OMB APPROVAL
OMB Number: 3235-0570
Expires: Nov. 30, 2005
Estimated average burden hours per response: 5.0
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-10223
ING Senior Income Fund
(Exact name of registrant as specified in charter)
7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258
(Address of principal executive offices) (Zip code)
The Corporation Trust Company, 1209 Orange Street, Wilmington, DE 19801
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-992-0180
Date of fiscal year end: February 28
Date of reporting period: February 28, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
The following is a copy of the report transmitted to stockholders pursuant to
Rule 30e-1 under the Act (17 CFR 270.30e-1):
ANNUAL REPORT
February 28, 2003 ING SENIOR INCOME FUND
[GRAPHIC]
[LION LOGO]
ING FUNDS
ING Senior Income Fund
ANNUAL REPORT
February 28, 2003
----------
Table of Contents
Portfolio Managers' Report ..................................... 2
Statistics ..................................................... 8
Report of Independent Auditors ................................. 9
Statement of Assets and Liabilities ............................ 10
Statement of Operations ........................................ 12
Statements of Changes in Net Assets ............................ 13
Statements of Cash Flows ....................................... 14
Financial Highlights ........................................... 15
Notes to Financial Statements .................................. 16
Portfolio of Investments ....................................... 23
Tax Information ................................................ 34
Trustee and Officer Information ................................ 35
----------
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REPORT
- --------------------------------------------------------------------------------
Dear Shareholders:
ING Senior Income Fund (the "Fund") invests in a diversified portfolio of
non-investment grade senior secured floating rate loans issued primarily by U.S.
based corporations. The Fund's objective is to provide investors with a high
level of monthly income.
PERFORMANCE OF THE FUND
During the fiscal year ended February 28, 2003, the Fund's Class A and Q shares
each distributed total dividends of $0.69, representing an average annualized
distribution rate of 4.68%(1) and 4.69%(1), respectively. During the same
period, the Fund's Class B and C shares each distributed total dividends of
$0.62, representing an average annualized distribution rate of 4.19%.(1)
The Fund's total return for the fiscal year, for each of the share classes (high
of 4.2% on Class A; low of 3.6% on Classes B and C), comfortably outpaced that
of the S&P/LSTA Loan Index (gross total return of 3.4%)(2) and earned a top
quartile ranking among the Fund's Lipper Loan Participation Fund peer group of
forty funds/share classes.(3) Because the Fund commenced operations on April 1,
2001, five- and ten-year performance comparisons are not applicable. Relative to
other major asset classes, the Fund, and the senior loan asset class in general,
fared well during the difficult market conditions exhibited during the
twelve-month period ended February 28, 2003. During the period, the S&P 500
Index declined 22.7%, while the Merrill Lynch U.S High-Yield Master II Index
posted a gain of 3.2%.
The Fund remains conservatively positioned as to both sector and issuer
selection. We continue to strive to further improve industry and issuer
diversification, arguably the best line of defense against broad-based credit
risk. During the twelve-month period ended February 28, 2003, we were able to
decrease the Fund's average position size to roughly 0.48% of total assets, from
0.82% at February 28, 2002, while growing the overall portfolio at a modest
pace.
Driving recent performance has been a continued slight overweight in several
strong performing industry groups, together with a significant improvement in
the underlying indicative prices on two of the Fund's larger holdings. Top
sector weightings at period-end included Healthcare, Education and Childcare
(7.3% of total assets at period-end), Printing and Publishing (7.1%) and
Beverage, Food and Tobacco (6.8%), each of which currently balances a relatively
defensive profile with an acceptable return. Standout performers among
individual holdings during the period included Nextel Communications and
subsidiaries ("Nextel", approximately 2.1% of total assets on a consolidated
basis at February 28, 2003) and Microcell Connexions, Inc. ("Microcell", 1.2% of
total assets at period-end). Nextel has consistently exceeded analysts'
operational and financial expectations, a trend that began in the second half of
2002, thereby pushing prices for the company's term loans to near-par levels.
Nextel's string of success has also had a tangible positive effect on the Fund's
other cellular communications credits, including Microcell. Improved investor
confidence in the sector effectively facilitated a restructuring of Microcell's
balance sheet via a pre-arranged bankruptcy filing. Several opportunistic
purchases of Microcell's term loans at prices well below par enabled us to
recoup our original investment. Although our remaining position continues to be
classified as a non-performing asset, upon emergence from bankruptcy, we expect
this loan to return to performing status. The other non-performing asset in the
portfolio at February 28, 2003, consists of two tranches of Norwood Promotional
Products, Inc. restructured senior facilities (collectively comprising roughly
0.9% of total assets at period-end), the larger of which is currently paying
interest in-kind instead of cash.
2
The Fund prudently utilizes financial leverage to seek to increase the yield to
the holders of common shares. As of period-end, the Fund had $47 million of
borrowings outstanding under a $100 million revolving credit facility. Total
leverage, as a percentage of total assets, was 14.5%, and the average cost of
leverage was 2.7%. While the use of leverage for investment purposes increases
both investment opportunity and investment risk, we continue to deploy leverage
only when it is in the best interest of the Fund's common shareholders.
OUTLOOK
In our view, the Fund, and the non-investment grade loan market at large,
appears to be reasonably well positioned to meet the expected challenges of the
coming months. Overall credit conditions continue to slowly improve, as
evidenced by another quarter-over-quarter decline in the trailing loan default
rate (by principal amount) for the industry to approximately 5.5%, after peaking
at 7.4% in June of last year.(2) Further, the supply of new transactions, an
important barometer of market health, has been fairly generous. Institutional
M&A-related loan volume closed out at $6.2 billion during the first quarter of
2003, the highest level since the first quarter of 2000.(4) Understandably, the
forward calendar looks less robust at this point, effectively capped by
uncertainty surrounding the outcome of military action in the Middle East.
Nonetheless, we do maintain a cautious view of the economic outlook, as it
appears today, and once hostilities in Iraq come to an end. Several indicators,
not the least being a chronically anemic labor market, point to significantly
slower growth than originally anticipated. Whether such weakness is a
continuation of the unwinding of the excesses of the 1990s or a by-product of
caution on the part of companies and consumers alike, remains to be seen. If
macro economic conditions were to deteriorate, it could further pressure a good
portion of the non-investment grade issuer universe and increase the prospects
for a further rate cut on the part of the Federal Reserve. An additional
reduction in already historically low short-term interest rates could continue
to depress returns, even if underlying loan values continue to rise. As stated
in our prior report, until we gain sufficient clarity on several fronts, we will
remain in a relatively defensive posture: that of seeking to maintain a high
degree of diversification while attempting to take advantage of selective buying
opportunities.
We thank you for your continued confidence and encourage your questions and
comments.
/s/ Jeffrey A. Bakalar /s/ Daniel A. Norman
Jeffrey A. Bakalar Daniel A. Norman
SENIOR VICE PRESIDENT SENIOR VICE PRESIDENT
CO-SENIOR PORTFOLIO MANAGER CO-SENIOR PORTFOLIO MANAGER
ING Senior Income Fund
April 7, 2003
3
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REPORT FOOTNOTES
- --------------------------------------------------------------------------------
1. The distribution rate is calculated by dividing the total distributions
declared during the quarter by the Fund's net asset value at the end of the
period. The distribution rate is based solely on the actual dividends and
distributions, which are made at the discretion of management. The
distribution rate may or may not include all investment income and
ordinarily will not include capital gains or losses, if any.
2. Source: As tracked by Standard & Poor's Leveraged Commentary & Portfolio
Management Data Group, a leading data provider to the Loan Market.
3. Source: Lipper Loan Participation Fund. Lipper, Inc. rankings are based on
average annual total return not including sales charge. For the one year
ended February 28th, 2003, ING Senior Income Fund Class A, B, C and Q
ranked second, fourth, fourth and third, respectively, among a universe of
40 loan participation funds/classes.
4
- --------------------------------------------------------------------------------
INDEX DESCRIPTIONS
- --------------------------------------------------------------------------------
The S&P/LSTA LEVERAGED LOAN INDEX ("LLI") is a total return index that captures
accrued interest, repayments, and market value changes. It represents a broad
cross section of leveraged loans syndicated in the United States, including
dollar-denominated loans to overseas issuers. Standard & Poor's and the Loan
Syndications & Trading Association ("LSTA") conceived of the LLI to establish a
performance benchmark for the syndicated leveraged loan industry.
The S&P 500 INDEX is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization companies whose securities
are traded on major U.S. stock markets.
The MERRILL LYNCH U.S. HIGH YIELD MASTER II INDEX is an unmanaged market
value-weighted index of all domestic and Yankee high yield bonds, including
deferred interest bonds and payment-in-kind securities. Issues included in the
index have maturities of one year or more and have a credit rating lower than
BBB-/Baa3 but are not in default.
All indices are unmanaged.
An investor cannot invest directly in an index.
5
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REPORT
- --------------------------------------------------------------------------------
4/2/2001 2/28/2002 2/28/2003
-------- --------- ---------
ING Senior Income Fund Class B With Sales Charge $ 9,525 $10,146 $10,571
ING Senior Income Fund Class B Without Sales Charge $10,000 $10,445 $10,818
S&P/LSTA Leveraged Loan Index $10,000 $10,130 $10,057
AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED FEBRUARY 28, 2003
----------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS A, B AND C OF CLASS Q
1 YEAR 4/2/01 12/15/00
------ ------ --------
Including Sales Charge:(1)
Class A (i) -0.77% 2.11% --
Class B (i) 0.59% 2.95% --
Class C (i) 2.57% 4.20% --
Class Q (ii) 4.09% -- 4.66%
Excluding Sales Charge:
Class A 4.15% 4.75% --
Class B 3.57% 4.20% --
Class C 3.57% 4.20% --
Class Q 4.09% -- 4.66%
S&P/LSTA Leveraged Loan Index 1.70% 2.75%(iii) --
Based on a $10,000 initial investment, the table and graph above illustrate the
total return of ING Senior Income Fund against the S&P/LSTA Leveraged Loan
Index. The Index has an inherent performance advantage over the Fund since it
has no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund, subject to possible later
reimbursement during a three-year period. Total returns would have been lower
had there been no waiver to the fund.
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING"
STATEMENTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 4.75%. Class B
maximum CDSC is 3% in the first year, declining to 1% in the fifth year
and eliminated thereafter. Class C maximum CDSC is 1% for the first year.
Class Q has no front-end sales charge or CDSC charges.
(i) Inception Date for Classes A, B and C: April 2, 2001.
(ii) Inception Date for Class Q: December 15, 2000.
(iii) Source: S&P/Loan Syndication Trading Association, Since Inception
performance for the index is shown from March 31, 2001.
6
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REPORT
- --------------------------------------------------------------------------------
YIELDS AND DISTRIBUTION RATES
AS OF FEBRUARY 28, 2003
30-DAY SEC AVERAGE ANNUALIZED
YIELDS(2) DISTRIBUTION RATES(3)
--------- ---------------------
Class A 4.66% 4.68%
Class B 4.16% 4.19%
Class C 4.16% 4.19%
Class Q 4.66% 4.69%
(2) Yield is calculated by dividing the Fund's net investment income per share
for the most recent thirty days by the net asset value. Yield calculations
do not include any commissions or sales charges, and are compounded for six
months and annualized for a twelve-month period to derive the Fund's yield
consistent with the SEC standardized yield formula for open-end investment
companies. If the Investment Manager had not waived certain Fund expenses,
the 30-Day SEC yield would have been 4.56% for Class A shares, 4.06% for
Class B and Class C shares and 4.56% for Class Q shares.
(3) Distribution Rates are calculated by annualizing dividends declared during
the period (i.e., divide the monthly dividend amount by the number of days
in the month and multiply by the number of days in the fiscal year) and
then dividing the resulting annualized dividend by the month-ending NAV.
PRINCIPAL RISK FACTOR(S): Loans in the Fund's portfolio will typically be below
investment grade credit quality. As a result, investment in the Fund involves
the risk that borrowers may default on obligations to pay principal or interest
when due and lenders may have difficulty liquidating the collateral securing the
loans or enforcing their rights under the terms of the loans, and that the
Fund's investment objective may not be realized.
7
ING Senior Income Fund
- --------------------------------------------------------------------------------
STATISTICS as of February 28, 2003
- --------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
Net Assets $276,742,290
Assets Invested in Senior Loans $313,424,118
Total Number of Senior Loans 208
Average Amount Outstanding per Loan $ 1,506,847
Total Number of Industries 33
Average Loan Amount per Industry $ 9,497,701
Portfolio Turnover Rate 60%
Weighted Average Days to Interest Rate Reset 44 days
Average Loan Final Maturity 57 months
Borrowings as a Percentage of Total Assets 14.5%
TOP TEN INDUSTRY SECTORS AS A PERCENTAGE OF:
NET ASSETS TOTAL ASSETS
---------- ------------
Healthcare, Education and Childcare 8.5% 7.3%
Printing and Publishing 8.4% 7.1%
Beverage, Food and Tobacco 8.0% 6.8%
Cable Television 7.3% 6.3%
Radio and Television Broadcasting 7.3% 6.2%
Containers, Packaging and Glass 6.4% 5.4%
Chemicals, Plastics and Rubber 5.8% 4.9%
Cellular 5.6% 4.7%
Leisure, Amusement and Entertainment 5.3% 4.5%
Personal & Non Durable Consumer Products 5.2% 4.5%
TOP TEN SENIOR LOAN ISSUERS AS A PERCENTAGE OF:
NET ASSETS TOTAL ASSETS
---------- ------------
Nextel Operations, Inc. 2.5% 2.1%
Safelite Glass Corporation 1.6% 1.4%
Playtex Products, Inc. 1.5% 1.3%
Microcell Connexions, Inc. 1.4% 1.2%
Murray's Discount Auto Stores, Inc. 1.3% 1.1%
Pegasus Media and Communications, Inc. 1.3% 1.1%
Argosy Gaming Company 1.3% 1.1%
Olympus Cable Holdings, LLC 1.2% 1.1%
Six Flags Theme Parks, Inc. 1.2% 1.0%
Crown Castle Operating Company 1.2% 1.0%
See Accompanying Notes to Financial Statements
8
ING Senior Income Fund
- --------------------------------------------------------------------------------
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
ING Senior Income Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the ING Senior Income Fund as of February 28,
2003, and the related statements of operations and cash flows for the year then
ended, and the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the two-year period then ended and the period from December 15, 2000 (inception)
to February 28, 2001. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by mangement, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of February 28, 2003 by
correspondence with the custodian and other appropriate auditing procedures. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
ING Senior Income Fund as of February 28, 2003 and the results of its operations
and cash flows for the year then ended, and the changes in net assets for each
of the years in the two-year period then ended and financial highlights for each
of the years in the two-year period then ended and the period from December 15,
2000 to February 28, 2002 in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
Los Angeles, California
April 11, 2003
9
ING Senior Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES as of February 28, 2003
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value
(Cost $319,121,472) $ 317,636,294
Short-term investments at amortized cost 1,999,854
Cash 2,445,588
Receivables:
Fund Shares Sold 899,974
Interest 1,534,226
Reimbursement due from Manager 47,349
Prepaid expenses 20,819
Prepaid arrangement fees on notes payable 337,527
-------------
Total assets 324,921,631
-------------
LIABILITIES:
Notes payable 47,000,000
Accrued interest payable 71,952
Deferred arrangement fees on senior loans 677,843
Payable to affilates 292,706
Accrued Trustees fees 312
Other accrued expenses and liabilities 136,528
-------------
Total liabilities 48,179,341
-------------
NET ASSETS $ 276,742,290
=============
NET ASSETS CONSIST OF:
Paid-in capital $ 280,818,269
Undistributed net investment income 519,830
Accumulated net realized loss on investments (3,110,631)
Net unrealized depreciation of investments (1,485,178)
-------------
NET ASSETS $ 276,742,290
=============
See Accompanying Notes to Financial Statements
10
ING Senior Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A:
Net assets $ 11,105,900
Shares authorized unlimited
Par value $ 0.01
Shares outstanding 748,800
Net asset value and redemption price per share $ 14.83
Maximum offering price per share (4.75%)(1) $ 15.57
CLASS B:
Net assets $ 17,648,123
Shares authorized unlimited
Par value $ 0.01
Shares outstanding 1,190,873
Net asset value and redemption price per share(2) $ 14.82
Maximum offering price per share $ 14.82
CLASS C:
Net assets $ 32,647,077
Shares authorized unlimited
Par value $ 0.01
Shares outstanding 2,202,255
Net asset value and redemption price per share(2) $ 14.82
Maximum offering price per share $ 14.82
CLASS Q:
Net assets $ 215,341,190
Shares authorized unlimited
Par value $ 0.01
Shares outstanding 14,559,025
Net asset value and redemption price per share $ 14.79
Maximum offering price per share $ 14.79
(1) Maximum offering price is computed at 100/95.25 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced by any applicable contingent
deferred sales charge.
See Accompanying Notes to Financial Statements
11
ING Senior Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS for the Year Ended February 28, 2003
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 16,338,451
Arrangement fees earned 238,963
Other 350,392
------------
Total investment income 16,927,806
------------
EXPENSES:
Investment management fees 2,275,682
Administration fees 284,458
Distribution and service fees:
Class A 17,768
Class B 161,045
Class C 214,449
Class Q 544,871
Transfer agent fees:
Class A 10,498
Class B 22,682
Class C 40,530
Class Q 302,432
Shareholder reporting expense 74,412
Offering costs 76,370
Interest expense 387,981
Custodian fees 117,404
Revolving credit facility fees 92,841
Pricing expense 29,616
Professional fees 231,806
Trustees' fees 7,112
SEC Registration fees 24,849
Postage expense 28,130
Insurance expense 3,866
------------
Total expenses 4,948,802
------------
Less:
Net waived and reimbursed fees 441,151
------------
Net expenses 4,507,651
------------
Net investment income 12,420,155
------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS:
Net realized loss on investments (1,013,477)
Net change in unrealized depreciation of investments (920,901)
------------
Net loss on investments (1,934,378)
------------
Net increase in net assets resulting from operations $ 10,485,777
============
See Accompanying Notes to Financial Statements
12
ING Senior Income Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28,
2003 2002
------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 12,420,155 $ 12,986,849
Net realized loss on investments (1,013,477) (2,097,154)
Net change in unrealized depreciation
on investments (920,901) (787,358)
------------- -------------
Net increase in net assets resulting from
operations 10,485,777 10,102,337
============= =============
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (343,871) (53,413)
Class B (655,286) (364,877)
Class C (1,183,573) (561,580)
Class Q (10,232,636) (12,767,384)
Net realized gain from investments
Class Q -- (54,347)
------------- -------------
Total Distributions (12,415,366) (13,801,601)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 46,900,491 153,881,286
Shares resulting from dividend reinvestments 11,601,350 13,451,986
------------- -------------
58,501,841 167,333,272
Cost of shares repurchased (29,437,098) (8,123,001)
------------- -------------
Net increase in net assets resulting from
capital share transactions 29,064,743 159,210,271
------------- -------------
Net increase in net assets 27,135,154 155,511,007
------------- -------------
NET ASSETS:
Beginning of year 249,607,136 94,096,129
------------- -------------
End of year $ 276,742,290 $ 249,607,136
============= =============
Undistributed net investment income
at end of year $ 519,830 $ 30,296
============= =============
See Accompanying Notes to Financial Statements
13
ING Senior Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS for the period ended February 28, 2003
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 14,520,628
Facility fees paid 122,456
Arrangement fee received 868,844
Other income received 354,157
Interest paid (338,286)
Other operating expenses paid (3,919,025)
Purchases of portfolio securities (1,095,310,136)
Proceeds from disposition of portfolio securities 1,029,530,544
---------------
Net cash used for operating activities (54,170,818)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to common shareholders (814,016)
Proceeds from capital share sold 46,481,136
Disbursements for capital shares repurchased (29,437,098)
Net proceeds from notes payable 39,000,000
---------------
Net cash provided by financing activities 55,230,022
---------------
Net increase in cash 1,059,204
Cash at beginning of year 1,386,384
---------------
Cash at end of year $ 2,445,588
===============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 10,485,777
---------------
Adjustments to reconcile net increase in net assets resulting
from operations to net cash used in operating activities:
Change in unrealized depreciation on investments 920,901
Net accretion/amortization of discounts on investments (1,584,366)
Realized loss on sale of investments 1,013,477
Purchases of investments (1,095,310,136)
Proceeds on sale of investments 1,029,530,544
Decrease in deferred offering costs 76,370
Increase in interest receivable (233,457)
Decrease in other assets 3,765
Decrease in prepaid arrangement fees on notes payable 122,456
Decrease in prepaid expenses 11,726
Increase in deferred arrangement fees on senior loans 629,881
Increase in accrued interest payable 49,695
Decrease in reimbursement due from Manager 30,586
Increase in payable to affiliate 57,403
Increase in accrued trustees' fees 312
Increase in accrued expenses 24,248
---------------
Total adjustments (64,656,595)
---------------
Net cash used for operating activities $ (54,170,818)
===============
NON CASH FINANCING ACTIVITES
Receivable for shares sold $ 899,974
Reinvestment of dividends $ 11,601,350
See Accompanying Notes to Financial Statements
14
FINANCIAL HIGHLIGHTS ING SENIOR INCOME FUND
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------ ------------------ ------------------
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
FEB. 28, FEB. 28, FEB. 28, FEB. 28, FEB. 28, FEB. 28,
2003 2002(1) 2003 2002(1) 2003 2002(1)
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.92 15.00 14.92 15.00 14.92 15.00
Income from investment operations:
Net investment income $ 0.69 0.81 0.62 0.75 0.62 0.75
Net realized and unrealized loss on investments $ (0.09) (0.09) (0.10) (0.10) (0.10) (0.10)
Total from investment operations $ 0.60 0.72 0.52 0.65 0.52 0.65
Less distributions from:
Net investment income $ 0.69 0.80 0.62 0.73 0.62 0.73
Net asset value, end of period $ 14.83 14.92 14.82 14.92 14.82 14.92
TOTAL RETURN(3) % 4.15 4.92 3.57 4.45 3.57 4.45
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 11,106 2,411 17,648 12,776 32,647 19,391
Average borrowings (000's)(7) $ 17,655 19,797 17,655 19,797 17,655 19,797
RATIOS TO AVERAGE NET ASSETS AFTER REIMBURSEMENT:
Expenses (before interest and other fees related to
revolving credit facility)(4)(5) % 1.42 1.47 1.91 1.96 1.91 1.96
Expenses (with interest and other fees related to
revolving credit facility)(4)(5) % 1.63 1.73 2.09 2.23 2.09 2.23
Net investment income(4)(5) % 4.88 5.58 4.12 5.19 4.19 5.20
RATIOS TO AVERAGE NET ASSETS BEFORE REIMBURSEMENT:
Expenses (before interest and other fees related to
revolving credit facility)(4)(5) % 1.57 1.82 2.31 2.29 2.06 2.29
Expenses (with interest and other fees related to
revolving credit facility)(4)(5) % 1.78 2.07 2.49 2.54 2.24 2.54
Net investment income(4)(5) % 4.73 5.26 3.72 4.89 4.04 4.89
Portfolio turnover rate % 60 65 60 65 60 65
Shares outstanding at end of period (000's) 749 162 1,191 856 2,202 1,300
CLASS Q(6)
------------------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
FEB. 28, 2003 FEB. 28, 2002 FEB. 28, 2001(2)
------------- ------------- ----------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.89 15.30 15.02
Income from investment operations:
Net investment income $ 0.69 0.81 0.14
Net realized and unrealized gain (loss) on investments $ (0.10) (0.32) 0.14
Total from investment operations $ 0.59 0.49 0.28
Less distributions from:
Net investment income $ 0.69 0.90 --
Net asset value, end of period $ 14.79 14.89 15.30
TOTAL RETURN(3) % 4.09 3.73 1.80
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 215,341 215,029 94,096
Average borrowings (000's)(7) $ 17,655 19,797 --
RATIOS TO AVERAGE NET ASSETS AFTER REIMBURSEMENT:
Expenses (before interest and other fees related to
revolving credit facility)(4)(5) % 1.41 1.43 --
Expenses (with interest and other fees related to
revolving credit facility)(4)(5) % 1.59 1.63 1.85
Net investment income(4)(5) % 4.69 5.94 7.00
RATIOS TO AVERAGE NET ASSETS BEFORE REIMBURSEMENT:
Expenses (before interest and other fees related to
revolving credit facility)(4)(5) % 1.56 1.70 --
Expenses (with interest and other fees related to
revolving credit facility)(4)(5) % 1.74 1.90 1.85
Net investment income(4)(5) % 4.54 5.67 7.00
Portfolio turnover rate % 60 65 11
Shares outstanding at end of period (000's) 14,559 14,439 6,152
- ----------
(1) Classes A, B and C commenced offering of shares on April 2, 2001.
(2) Class Q commenced operations on December 15, 2000.
(3) Total returns are not annualized for periods of less than one year.
(4) Annualized for periods less than one year.
(5) The investment manager has agreed to limit expenses excluding interest,
taxes, brokerage and extraordinary expenses.
(6) Effective March 30, 2001, the Management of the Fund effectuated a reverse
stock split of 0.6656 of a Share for one Share. Prior period amounts have
been restated to reflect the reverse stock split.
(7) Based on the active days of borrowing.
See Accompanying Notes to Financial Statements
15
ING Senior Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
ING Senior Income Fund (the "Fund"), a Delaware business trust, is registered
under the Investment Company Act of 1940 as amended, (the "1940 Act"), as a
continuously-offered, diversified, closed-end, investment management company.
During the period December 15, 2000 through March 30, 2001, the Fund issued
19,933,953 Class Q shares to Lion Connecticut Holdings, Inc., the indirect
parent company of the Fund's manager, ING Investments, LLC (the "Investment
Manager") in exchange for $200,000,000. Effective April 2, 2001, the Fund
commenced the offering of Class A, Class B, Class C and Class Q shares to the
public. Class A shares are subject to a sales charge of up to 4.75%. Class A
shares purchased in excess of $1,000,000 are subject to an Early Withdrawal
Charge ("EWC") of up to 1% over the two-year period after purchase. Class A
shares are available upon conversion of Class B shares eight years after
purchase or through an exchange of Class A shares of certain ING Funds. Class B
common shares are subject to an EWC of up to 3.0% over the five-year period
after purchase and Class C common shares are subject to an EWC of 1% during the
first year after purchase. The separate classes of shares differ principally in
the distribution fees and shareholder servicing fees. All shareholders bear the
common expenses of the Fund and earn income from all portfolios pro rata on the
average daily net assets of each class, without distinction between share
classes. Dividends for each class are based on income and expenses allocable to
each class. Realized gains are allocated to each class pro rata based on the net
assets of each class on the date of distribution. No class has preferential
dividend rights. Differences in the per share dividend rates generally result
from the relative weighting of pro rata income and realized gains allocations
and from differences in separate class expenses, including distribution fees and
shareholder servicing fees. The Fund invests at least 80% of its assets in
senior loans which are exempt from registration under the Securities Act of 1933
as amended (the "'33 Act"), but contain certain restrictions on resale and
cannot be sold publicly. These loans bear interest (unless otherwise noted) at
rates that float periodically at a margin above the London Inter-Bank Offered
Rate ("LIBOR") and other short-term rates.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles in the
United States of America.
A. SENIOR LOAN AND OTHER SECURITY VALUATION. Loans are normally valued at the
mean of the means of one or more bid and asked quotations obtained from a
pricing service or other sources determined by the Board of Trustees to be
independent and believed to be reliable. Loans for which reliable
quotations are not available may be valued with reference to another loan
or a group of loans for which quotations are more readily available and
whose characteristics are comparable to the loan being valued. Under this
approach, the comparable loan or loans serve as a proxy for changes in
value. The Fund has engaged an independent pricing service to provide
quotations from dealers in loans and to calculate values under the proxy
procedure described above. It is expected that most of the loans held by
the Fund will be valued with reference to quotations from the independent
pricing service or with reference to the proxy procedure described above.
As of February 28, 2003, 98.1% of total long-term investments were valued
based on these procedures.
Prices from a pricing service may not be available for all loans and the
Investment Manager may believe that the price for a loan derived from
market quotations or the proxy procedure described above is not reliable or
accurate. Among other reasons, this may be the result of information about
a particular loan or borrower known to the Investment Manager that the
Investment Manager believes may not be known to the pricing service or
reflected in a price quote. In this event, the loan is valued at fair value
as determined in good faith under procedures established by the Fund's
Board of Trustees and in accordance with the provisions of the 1940 Act.
Under these procedures, fair value is determined by the Investment Manager
and
16
ING Senior Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
monitored by the Fund's Board of Trustees through its Valuation Committee.
In fair valuing a loan, consideration is given to several factors, which
may include, among others, the following: (i) the characteristics of and
fundamental analytical data relating to the loan, including the cost, size,
current interest rate, period until the next interest rate reset, maturity
and base lending rate of the loan, the terms and conditions of the loan and
any relatedagreements, and the position of the loan in the borrower's debt
structure; (ii) the nature, adequacy and value of the collateral, including
the Fund's rights, remedies and interests with respect to the collateral;
(iii) the creditworthiness of the borrower and the cash flow coverage of
outstanding principal and interest, based on an evaluation of its financial
condition, financial statements and information about the borrower's
business, cash flows, capital structure and future prospects; (iv)
information relating to the market for the loan, including price quotations
for, and trading in, the loan and interests in similar loans and the market
environment and investor attitudes towards the loan and interests in
similar loans; (v) the reputation and financial condition of the agent for
the loan and any intermediate participants in the loan; (vi) the borrower's
management; and (vii) the general economic and market conditions affecting
the fair value of the loan. Securities other than senior loans for which
reliable quotations are not readily available and all other assets will be
valued at their respective fair values as determined in good faith by, or
under procedures established by, the Board of Trustees of the Fund.
Investments in securities maturing in less than 60 days from the date of
acquisition are valued at amortized cost, which, when combined with accrued
interest, approximates market value. Short-term investments are carried at
amortized cost.
B. FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to "regulated
investment companies" and to distribute all of its taxable income to its
shareholders. Therefore, no provision for Federal income taxes is required.
In addition, by distributing during each calendar year substantially all of
its net investment income, if any, the Fund intends not to be subject to
any federal excise tax.
C. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Loans are booked on a
settlement basis and security transactions are accounted for on trade date
(date the order to buy or sell is executed). Realized gains or losses are
reported on the basis of identified cost of securities delivered. Interest
income is recorded on an accrual basis at the then-current loan rate. The
accrual of interest on loans is discontinued when, in the opinion of
management, there is an indication that the borrower may be unable to meet
payments as they become due. Upon such discontinuance, all unpaid accrued
interest is reversed. Cash collections on nonaccrual senior loans are
generally applied as a reduction to the recorded investment of the loan.
Senior loans are returned to accrual status only after all past due amounts
have been received and the borrower has demonstrated sustained performance.
Premium amortization and discount accretion are determined by the effective
yield method over the shorter of four years or the actual term of the loan.
Arrangement fees on revolving credit facilities, which represent
non-refundable fees associated with the acquisition of loans, are deferred
and recognized using the effective yield method over the shorter of four
years or the actual term of the loan. No such fees are recognized on loans
which have been placed on non-accrual status. Arrangement fees associated
with all other loans, except revolving credit facilities, are treated as
discounts and are accreted as described above.
D. DISTRIBUTIONS TO SHAREHOLDERS. The Fund records distributions to its
shareholders on the ex-dividend date. The Fund declares and goes
ex-dividend daily and pays dividends monthly for net investment income.
Distributions from capital gains, if any, are declared on an annual basis.
17
ING Senior Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
E. ORGANIZATION EXPENSES AND OFFERING COSTS. Costs incurred with the
organization of the Fund were expensed as incurred. Costs incurred with the
offering of shares of the Fund are deferred and amortized over a
twelve-month period on a straight-line basis.
F. USE OF ESTIMATES. Management of the Fund has made certain estimates and
assumptions relating to the reporting of assets, liabilities, revenues,
expenses and contingencies to prepare these financial statements in
conformity with accounting principles generally accepted in the United
States of America. Actual results could differ from these estimates.
NOTE 3 -- INVESTMENTS
For the year ended February 28, 2003, the cost of purchases and the proceeds
from principal repayment and sales of investments, excluding short-term
investments, totaled $230,058,853 and $166,909,586, respectively. At February
28, 2003, the Fund held senior loans valued at $313,424,118 representing 98.7%
of its total investments (excluding short-term investments). The market value of
these assets is established as set forth in Note 1.
The senior loans acquired by the Fund may take the form of a direct lending
relationship with the borrower, an assignment of a lender's interest in a loan,
or a participation interest in a lender's interest in a loan. The lead lender in
a typical corporate loan syndicate administers the loan and monitors collateral.
In the event that the lead lender becomes insolvent, enters FDIC receivership
or, if not FDIC insured, enters into bankruptcy, the Fund may incur certain
costs and delays in realizing payment, or may suffer a loss of principal and/or
interest. Additionally, certain situations may arise where the Fund acquires a
participation in a lender's interest in a loan and the Fund does not have
privity of contract with or direct recourse against the borrower. Accordingly,
the Fund may incur additional credit risk as a participant because it must
assume the risk of insolvency or bankruptcy of the lender from which the
participation was acquired.
Warrants and shares of common shares held in the portfolio were acquired in
conjunction with senior loans held by the Fund. Certain of these shares and
warrants are restricted and may not be publicly sold without registration under
the '33 Act, or without an exemption under the '33 Act. In some cases, these
restrictions expire after a designated period of time after the issuance of the
stock. The Fund values portfolio securities by using the market value of the
securities when market quotations for the securities are readily available. When
market quotations are not readily available, the Fund determines, in good faith,
the fair value of the securities in accordance with the Fund's fair valuation
procedures as established by the Board of Directors. Dates of acquisition and
cost or assigned basis of restricted securities are as follows:
DATE OF COST OR
ACQUISITION ASSIGNED BASIS
----------- --------------
Safelite Glass Corporation -- Common Shares 6/21/01 $ --
Safelite Realty -- Common Shares 6/21/01 --
Murray's Discount Auto Stores, Inc. -- Common Shares 3/22/02 --
Murray Discount Auto Stores, Inc. -- Warrants 11/30/01 --
New World Restaurant Group, Inc. -- Warrants 02/20/02 20
Decision One Corporation -- Common Shares 09/27/01 --
-----
Total restricted securities excluding senior loans (market value
of $2,274,676 was 0.82% of net assets at February 28, 2003) $ 20
=====
18
ING Senior Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 4 -- MANAGEMENT AND ADMINISTRATION AGREEMENT
The Fund has entered into an Investment Management Agreement with the Investment
Manager to provide advisory and management services. The Investment Management
Agreement compensates the Investment Manager with a fee, computed daily and
payable monthly, at an annual rate of 0.80% of the Fund's average daily gross
asset value, minus the sum of the Fund's accrued liabilities (other than
liabilities for the principal amount of any borrowings incurred, commercial
paper or notes issued by the Fund) ("Managed Assets").
The Fund has also entered into an Administration Agreement with ING Funds
Services, LLC (the "Administrator") to provide administrative services. The
Administrator is compensated with a fee, computed daily and payable monthly, at
an annual rate of 0.10% of the Fund's Managed Assets.
NOTE 5 -- DISTRIBUTION AND SERVICE FEES
Each share class of the Fund has adopted a Plan pursuant to Rule 12b-1 under the
1940 Act (the "12b-1 Plans"), whereby ING Funds Distributor, LLC (the
"Distributor") is reimbursed or compensated (depending on the class of shares)
by the Fund for expenses incurred in the distribution of the Fund's shares
("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled
to a payment each month for actual expenses incurred in the distribution and
promotion of the Fund's shares, including expenses incurred in printing
prospectuses and reports used for sales purposes, expenses incurred in preparing
and printing sales literature and other such distribution related expenses,
including any distribution or Shareholder Servicing Fees ("Service Fees") paid
to securities dealers who executed a distribution agreement with the
Distributor. Under the 12b-1 plans, each class of shares of the Fund pays the
Distributor a combined Distribution and Service Fee based on average daily net
assets at the following annual rates:
CLASS A CLASS B CLASS C CLASS Q
------- ------- ------- -------
0.25% 1.00% 0.75% 0.25%
During the year ended February 28, 2003, the Distributor waived 0.25% of the
Service Fee on Class B only.
NOTE 6 -- EXPENSE LIMITATIONS
The Investment Manager has voluntarily agreed to limit expenses, excluding
interest, taxes, brokerage commissions, leverage expenses, other
investment-related costs and extraordinary expenses, to the following:
Class A -- 0.90% of Managed Assets plus 0.45% of average daily net assets
Class B -- 0.90% of Managed Assets plus 1.20% of average daily net assets
Class C -- 0.90% of Managed Assets plus 0.95% of average daily net assets
Class Q -- 0.90% of Managed Assets plus 0.45% of average daily net assets
As of February 28, 2003, the three-year cumulative amount of reimbursed fees
that are subject to possible recoupment by the Manager is $1,004,355.
NOTE 7 -- COMMITMENTS
The Fund has entered into a five-year revolving credit agreement, collateralized
by assets of the Fund, to borrow up to $100 million maturing June 13, 2006.
Borrowing rates under this agreement are based on a commercial paper pass
through rate plus 0.40% on the funded portion. A commitment fee of 0.10% is
charged on the unused portion of the facility. The amount of borrowings
outstanding at February 28, 2003 was $47.0 million at an interest rate of 1.42%.
The amount of borrowings represented 14.5% of net assets plus borrowings at
February 28, 2003. Average borrowings for the year ended February 28, 2003 was
$17,654,605 and the average annualized cost of borrowings was 2.72%.
19
ING Senior Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 8 -- SENIOR LOAN PARTICIPATION COMMITMENTS
At February 28, 2003, the Fund had unfunded loan commitments pursuant to the
terms of the following loan agreements:
Airgate PCS, Inc. $ 117,264
Citadel Broadcasting Company 934,500
Fleming Companies, Inc. 349,346
Hercules, Inc. 1,000,000
Hilton Hawaiian Village, LLC 235,294
Lyondell Chemical Company 1,000,000
Owens Brockway Glass Container, Inc. 775,253
Riverwood International Corp. 900,000
Six Flags Theme Parks, Inc. 566,667
----------
$5,878,324
==========
NOTE 9 -- TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
At February 28, 2003, the Fund had the following amounts recorded in payable to
affiliates on the accompanying Statement of Assets and Liabilities (see Notes 3
and 4):
ACCRUED INVESTMENT ACCRUED ACCRUED DISTRIBUTION
MANAGEMENT FEES ADMINISTRATIVE FEES AND SERVICE FEES TOTAL
--------------- ------------------- ---------------- --------
$ 196,853 $24,606 $71,247 $292,706
At February 28, 2003, ING Life Insurance and Annuity Company and Equitable Life
Insurance Company of Iowa, wholly-owned indirect subsidiaries of ING Groep N.V.,
held 75.6% of the shares outstanding of the Fund. Investment activities of this
shareholder could have a material impact on the Fund.
The Fund has adopted a Retirement Policy covering all independent trustees of
the Fund who will have served as an independent trustee for at least five years
at the time of retirement. Benefits under this plan are based on an annual rate
as defined in the plan agreement, as amended.
NOTE 10 -- CUSTODIAL AGREEMENT
State Street Bank and Trust Company ("SSB") serves as the Fund's custodian and
recordkeeper. Custody fees paid to SSB may be reduced by earnings credits based
on the cash balances held by SSB for the Fund.
There were no earning credits for the year ended February 28, 2003.
NOTE 11 -- SUBORDINATED LOANS AND UNSECURED LOANS
The primary risk arising from investing in subordinated loans or in unsecured
loans is the potential loss in the event of default by the issuer of the loans.
The Fund may invest up to 10% of its total assets, measured at the time of
investment, in subordinated loans and up to 10% of its total assets, measured at
the time of investment, in unsecured loans. As of February 28, 2003, the Fund
held 1.9% of its total assets in subordinated loans and unsecured loans.
NOTE 12 -- RESCISSION OFFER
Certain of the Fund's Class B shares sold during the period of April 25, 2002 to
June 28, 2002 ("Rescission Period") were not registered with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended. During
the Rescission Period, up to 101,617 shares were sold without registration. In
August 2002, the Fund filed a Registration Statement on Form N-2 offering to
repurchase the unregistered Class B shares sold during the Rescission Period
("Rescission Offer"). The total number of shares repurchased as provided by the
Rescission offer was 12,712. The Investment Manager has paid the special costs
of the Rescission Offer (i.e., legal and accounting expenses and printing and
mailing expenses) of $4,582 to reimburse the Fund for losses from the Rescission
Offer. This amount is included in paid-in-capital on the Statement of Assets and
Liabilities.
20
ING Senior Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 13 -- CAPITAL SHARES
Transactions in capital shares and dollars were as follows:
CLASS A SHARES CLASS B SHARES
------------------------------ --------------------------------
YEAR APRIL 2, 2001(1) YEAR APRIL 2, 2001(1)
ENDED TO ENDED TO
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
2003 2002 2003 2002
------------- ------------- ------------- -------------
NUMBER OF SHARES
Shares sold 697,541 178,745 529,384 (2) 898,438
Shares issued as reinvestments of dividends 18,011 3,113 22,777 13,329
Shares redeemed (128,377) (20,233) (217,666)(2) (55,389)
------------- ------------- ------------- -------------
Net increase in shares outstanding 587,175 161,625 334,495 856,378
============= ============= ============= =============
DOLLAR AMOUNT ($)
Shares sold $ 10,303,765 $ 2,671,160 $ 7,862,602 (3) $ 13,454,949
Shares issued as reinvestments of dividends 265,212 46,451 336,436 198,883
Shares redeemed (1,890,380) (300,937) (3,212,215)(3) (825,942)
------------- ------------- ------------- -------------
Net increase $ 8,678,597 $ 2,416,674 $ 4,986,823 $ 12,827,890
============= ============= ============= =============
CLASS C SHARES CLASS Q SHARES
------------------------------ -------------------------------
YEAR APRIL 2, 2001(1) YEAR YEAR
ENDED TO ENDED ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
2003 2002 2003 2002
------------- ------------- ------------- -------------
NUMBER OF SHARES
Shares sold 1,548,667 1,605,545 374,311 11,143,439
Shares issued as reinvestments of dividends 63,192 27,934 682,409 883,363
Shares adjustment resulting from
reverse stock-split -- -- -- (6,696,383)(4)
Shares redeemed (709,214) (333,869) (936,355) (134,443)
------------- ------------- ------------- -------------
Net increase in shares outstanding 902,645 1,299,610 120,365 5,195,976
============= ============= ============= =============
DOLLAR AMOUNT ($)
Shares sold $ 22,961,598 $ 24,067,664 $ 5,582,887 $ 113,687,513
Shares issued as reinvestments of
dividends 932,572 416,985 10,067,130 12,789,667
Shares redeemed (10,428,994) (5,001,438) (13,715,870) (1,994,684)
------------- ------------- ------------- -------------
Net increase $ 13,465,176 $ 19,483,211 $ 1,934,147 $ 124,482,496
============= ============= ============= =============
- ----------
(1) Classes A, B and C commenced offering of shares on April 2, 2001.
(2) Excludes 12,712 shares rescinded.
(3) Excludes $189,639 for shares rescinded.
(4) On March 30, 2001, the Management of the Fund effectuated a reverse stock
split of 0.6656 of a share for one share to achieve a net asset value of
$15.00 per share.
21
ING Senior Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 14 -- FEDERAL INCOME TAXES
Dividends paid by the Fund from net investment income and distributions of net
realized short-term capital gains are, for federal income tax purposes, taxable
as ordinary income to shareholders. The tax composition of dividends and
distributions to shareholders for years ended February 28, 2003 and 2002 were as
follow:
ORDINARY LONG-TERM TAX RETURN
INCOME CAPITAL GAINS OF CAPITAL
----------- ------------- ----------
2003 $12,415,366 $ -- $ --
2002 $13,801,601 $ -- $ --
The amount of distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. Key
differences are the treatment of short-term capital gains, foreign currency
transactions, organization costs and other temporary differences. To the extend
that these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassifications. To the extent
distributions exceed net investment income and/or net realized capital gains for
tax purposes, they are reported as distributions of paid-in capital.
Accordingly, the following amounts represent current year permanent tax
differences that have been reclassified as of February 28, 2003:
PAID-IN UNDISTRIBUTED NET
CAPITAL INVESTMENT INCOME
------- -----------------
$(484,745) $ 484,745
Capital loss carryforwards, which may be used to offset future realized capital
gains for federal income tax purposes were as follows at February 28, 2003:
AMOUNT EXPIRATION DATES
---------- ----------------
$2,454,651 2010-2011
The following represents the tax-basis components of distributable earnings as
of February 28, 2003:
UNDISTRIBUTED CAPITAL POST OCTOBER
UNDISTRIBUTED LONG-TERM UNREALIZED LOSS LOSSES
ORDINARY INCOME CAPITAL GAINS DEPRECIATION CARRYFORWARDS DEFERRED
- --------------- ------------- ------------ ------------- --------
$ 530,830 $ -- $ (1,485,500) $ (2,454,651) $(655,659)
NOTE 15 -- SUBSEQUENT EVENTS
Subsequent to February 28, 2003, the Fund declared the following dividends:
PER SHARE AMOUNT TYPE DECLARATION DATE RECORD DATE PAYABLE DATE
- ---------------- ---- ---------------- ----------- ------------
$0.00193 (A) NII Daily Daily 04/01/03
$0.00173 (B) NII Daily Daily 04/01/03
NII -- Net Investment Income
(A) For Class A and Q shares.
(B) For Class B and C shares.
22
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003
- --------------------------------------------------------------------------------
SENIOR LOANS*: 113.3%
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE: 2.5%
ALLIANT TECHSYSTEMS, INC. Ba2 BB-
$ 2,638,955 Term Loan, maturing April 20, 2009 $ 2,645,882
DRS TECHNOLOGIES, INC. Ba3 BB-
987,509 Term Loan, maturing September 30, 2008 994,093
TITAN CORPORATION Ba3 BB-
1,990,000 Term Loan, maturing June 30, 2009 1,990,000
TRANSDIGM HOLDING CORPORATION B1 B+
218,993 Term Loan, maturing May 15, 2006 220,396
573,101 Term Loan, maturing May 15, 2007 576,772
UNITED DEFENSE INDUSTRIES, INC. Ba3 BB-
637,289 Term Loan, maturing August 13, 2009 639,395
------------
7,066,538
------------
AUTOMOBILE: 3.1%
AFTERMARKET TECHNOLOGY CORPORATION Ba2 BB-
411,471 Term Loan, maturing February 8, 2008 412,168
563,555 Term Loan, maturing February 8, 2008 564,510
COLLINS & AIKMAN PRODUCTS Ba3 BB-
978,703 Term Loan, maturing December 31, 2005 981,863
POLYPORE, INC. Ba3 B+
1,488,750 Term Loan, maturing December 31, 2007 1,493,093
SAFELITE GLASS CORPORATION B3 B+
2,750,821 Term Loan, maturing September 30, 2007 2,709,559
1,841,404 Term Loan, maturing September 30, 2007 1,813,783
STONERIDGE, INC. Ba3 BB
492,500 Term Loan, maturing April 30, 2008 492,192
------------
8,467,168
------------
BEVERAGE, FOOD AND TOBACCO: 8.0%
AURORA FOODS, INC. B3 CCC
2,943,750 Term Loan, maturing September 30, 2006 2,675,133
BIRDS EYE FOODS, INC. Ba3 B+
1,496,250 Term Loan, maturing June 30, 2008 1,499,679
COMMONWEALTH BRANDS, INC. Ba3 BB-
1,850,000 Term Loan, maturing August 28, 2007 1,848,844
COTT BEVERAGES, INC. Ba3 BB-
1,176,363 Term Loan, maturing December 31, 2006 1,181,509
CP KELCO APS B3 B+
1,410,075 Term Loan, maturing March 31, 2008 1,363,719
475,307 Term Loan, maturing September 30, 2008 460,156
DEAN FOODS COMPANY Ba1 BB+
2,985,000 Term Loan, maturing July 15, 2008 2,988,173
DEL MONTE CORPORATION Ba3 BB-
2,000,000 Term Loan, maturing December 20, 2010 2,017,000
FLEMING COMPANIES, INC. Ba3 B
427,273 Revolver, maturing June 18, 2007 383,121
981,575 Term Loan, maturing June 18, 2008 961,453
See Accompanying Notes to Financial Statements
23
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
BEVERAGE, FOOD AND TOBACCO (CONTINUED)
FLOWERS FOODS, INC. Ba2 BBB-
$ 2,462,500 Term Loan, maturing March 26, 2007 $ 2,472,762
INTERSTATE BRANDS CORPORATION Ba1 BBB-
1,970,000 Term Loan, maturing July 19, 2007 1,970,008
NATIONAL DAIRY HOLDINGS, L.P. Ba2 BB+
992,500 Term Loan, maturing April 30, 2009 992,086
SOUTHERN WINE & SPIRITS OF AMERICA, INC. Ba3 BBB-
1,243,750 Term Loan, maturing July 2, 2008 1,246,860
------------
22,060,503
------------
BUILDINGS AND REAL ESTATE: 0.8%
ASSOCIATED MATERIALS, INC. Ba3 BB-
612,000 Term Loan, maturing April 19, 2009 615,443
MACERICH PARTNERSHIP, L.P. Ba2 NR
1,638,400 Term Loan, maturing July 26, 2005 1,640,448
------------
2,255,891
------------
CABLE TELEVISION: 7.3%
(1) ADELPHIA COMMUNICATIONS CORPORATION NR BBB
2,000,000 Debtor in Possession Term Loan, maturing
June 25, 2004 2,005,000
CC VIII OPERATING, LLC B2 B-
2,970,000 Term Loan, maturing February 2, 2008 2,506,998
(1) CENTURY CABLE HOLDINGS, LLC Caa1 D
820,000 Revolver, maturing March 31, 2009 568,260
1,000,000 Term Loan, maturing December 31, 2009 706,111
CHARTER COMMUNICATIONS OPERATING, LLC B2 B
2,955,000 Term Loan, maturing March 18, 2008 2,488,243
(1) FRONTIERVISION OPERATING PARTNERS, L.P. B2 D
1,000,000 Revolver, maturing October 31, 2005 880,000
1,136,364 Term Loan, maturing September 30, 2005 1,000,000
1,000,000 Term Loan, maturing March 31, 2006 880,000
INSIGHT MIDWEST HOLDINGS, LLC Ba3 BB+
3,000,000 Term Loan, maturing December 31, 2009 2,897,625
MCC IOWA MEDIACOM BROADBAND Ba3 BB+
3,000,000 Term Loan, maturing September 30, 2010 2,938,125
(1) OLYMPUS CABLE HOLDINGS, LLC B2 D
4,250,000 Term Loan, maturing September 30, 2010 3,447,328
------------
20,317,690
------------
See Accompanying Notes to Financial Statements
24
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
CARGO TRANSPORT: 0.9%
RAILAMERICA, INC. Ba3 BB
$ 1,413,333 Term Loan, maturing May 23, 2009 $ 1,411,213
266,667 Term Loan, maturing May 23, 2009 266,267
320,000 Term Loan, maturing May 23, 2009 319,520
TEREX CORPORATION B1 BB-
496,250 Term Loan, maturing December 31, 2009 480,535
------------
2,477,535
------------
CELLULAR: 5.6%
AIRGATE PCS, INC. B3 CCC-
169,300 Term Loan, maturing June 6, 2007 122,742
1,706,840 Term Loan, maturing September 30, 2008 1,237,459
AMERICAN CELLULAR CORPORATION B3 CC
790,144 Term Loan, maturing March 31, 2008 595,571
906,725 Term Loan, maturing March 31, 2009 683,444
(3) MICROCELL CONNEXIONS, INC. Ca D
3,242,968 (2) Term Loan, maturing March 1, 2006 2,393,776
2,000,000 (2) Term Loan, maturing February 22, 2007 1,477,500
NEXTEL FINANCE COMPANY Ba3 BB-
3,000,000 Term Loan, maturing March 31, 2009 2,802,990
NEXTEL OPERATIONS, INC. Ba3 BB-
1,850,222 Term Loan, maturing March 15, 2005 1,815,275
2,353,577 Term Loan, maturing February 10, 2007 2,251,258
WESTERN WIRELESS CORPORATION B3 B
2,500,000 Term Loan, maturing March 31, 2008 1,993,125
------------
15,373,140
------------
CHEMICALS, PLASTICS AND RUBBER: 5.8%
EQUISTAR CHEMICALS, L.P. Ba2 BB+
1,984,975 Term Loan, maturing August 24, 2007 1,990,558
FMC CORPORATION Ba1 BBB-
1,000,000 Term Loan, maturing October 21, 2007 1,012,500
GEO SPECIALTY CHEMICALS, INC. B1 B+
1,838,571 Term Loan, maturing December 31, 2007 1,697,614
HERCULES, INC. Ba1 BB
2,500,000 Term Loan, maturing May 15, 2007 2,503,908
HUNTSMAN COMPANY, LLC B3 B+
675,808 Term Loan, maturing March 31, 2007 555,852
324,192 Term Loan, maturing March 31, 2007 266,648
HUNTSMAN INTERNATIONAL, LLC B2 BB-
1,000,054 Term Loan, maturing June 30, 2007 984,220
999,946 Term Loan, maturing June 30, 2008 984,114
INEOS GROUP HOLDINGS, PLC Ba3 BB
2,390,124 Term Loan, maturing April 26, 2009 2,386,763
JOHNSONDIVERSEY, INC. Ba3 BB-
1,990,000 Term Loan, maturing November 3, 2009 2,001,817
NOVEON, INC. B1 BB-
738,750 Term Loan, maturing September 30, 2008 741,124
OM GROUP, INC. B2 B+
992,506 Term Loan, maturing April 1, 2006 951,565
------------
16,076,683
------------
See Accompanying Notes to Financial Statements
25
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
CONTAINERS, PACKAGING AND GLASS: 6.4%
BERRY PLASTICS CORPORATION B1 B+
$ 1,990,000 Term Loan, maturing July 22, 2010 $ 2,001,194
CONSTAR INTERNATIONAL, INC. B1 BB-
1,995,000 Term Loan, maturing November 20, 2009 2,004,975
GRAPHIC PACKAGING CORPORATION Ba3 BB
990,000 Term Loan, maturing February 28, 2009 994,950
GREIF BROS. CORPORATION Ba3 B+
995,000 Term Loan, maturing August 23, 2009 999,104
JEFFERSON SMURFIT CORPORATION Ba3 B+
1,992,727 Term Loan, maturing March 31, 2007 1,989,880
OWENS-BROCKWAY GLASS CONTAINER, INC. B1 BB
2,681,688 Revolver, maturing March 31, 2004 2,647,831
RIVERWOOD INTERNATIONAL CORPORATION B1 B
100,000 Revolver, maturing December 31, 2006 94,938
3,000,000 Term Loan, maturing December 31, 2006 2,997,189
SILGAN HOLDINGS, INC. Ba2 BB-
995,000 Term Loan, maturing November 30, 2008 994,171
SMURFIT-STONE CONTAINER CANADA, INC. Ba3 B+
807,692 Term Loan, maturing June 30, 2009 798,859
STONE CONTAINER CORPORATION Ba3 B+
2,192,308 Term Loan, maturing June 30, 2009 2,168,843
------------
17,691,934
------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING: 3.9%
BRAND SERVICES, INC. B1 B+
1,000,000 Term Loan, maturing October 16, 2009 1,003,750
FLOWSERVE CORPORATION Ba3 BB-
3,130,407 Term Loan, maturing June 30, 2009 3,129,846
MUELLER GROUP, INC. B1 B+
995,000 Term Loan, maturing May 31, 2008 993,756
NEPTUNE TECHNOLOGY GROUP, INC. Ba3 BB-
969,262 Term Loan, maturing November 1, 2008 974,108
REXNORD CORPORATION B1 B+
1,944,444 Term Loan, maturing November 25, 2009 1,962,067
SPX CORPORATION Ba2 BB+
1,025,625 Term Loan, maturing September 30, 2009 1,024,087
1,709,375 Term Loan, maturing March 31, 2010 1,706,811
------------
10,794,425
------------
DIVERSIFIED/CONGLOMERATE SERVICE: 1.1%
IRON MOUNTAIN, INC. Ba3 BB
998,000 Term Loan, maturing February 15, 2008 1,001,119
US INVESTIGATIONS SERVICES, LLC B1 BB-
2,000,000 Term Loan, maturing January 10, 2009 1,986,250
------------
2,987,369
------------
ECOLOGICAL: 1.0%
ALLIED WASTE NORTH AMERICA, INC. Ba3 BB
679,029 Term Loan, maturing July 21, 2005 676,907
CASELLA WASTE SYSTEMS, INC. B1 BB-
2,000,000 Term Loan, maturing May 11, 2007 2,010,000
------------
2,686,907
------------
See Accompanying Notes to Financial Statements
26
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
ELECTRONICS: 2.3%
DECISION ONE CORPORATION B3 CCC
$ 3,010,000 Term Loan, maturing April 18, 2005 $ 2,558,500
SEAGATE TECHNOLOGY HDD HOLDINGS, INC. Ba1 BB+
1,421,457 Term Loan, maturing May 13, 2007 1,420,823
SEAGATE TECHNOLOGY (US) HOLDINGS, INC. Ba1 BB+
568,543 Term Loan, maturing May 13, 2007 568,289
TRANSACTION NETWORK SERVICES, INC. Ba3 BB-
1,804,180 Term Loan, maturing April 3, 2007 1,801,925
------------
6,349,537
------------
FARMING AND AGRICULTURE: 1.0%
SCOTTS COMPANY Ba3 BB
2,782,995 Term Loan, maturing December 31, 2007 2,795,866
------------
2,795,866
------------
FINANCE: 0.8%
RENT-A-CENTER, INC. Ba2 BB
577,165 Term Loan, maturing January 31, 2006 576,227
1,136,260 Term Loan, maturing January 31, 2007 1,134,413
VALUE ASSET MANAGEMENT, INC. B1 B+
529,412 Term Loan, maturing April 28, 2003 512,868
------------
2,223,508
------------
GAMING: 4.1%
ALLIANCE GAMING CORPORATION B1 BB-
1,985,000 Term Loan, maturing December 31, 2006 1,996,578
AMERISTAR CASINOS, INC. Ba3 BB-
1,994,895 Term Loan, maturing December 20, 2006 2,005,618
ARGOSY GAMING COMPANY Ba2 BB
3,447,500 Term Loan, maturing July 31, 2008 3,469,047
ISLE OF CAPRI CASINOS, INC. Ba2 BB-
992,500 Term Loan, maturing April 26, 2008 995,292
MANDALAY RESORT GROUP Ba2 BB+
3,000,000 Term Loan, maturing August 22, 2006 2,973,126
------------
11,439,661
------------
GROCERY: 0.7%
GIANT EAGLE, INC. Ba2 BB+
1,990,000 Term Loan, maturing August 2, 2009 1,993,731
------------
1,993,731
------------
HEALTHCARE, EDUCATION AND CHILDCARE: 8.5%
ALLIANCE IMAGING, INC. B1 B+
778,626 Term Loan, maturing November 2, 2006 765,973
895,105 Term Loan, maturing June 10, 2008 883,916
APRIA HEALTHCARE GROUP, INC. Ba1 BBB-
1,970,000 Term Loan, maturing July 20, 2008 1,970,617
CAREMARK RX, INC. Ba2 BB+
1,486,263 Term Loan, maturing March 31, 2006 1,487,501
COMMUNITY HEALTH SYSTEMS, INC. Ba3 BB-
2,992,500 Term Loan, maturing July 16, 2010 2,983,148
DAVITA, INC. Ba3 BB-
1,980,765 Term Loan, maturing March 31, 2009 1,985,594
See Accompanying Notes to Financial Statements
27
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
HEALTHCARE, EDUCATION AND CHILDCARE (CONTINUED)
EXPRESS SCRIPTS, INC. Ba1 BBB-
$ 923,077 Term Loan, maturing March 31, 2008 $ 923,489
FRESENIUS MEDICAL CARE HOLDING, INC. Ba1 BB+
2,000,000 Term Loan, maturing June 30, 2006 2,000,000
GENESIS HEALTH VENTURES, INC. Ba3 B+
117,498 Term Loan, maturing March 31, 2007 115,736
362,104 Term Loan, maturing March 31, 2007 362,104
HCA, INC. Ba1 BBB-
1,387,500 Term Loan, maturing April 30, 2006 1,369,289
IASIS HEALTHCARE CORPORATION B1 B
2,000,000 Term Loan, maturing February 7, 2009 2,010,834
KINETIC CONCEPTS, INC. Ba3 B+
1,319,984 Term Loan, maturing March 31, 2006 1,321,222
TRIAD HOSPITALS, INC. Ba3 B+
1,972,727 Term Loan, maturing September 30, 2008 1,984,687
VANGUARD HEALTH SYSTEMS, INC. Ba3 B+
1,500,000 Term Loan, maturing January 3, 2010 1,504,687
VICAR OPERATING, INC. B1 B+
1,990,000 Term Loan, maturing September 30, 2008 2,000,780
------------
23,669,577
------------
HOME AND OFFICE FURNISHING, HOUSEWARES: 0.4%
SEALY MATTRESS COMPANY B1 B+
378,320 Term Loan, maturing December 15, 2004 374,064
272,861 Term Loan, maturing December 15, 2005 269,791
348,819 Term Loan, maturing December 15, 2006 344,895
------------
988,750
------------
INSURANCE: 0.2%
FUND AMERICAN COMPANIES, INC. Baa2 BBB+
491,250 Term Loan, maturing March 31, 2007 489,776
------------
489,776
------------
LEISURE, AMUSEMENT AND ENTERTAINMENT: 5.3%
AMF BOWLING WORLDWIDE, INC. B1 B
932,382 Term Loan, maturing February 28, 2008 929,662
BALLY TOTAL FITNESS HOLDING CORPORATION Ba3 B+
984,519 Term Loan, maturing November 10, 2004 945,138
KERASOTES THEATRES, INC. B1 B+
1,000,000 Term Loan, maturing December 31, 2008 1,002,500
LOEWS CINEPLEX ENTERTAINMENT
CORPORATION NR NR
2,965,111 Term Loan, maturing February 29, 2008 2,914,457
METRO-GOLDWYN-MAYER STUDIOS, INC. Ba3 BB-
3,000,000 Term Loan, maturing June 30, 2008 2,985,468
REGAL CINEMAS, INC. Ba2 BB-
950,000 Term Loan, maturing December 31, 2007 953,563
SIX FLAGS THEME PARKS, INC. Ba2 BB-
433,333 Revolver, maturing June 30, 2008 420,333
3,000,000 Term Loan, maturing June 30, 2009 2,970,000
WASHINGTON FOOTBALL, INC. Baa3 NR
1,500,000 Term Loan, maturing October 16, 2007 1,508,438
------------
14,629,559
------------
See Accompanying Notes to Financial Statements
28
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
LODGING: 3.1%
EXTENDED STAY AMERICA, INC. Ba3 BB-
$ 1,454,580 Term Loan, maturing January 15, 2008 $1,431,852
HILTON HAWAIIAN VILLAGE, LLC Ba1 BBB-
1,764,706 Revolver, maturing June 1, 2003 1,738,235
KSL RECREATIONAL GROUP, INC. Ba3 B+
326,460 Term Loan, maturing April 30, 2005 324,148
326,460 Term Loan, maturing April 30, 2006 324,727
801,818 Term Loan, maturing December 22, 2006 799,814
MERISTAR INVESTMENT PARTNERS Ba3 B-
2,024,128 Term Loan, maturing March 31, 2003 2,029,188
WYNDHAM INTERNATIONAL, INC. NR CCC+
1,088,409 Term Loan, maturing June 30, 2004 825,490
1,356,310 Term Loan, maturing June 30, 2006 985,529
------------
8,458,983
------------
MACHINERY: 1.2%
ALLIANCE LAUNDRY HOLDINGS, LLC B1 B
1,896,373 Term Loan, maturing August 2, 2007 1,881,360
NATIONAL WATERWORKS, INC. B1 BB-
1,500,000 Term Loan, maturing November 22, 2009 1,514,062
------------
3,395,422
------------
OIL AND GAS: 2.3%
PACIFIC ENERGY GROUP, LLC Ba2 BBB-
1,000,000 Term Loan, maturing July 26, 2009 1,005,938
PLAINS MARKETING, L.P. Ba1 BBB-
990,000 Term Loan, maturing September 21, 2007 994,950
PMC COMPANY Ba1 BBB-
1,980,000 Term Loan, maturing May 5, 2006 1,984,950
TESORO PETROLEUM CORPORATION Ba3 BB
880,033 Term Loan, maturing December 31, 2007 836,911
W-H ENERGY SERVICES, INC. B2 B+
1,473,750 Term Loan, maturing April 16, 2007 1,451,644
------------
6,274,393
------------
OTHER TELECOMMUNICATIONS: 1.2%
BROADWING, INC. B1 B-
1,917,647 Term Loan, maturing November 9, 2004 1,847,332
GCI HOLDINGS, INC. Ba3 B+
1,500,000 Term Loan, maturing October 15, 2004 1,496,250
------------
3,343,582
------------
PERSONAL AND NON DURABLE CONSUMER PRODUCTS: 5.2%
ARMKEL, LLC Ba3 B+
987,500 Term Loan, maturing March 28, 2009 994,112
CHURCH & DWIGHT COMPANY, INC. Ba2 BB
1,985,013 Term Loan, maturing September 30, 2007 1,997,625
JOSTENS, INC. B1 BB-
2,492,424 Term Loan, maturing December 31, 2009 2,497,098
NORWOOD PROMOTIONAL PRODUCTS, INC. NR NR
2,310,555 Term Loan, maturing February 1, 2005 2,310,555
1,616,156 (2) Term Loan, maturing February 1, 2005 719,189
452,744 (2) Term Loan, maturing February 1, 2005 --
See Accompanying Notes to Financial Statements
29
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
PERSONAL AND NON DURABLE CONSUMER PRODUCTS (CONTINUED)
PLAYTEX PRODUCTS, INC. Ba3 BB-
$ 4,145,833 Term Loan, maturing May 31, 2009 $ 4,139,615
RAYOVAC CORPORATION Ba3 BB-
1,823,333 Term Loan, maturing September 30, 2009 1,829,031
------------
14,487,225
------------
PERSONAL, FOOD AND MISCELLANEOUS SERVICES: 3.1%
AFC ENTERPRISES, INC. Ba2 BB
796,000 Term Loan, maturing May 23, 2009 797,907
COINMACH CORPORATION B1 BB-
980,000 Term Loan, maturing July 25, 2009 983,063
DOMINO'S, INC. Ba3 BB-
995,000 Term Loan, maturing June 30, 2008 998,109
NEW WORLD RESTAURANT GROUP, INC. aa2 CCC+
2,000,000 Secured Floating Rate Note, maturing
June 15, 2003 1,800,000
OTIS SPUNKMEYER, INC. B1 B+
1,977,273 Term Loan, maturing January 21, 2009 1,976,037
SC INTERNATIONAL SERVICES Ba1 BB
1,963,808 Term Loan, maturing March 1, 2007 1,944,170
------------
8,499,286
------------
PRINTING AND PUBLISHING: 8.4%
ADAMS OUTDOOR ADVERTISING, L.P. B1 B+
1,780,000 Term Loan, maturing February 8, 2008 1,786,305
ADVANSTAR COMMUNICATIONS, INC. B2 B
420,404 Term Loan, maturing April 11, 2007 389,924
AMERICAN MEDIA OPERATIONS, INC. Ba3 B+
61,105 Term Loan, maturing April 1, 2006 60,972
3,136,469 Term Loan, maturing April 1, 2007 3,146,271
BELL ACTIMEDIA, INC. Ba3 BB-
1,000,000 Term Loan, maturing November 29, 2010 1,007,125
CANWEST MEDIA, INC. Ba3 B+
606,200 Term Loan, maturing May 15, 2008 606,873
917,055 Term Loan, maturing May 15, 2009 918,074
DEX MEDIA EAST, LLC Ba3 BB-
2,500,000 Term Loan, maturing May 8, 2009 2,526,823
HOLLINGER INTERNATIONAL PUBLISHING, INC. Ba2 BB-
1,000,000 Term Loan, maturing September 30, 2009 1,005,000
LAMAR MEDIA CORPORATION Ba2 BB-
1,600,000 Term Loan, maturing March 1, 2006 1,581,333
1,000,000 Term Loan, maturing February 1, 2007 1,000,250
READER'S DIGEST ASSOCIATIONS, INC. Baa3 BB+
2,985,000 Term Loan, maturing May 20, 2008 2,937,559
R.H. DONNELLEY, INC. Ba3 BB
2,000,000 Term Loan, maturing June 30, 2010 2,014,250
TRANSWESTERN PUBLISHING COMPANY Ba3 BB-
2,462,500 Term Loan, maturing June 27, 2008 2,460,961
ZIFF DAVIS MEDIA, INC. B3 CCC-
2,000,000 Term Loan, maturing March 31, 2007 1,720,000
------------
23,161,720
------------
See Accompanying Notes to Financial Statements
30
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
RADIO AND TELEVISION BROADCASTING: 7.3%
CITADEL BROADCASTING COMPANY Ba2 B+
$ 540,000 Revolver, maturing April 2, 2008 $ 503,550
500,000 Term Loan, maturing April 2, 2008 498,750
1,600,000 Term Loan, maturing June 26, 2009 1,606,400
CUMULUS MEDIA, INC. Ba3 B+
2,000,000 Term Loan, maturing March 28, 2010 2,014,376
EMMIS OPERATING COMPANY Ba2 B+
1,692,932 Term Loan, maturing August 31, 2009 1,700,339
853,275 Term Loan, maturing February 28, 2009 855,675
FISHER BROADCASTING, INC. Ba3 B+
1,000,000 Term Loan, maturing February 28, 2010 1,001,250
GRAY TELEVISION, INC. Ba3 B+
2,000,000 Term Loan, maturing December 31, 2010 2,010,416
LIN TELEVISION CORPORATION Ba2 BB
525,714 Term Loan, maturing December 31, 2007 526,372
TELEVICENTRO OF PUERTO RICO, LLC Ba2 BB
474,286 Term Loan, maturing December 31, 2007 474,879
PEGASUS MEDIA & COMMUNICATIONS, INC. B3 B-
3,915,063 Term Loan, maturing April 30, 2005 3,538,778
SINCLAIR BROADCAST GROUP, INC. Ba2 BB
2,000,000 Term Loan, maturing December 31, 2009 2,004,554
1,000,000 Term Loan, maturing December 31, 2009 1,002,545
SUSQUEHANNA MEDIA COMPANY Ba1 BB-
2,481,250 Term Loan, maturing June 30, 2008 2,493,656
------------
20,231,540
------------
RETAIL STORES: 4.9%
ADVANCE STORES COMPANY, INC. Ba3 BB-
3,000,000 Term Loan, maturing November 30, 2007 3,005,625
CH OPERATING, LLC B2 B+
810,345 Term Loan, maturing June 30, 2007 804,267
K MART CORPORATION Ba1 BBB
Debtor in Possession Term Loan, maturing
1,500,000 April 22, 2004 1,485,626
MURRAY'S DISCOUNT AUTO STORES, INC. NR B
3,642,593 Term Loan, maturing June 30, 2003 3,618,967
PETCO ANIMAL SUPPLIES, INC. Ba3 BB-
994,832 Term Loan, maturing October 2, 2008 998,252
RITE AID CORPORATION B2 BB-
2,940,405 Term Loan, maturing June 27, 2005 2,911,001
SHOPPERS DRUG MART CORPORATION Ba1 BBB+
882,353 Term Loan, maturing February 4, 2009 884,449
------------
13,708,187
------------
TELECOMMUNICATIONS EQUIPMENT: 3.7%
AMERICAN TOWER, L.P. B2 B
3,347,738 Term Loan, maturing June 30, 2007 3,105,445
CROWN CASTLE OPERATING COMPANY Ba3 B-
3,400,000 Term Loan, maturing March 15, 2008 3,224,332
See Accompanying Notes to Financial Statements
31
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT (CONTINUED)
SPECTRASITE COMMUNICATIONS, INC. B3 CC
$ 1,803,511 Term Loan, maturing December 31, 2007 $ 1,600,616
TSI TELECOMMUNICATION SERVICES, INC. Ba3 B+
2,372,159 Term Loan, maturing December 31, 2006 2,266,895
------------
10,197,288
------------
TEXTILES AND LEATHER: 1.5%
LEVI STRAUSS & COMPANY B1 BB
1,000,000 Term Loan, maturing July 31, 2006 1,002,708
TARGUS GROUP, INC. NR NR
2,378,246 Term Loan, maturing August 31, 2006 2,104,748
WILLIAM CARTER COMPANY Ba3 BB
987,500 Term Loan, maturing September 30, 2008 994,906
------------
4,102,362
------------
UTILITIES: 1.7%
MICHIGAN ELECTRIC TRANSMISSION COMPANY Baa2 BB+
995,000 Term Loan, maturing May 1, 2007 995,311
PIKE ELECTRIC, INC. Ba3 BB-
1,717,647 Term Loan, maturing April 18, 2010 1,728,383
SOUTHERN CALIFORNIA EDISON COMPANY Ba2 BB
2,000,000 Term Loan, maturing March 1, 2005 2,004,688
------------
4,728,382
------------
TOTAL SENIOR LOANS
(COST $317,126,685) 313,424,118
------------
OTHER CORPORATE DEBT: 0.7%
FINANCE: 0.7%
VALUE ASSET MANAGEMENT, INC. B3 B
2,000,000 Senior Subordinated Bridge,
maturing August 31, 2005 1,937,500
------------
TOTAL OTHER CORPORATE DEBT
(COST $1,994,767) 1,937,500
------------
EQUITIES AND OTHER ASSETS: 0.8%
(@),(R) Decision One Corporation (92,638 Common Shares) 249,196
(@),(R) Murray's Discount Auto Stores, Inc. (10 Common Shares) 39,631
(@),(R) Murray's Discount Auto Stores, Inc.
(Warrants for 244 Common Shares, Expires January 22, 2007) 973,311
(@),(R) New World Restaurant Group, Inc.
(Warrants for 2,244 Common Shares, Expires June 15, 2006) 18,583
(@),(R) Safelite Glass Corporation (99,495 Common Shares) 993,955
(@),(R) Safelite Realty (6,716 Common Shares) --
------------
TOTAL FOR EQUITIES AND OTHER ASSETS (COST $20) 2,274,676
------------
TOTAL LONG-TERM INVESTMENTS (COST $319,121,472) 317,636,294
------------
See Accompanying Notes to Financial Statements
32
ING Senior Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued)
- --------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
- --------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 0.7%
COMMERCIAL PAPER: 0.7%
$ 2,000,000 State Street Bank & Trust, 1.310%, due 03/03/03 $ 1,999,854
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,999,854) 1,999,854
------------
TOTAL INVESTMENTS
(COST $321,121,326) 115.5% $319,636,148
OTHER ASSETS AND LIABILITIES-NET (15.5) (42,893,858)
------ ------------
NET ASSETS 100.0% $276,742,290
====== ============
- ----------
(@) Non-income producing security.
(R) Restricted security.
* Senior loans, while exempt from registration under the Securities Act of
1933, as amended, contain certain restrictions on resale and cannot be sold
publicly. These senior loans bear interest (unless otherwise noted) at
rates that float periodically at a margin above the London Inter-Bank
Offered Rate ("LIBOR") and other short-term rates.
NR Not Rated
+ Bank Loans rated below Baa by Moody's Investor Services, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
(1) The borrower filed for protection under Chapter 11 of the U.S. Federal
bankruptcy code.
(2) Loan is on non-accrual basis.
(3) The borrower filed for protection under the Canadian Bankruptcy and
Insolvency Act.
(4) For federal income tax purposes, cost of investments (excluding short-term
investments) is $319,121,794 and net unrealized depreciation consists of
the following:
Gross Unrealized Appreciation $ 5,575,769
Gross Unrealized Depreciation (7,061,269)
------------
Net Unrealized Depreciation $ (1,485,500)
============
See Accompanying Notes to Financial Statements
33
ING Senior Income Fund
- --------------------------------------------------------------------------------
TAX INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
Dividends paid during the year ended February 28, 2003 were as follows:
TYPE PER SHARE AMOUNT
---- ----------------
Class A NII $ 0.6925
Class B NII $ 0.6186
Class C NII $ 0.6186
Class Q NII $ 0.6925
- ----------
NII -- Net investment income
34
ING Senior Income Fund
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees. A trustee who is not an interested person of the Fund,
as defined in the 1940 Act, is an independent trustee ("Independent Trustee").
The Trustees of the Fund are listed below. The Statement of Additional
Information includes additional information about trustees of the Registrant and
is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
INDEPENDENT TRUSTEES
Paul S. Doherty(2) Trustee January Mr. Doherty is Presi- 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - dent and Partner, (February 2002 -
Scottsdale, Arizona 85258 Present Doherty, Wallace, Present).
Born: 1934 Pillsbury and Murphy,
P.C., Attorneys (1996
-Present); Director,
Tambrands, Inc. (1993 -
1998); and Trustee of
each of the funds man-
aged by Northstar In-
vestment Management
Corporation (1993 -
1999).
J. Michael Earley(3) Trustee February President and Chief Ex- 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - ecutive Officer, Bankers (1997 - Present).
Scottsdale, Arizona 85258 Present Trust Company, N.A.
Born: 1945 (1992 - Present).
R. Barbara Gitenstein(2) Trustee February President, College of 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - New Jersey (1999 - (1997 - Present).
Scottsdale, Arizona 85258 Present Present). Formerly, Ex-
Born: 1948 ecutive Vice President
and Provost, Drake Uni-
versity (1992 - 1998).
Walter H. May(2) Trustee January Retired. Formerly, Man- 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - aging Director and Di- (February 2002 -
Scottsdale, Arizona 85258 Present rector of Marketing, Present) and Best
Born: 1936 Piper Jaffray, Inc.; Prep Charity
Trustee of each of the (1991 - Present).
funds managed by
Northstar Investment
Management Corpora-
tion (1996 - 1999).
Jock Patton(2) Trustee January Private Investor (June 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - 1997 - Present). For- (February 2002 -
Scottsdale, Arizona 85258 Present merly, Director and Present); Director,
Born: 1945 Chief Executive Officer, Hypercom, Inc. (January
Rainbow Multimedia 1999 - Present); JDA
Group, Inc. (January Software Group, Inc.
1999 - December 2001); (January 1999 -
Director of Stuart En- Present); Buick of
tertainment, Inc.; Direc- Scottsdale, Inc.; Na-
tor of Artisoft, Inc. tional Airlines, Inc.; BG
(1994 - 1998). Associates, Inc.; BK En-
tertainment, Inc.; and
Arizona Rotorcraft, Inc.
35
ING Senior Income Fund
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
David W.C. Putnam(3) Trustee January President and Director, 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - F.L. Putnam Securities (February 2002 -
Scottsdale, Arizona 85258 Present Company, Inc. and its Present), Anchor
Born: 1939 affiliates; President, International Bond Trust
Secretary and Trustee, (December 2000 -
The Principled Equity Present); F.L. Putnam
Market Fund. Formerly, Foundation (December
Trustee, Trust Realty 2000 - Present);
Corp.; Anchor Progressive Capital
Investment Trust; Bow Accumulation Trust
Ridge Mining Company (August 1998 - Present);
and each of the funds Principled Equity Market
managed by Northstar Fund (November 1996 -
Investment Present), Mercy
Management Endowment Foundation
Corporation (1994 - (1995 - Present);
1999). Director, F.L. Putnam
Investment Management
Company (December 2001 -
Present); Asian American
Bank and Trust Company
(June 1992 - Present);
and Notre Dame Health
Care Center (1991 -
Present) F.L. Putnam
Securities Company, Inc.
(June 1978 -
Present); and an Honorary
Trustee, Mercy Hospital
(1973 - Present).
Blaine E. Rieke(3) Trustee February General Partner, 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - Huntington Partners (February 2002 -
Scottsdale, Arizona 85258 Present (January 1997 - Present) and Morgan
Born: 1933 Present). Chairman of Chase Trust Co. (January
the Board and Trustee 1998 - Present).
of each of the funds
managed by ING
Investment
Management Co. LLC
(November 1998 -
February 2001).
Roger B. Vincent(3) Trustee February President, Springwell 103 Trustee, GCG Trust (1994
7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - - Present); and Director,
Scottsdale, Arizona 85258 Present Present). Formerly, AmeriGas Propane, Inc.
Born: 1945 Director, Tatham (1998 - Present).
Offshore, Inc. (1996 -
2000).
Richard A. Wedemeyer(2) Trustee February Retired. Mr. 103 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - Wedemeyer was (February 2002 -
Scottsdale, Arizona 85258 Present formerly Vice President Present) and Touchstone
Born: 1936 - Finance and ConsultingGroup (1997 -
Administration, Present).
Channel Corporation
(June 1996 - April
2002). Formerly, Vice
President, Operations
and Administration,
Jim Henson Productions
(1979 - 1997); Trustee,
First Choice Funds
(1997 - 2001); and of
each of the funds
managed by ING
Investment
Management Co. LLC
(1998 - 2001).
36
ING Senior Income Fund
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
TRUSTEES WHO ARE "INTERESTED PERSONS"
R. Glenn Hilliard(4) Trustee February Chairman and CEO, ING 103 Trustee, GCG Trust
ING Americas 2002 - Americas and Member, (February 2002 -
5780 Powers Ferry Road, NW Present Americas Executive Present) and Woodruff
Atlanta, GA 30327 Committee (1999 - Arts Center; Member of
Born: 1943 Present). Formerly, the Board of Directors,
Chairman and CEO, ING Clemson University
North America (1994 - Foundation, the Board
1999). of Councilors, Carter
Center, and the High
Museum of Art.
Thomas J. McInerney(5) Trustee February Chief Executive Officer, 157 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial (February 2002 -
Scottsdale, Arizona 85258 Present Services (September Present); Equitable Life
Born: 1956 2001 - Present); Insurance Co., Golden
General Manager and American Life
Chief Executive Officer, Insurance Co., Life
ING U.S. Worksite Insurance Company of
Financial Services Georgia, Midwestern
(December 2000 - United Life Insurance
Present); Member, ING Co., ReliaStar Life
Americas Executive Insurance Co., Security
Committee (2001 - Life of Denver, Security
Present); President, Connecticut Life
Chief Executive Officer Insurance Co.,
and Director of Southland Life
Northern Life Insurance Insurance Co., USG
Company (March 2001 - Annuity and Life
October 2002), ING Company, and United
Aeltus Holding Life and Annuity
Company, Inc. (2000 - Insurance Co. Inc
Present), ING Retail (March 2001 - Present);
Holding Company Director, Ameribest Life
(1998 - Present), ING Insurance Co., (March
Life Insurance and 2001 to January 2003);
Annuity Company Director, First
(September 1997 - Columbine Life
November 2002) and Insurance Co. (March
ING Retirement 2001 to December
Holdings, Inc. (1997 - 2002); Member of the
Present). Formerly, Board, National
General Manager and Commission on
Chief Executive Officer, Retirement Policy,
ING Worksite Division Governor's Council on
(December 2000 - Economic
October 2001), Competitiveness and
President, ING-SCI, Inc. Technology of
(August 1997 - Connecticut,
December 2000); Connecticut Business
President, Aetna and Industry
Financial Services Association, Bushnell;
(August 1997 - Connecticut Forum;
December 2000). Metro Hartford
Chamber of Commerce;
and is Chairman,
Concerned Citizens for
Effective Government.
37
ING Senior Income Fund
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
John G. Turner(6) Trustee January Chairman, Hillcrest 157 Trustee, GCG; Director,
7337 E. Doubletree Ranch Rd. 2001 - Capital Partners (May Hormel Foods
Scottsdale, Arizona 85258 Present 2002-Present); Corporation (March
Born: 1939 President, Turner 2000 - Present); Shopko
Investment Company Stores, Inc. (August
(January 2002 - 1999 - Present); and
Present). Mr. Turner M.A. Mortenson
was formerly Vice Company (March 2002 -
Chairman of ING Present).
Americas (2000 -
2002); Chairman and
Chief Executive
Officer of ReliaStar
Financial Corp. and
ReliaStar Life
Insurance Company
(1993 - 2000);
Chairman of ReliaStar
United Services Life
Insurance Company
(1995 - 1998);
Chairman of ReliaStar
Life Insurance Company
of New York (1995 -
2001); Chairman of
Northern Life
Insurance Company
(1992 - 2001);
Chairman and Trustee
of the Northstar
affiliated investment
companies (1993 -
2001) and Director,
Northstar Investment
Management Corporation
and its affiliates
(1993 - 1999).
- ------------
(1) Trustees serve until their successors are duly elected and qualified.
(2) Valuation Committee Members.
(3) Audit Committee Members.
(4) Mr. Hilliard is an "interested person," as defined by the Investment
Company Act of 1940, as amended (the "1940 Act"), because of his
relationship with ING Americas, an affiliate of ING Investments, LLC.
(5) Mr. McInerney is an "interested person," as defined by the 1940 Act,
because of his affiliation with ING U.S. Worksite Financial Services, an
affiliate of ING Investments, LLC.
(6) Mr. Turner is an "interested person," as defined by the 1940 Act, because
of his affiliation with ING Americas, an affiliate of ING Investments, LLC.
38
ING Senior Income Fund
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Information about the Fund's officers is set forth in the table below:
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
James M. Hennessy President, January 2001 - President and Chief Executive
7337 E. Doubletree Ranch Rd. Chief Executive Present Officer, ING Capital Corpora-
Scottsdale, Arizona 85258 Officer and tion, LLC, ING Funds Services,
Born: 1949 Chief Operating LLC, ING Advisors, Inc., ING
Officer Investments, LLC, Lexington
Funds Distributor, Inc., Express
America T.C., Inc. and EAMC
Liquidation Corp. (December
2001 - Present); Executive Vice
President and Chief Operating
Officer and ING Funds
Distributor, LLC (June 2000 -
Present). Formerly, Executive
Vice President and Chief
Operating Officer, ING Quanti-
tative Management, Inc. (Octo-
ber 2001 - September 2002),
Senior Executive Vice President
(June 2000 - December 2000)
and Secretary (April 1995 - De-
cember 2000), ING Capital Cor-
poration, LLC, ING Funds
Services, LLC, ING Investments,
LLC, ING Advisors, Inc., Express
America T.C., Inc. and EAMC
Liquidation Corp.; Executive
Vice President, ING Capital Cor-
poration, LLC and its affiliates
(May 1998 - June 2000); and
Senior Vice President, ING Capi-
tal Corporation, LLC and its af-
filiates (April 1995 - April
1998).
Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief
7337 E. Doubletree Ranch Rd. President, Assistant Present Financial Officer and Treasurer,
Scottsdale, Arizona 85258 Secretary ING Funds Services, LLC, ING
Born: 1958 Funds Distributor, LLC, ING Ad-
Chief Financial Officer January 2001 - visors, Inc., ING Investments,
Present LLC, Inc., Lexington Funds Dis-
tributor, Inc., Express America
T.C., Inc. and EAMC Liquidation
Corp. (December 2001 -
Present). Formerly, Executive
Vice President, Chief Financial
Officer and Treasurer ING
Quantitative Management (De-
cember 2001 - September
2002), Senior Vice President,
ING Funds Services, LLC, ING
Investments, LLC and ING Funds
Distributor, LLC (June 1998 -
December 2001) and Chief Fi-
nancial Officer of Endeavor
Group (April 1997 - June 1998).
Daniel Norman Senior Vice President January 2001 - Senior Vice President, ING In-
7337 E. Doubletree Ranch Rd. and Treasurer Present vestments, LLC (December 1994
Scottsdale, Arizona 85258 - Present); and ING Funds Dis-
Born: 1957 Co-Senior Portfolio tributor, LLC (December 1995 -
Manager Present); has served as an of-
ficer of other affiliates of ING
since February 1992.
39
ING Senior Income Fund
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
Jeffrey A. Bakalar Senior Vice President January 2001 - Senior Vice President, ING
7337 E. Doubletree Ranch Rd. Present Investments, LLC (November
Scottsdale, Arizona 85258 Co-Senior Portfolio 1999 - Present). Formerly, Vice
Born: 1959 Manager President and Assistant
Portfolio Manager, ING
Investments, LLC (February
1998 -- November 1999); Vice
President of The Communications
Positions of First National
Bank of Chicago (July 1994 --
January 1998).
Elliot Rosen Senior Vice President May 2002 - Present Senior Vice President, ING
7337 E. Doubletree Ranch Rd. Investments, LLC (February
Scottsdale, Arizona 85258 1999 - Present). Formerly,
Born: 1953 Senior Vice President
IPS-Sendero (May 1997 -
February 1999) and President
of Sendero, which merged
into IPS (August 1993 - May 1997).
Robert S. Naka Senior Vice President January 2001 - Senior Vice President and
7337 E. Doubletree Ranch Rd. and Assistant Present Assistant Secretary, ING Funds
Scottsdale, Arizona 85258 Secretary Services, LLC, ING Funds
Born: 1963 Distributor, LLC, ING Advisors,
Inc., ING Capital Corporation,
LLC, ING Investments, LLC
(October 2001 - Present) and
Lexington Funds Distributor, Inc.
(December 2001 - Present).
Formerly, Senior Vice President
and Assistant Secretary, ING
Quantitative Management, Inc.
(October 2001 - September 2002),
Vice President, ING Investments,
LLC (April 1997 - October 1999),
ING Funds Services, LLC
(February 1997 - August 1999)
and Assistant Vice President,
ING Funds Services, LLC
(August 1995 - February 1997).
William H. Rivoir III Senior Vice President January 2001 - Senior Vice President and
7337 E. Doubletree Ranch Rd. and Assistant Present Secretary of ING Capital
Scottsdale, Arizona 85258 Secretary Corporation, LLC and ING
Born: 1951 Funds Services, LLC (February
2001 - Present), ING Funds
Distributor, LLC, ING Advisors,
Inc. and ING Investments, LLC.
(October 2001 - Present), Senior
Vice President and Secretary,
ING Quantitative Management,
Inc. (October 2001 - September
2002). Lexington Funds
Distributor, Inc., ING Pilgrim
Funding, Inc., Pilgrim America
Financial, Inc., Express America
TC, Inc. and EAMC Liquidation
Corp. (December 2001 -
Present). Formerly, Senior Vice
President and Assistant
Secretary of ING Funds Services,
LLC (June 1998 - Present), ING
Investments, LLC, and Pilgrim
America Financial, Inc.
(February 1999 - Present),
Senior Vice President of ING
Investments, LLC (December -
Present 1998) and Assistant
Secretary of ING Funds
Distributor, LLC (February 1999
- Present) and ING Investments,
LLC (June 1998 - Present).
40
ING Senior Income Fund
- --------------------------------------------------------------------------------
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
Curtis F. Lee Senior Vice President January 2001 - Senior Vice President and Chief
7337 E. Doubletree Ranch Rd. and Chief Credit Present Credit Officer - Senior Loans of
Scottsdale, Arizona 85258 Officer ING Investments, LLC (August
Born: 1954 1999 - Present). Formerly, held
a series of positions with
Standard Chartered Bank in the
credit approval and problem
loan management functions
(August 1992 - June 1999).
Kimberly A. Anderson Vice President January 2001 - Vice President and Secretary,
7337 E. Doubletree Ranch Rd. Present ING Funds Services, LLC, ING
Scottsdale, Arizona 85258 Funds Distributor, LLC, ING
Born: 1964 Secretary February 2001 - Advisors, Inc., ING Investments,
Present LLC (October 2001 - Present)
and Lexington Funds
Distributor, Inc. (December
2001 - Present). Formerly, Vice
President, ING Quantitative
Management, Inc. (October
2001 - September 2002);
Assistant Vice President, ING
Funds Services, LLC (November
1999 - January 2001) and has
held various other positions
with ING Funds Services, LLC
for more than the last five
years.
Robyn L. Ichilov Vice President January 2001 - Vice President, ING Funds
7337 E. Doubletree Ranch Rd. Present Services, LLC (October 2001 -
Scottsdale, Arizona 85258 Present) and ING Investments,
Born: 1967 LLC (August 1997 - Present);
Accounting Manager, ING
Investments, LLC (November
1995 - Present).
Maria M. Anderson Assistant Vice August 2001 - Assistant Vice President, ING
7337 E. Doubletree Ranch Rd. President Present Funds Services, LLC (October
Scottsdale, Arizona 85258 2001 - Present). Formerly,
Born: 1958 Manager of Fund Accounting
and Fund Compliance, ING
Investments, LLC (September
1999 - November 2001); Section
Manager of Fund Accounting,
Stein Roe Mutual Funds
(July 1998 - August 1999); and
Financial Reporting Analyst,
Stein Roe Mutual Funds (August
1997 - July 1998).
Todd Modic Assistant Vice August 2001 - Director of Financial Reporting,
7337 E. Doubletree Ranch Rd. President Present ING Investments, LLC (March
Scottsdale, Arizona 85258 2001 - Present). Formerly,
Born: 1967 Director of Financial Reporting,
Axient Communications, Inc.
(May 2000 - January 2001) and
Director of Finance,
Rural/Metro Corporation
(March 1995 - May 2000).
Susan P. Kinens Assistant Vice February 2003 - Assistant Vice President and
7337 E. Doubletree Ranch Rd. President Present Assistant Secretary, ING Funds
Scottsdale, Arizona 85258 Services, LLC (December 2002 -
Born: 1976 Present); and has held various
other positions with ING Funds
Services, LLC for the last five
years.
- ----------
(1) The officers hold office until the next annual meeting of the Trustees and
until their successors shall have been elected and qualified.
41
INVESTMENT MANAGER
ING Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
ADMINISTRATOR
ING Fund Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180
INSTITUTIONAL INVESTORS AND ANALYSTS
Call ING Senior Income Fund
1-800-336-3436
DISTRIBUTOR
ING Funds Distributor, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-334-3444
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 219368
Kansas City, Missouri 64141-9368
CUSTODIAN
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, Missouri 64105
LEGAL COUNSEL
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
KPMG LLP
355 South Grand Avenue
Los Angeles, California 90071
WRITTEN REQUESTS
Please mail all account inquiries and other comments to:
ING Senior Income Fund c/o
ING Fund Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
TOLL-FREE SHAREHOLDER INFORMATION
Call us from 9:00 a.m. to 7:00 p.m. Eastern time on any business day for account
or other information, at 1-800-992-0180
A prospectus containing more complete information regarding the Fund, including
charges and expenses, may be obtained by calling ING Funds Distributor, LLC,
Distributor, at 1-800-992-0180. Please read the prospectus carefully before you
invest or send money.
[LION LOGO]
ING FUNDS SIFAR022803-042803
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEMS 4-8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Not applicable.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act (17
CFR 270.30a-2) is attached hereto as EX-99.CERT. The officer certifications
required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as
EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): ING Senior Income Fund
By /s/ James M. Hennessy
--------------------------------------
James M. Hennessy
President and Chief Executive Officer
Date May 6, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James M. Hennessy
--------------------------------------
James M. Hennessy
President and Chief Executive Officer
Date May 6, 2003
By /s/ Michael J. Roland
--------------------------------------
Michael J. Roland
Executive Vice President and
Chief Financial Officer
Date May 6, 2003