956 2001 - Present); Insurance Co., Golden
General Manager and American Life
Chief Executive Officer, Insurance Co., Life
ING U.S. Worksite Insurance Company of
Financial Services Georgia, Midwestern
(December 2000 - United Life Insurance
Present); Member, ING Co., ReliaStar Life
Americas Executive Insurance Co., Security
Committee (2001 - Life of Denver, Security
Present); President, Connecticut Life
Chief Executive Officer Insurance Co.,
and Director of Southland Life
Northern Life Insurance Insurance Co., USG
Company (March 2001 - Annuity and Life
October 2002), ING Company, and United
Aeltus Holding Life and Annuity
Company, Inc. (2000 - Insurance Co. Inc
Present), ING Retail (March 2001 - Present);
Holding Company Director, Ameribest Life
(1998 - Present), ING Insurance Co., (March
Life Insurance and 2001 to January 2003);
Annuity Company Director, First
(September 1997 - Columbine Life
November 2002) and Insurance Co. (March
ING Retirement 2001 to December
Holdings, Inc. (1997 - 2002); Member of the
Present). Formerly, Board, National
General Manager and Commission on
Chief Executive Officer, Retirement Policy,
ING Worksite Division Governor's Council on
(December 2000 - Economic
October 2001), Competitiveness and
President, ING-SCI, Inc. Technology of
(August 1997 - Connecticut,
December 2000); Connecticut Business
President, Aetna and Industry
Financial Services Association, Bushnell;
(August 1997 - Connecticut Forum;
December 2000). Metro Hartford
Chamber of Commerce;
and is Chairman,
Concerned Citizens for
Effective Government.
45
ING Prime Rate Trust
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
John G. Turner(6) Trustee October Chairman, Hillcrest 157 Trustee, GCG; Director,
7337 E. Doubletree Ranch Rd. 1999 - Capital Partners (May Hormel Foods
Scottsdale, Arizona 85258 Present 2002-Present); Corporation (March
Born: 1939 President, Turner 2000 - Present); Shopko
Investment Company Stores, Inc. (August
(January 2002 - 1999 - Present); and
Present). Mr. Turner M.A. Mortenson
was formerly Vice Company (March 2002 -
Chairman of ING Present).
Americas (2000 - 2002);
Chairman and Chief
Executive Officer of
ReliaStar Financial
Corp. and ReliaStar Life
Insurance Company
(1993 - 2000); Chairman
of ReliaStar United
Services Life Insurance
Company (1995 - 1998);
Chairman of ReliaStar
Life Insurance Company
of New York (1995 -
2001); Chairman of
Northern Life Insurance
Company (1992 - 2001);
Chairman and Trustee
of the Northstar
affiliated investment
companies (1993 - 2001)
and Director, Northstar
Investment Management
Corporation and its
affiliates (1993 - 1999).
- ----------
(1) Trustees serve until their successors are duly elected and qualified.
(2) Valuation Committee member.
(3) Audit Committee member.
(4) Mr. Hilliard is an "interested person," as defined by the Investment
Company Act of 1940, as amended (the "1940 Act"), because of his
relationship with ING Americas, an affiliate of ING Investments, LLC.
(5) Mr. McInerney is an "interested person," as defined by the 1940 Act,
because of his affiliation with ING U.S. Worksite Financial Services, an
affiliate of ING Investments, LLC.
(6) Mr. Turner is an "interested person," as defined by the 1940 Act, because
of his affiliation with ING Americas, an affiliate of ING Investments, LLC.
46
ING Prime Rate Trust
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
OFFICERS:
James M. Hennessy President and Chief February 2001 - President and Chief Executive
7337 E. Doubletree Ranch Rd., Executive Officer Present Officer of ING Capital Corporation,
Scottsdale, Arizona 85258 LLC, ING Funds Services, LLC, ING
Born: 1949 Chief Operating June 2000 - Present Advisors, Inc., ING Investments,
Officer LLC, Lexington Funds Distributor,
Inc., Express America T.C. Inc. and
Senior Executive June 2000 - February EAMC Liquidation Corp. (since
Vice President 2001 December 2001); Executive Vice
President and Chief Operating
Secretary April 1995 - February Officer of ING Funds Distributor,
2001 LLC (since June 2000). Formerly,
Executive Vice President and Chief
Operating Officer of ING
Quantitative Management, Inc.
(October 2001 to September 2002);
Senior Executive Vice President
(June 2000 to December 2000) and
Secretary (April 1995 to December
2000) of ING Capital Corporation,
LLC, ING Funds Services, LLC, ING
Investments, LLC, ING Advisors, Inc.,
Express America T.C. Inc., and EAMC
Liquidation Corp.; and Executive Vice
President, ING Capital Corporation,
LLC and its affiliates (May 1998 to
June 2000) and Senior Vice President,
ING Capital Corporation, LLC and its
affiliates (April 1995 to April 1998).
Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief
7337 E. Doubletree Ranch Rd., President and Present Financial Officer and Treasurer of
Scottsdale, Arizona 85258 Assistant Secretary ING Funds Services, LLC, ING Funds
Born: 1958 Distributor, LLC, ING Advisors, Inc.,
Chief Financial Officer June 1998 - Present ING Investments, LLC (December
2001 to present), Lexington Funds
Senior Vice President June 1998 - February Distributor, Inc., Express America
2002 T.C. Inc. and EAMC Liquidation
Corp. (since December 2001). Formerly,
Executive Vice President, Chief
Financial Officer and Treasurer of ING
Quantitative Management, Inc. (December
2001 to October 2002); Senior Vice
President, ING Funds Services, LLC,
ING Investments, LLC, and ING Funds
Distributor, LLC (June 1998 to December
2001) and Chief Financial Officer of
Endeavor Group (April 1997 to June 1998).
Daniel Norman Senior Vice President April 1995 - Present Senior Vice President, ING
7337 E. Doubletree Ranch Rd., Investments, LLC (since December
Scottsdale, Arizona 85258 Co-Senior Portfolio November 1999 - 1994); ING Funds Distributor, LLC
Born: 1957 Manager Present (since December 1995); has served
as an officer of other affiliates of
Treasurer June 1997 - Present ING since February 1992.
Jeffrey A. Bakalar Senior Vice President January 1998 - Senior Vice President, ING
7337 E. Doubletree Ranch Rd., Present Investments, LLC (since November
Scottsdale, Arizona 85258 1999). Formerly Vice President and
Born: 1959 Co-Senior Portfolio November 1999 - Assistant Portfolio Manager, ING
Manager Present Investments, LLC (February 1998 -
November 1999); Vice President of
First National Bank of Chicago
(July 1994 - January 1998).
47
ING Prime Rate Trust
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
OFFICERS:
Elliot Rosen Senior Vice President May 2002 - Present Senior Vice President, ING
7337 E. Doubletree Ranch Rd., Investments, LLC (since February
Scottsdale, Arizona 85258 1999). Formerly, Senior Vice
Born: 1953 President IPS-Sendero (May 1997 -
February 1999) and President of
Sendero, which merged into IPS
(August 1993 - May 1997).
Robert S. Naka Senior Vice President November 1999 - Senior Vice President and Assistant
7337 E. Doubletree Ranch Rd., Present Secretary of ING Funds Services,
Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC,
Born: 1963 Assistant Secretary July 1996 - Present ING Advisors, Inc., ING
Investments, LLC (October 2001 to
present) and Lexington Funds
Distributor, Inc. (since December
2001). Formerly, Senior Vice
President and Assistant Secretary
for ING Quantitative
Management, Inc. (October 2001
to October 2002); Vice President,
ING Investments, LLC (April 1997
to October 1999) , ING Funds
Services, LLC (February 1997 to
August 1999) and Assistant Vice
President, ING Funds Services, LLC
(August 1995 to February 1997).
William H. Rivoir III Senior Vice President February 2001 - Senior Vice President and
7337 E. Doubletree Ranch Rd., and Assistant Present Secretary of ING Capital
Scottsdale, Arizona 85258 Secretary Corporation, LLC and ING Funds
Born: 1951 Services, LLC (since February 2001),
ING Funds Distributor, LLC, ING
Advisors, Inc., ING Investments,
LLC, and ING Quantitative
Management, Inc. (since October
2001), Lexington Funds Distributor,
Inc., ING Pilgrim Funding, Inc.,
Pilgrim America Financial, Inc.,
Express America TC, Inc. and
EAMC Liquidation Corp. (since
December 2001). Formerly, Senior
Vice President and Assistant
Secretary of ING Funds Services,
LLC (since June 1998), ING
Investments, LLC, and Pilgrim
America Financial, Inc. (since
February 1999), Senior Vice
President of ING Investments, LLC
(since December 1998) and
Assistant Secretary of ING Funds
Distributor, LLC (since February
1999) and ING Investments, LLC
(since June 1998).
Curtis F. Lee Senior Vice President January 2001 - Present Senior Vice President and Chief
7337 E. Doubletree Ranch Rd., and Chief Credit Credit Officer of Senior Loans of
Scottsdale, Arizona 85258 Officer ING Investments, LLC (since August
Born: 1955 1999). Formerly, held a series of
positions with Standard Chartered
Bank in the credit approval and
problem loan management functions
(August 1992 - June 1999).
48
ING Prime Rate Trust
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
OFFICERS:
Kimberly A. Anderson Vice President and February 2001 - Vice President and Assistant
7337 E. Doubletree Ranch Rd., Secretary Present Secretary of ING Funds Services,
Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC,
Born: 1964 Assistant Vice November 1999 - ING Advisors, Inc., ING
President and February 2001 Investments, LLC (since October
Assistant Secretary 2001) and Lexington Funds
Distributor, Inc. (since December
2001). Formerly, Vice President for
ING Quantitative Management,
Inc. (October 2001 to October
2002); Assistant Vice President of
ING Funds Services, LLC (November
1999 to January 2001) and has
held various other positions with
ING Funds Services, LLC for more
than the last five years
Robyn L. Ichilov Vice President November 1997 - Vice President of ING Funds
7337 E. Doubletree Ranch Rd., Present Services, LLC (since October 2001)
Scottsdale, Arizona 85258 and ING Investments, LLC (since
Born: 1967 August 1997); Accounting
Manager, ING Investments, LLC
(since November 1995).
Maria M. Anderson Assistant Vice August 2001 - Present Assistant Vice President of ING
7337 E. Doubletree Ranch Rd., President Funds Services, LLC (since October
Scottsdale, Arizona 85258 2001). Formerly, Manager of Fund
Born: 1958 Accounting and Fund Compliance,
ING Investments, LLC (September
1999 to November 2001); Section
Manager of Fund Accounting, Stein
Roe Mutual Funds (July 1998 to
August 1999); and Financial
Reporting Analyst, Stein Roe Mutual
Funds (August 1997 to July 1998).
Todd Modic Assistant Vice August 2001 - Present Director of Financial Reporting of
7337 E. Doubletree Ranch Rd., President ING Investments, LLC (since March
Scottsdale, Arizona 85258 2001). Formerly, Director of
Born: 1967 Financial Reporting, Axient
Communications, Inc. (May 2000
to January 2001) and Director of
Finance, Rural/Metro Corporation
(March 1995 to May 2000).
Susan P. Kinens Assistant Vice February 2003 - Assistant Vice President and
7337 E. Doubletree Ranch Rd. President and Present (For the ING Assistant Secretary, ING Funds
Scottsdale, Arizona 85258 Assistant Secretary Funds) Services, LLC (December 2002 -
Born: 1976 Present); and has held various
other positions with ING Funds
Services, LLC for the last five
years.
- ----------
(1) The officers hold office until the next meeting of the Trustees and untill
their successors shall have been elected and qualified.
49
INVESTMENT MANAGER
ING Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
ADMINISTRATOR
ING Fund Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180
INSTITUTIONAL INVESTORS AND ANALYSTS
Call ING Prime Rate Trust
1-800-336-3436, Extension 2217
DISTRIBUTOR
ING Funds Distributor, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-334-3444
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 219368
Kansas City, Missouri 64141-9368
CUSTODIAN
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, Missouri 64105
LEGAL COUNSEL
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
KPMG LLP
355 S. Grand Avenue, Suite 2000
Los Angeles, CA 90071
WRITTEN REQUESTS
Please mail all account inquiries and other comments to:
ING Prime Rate Trust Account
c/o ING Fund Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
TOLL-FREE SHAREHOLDER INFORMATION
Call us from 9:00 a.m. to 7:00 p.m. Eastern time on any business day for account
or other information, at 1-800-992-0180
A prospectus containing more complete information regarding the Trust, including
charges and expenses, may be obtained by calling ING Funds Distributor, LLC,
Distributor, at 1-800-992-0180. Please read the prospectus carefully before you
invest or send money.
[LION LOGO]
ING FUNDS PRTAR022803-042803
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEMS 4-8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Not applicable.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act (17
CFR 270.30a-2) is attached hereto as EX-99.CERT. The officer certifications
required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as
EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): ING Prime Rate Trust
By /s/ James M. Hennessy
-------------------------------------
James M. Hennessy
President and Chief Executive Officer
Date May 6, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James M. Hennessy
-------------------------------------
James M. Hennessy
President and Chief Executive Officer
Date May 6, 2003
By /s/ Michael J. Roland
-------------------------------------
Michael J. Roland
Executive Vice President and
Chief Financial Officer
Date May 6, 2003