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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-7978
ING Mayflower Trust
(Exact name of registrant as specified in charter)
7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258
(Address of principal executive offices) (Zip code)
C T Corporation System, 101 Federal Street, Boston, MA 02110
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-992-0180
Date of fiscal year end: May 31
Date of reporting period: May 31, 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
May 31, 2003 DOMESTIC EQUITY GROWTH FUNDS
ING Growth + Value Fund
CLASSES A, B, C, M AND T ING Growth Opportunities Fund
ING LargeCap Growth Fund
ING MidCap Opportunities Fund
ING SmallCap Opportunities Fund
ING Disciplined LargeCap Fund
DOMESTIC EQUITY VALUE FUNDS
ING Financial Services Fund
ING Large Company Value Fund
ING MagnaCap Fund
ING MidCap Value Fund
ING SmallCap Value Fund
ING Tax Efficient Equity Fund
DOMESTIC EQUITY AND INCOME FUNDS
ING Convertible Fund
ING Equity and Bond Fund
ING Real Estate Fund
[PHOTO]
[LION LOGO]
ING FUNDS
TABLE OF CONTENTS
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President's Letter ........................... 1
Portfolio Managers' Reports:
Domestic Equity Growth Funds ............... 2
Domestic Equity Value Funds ................ 16
Domestic Equity and Income Funds ........... 24
Index Descriptions ........................... 32
Independent Auditors' Report ................. 33
Statements of Assets and Liabilities ......... 34
Statements of Operations ..................... 42
Statements of Changes in Net Assets .......... 46
Financial Highlights ......................... 54
Notes to Financial Statements ................ 80
Portfolios of Investments .................... 102
Trustee and Officer Information .............. 139
PRESIDENT'S LETTER
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[PHOTO]
JAMES M. HENNESSY
Dear Shareholder,
It would be an understatement to refer to this past year as a challenging one
for investors. There have been many events on the geopolitical front and
numerous economic challenges that have tested investor resilience.
We are now in a period of one of the longest economic downturns in U.S. history.
Although few of us will take much comfort in the fact that we have coped with a
particularly challenging time, perhaps we should.
We at ING Funds remain optimistic about the future, preferring to see the
positives that have emerged in the wake of recent difficulties. For instance,
the quick actions on the part of the financial industry and government
regulators that followed a string of recent corporate scandals may have helped
regain investor trust and the tough new accounting standards now in place should
help permanently improve our industry.
Although I do not wish to be premature in my enthusiasm, I do believe that the
gradual market upturn of recent months supports ING Funds' long-held philosophy
that it is important to remain focused on long-term investment goals and
maintain reasonable expectations.
In recent months, we at ING Funds have made some changes to some of our fund
management teams. We have also entered into new relationships with respected
sub-advisers and are launching several new mutual funds. We have implemented
improvements to our website that make it more accessible to investors and
financial advisors alike.
We remain committed to providing quality service and innovative products to help
meet the needs of our investors, and we are excited and optimistic about the
future.
On behalf of ING Funds, I thank you for your continued support and confidence
and look forward to serving you in the future.
Sincerely,
/s/ James M. Hennessy
James M. Hennessy
President
ING Funds
July 15, 2003
1
ING GROWTH + VALUE FUND Portfolio Managers' Report
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PORTFOLIO MANAGEMENT: Louis Navellier, Navellier Fund Management, Inc., the
Sub-Advisor*
GOAL: ING Growth + Value Fund (the "Fund") seeks capital appreciation by
investing in a diversified portfolio of equity securities, including common and
preferred stock.
MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31,
2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad
measures of market performance) declined 7.73% and 8.06%, respectively. The
market's decline was evident in measures of mid-cap growth and small-cap growth
stocks as well. Two indices of such performance, the Russell Midcap Growth Index
fell 5.84%, and the Russell 2000 Growth Index dropped 9.59%.
The reporting period was marked by continued disappointment in the economic
numbers but strength in consumer spending, buoyed by record refinancing. During
the final months of the fiscal year, investors were focused on geopolitical
uncertainties, especially the potential for armed conflict in Iraq. Once the
coalition forces did, in fact, enter Iraq, the market began trading up off its
March 11 low. Through the first week of April, the overall market gained an
additional 4%.
Recent market leadership has centered on the technology group, with value stocks
trailing the overall market by a small margin. We have seen some institutional
investors purchasing tech stocks, hoping the sector would provide the most
leveraged upside returns if a widespread economic recovery ensues. To date,
fundamentals have not, in our opinion, justified this type of anticipatory
buying. As value investors, we are willing to forgo a small amount of short-term
upside return whenever we see this kind of speculative buying, When the markets
settle, we expect investors will once again focus on the fundamentals of
individual companies.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -20.88% compared to the
Russell 3000 Index for which the total return was -7.73%.
PORTFOLIO SPECIFICS: In the semiannual report, we stated that the Fund
underperformed the index in the first half primarily due to stock selection in
the consumer discretionary and technology sectors. In the six months since, the
Fund returned 1.81% and the index 9.34%. During this period, the source of the
underperformance was again mainly stock selection, this time in the healthcare
and technology sectors, partly offset by favorable stock selection in
industrials. Sector selection also detracted from performance. In the most
noteworthy cases, we were overweight in technology, which has performed
relatively poorly, and were underweight in the financial sector, which was a
better-than-average performer in the index. Over the last six months, sector
weights underwent significant change. Principally, we cut our underweight in
financials by one-third, halved the overweight in technology and reduced our
heavy overweight in consumer discretionary stocks to a small amount.
MARKET OUTLOOK: Value stocks have recently been trailing their growth
counterparts. While we believe this is a short-term reactionary move, equities
across the spectrum are very reasonably priced today. This, in combination with
low interest rates and fairly indifferent/low consumer sentiment, makes for one
of the best investment opportunities we have seen in at least five years. Adding
in such factors as stock market fear, post-war reconstruction uncertainty,
record low interest rates, and a business environment that has been extremely
conservative, we believe the upside potential for our equity market far exceeds
the downside risk.
* Effective June 16, 2003 ING Investments, LLC assumed direct management of
the Fund. Since that date the Fund has been managed by a team of investment
professionals led by Matthew S. Price and David C. Campbell.
2
Portfolio Managers' Report ING GROWTH + VALUE FUND
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11/18/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
-------- ------- ------- ------- ------- ------- ------- -------
ING Growth + Value Fund Class A
With Sales Charge $ 9,425 $ 9,614 $11,337 $14,912 $24,511 $16,452 $11,806 $ 9,340
ING Growth + Value Fund Class A
Without Sales Charge $10,000 $10,200 $12,029 $15,822 $26,006 $17,456 $12,526 $ 9,910
Russell 2000 Growth Index $10,000 $10,844 $13,148 $12,795 $14,063 $14,863 $14,788 $13,578
Russell 3000 Growth Index $10,000 $11,170 $14,496 $17,133 $19,159 $17,297 $15,140 $13,970
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
-----------------------------------------
SINCE INCEPTION
1 YEAR 5 YEAR 11/18/96
------ ------ --------
Including Sales Charge:
Class A (1) -25.45% -4.93% -1.04%
Class B (2) -25.36% -4.80% -0.84%
Class C (3) -22.24% -4.50% -0.86%
Excluding Sales Charge:
Class A -20.88% -3.80% -0.14%
Class B -21.43% -4.49% -0.84%
Class C -21.45% -4.50% -0.86%
Russell 2000 Index -8.18% 0.65% 4.82%(4)
Russell 3000 Index -7.73% -0.74% 5.28%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Growth + Value Fund against the Russell 2000 Index and the
Russell 3000 Index. The Indices have no cash in their portfolios, impose no
sales charges and incur no operating expenses. An investor cannot invest
directly in an index. The Fund's performance is shown both with and without the
imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and 5 year returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Since inception performance for the index is shown from 12/01/96.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller and mid-sized companies may entail greater price volatility
than investing in stocks of larger companies. From time to time, the stock
market may not favor the mix of growth and value securities in which the Fund
invests.
See accompanying index descriptions on page 32.
3
ING GROWTH OPPORTUNITIES FUND Portfolio Managers' Report
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PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price,
CFA and David Campbell, ING Investments, LLC.*
GOAL: The Growth Opportunities Fund seeks long-term growth of capital through
investment in a portfolio consisting primarily of common stocks of U.S.
companies that the managers feel have above-average prospects for growth.
MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31,
2003. For the period, the Russell 3000 and the S&P 500 index (two broad measures
of market performance) declined 7.73% and 8.06%, respectively. The market's
decline was evident in measures of mid cap growth and small cap growth stocks as
well. The Russell Midcap Growth index fell 5.84%, and the Russell 2000 Growth
index dropped 9.59%.
The results for the six months ending May 31, 2003 were more encouraging. The
Russell 3000 Index advanced 4.92% during the six-month period and the S&P 500
moved up 3.87%. Indeed, the returns for the latest three months -- ended May 31,
2003 -- were even better. In the three-month period, the Russell 3000 index
moved up 15.90% and the S&P 500 advanced 15.05%. We think that a major part of
this advance can be attributed to a resurgence in those stocks that were most
beaten-up over the last several years. We expect, though, that as this
speculation broadens out, the advance may become more sustainable, albeit
somewhat less explosive.
MARKET OUTLOOK: After several years of declines, the stock market appeared to be
in a recovery mode from mid-March through the end of May, 2003. This seemed in
part to reflect some improvement in corporate profit trends; in addition the
market's advance may well have reflected investors' increasing optimism about
the economy's growth later this year and into 2004.
There are reasons to believe that the conditions are favorable for both the
economy and for common stocks. The combination of low interest rates (with the
possibility of even further Federal Reserve loosening) and stimulative tax cuts
could well spur an acceleration of the economy. And inflation certainly is not
an imminent concern, notwithstanding the toll that energy prices are taking on
the economy.
The Fund's investment discipline is not dependent on the forecast for the
economy. The Fund will build a diversified portfolio of mostly smaller common
stocks selected for their growth prospects, reasonable valuation, and evidence
of relative strength.
PERFORMANCE: For the year ended May 31, 2003, the ING Growth Opportunities Fund
had a total return of -16.03% compared to the S&P 500 index for which the total
return was -8.06%.
PORTFOLIO SPECIFICS: In the semi annual report we stated that the Fund
under-performed the index in the first half year and this was primarily due to
exposure to more cyclically sensitive Technology stocks such as semiconductors.
In the six months since the date of the semi-annual report, the Fund returned
1.00% and the index 3.96%. During this period, the source of the
underperformance was mainly sector selection. We over weighted the Technology
sector, which was a laggard for most of the period and were underweight in the
Utilities and Financial sectors, which were relatively strong. Over the last six
months, sector weights underwent significant change with both the substantial
over weight in Technology and under weight in Financials more than halved.
* A team of investment professionals led by Matthew Price, CFA and David
Campbell, ING Investments, LLC assumed responsibility for the Fund on April
21, 2003.
4
Portfolio Managers' Report ING GROWTH OPPORTUNITIES FUND
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6/1/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- ------- ------- ------- ------- -------
ING Growth Opportunities Fund Class A
With Sales Charge $ 9,427 $11,577 $13,940 $17,012 $22,349 $35,726 $22,156 $15,805 $13,272
ING Growth Opportunities Fund Class A
Without Sales Charge $10,000 $12,282 $14,788 $18,047 $23,709 $37,899 $23,504 $16,767 $14,080
Russell 3000 Index $10,000 $13,008 $16,255 $21,095 $24,932 $27,880 $25,170 $22,032 $20,328
S&P 500 Index $10,000 $12,844 $16,622 $21,722 $26,289 $29,042 $25,977 $22,380 $20,575
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
--------------------------------------------------------
SINCE INCEPTION
OF CLASS A, B AND C
1 YEAR 5 YEAR 10 YEAR 6/5/95
------ ------ ------- ------
Including Sales Charge:
Class A (1) -20.85% -5.97% -- 3.61%
Class B (2) -20.72% -5.75% -- 3.68%
Class C (3) -17.42% -5.46% -- 3.69%
Class T (4) -19.89% -5.48% 4.04% --
Excluding Sales Charge:
Class A -16.03% -4.84% -- 4.38%
Class B -16.55% -5.52% -- 3.68%
Class C -16.59% -5.46% -- 3.69%
Class T -16.55% -5.48% 4.04% --
Russell 3000 Index -7.73% -0.74% 9.63% 9.27%
S&P 500 Index -8.06% -1.08% 9.93% 9.44%(5)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Growth Opportunities Fund against the Russell 3000 Index and
the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales
charges and incurs no operating expenses. An investor cannot invest directly in
an index. The Fund's performance is shown both with and without the imposition
of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and 5 year returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Reflects deduction of the Class T deferred sales charge of 4% for the 1
year return.
(5) Since inception performance for the index is shown from 6/1/95.
(6) The Fund may invest in securities of large, mid- and small-capitalization
companies, and the Russell 3000 Index tracks a larger number of companies
than the S&P 500 Index with a large range of market capitalizations.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller and mid-size companies may entail greater price volatility
than investing in stocks of larger companies. From time to time, the stock
market may not favor the growth securities in which the Fund invests.
See accompanying index descriptions on page 32.
5
ING LARGECAP GROWTH FUND Portfolio Managers' Report
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PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail,
CFA, Senior Vice President, ING Investments, LLC.*
GOAL: The ING LargeCap Growth Fund (the "Fund") seeks long-term capital
appreciation by investing in equity securities of large U.S. companies.
MARKET OVERVIEW: The S&P 500 Index posted a loss of 8.06% over the 12 months
ended May 31, 2003. Declines occurred in the first half of the period due to
accounting concerns, conflict with Iraq, and concerns regarding the strength of
the U.S. economic rebound. However, the market retraced a significant portion of
those losses this year after the successful resolution of the war and mounting
evidence of improving corporate earnings.
Within the market, leadership has swung sharply back and forth between defensive
stocks and former growth stocks. The sharp rallies of the fourth quarter of 2002
and from April 2003 have favored the smallest stocks within the index,
especially those trading at low dollar prices. For the whole period financials,
health care and information technology stocks were the strongest performers. The
utilities and consumer discretionary sectors suffered the worst performance
during the period.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -13.56% compared to the
Russell 1000 Growth Index for which the total return was -7.85%.
PORTFOLIO SPECIFICS: In the semi annual report we stated that underperformance
in the first half year was primarily due to the underperformance of cyclically
sensitive Technology stocks such as semiconductors. In the six-months since the
date of the semi-annual report, the Fund returned 2.80% and the index 3.83%.
During the period stock selection was neutral over all with relative gains in
the Technology and Health Care sectors more or less balancing relative losses in
Financials and Energy. Sector selection detracted slightly from performance on
balance: we held on average an over weight in Technology, which was a laggard
for most of the period, and an over weight in Energy which was generally strong,
(although, as noted, the results of our stock selections were in the opposite
direction). Over the last six months, sector weights did not undergo significant
change. The largest pair of changes was the reduction of our over weight in
Telecommunications stocks and an increase in Consumer Discretionary stocks, both
by about 3 1/2%.
MARKET OUTLOOK: While we expect the recovery to continue at a more moderate pace
as compared to prior cycles, our optimism has improved at the margin. The
economic cycle is greatly influenced by psychology and the inventory cycle.
Although the consumer has been supported by a housing refinance boom during the
down cycle, business spending has been weak. Once corporate psychology improves
to the point that pent up projects are released, the positive feedback loop of
psychology and the inventory cycle can be put into play. Inventories remain at
very low levels, so there is reason to believe that the boost to the economy
from inventory growth could be substantial.
Meanwhile, government authorities are doing everything possible to set a
recovery in motion. The combined monetary and fiscal stimulus of the Fed rate
cuts, mortgage refinancings, and the most recent tax cut will continue to inject
tremendous additional liquidity into the financial system.
In summary, the economic outlook has improved. Reduced geo-political uncertainty
and aggressive economic policy conditions have lowered investors' risk aversion
and improved capital market sentiment. This condition has reduced the financial
distress of consumers, corporations and emerging markets government borrowers
alike, setting the stage for improved growth in the quarters ahead. This
enhanced economic backdrop should bode well for corporate profit growth and
investor sentiment.
* Effective June 2, 2003, Wellington Management Company, LLP became the
Sub-Advisor. Andrew J. Shilling, Senior Vice Presidentand Partner is the
portfolio manager.
6
Portfolio Managers' Report ING LARGECAP GROWTH FUND
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7/21/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- ------- ------- -------
ING LargeCap Growth Fund Class A
With Sales Charge $ 9,427 $11,949 $20,505 $30,828 $19,446 $13,224 $11,431
ING LargeCap Growth Fund Class A
Without Sales Charge $10,000 $12,675 $21,752 $32,702 $20,628 $14,028 $12,126
Russell 1000 Growth Index $10,000 $11,375 $14,357 $17,946 $12,614 $ 9,982 $ 9,198
S&P 500 Index $10,000 $11,586 $14,022 $15,491 $13,856 $11,937 $10,975
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
--------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEAR 7/21/97
Including Sales Charge:
Class A (1) -18.52% -2.04% 2.31%
Class B (2) -18.40% -1.90% 2.51%
Class C (3) -15.14% -1.59% 2.62%
Excluding Sales Charge:
Class A -13.62% -0.88% 3.34%
Class B -14.17% -1.52% 2.66%
Class C -14.15% -1.59% 2.62%
Russell 1000 Growth Index(4) -7.85% -4.16% 2.49%(4)
S&P 500 Index -8.06% -1.08% 1.61%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING LargeCap Growth Fund against the Russell 1000 Growth Index
and the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales
charges and incurs no operating expenses. An investor cannot invest directly in
an index. The Fund's performance is shown both with and without the imposition
of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5%, 2% and 1%,
respectively, for the 1 year, 5 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Since inception performance for the index is shown from 8/1/97.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. From time to time, the stock market may not favor the
large company growth-oriented securities in which the Fund invests.
See accompanying index descriptions on page 32.
7
ING MIDCAP OPPORTUNITIES FUND Portfolio Manager's Report
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PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price,
CFA and David Campbell, ING Investments, LLC.*
GOAL: The ING MidCap Opportunities Fund (the "Fund") seeks long-term capital
appreciation by investing primarily in the common stock of mid-sized U.S.
companies.
MARKET OVERVIEW: The U.S. equity markets declined during the year ending May 31,
2003. For the period, the Russell MidCap Growth index declined 5.84%. Mid-sized
stocks were not alone in their decline. The Russell 2000 Growth index fell
9.59%, the S&P 500 was down 8.06% and the Dow Jones Industrials dropped 8.90%.
The NASDAQ Composite, down 1.23%, held up a little better following its steep
drop in the two preceding years.
The results for the six months ending May 31, 2003 were more encouraging. The
Russell MidCap Growth index advanced 10.00% during the six-month period. Indeed,
the returns for the latest three months -- ended May 31, 2003 -- were even
better. In the three-month period, the Russell MidCap Growth index moved up
19.27%. We think that a major part of this advance can be attributed to a
resurgence in those stocks that were most beaten-up over the last several years.
We expect, though, that as this speculation broadens out, the advance may become
more sustainable, albeit somewhat less explosive.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -8.91% compared to the
Russell Mid Cap Growth Index for which the total return was -5.84% and the S&P
MidCap 400 Index for which the total return was -9.14%.
PORTFOLIO SPECIFICS: In the semi annual report we stated that the Fund
outperformed the index in the first half year and this was primarily due to
stock selection in the transportation, telecommunications and financial sectors.
In the six months since the date of the semi-annual report, the Fund returned
4.01% and the index 10.00%. During this period, the source of the
underperformance was mainly stock selection in the Healthcare and Industrials
sectors. We estimate that these accounted for approximately half of the
underperformance. Sector selection also detracted from performance. We held on
average an over weight in Technology which was a laggard for most of the period
and were underweight in the Healthcare sector which was relatively strong. Over
the last six months, sector weights underwent significant change with the
substantial over weight in Technology taken to an underweight and the under
weight in Healthcare stocks reduced considerably.
MARKET OUTLOOK: After several years of declines, the stock market appeared to be
in a recovery mode from mid-March through the end of May 2003. This seemed in
part to reflect some improvement in corporate profit trends; in addition the
market's advance may well have reflected investors' increasing optimism about
the economy's growth later this year and into 2004.
There are reasons to believe that the conditions are favorable for both the
economy and for common stocks. The combination of low interest rates (with the
possibility of even further Federal Reserve loosening) and stimulative tax cuts
could well spur an acceleration of the economy. And inflation certainly is not
an imminent concern, notwithstanding the toll that energy prices are taking on
the economy.
The Fund's investment discipline is not dependent on the forecast for the
economy. The Fund will build a diversified portfolio of mostly smaller common
stocks selected for their growth prospects, reasonable valuation, and evidence
of relative strength.
* A team of investment professionals led by Matthew Price, CFA and David
Campbell, ING Investments, LLC assumed responsibility for the Fund on April
21, 2003.
8
ING MIDCAP OPPORTUNITIES FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
8/20/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- ------- -------
ING MidCap Opportunities Fund Class A
With Sales Charge $ 9,425 $14,581 $24,651 $18,865 $14,375 $13,094
ING MidCap Opportunities Fund Class A
Without Sales Charge $10,000 $15,470 $26,155 $20,016 $15,252 $13,893
S&P MidCap 400 Index $10,000 $14,218 $17,268 $19,154 $19,612 $17,820
Russell MidCap Growth Index $10,000 $14,521 $20,869 $15,801 $13,091 $12,326
AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS ENDED MAY 31, 2003
-------------------------------
SINCE INCEPTION
1 YEAR 8/20/98
------ -------
Including Sales Charge:
Class A (1) -14.16% 5.80%
Class B (2) -14.04% 6.14%
Class C (3) -10.38% 6.38%
Excluding Sales Charge:
Class A -8.91% 7.12%
Class B -9.51% 6.47%
Class C -9.47% 6.38%
Russell MidCap Growth Index(4) -5.84% 4.50%(5)
S&P MidCap 400 Index -9.14% 12.93%(5)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING MidCap Opportunities Fund against the S&P MidCap 400 Index.
The Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) The Fund normally invests in mid-cap companies that the portfolio managers
feel have above average prospects for growth. The Russell MidCap Growth
Index tracks the performance of mid-cap growth companies.
(5) Since inception performance for the index is shown from 9/1/98.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of mid-size companies may entail greater price volatility than investing
in stocks of larger companies. From time to time, the stock market may not favor
the mid-cap growth securities in which the Fund invests.
See accompanying index descriptions on page 32.
9
ING SMALLCAP OPPORTUNITIES FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price,
CFA and David Campbell, ING Investments, LLC.*
GOAL: The Small Cap Opportunities Fund (the "Fund") seeks capital appreciation
through investing primarily in common stocks of smaller, lesser-known U.S.
companies.
MARKET OVERVIEW: The U.S. equity markets declined during the year ending May 31,
2003. For the period, the Russell 2000 Growth index declined 9.59%. This small
cap growth index fared slightly worse than other broad market measures: The
Russell Midcap Growth index fell 5.84%, the S&P 500 was down 8.06% and the Dow
Jones Industrials dropped 8.90%. The NASDAQ Composite, down 1.23%, held up a
little better following its steep drop in the two preceding years.
The results for the six months ending May 31, 2003 were more encouraging. The
Russell 2000 Growth index advanced 9.00% during the six-month period. Indeed,
the returns for the latest three months -- ended May 31, 2003 -- were even
better. In the three-month period, the Russell 2000 Growth index moved up
23.64%, leading all the major market indexes. We think that a major part of this
advance can be attributed to a resurgence in those stocks that were most
beaten-up over the last several years. We expect, though, that as this
speculation broadens out, the advance may become more sustainable, albeit
somewhat less explosive
PERFORMANCE: For the year ended May 31, 2003, the ING SmallCap Opportunities
Fund had a total return of -24.46% compared to the Russell 2000 index for which
the total return was -8.18%.
PORTFOLIO SPECIFICS: In the semi annual report we stated that underperformance
in the first half year was primarily due to exposure to consumer related stocks.
In the six-months since the date of the semi-annual report, the Fund returned
- -2.76% and the index 9.00%. During this period, the source of the
underperformance was mainly stock selection in the Health Care and Technology
sectors. We estimate that these accounted for approximately half and a quarter
of the underperformance respectively. Sector selection also detracted from
performance. We held on average an over weight in Technology, which was a
laggard for most of the period and were underweight in the Financial sector
which was relatively strong. Over the last six months, sector weights underwent
significant change with the strong over weight in Technology reduced
considerably and the under weight in Financial stocks halved.
MARKET OUTLOOK: After several years of declines, the stock market appeared to be
in a recovery mode from mid-March through the end of May 2003. This seemed in
part to reflect some improvement in corporate profit trends; in addition the
market's advance may well have reflected investors' increasing optimism about
the economy's growth later this year and into 2004.
There are reasons to believe that the conditions are favorable for both the
economy and for common stocks. The combination of low interest rates (with the
possibility of even further Federal Reserve loosening) and stimulative tax cuts
could well spur an acceleration of the economy. And inflation certainly is not
an imminent concern, notwithstanding the toll that energy prices are taking on
the economy.
The Fund's investment discipline is not dependent on the forecast for the
economy. The Fund will build a diversified portfolio of mostly smaller common
stocks selected for their growth prospects, reasonable valuation, and evidence
of relative strength.
* A team of investment professionals led by Matthew Price, CFA and David
Campbell, ING Investments, LLC assumed responsibility for the Fund on April
21, 2003.
10
Portfolio Manager's Report ING SMALLCAP OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
6/5/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- ------- ------- ------- ------- -------
ING SmallCap Opportunities Fund Class A
With Sales Charge $ 9,427 $13,196 $12,928 $15,263 $16,604 $34,571 $29,477 $18,907 $14,283
ING SmallCap Opportunities Fund Class A
Without Sales Charge $10,000 $13,998 $13,714 $16,191 $17,614 $36,674 $31,271 $20,057 $15,152
Russell 2000 Growth Index $10,000 $14,460 $13,679 $15,847 $16,470 $19,713 $16,611 $13,983 $12,642
Russell 2000 Index $10,000 $13,589 $14,536 $17,624 $17,150 $18,851 $19,923 $19,823 $18,200
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
-----------------------------------------------------------
SINCE INCEPTION
OF CLASS A, B AND C
1 YEAR 5 YEAR 10 YEAR 6/5/95
------ ------ ------- ------
Including Sales Charge:
Class A (1) -28.81% -2.48% -- 4.56%
Class B (2) -28.71% -2.25% -- 4.62%
Class C (3) -25.75% -2.02% -- 4.59%
Class T (4) -27.93% -1.90% 4.61% --
Excluding Sales Charge:
Class A -24.46% -1.32% -- 5.34%
Class B -24.96% -1.99% -- 4.62%
Class C -25.00% -2.02% -- 4.59%
Class T -24.92% -1.90% 4.61% --
Russell 2000 Growth Index(5) -9.59% -4.42% 4.17% 2.97%(6)
Russell 2000 Index -8.18% 0.65% 8.12% 7.77%(6)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING SmallCap Opportunities Fund against the Russell 2000 Growth
Index and the Russell 2000 Index. The Index has no cash in its portfolio,
imposes no sales charges and incurs no operating expenses. An investor cannot
invest directly in an index. The Fund's performance is shown both with and
without the imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 MANAGER, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and 5 year returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Reflects deduction of the Class T deferred sales charge of 4% for the 1
year return.
(5) The Fund normally invests in small-cap companies that the portfolio manager
believes have above average prospects for growth. The Russell 2000 Growth
Index tracks the performance of small-cap growth companies.
(6) Since inception performance for the index is shown from 6/1/95.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller companies may entail greater price volatility than investing
in stocks of larger companies. From time to time, the stock market may not favor
the small size growth companies in which the Fund invests.
See accompanying index descriptions on page 32.
11
ING DISCIPLINED LARGECAP FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by Hugh T.M.
Whelan, CFA, Aeltus Investment Management, Inc., the Sub-Advisor.
GOAL: The ING Disciplined LargeCap Fund (formerly, ING Research Enhanced Index
Fund) (the "Fund") seeks capital appreciation by investing at least 80% of its
net assets in stocks included in the S&P 500.
MARKET OVERVIEW: The S&P 500 Index posted a loss of 8.06% over the 12 months
ended May 31, 2003. Declines occurred in the first half of the period due to
accounting concerns, conflict with Iraq, and concerns regarding the strength of
the U.S. economic rebound. However, the market retraced a significant portion of
those losses this year after the successful resolution of the war and mounting
evidence of improving corporate earnings.
Within the market, leadership has swung sharply back and forth between defensive
stocks and former growth stocks. The sharp rallies of the fourth quarter of 2002
and from April 2003 have favored the smallest stocks within the index,
especially those trading at low dollar prices. For the whole period financials,
health care and information technology stocks were the strongest performers. The
utilities and consumer discretionary sectors suffered the worst performance
during the period.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -9.73%, compared to -8.06%
for the S&P 500 Index.
PORTFOLIO SPECIFICS: Our return attribution analysis indicates that the bulk of
the underperformance was due to stock selection, especially in April - May of
2003. The models we use to determine our overweights and underweights measure
three things: business momentum/earnings quality, valuation, and market
recognition. In looking at what was effective and what was not, we were hurt
primarily by our market recognition variables, including price momentum, analyst
estimate revision, and short interest during the rally in 2003. This was due to
the fact that market's recent focus on small, low priced stocks represents a
sharp change in market leadership and is unsupported by our measures of positive
analyst estimate revisions. Only some of our valuation factors, like price to
free cash flow, cash as a percentage of market value, and forward P/E were
effective during the period.
While the Fund benefited from its underweights in less fundamentally attractive
stocks in 2002, this year our underweights have detracted from performance as
the stocks with the poorest fundamentals according to our measures have had the
best performance on balance. The largest individual detractors from performance
were our overweights of Home Depot and Cisco, and our underweight in AIG.
Positive contributors to performance were our underweights in Altria Group,
Baxter International, and Electronic Data Systems.
The Fund's sector allocation did not have a significant impact on performance,
as is typically the case because we maintain sector exposures that are very
close to those of our benchmark.
MARKET OUTLOOK: Our bottom-up quantitative ranking process is leading us
currently to modest overweights in industrials and financials and small
underweights in the healthcare and consumer discretionary sectors. Our fully
invested approach will continue to focus on the goal of adding performance
through strong individual stock selection -- not through sector or style
rotation -- while maintaining overall portfolio characteristics that are
representative of the S&P 500 Index.
We believe that if the current rally continues, our model will identify the
strongest performing stocks based on our research which shows that stocks with
attractive valuations, strong underlying business momentum, and clear market
recognition usually outperform stocks, which have the worst scores in these
areas over the long run.
Portfolio Manager's Report ING DISCIPLINED LARGECAP FUND
- --------------------------------------------------------------------------------
12/30/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
-------- ------- ------- ------- ------- -------
ING Disciplined LargeCap Fund Class A
With Sales Charge $ 9,425 $10,123 $10,719 $ 9,421 $ 8,047 $ 7,264
ING Disciplined LargeCap Fund Class A
Without Sales Charge $10,000 $10,740 $11,373 $ 9,996 $ 8,538 $ 7,707
S&P 500 Index $10,000 $10,647 $11,763 $10,521 $ 9,064 $ 8,333
AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS ENDED MAY 31, 2003
-------------------------------
SINCE INCEPTION
1 YEAR 12/30/98
------ --------
Including Sales Charge:
Class A (1) -14.88% -6.98%
Class B (2) -14.93% -6.82%
Class C (3) -11.34% -6.40%
Excluding Sales Charge:
Class A -9.73% -5.72%
Class B -10.45% -6.40%
Class C -10.45% -6.40%
S&P 500 Index -8.06% -4.04%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Disciplined LargeCap Fund against the S&P 500 Index. The
Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Since inception performance for the index is shown from 01/01/99.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. While equities may offer the potential for greater
long-term growth than most debt securities, they generally have higher
volatility. Derivatives are subject to the risk of changes in the market price
of the security and the risk of loss due to changes in interest rates. The use
of certain derivatives may also have a leveraging effect, which may increase the
volatility of the Fund. From time to time, the stock market may not favor the
large company growth oriented securities in which the Fund invests.
See accompanying index descriptions on page 32.
13
ING FINANCIAL SERVICES FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: Steven L. Rayner, CFA, CPA, Vice-President and Portfolio
Manager; Robert M. Kloss, Vice-President & Portfolio Manager. ING Investments,
LLC, Investment Adviser.
GOAL: The Financial Services Fund (the "Fund") seeks long-term capital
appreciation by investing primarily in the equity securities of companies
engaged in financial services.
MARKET OVERVIEW: The six months ended May 31, 2003 could be termed "a tale of
two markets" for the Fund, our benchmark financial index, and the broader market
index, all of which had declined by double-digit percentages as of mid-March,
but subsequently rallied strongly to post mid-single-digit gains for the period.
Continued lackluster economic data and a mixed picture for corporate earnings
plagued the markets during the first calendar quarter of 2003, with the
then-impending Iraqi conflict acting as a further overhang. However, even as war
finally came and proceeded tentatively in the early stages, indications of
improving economic conditions began to emerge. By the time the war ended in a
decisive if not unexpected victory, the markets were in full rally mode, with
many of the more credit- and market-sensitive companies benefiting the most in
the general upturn.
Most of the sub-groups in our financial universe advanced during the period,
though the route taken to achieve those gains varied widely. The more
economically-sensitive groups, such as the consumer finance companies, brokers,
and asset managers, were generally quite weak early in the year, but roared back
as the rally took hold in the second calendar quarter of 2003. Certain defensive
areas, including banks, some life insurers, and the property/casualty insurers,
held up better early in the year, but then watched passively as beaten-down
sub-sectors advanced more swiftly in the subsequent rally.
The S&P Financials Index rose 6.13% during the six months ending May 31, 2003,
surpassing the 3.87% return posted by the broader market as measured by the S&P
500 Index. For the full 12-month period ending May 31, 2003, the S&P Financials
Index declined -4.08%, outperforming the -8.06% decline in the S&P 500 Index.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -6.98% compared to the
- -4.08% return for the S&P Financials Index.
PORTFOLIO SPECIFICS: The Fund moved incrementally to take advantage of depressed
valuations early in the period, moving our offensive/defensive bias from a
mildly defensive stance to a neutral-to-slightly-offensive position by the end
of the fiscal year. As the rally off the mid-March lows progressed, many of our
holdings performed well, though we were underweighted in certain names versus
our index, which held back the Fund's relative performance.
Among the individual stocks that were significant contributors to performance
during the year ended May 31, 2003 were: securities brokers Lehman Brothers and
Goldman Sachs; diversified financials, American Express and CitiGroup; regional
banks, UCBH Holdings, Prosperity Bancshares, and Alabama National; and
disability insurer, Delphi Financial Group.
Conversely, our two multiline insurers, American International Group and
Hartford Financial Services, produced sharply negative results during the fiscal
year, as both were beset by reserving issues and continued concerns over
potential casualty and asbestos liabilities.
Our significant bet on the mortgage insurance sub-sector has yet to pay off,
though one of our two holdings has produced a slight profit. We are still
convinced that the eventual waning of the seemingly endless refinance boom will
see these companies earn substantial profits as policy persistency improves and
expenses moderate.
We continue to search all areas of our financial universe for distinctive values
in attractively-priced names.
MARKET OUTLOOK: Six months ago, we wrote about our expectation that improved
earnings prospects might be the catalyst to finally get the markets and our
sector moving forward again. While we are happy to see that optimism over the
earnings outlook has helped fuel the recent advance, we are not convinced that
the most deserving stocks in our universe have received the most investor
attention.
Thus, we have concentrated on finding what we believe to be the best relative
values among those companies leveraged to an economic recovery, as opposed to
those that might be derailed by overly exuberant expectations or by the prospect
of higher interest rates looming somewhere down the road. We continue to see
considerable value within our universe of financial stocks, though we feel
selectivity will be key.
14
Portfolio Manager's Report ING FINANCIAL SERVICES FUND
- --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
ING Financial Services
Fund Class A With
Sales Charge $ 9,422 $10,182 $11,071 $14,761 $22,743 $34,654 $31,249 $26,386 $35,807 $38,349 $35,674
ING Financial Services
Fund Class A Without
Sales Charge $10,000 $10,806 $11,750 $15,667 $24,138 $36,780 $33,166 $28,004 $38,003 $40,701 $37,862
S&P 500 Index $10,000 $10,743 $12,576 $15,891 $19,939 $25,705 $29,068 $29,821 $31,947 $27,024 $24,674
S&P Financials Index $10,000 $10,880 $12,658 $16,845 $24,553 $34,593 $37,457 $38,068 $44,094 $41,391 $39,404
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
--------------------------------------------------
SINCE INCEPTION
OF CLASS B
1 YEAR 5 YEAR 10 YEAR 10/17/97
------ ------ ------- --------
Including Sales Charge:
Class A (1) -12.33% -0.60% 13.56% --
Class B (2) -12.00% -0.46% -- 2.85%
Excluding Sales Charge:
Class A -6.98% 0.58% 14.24% --
Class B -7.66% -0.18% -- 2.97%
S&P 500 Index -8.06% -1.08% 9.93% 2.38%(3)
S&P 500 Financials Index -4.08% 2.65% 14.69% 6.03%(3)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Financial Services Fund against the S&P 500 Index and S&P
500 Financials Index. The Indices have no cash in their portfolios, impose no
sales charges and incur no operating expenses. An investor cannot invest
directly in an index. The Fund's performance is shown both with and without the
imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Prior to October 20, 1997, the Fund operated as a closed-end investment company.
All performance information prior to this date reflects the historical expense
levels of the Fund as a closed-end investment company without adjustment for the
higher annual expenses of the Fund's Class A shares. Performance would have been
lower if adjusted for these expenses. Ten-year returns assume no participation
in the 1992 rights offering and full participation in the 1993 rights offering,
and reflect an additional investment of $3,639 into the Fund. A simultaneous
investment of the same amount is included in each index for comparative reasons.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5%, 2% and 1%,
respectively, for the 1 year, 5 year and since inception returns.
(3) Since inception performance for the index is shown from 11/1/97.
PRINCIPAL RISK FACTOR(S): Because the Fund's portfolio is concentrated in the
financial services industry, it may be subject to greater risk than a portfolio
that is not concentrated in one industry. International investing does pose
special risks including currency fluctuation, economic and political risks not
found in investments that are solely domestic. The Fund may invest in small- and
mid-sized companies, which may be more susceptible to price swings and less
liquid than larger companies. The value of convertible or debt securities may
fall when interest rates rise. Profitability of financial services companies are
more affected by changes in interest rates than some other companies.
See accompanying index descriptions on page 32.
15
ING LARGE COMPANY VALUE FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by William F.
Coughlin, CFA, ING Investments, LLC.*
GOAL: The Large Company Value Fund's (the "Fund") principal objective is
long-term capital appreciation through investment in a diversified portfolio
consisting primarily of common stocks of large companies. Income is a secondary
objective.
MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31,
2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad
measures of market performance) declined 7.73% and 8.06%, respectively. The
market's decline was evident in measures of mid-cap growth and small-cap growth
stocks as well. The Russell MidCap Growth Index fell 5.84%, and the Russell 2000
Growth Index dropped 9.59%.
The reporting period was marked by continued disappointment in the economic
numbers but strength in consumer spending, buoyed by record refinancing. During
the final months of the fiscal year, investors were focused on geopolitical
uncertainties, especially the potential for armed conflict in Iraq conflict.
Once the coalition forces did, in fact, enter Iraq, the market began trading up
off its March 11 low. Through the first week of April, the overall market gained
an additional 4%.
Recent market leadership has centered on the technology group, with value stocks
trailing the overall market by a small margin. We have seen some institutional
investors purchasing tech stocks, hoping the sector would provide the most
leveraged upside returns if a widespread economic recovery ensues. To date,
fundamentals have not, in our opinion, justified this type of anticipatory
buying. As value investors, we are willing to forgo a small amount of short-term
upside return whenever we see this kind of speculative buying, When the markets
settle, we expect investors will once again focus on the fundamentals of
individual companies.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -15.21% compared to the
S&P/Barra Value index for which the total return was -8.70%.
PORTFOLIO SPECIFICS: In the semiannual report we stated that the Fund
underperformed the index in the first half year, and this was primarily due to
exposure to electric utilities. In the six months since the last semiannual
report, the Fund returned 1.98% and the index 5.61%. During this period, the
source of the underperformance was mainly sector selection. In the most
noteworthy cases, we were overweight technology when it was performing poorly,
and were underweighted in utilities, which was the best performing sector in the
index. This was partly offset by our overweight in the strong health care
sector. By contrast, the aggregate effect of stock selection was much smaller,
although some of the components were individually significant. Stock selection
in the financials and consumer discretionary sectors had an adverse effect on
performance, while stock selection in technology and telecommunications was
positive. Over the last six months, sector weights underwent significant change.
We cut our underweight in financials by two-thirds, halved the overweight in
health care and converted the overweight in technology to an underweight.
MARKET OUTLOOK: Value stocks have recently been trailing their growth
counterparts. While we believe this is a short-term reactionary move, equities
across the spectrum are very reasonably priced today. This, in combination with
low interest rates and fairly indifferent/low consumer sentiment, makes for one
of the best investment opportunities we have seen in at least five years. Adding
in such factors as stock market fear, post-war reconstruction uncertainty,
record low interest rates, and a business environment that has been extremely
conservative, we believe the upside potential for our equity market far exceeds
the downside risk.
* A team of investment professionals led by William F. Coughlin, CFA, ING
Investments, LLC assumed responsibility for the Fund on April 21, 2003.
16
Portfolio Manager's Report ING LARGE COMPANY VALUE FUND
- --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
ING Large Company Value
Fund Class A
With Sales Charge $ 9,427 $ 9,738 $ 9,598 $10,703 $12,924 $13,765 $13,691 $27,000 $24,980 $21,775 $18,462
ING Large Company Value
Fund Class A
Without Sales Charge $10,000 $10,330 $10,182 $11,353 $13,710 $14,602 $14,523 $28,641 $26,498 $23,098 $19,584
S&P Barra Value Index $10,000 $10,743 $12,576 $15,891 $19,939 $25,705 $29,068 $29,821 $31,947 $27,024 $24,674
S&P 500 Index $10,000 $10,426 $12,531 $16,094 $20,828 $27,219 $32,942 $36,392 $32,551 $28,044 $25,783
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
----------------------------------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS B OF CLASS C
1 YEAR 5 YEAR 10 YEAR 8/22/00 9/26/00
------ ------ ------- ------- -------
Including Sales Charge:
Class A (1) -20.08% -4.05% 6.32% -- --
Class B (2) -19.99% -- -- -17.22% --
Class C (3) -16.72% -- -- -- -16.25%
Excluding Sales Charge:
Class A -15.21% -2.90% 6.95% -- --
Class B -15.78% -- -- -16.46% --
Class C -15.88% -- -- -- -16.25%
S&P Barra Value Index(4) -8.70% -0.81% 9.45% -8.15%(5) -8.39%(6)
S&P 500 Index -8.06% -1.08% 9.93% -13.96%(5) -12.60%(6)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of the ING Large Company Value Fund against the S&P 500 Index. The
Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 MANAGER, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 3%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) The Fund normally invests in companies that the portfolio manager considers
to be undervalued compared to the overall stock market. The S&P Barra Value
Index tracks the performance of companies with low price-to-book ratios.
(5) Since inception performance for the index is shown from 9/1/00.
(6) Since inception performance for the index is shown from 10/1/00.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller and mid-sized companies may entail greater price volatility
than investing in stocks of larger companies. The Fund may also invest in
foreign securities. International investing does pose special risks, including
currency fluctuations, economic and political risks not found in investments
that are solely domestic. From time to time, the stock market may not favor the
large company value securities in which the Fund invests.
See accompanying index descriptions on page 32.
17
ING MAGNACAP FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by William F.
Coughlin, CFA, ING Investments, LLC.*
GOAL: The ING MagnaCap Fund (the "Fund") seeks growth of capital, with dividend
income as a secondary consideration.
MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31,
2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad
measures of market performance) declined 7.73% and 8.06%, respectively. The
market's decline was evident in measures of mid-cap growth and small-cap growth
stocks as well. The Russell MidCap Growth Index fell 5.84%, and the Russell 2000
Growth Index dropped 9.59%.
The reporting period was marked by continued disappointment in the economic
numbers but strength in consumer spending was buoyed by record refinancing.
During the final months of the fiscal year, investors were focused on
geopolitical uncertainties, especially the potential for armed conflict in Iraq.
Once the coalition forces did, in fact, enter Iraq, the market began trading up
off its March 11 low. Through the first week of April, the overall market gained
an additional 4%.
Recent market leadership has centered on the technology group, with value stocks
trailing the overall market by a small margin. We have seen some institutional
investors purchasing tech stocks, hoping the sector would provide the most
leveraged upside returns if a widespread economic recovery ensues. To date,
fundamentals have not, in our opinion, justified this type of anticipatory
buying. As value investors, we are willing to forgo a small amount of short-term
upside return whenever we see this kind of speculative buying. When the markets
settle, we expect investors will once again focus on the fundamentals of
individual companies.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -12.46% compared to the S&P
500 Index for which the total return was -8.06%.
PORTFOLIO SPECIFICS: In the semi-annual report we stated that the Fund
underperformed the index in the first half year, and this was primarily due to
exposure to electric utilities. In the six months since the last semi-annual
report, the Fund returned 2.92% and the index 3.96%. During this period, the
source of the underperformance was mainly sector selection, although the
components were individually small. In the largest case, we underweighted
utilities, which was the best performing sector in the index. By contrast, the
aggregate effect of stock selection was minor, although some of the components
were individually significant. Stock selection in financials and the consumer
sectors had an adverse effect on performance, while stock selection in
healthcare and industrials was positive. Over the last six months, portfolio
sector weights underwent significant change. The primary change was to move to
an overweight in financials and reduced the underweight in the consumer sectors.
This was financed by increased underweights in technology and healthcare.
MARKET OUTLOOK: Value stocks have recently been trailing their growth
counterparts. While we believe this is a short-term reactionary move, equities
across the spectrum are very reasonably priced today. This, in combination with
low interest rates and fairly indifferent/low consumer sentiment, makes for one
of the best investment opportunities we have seen in at least five years. Adding
in such factors as stock market fear, post-war reconstruction uncertainty,
record low interest rates, and a business environment that has been extremely
conservative, we believe the upside potential for our equity market far exceeds
the downside risk.
* A team of investment professionals led by William F. Coughlin, CFA, ING
Investments, LLC assumed responsibility for the Fund on April 21, 2003.
18
Portfolio Manager's Report ING MAGNACAP FUND
- --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
ING MagnaCap Fund
Class A With
Sales Charge $ 9,422 $10,178 $11,889 $14,684 $18,394 $22,906 $25,700 $27,287 $25,891 $23,069 $20,196
ING MagnaCap Fund
Class A Without
Sales Charge $10,000 $10,802 $12,618 $15,584 $19,523 $24,312 $27,276 $28,960 $27,479 $24,485 $21,435
S&P Barra Value Index $10,000 $10,743 $12,576 $15,891 $19,939 $25,705 $29,068 $29,821 $31,947 $27,024 $24,674
S&P 500 Index $10,000 $10,426 $12,531 $16,094 $20,828 $27,219 $32,942 $36,392 $32,551 $28,044 $25,783
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
---------------------------------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS B AND M OF CLASS C
1 YEAR 5 YEAR 10 YEAR 7/17/95 6/1/99
------ ------ ------- ------- ------
Including Sales Charge:
Class A (1) -17.51% -3.63% 7.28% -- --
Class B (2) -17.38% -3.41% -- 5.86% --
Class C (3) -14.49% -- -- -- -6.66%
Class M (4) -15.89% -3.59% -- 5.66% --
Excluding Sales Charge:
Class A -12.46% -2.49% 7.92% -- --
Class B -13.03% -3.18% -- 5.86% --
Class C -13.11% -- -- -- -6.66%
Class M -12.85% -2.91% -- 6.14% --
S&P Barra Value Index(5) -8.70% -0.81% 9.45% 8.14%(6) -4.01%
S&P 500 Index -8.06% -1.08% 9.93% 8.87%(6) -5.94%
Based upon a $10,000 initial investment, the graph and table above illustrate
the total return of ING MagnaCap Fund against the S&P 500 Index. The Index has
no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. The Fund's performance
is shown both with and without the imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and 5 year returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Reflects deduction of the maximum Class M sales charge of 3.50%.
(5) The Fund invests in value securities that meet the Fund's disciplined
investment criteria. The S&P Barra Value Index tracks the performance of
companies with low price-to-book ratios.
(6) Since inception performance for the index is shown from 8/01/95.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. International investing does pose special risks
including currency fluctuation, economical and political risks not found in
domestic investments.
See accompanying index descriptions on page 32.
19
ING MIDCAP VALUE FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: The Mid Cap Investment Committee of Brandes Investment
Partners L.P. the Fund's sub-adviser.
GOAL: The Fund seeks long-term capital appreciation by investing at least 80% of
its assets in equity securities of U.S. issuers with equity market
capitalizations greater than $1 billion but no greater than $5 billion at the
time of purchase.
MARKET OVERVIEW: For the year ended May 31, 2003, the S&P 500 Index declined
8.06%. Similarly, the Russell MidCap Value Index, which aims to measure the
performance of medium-sized U.S. stocks, shed 5.73%.
Early in the period, U.S. equity prices retreated amid continued concerns
regarding corporate accounting improprieties and mixed economic reports. To
bolster the sluggish economy, the U.S. Federal Reserve Board cut interest rates
a half percent in November.
In early 2003, stock prices continued to languish, as consumer confidence
reached its lowest level in nearly 10 years and the unemployment rate stayed at
6%. Uncertainty surrounding U.S. military action in Iraq also weighed on
sentiment. Stocks rebounded substantially in April and May, however, as evidence
of improving corporate profits, improving consumer sentiment, and the end of
large-scale combat in Iraq paralleled strong returns.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -16.94% compared to the
Russell MidCap Value Index for which the total return was -5.73%.
PORTFOLIO SPECIFICS: During the year, declines for holdings in the auto
components industry had the most significant influence on the Fund's returns.
Goodyear Tire & Rubber (2.1% of the Fund) and Visteon (1.6%) were among
positions registering declines. Holdings in the airlines and insurance
industries, such as AMR (airlines -- 1.6%) and Allmerica Financial (insurance --
0.9%), also tended to decline.
While a majority of the Fund's holdings declined during the period, advances for
positions in industries such as food products and semiconductors & equipment
contributed positively to performance. Other top performers included holdings
such as PG&E (electric utilities -- 1.9%) and Lucent Technologies
(communications equipment -- 2.0%).
During the period, we sold Reebok International (textiles, apparel & luxury
goods -- 0.0%) as its market price advanced to our estimate of its intrinsic
value. In addition, we sold positions such as Comverse Technology (wireless
telecom services -- 0.0%) and Massey Energy (metals & mining -- 0.0%) to pursue
other investment opportunities.
Positions added during the year included firms such as CIT Group (diversified
financial services -- 3.8%) and El Paso (electric utilities -- 2.5%). We
purchased each new position at price levels that we believe offer significant
potential for long-term appreciation. We also added to select existing positions
at price levels that we consider attractive.
As of May 31, 2003, the Fund's most significant weightings lie in the insurance
and electric utilities industries. Keep in mind that weightings are not the
product of industry-level forecasts or opinions, but merely stem from our
company-by-company search for compelling investment opportunities.
MARKET OUTLOOK: As value investors, we offer no predictions regarding the
short-term direction of the overall market. A key teaching from Ben Graham --
widely considered the father of the value investing approach -- is that, in the
short term, the stock market is a voting machine, with a stock's price
reflecting only the stock's popularity with investors on any given day. In the
long term, however, the market is more of a weighing machine, aligning a stock's
price to reflect the fair value of the underlying business.
For value investors, this means that a stock's price and its fair value often
"detach" from one another in the short term. Because of the manic-depressive
nature of the overall market -- where sentiment can shift between sweeping,
carefree optimism and overwhelming fear and uncertainty seemingly overnight --
prices of stocks tend to fluctuate much more than the intrinsic value of the
companies they represent. This irrationality can materialize on the upside,
lifting prices to dangerously lofty heights. It can also appear on the downside,
dragging prices for select stocks to bargain levels.
We target the latter situation, purchasing stocks that are trading at discounts
to their fair values and then holding these stocks until the market recognizes
their inherent worth. By confidently approaching the short-term vagaries of the
market with rational, objective analysis, we believe we can identify compelling
investment opportunities and deliver superior long-term results.
20
Portfolio Manager's Report ING MIDCAP VALUE FUND
- --------------------------------------------------------------------------------
2/1/02 5/31/02 5/31/03
------ ------- -------
ING MidCap Value Fund Class A With Sales Charge $ 9,425 $ 9,689 $ 8,048
ING MidCap Value Fund Class A Without Sales Charge $10,000 $10,280 $ 8,538
Russell MidCap Value Index $10,000 $10,659 $10,048
TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS A OF CLASS B AND C
1 YEAR 02/01/2002 02/04/02
------ ---------- --------
Including Sales Charge:
Class A (1) -21.74% -15.07% --
Class B (2) -21.46% -- -13.51%
Class C (3) -18.14% -- -10.84%
Excluding Sales Charge:
Class A -16.94% -11.20% --
Class B -17.40% -- -10.84%
Class C -17.32% -- -10.84%
Russell MidCap Value Index -5.73% 1.05% 0.36%(4)
Based upon a $10,000 initial investment, the graph and table above illustrate
the total return of ING MidCap Value Fund against the Russell MidCap Value
Index. The Index has no cash in its portfolio, imposes no sales charges and
incurs no operating expenses. An investor cannot invest directly in an index.
The Fund's performance is shown both with and without the imposition of sales
charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5.00% for the
since inception return.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the
since inception return.
(4) Since inception performance for the index is shown from 02/01/02.
PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an
investment in equity securities. In exchange for higher growth potential,
investing in stocks of mid-size companies may entail greater price volatility
than investing in stocks of larger companies. From time to time, the stock
market may not favor the mid-cap value securities in which the Fund invests.
See accompanying index descriptions on page 32.
21
ING SMALLCAP VALUE FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: The SmallCap Investment Committee of Brandes Investment
Partners L.P. the Fund's sub-adviser.
GOAL: The Fund seeks long-term capital appreciation by investing at least 80% of
its assets in equity securities of U.S. issuers with equity market
capitalizations of $1.5 billion or less at the time of purchase.
MARKET OVERVIEW: For the year ended May 31, 2003, the S&P 500 Index declined
8.06%. Similarly, the Russell 200 Value Index, which aims to measure the
performance of smaller U.S. stocks, shed 8.78%.
Early in the period, U.S. equity prices retreated amid continued concerns
regarding corporate accounting improprieties and mixed economic reports. To
bolster the sluggish economy, the U.S. Federal Reserve Board cut interest rates
a half percent in November.
In early 2003, stock prices continued to languish, as consumer confidence
reached its lowest level in nearly 10 years and the unemployment rate stayed at
6%. Uncertainty surrounding U.S. military action in Iraq also weighed on
sentiment. Stocks rebounded substantially in April and May, however, as evidence
of improving corporate profits, improving consumer sentiment, and the end of
large-scale combat in Iraq paralleled strong returns.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -9.83% compared to the
Russell 200 Value Index for which the total return was -8.78%.
PORTFOLIO SPECIFICS: During the year, declines for holdings in the metals &
mining industry had the most significant influence on the Fund's returns.
Stillwater Mining (1.4% of the Fund) and Wolverine Tube (2.3%) were among
positions registering declines. Holdings in the textiles, apparel & luxury goods
and electrical equipment industries, such as Tommy Hilfiger (textiles, apparel &
luxury goods -- 2.2%) and Belden (electrical equipment -- 2.5%), also tended to
decline.
While a majority of the Fund's holdings declined during the period, advances for
positions in industries such as communications equipment and wireless telecom
services contributed positively to performance. Other top performers included
holdings such as Avaya (communications equipment -- 4.0%) and Fleetwood
Enterprises (household durables -- 2.8%).
During the period, we sold positions such as American Physicians Capital
(insurance) and Syms (specialty retail) as their market prices advanced to our
estimates of their intrinsic values. In addition, we sold select holdings to
pursue other investment opportunities.
Positions added during the year included firms such as Goodyear Tire & Rubber
(auto components -- 3.6%) and Gateway (computers & peripherals -- 2.5%). We
purchased each new position at price levels that we believe offer significant
potential for long-term appreciation. We also added to select existing positions
at price levels that we consider attractive.
As of May 31, 2003, the Fund's most significant weighting lies in the metals &
mining industry. Keep in mind that weightings are not the product of
industry-level forecasts or opinions, but merely stem from our
company-by-company search for compelling investment opportunities.
MARKET OUTLOOK: As value investors, we offer no predictions regarding the
short-term direction of the overall market. A key teaching from Ben Graham --
widely considered the father of the value investing approach -- is that, in the
short term, the stock market is a voting machine, with a stock's price
reflecting only the stock's popularity with investors on any given day. In the
long term, however, the market is more of a weighing machine, aligning a stock's
price to reflect the fair value of the underlying business.
For value investors, this means that a stock's price and its fair value often
"detach" from one another in the short term. Because of the manic-depressive
nature of the overall market -- where sentiment can shift between sweeping,
carefree optimism and overwhelming fear and uncertainty seemingly overnight,
prices of stocks tend to fluctuate much more than the intrinsic value of the
companies they represent. This irrationality can materialize on the upside,
lifting prices to dangerously lofty heights. It can also appear on the downside,
dragging prices for select stocks to bargain levels.
We target the latter situation, purchasing stocks that are trading at discounts
to their fair values and then holding these stocks until the market recognizes
their inherent worth. By confidently approaching the short-term vagaries of the
market with rational, objective analysis, we believe we can identify compelling
investment opportunities and deliver strong long-term results.
22
ING SMALLCAP VALUE FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
2/1/02 5/31/02 5/31/03
------- ------- -------
ING SmallCap Value Fund Class A With Sales Charge $ 9,425 $10,009 $ 9,026
ING SmallCap Value Fund Class A Without Sales Charge $10,000 $10,620 $ 9,576
Russell 200 Value Index $10,000 $ 9,977 $ 9,101
TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
-------------------------------------------------------------
SINCE INCEPTION SINCE INCEPTION SINCE INCEPTION
OF CLASS A OF CLASS B OF CLASS C
1 YEAR 02/01/2002 02/04/02 02/07/02
------ ---------- -------- --------
Including Sales Charge:
Class A (1) -15.03% -7.42% -- --
Class B (2) -14.96% -- -5.76% --
Class C (3) -11.43% -- -- -2.18%
Excluding Sales Charge:
Class A -9.83% -3.20% -- --
Class B -10.53% -- -2.83% --
Class C -10.55% -- -- -2.18%
Russell 200 Value Index -8.78% -6.82% -6.82%(4) -6.82%(4)
Based upon a $10,000 initial investment, the graph and table above illustrate
the total return of ING SmallCap Value Fund against the Russell 200 Value Index.
The Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5.00% for the
since inception return.
(3) Reflects deduction of the Class C deferred sales charge of 1.00% for the
since inception return.
(4) Since inception performance for the index is shown from 02/01/2002.
PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an
investment in equity securities. In exchange for higher growth potential,
investing in stocks of smaller companies may entail greater price volatility
than investing in stocks of larger companies. From time to time, the stock
market may not favor the small cap value securities in which the Fund invests.
See accompanying index descriptions on page 32.
23
ING TAX EFFICIENT EQUITY FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail
CFA, Senior Vice-President, ING Investment, LLC.*
GOAL: The ING Tax Efficient Fund (the "Fund") seeks capital appreciation. The
Fund seeks to provide taxable investors with a high total return on an after tax
basis.
MARKET OVERVIEW: After slowing over geopolitical concerns early in 2003, the
economy appears to be showing signs of improvement. Rail and truck shipments are
recovering modestly and demand for natural resources has stabilized. Housing
remains robust reflecting the low interest rate environment. The consumer while
cautious, continues to demonstrate resiliency despite a rising unemployment
environment. Under this umbrella, the stock market has rebounded sharply as the
Iraqi concerns have diminished and the domestic economy may have bottomed.
Lastly the weaker U.S. dollar has restored a degree of positive outlook to those
exporting sectors whose business had been harmed by the greenback's strength of
the last few years.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, provided a total return of -13.24% compared to a -8.06%
total return for the S&P 500 Index.
PORTFOLIO SPECIFICS: During the last twelve months the Fund underperformed the
S&P 500 Index reflecting several holdings that because of company specific
issues were down substantially. Those included Tenet Health Care, Baxter
International, Kimberly Clark and Ford Motor Company.
MARKET OUTLOOK: We believe the markets are poised to resume their upward bias
after second quarter earnings reports are digested and management comments
regarding current and prospecture business conditions are released. The various
forms of stimulus are in place for a better economy, rising corporate profits
and higher stock prices. Consider the low interest rate environment, fiscal
stimulus, weakened U.S. dollar and the impact of recent consumer home
refinancings should have on the economy. This has produced anemic fixed income
returns, and smaller returns for money market funds. In our opinion these all
point to potentially higher equity prices especially given the recent change in
tax treatment of dividends. We are encouraged by the outlook for equities.
Within this environment the Tax Efficient Equity Fund continues to search for
attractively valued stocks that can report above average earnings growth over
the intermediate term and are selling at relatively attractive levels.
* A team of investment professionals led by James A. Vail, CFA, Senior Vice
President, ING Investments, LLC assumed responsiblity for the Fund on April
21, 2003.
24
Portfolio Manager's Report ING TAX EFFICIENT EQUITY FUND
- --------------------------------------------------------------------------------
12/15/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
-------- ------- ------- ------- ------- -------
ING Tax Efficient Equity Fund Class A With Sales Charge $ 9,425 $10,886 $11,984 $10,930 $ 9,460 $ 8,207
ING Tax Efficient Equity Fund Class A Without Sales Charge $10,000 $11,550 $12,715 $11,597 $10,037 $ 8,708
S&P 500 Index $10,000 $11,261 $12,440 $11,127 $ 9,587 $ 8,813
AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS ENDED MAY 31, 2003
---------------------------------
SINCE INCEPTION
1 YEAR 12/15/98
------ --------
Including Sales Charge:
Class A (1) -18.24% -4.33%
Class B (2) -18.10% -4.08%
Class C (3) -14.74% -3.74%
Excluding Sales Charge:
Class A -13.24% -3.05%
Class B -13.79% -3.65%
Class C -13.88% -3.74%
S&P 500 Index -8.06% -2.77%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Tax Efficient Equity Fund against the S&P 500 Index. The
Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 3%,
respectively, for the 1 year and since inception returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Since inception performance for the index is shown from 12/01/98.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. The Fund is managed to provide high after-tax returns.
Therefore, it may not provide as high a return before tax as other funds, and as
a result may not be suitable for investors who are not subject to current income
tax. In exchange for higher growth potential, investing in stocks of mid-size
and smaller companies may entail greater price volatility than investing in
those of large companies.
See accompanying index descriptions on page 32.
25
ING CONVERTIBLE FUND Portfolio Managers' Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by Anuradha Sahai,
Vice President, ING Investments, LLC.*
GOAL: The ING Convertible Fund (the "Fund") seeks to maximize long-term total
return by investing at least 80% in convertible securities consisting of capital
appreciation and current income.
MARKET OVERVIEW: The convertible indices, the S&P 500, and the NASDAQ Composite
benchmark witnessed significant volatility during the one-year period ending May
31, 2003. The economic malaise that started turning around towards the latter
half of this period was the underlying driver of the ups and downs witnessed.
Additional factors contributing to the volatility were revelations of massive
corporate accounting frauds, SEC investigations leading to reduced Wall Street
credibility and the Iraqi situation -- all in all leading to an action packed
one-year period. The credit markets were also very volatile with corporate bond
spreads widening and then remarkably tightening towards the end of this period.
The turnaround occurred following the October low with equities rallying and
credit spreads tightening on improving economic numbers and an additional
interest rate cut by the Fed.
As an asset class, convertibles outperformed stocks over the one-year period.
Initially, with the decrease in equity valuations, their bond-like feature
helped convertibles outperform equities. The strong recent up trend in equities
along with credit spread tightening helped the convertible market outperform in
the latter part of this period too.
Liquidity in the market remains good in contrast to some fixed income markets.
Hedge funds reportedly have plenty of buying power and there continues to be a
large appetite for convertible new issuance. The traditional ability to hedge
incremental holdings of convertible securities by shorting the underlying common
stock continues to allow both dealers and hedge funds to position convertibles
more easily than they can accommodate straight corporate debt. New issuance
picked up in the last couple of months with May witnessing 48 new deals raising
just over $14 billion. A number of large deals have come to market largely
resulting from issuers' reluctance to go to the equity market as stock
valuations came down and due to their inability to raise capital in the straight
debt market at attractive rates. With demand for paper high as a result of
increased inflows and companies able to raise cheap capital in the convertible
market, issuance continues to remain high.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, returned 7.80% compared to 11.20% for the First Boston
Convertible Index.
PORTFOLIO SPECIFICS: The fund performance improved from its repositioning to a
more market weighted stance. Short-term defensive posturing with respect to
equity sensitivity augmented performance. Risk management measures helped the
fund weather the significant volatility the markets witnessed and improve
risk-adjusted returns. The Fund benefited from favorable security selection in
technology, media, industrials and consumer staples sectors and had a beneficial
under weight sensitivity to the consumer discretionary sector. This was somewhat
offset by underperformance in the transportation and utilities sectors.
Underperformance versus the benchmark was largely due to the under weighting of
the fund in riskier names that outperformed towards the latter half of this
period.
MARKET OUTLOOK: We believe the recent surge in the equity markets, led by over
optimism in the strength of the economy, may be unsustainable in the near term.
Economic indicators are improving, albeit gradually. Despite the indications
that the Fed may ease further, we think the profitability outlook for firms will
only slowly improve. Businesses simply do not have much pricing power and indeed
this aspect is one of the reasons why inflation should remain under control
during the economic recovery.
In these volatile times, we believe that convertible securities are attractive
relative to comparable alternative asset classes. We continue to look for
companies across the spectrum that will benefit from a gradually recovering
economy as we expect the market will likely reward companies that typically
benefit in the recovery part of the cycle.
A bottom up approach, which relies on fundamental analysis and careful security
selection within our broader top down sector positioning strategy, continues to
be the foundation for our investment decisions.
* A team of investment professionals led by Anuradha Sahai, Vice President,
ING Investments, LLC assumed responsibility for the Fund on April 21, 2003.
26
Portfolio Managers' Report ING CONVERTIBLE FUND
- --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98
------- ------- ------- ------- ------- -------
ING Convertible Fund Class A With Sales Charge $ 9,424 $10,427 $10,671 $13,797 $15,752 $19,180
ING Convertible Fund Class A Without Sales Charge $10,000 $11,064 $11,323 $14,640 $16,714 $20,352
Credit Suisse First Boston Convertible Index $10,000 $10,344 $11,685 $14,164 $15,158 $17,513
5/31/99 5/31/00 5/31/01 5/31/02 5/31/2003
------- ------- ------- ------- ---------
ING Convertible Fund Class A With Sales Charge $23,572 $32,071 $28,732 $25,151 $27,111
ING Convertible Fund Class A Without Sales Charge $25,012 $34,030 $30,169 $26,687 $28,767
Credit Suisse First Boston Convertible Index $19,317 $24,588 $23,308 $21,430 $23,830
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
---------------------------------------------------------------
SINCE INCEPTION
OF CLASS B
1 YEAR 5 YEAR 10 YEAR 5/31/95
------ ------ ------- -------
Including Sales Charge:
Class A (1) 1.57% 5.90% 11.01% --
Class B (2) 2.16% 6.26% -- 11.74%
Class C (3) 6.15% 6.53% 10.96% --
Excluding Sales Charge:
Class A 7.80% 7.17% 11.65% --
Class B 7.16% 6.53% -- 11.74%
Class C 7.15% 6.53% 10.96% --
First Boston Convertible Index 11.20% 6.35% 9.07% 9.32%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Convertible Fund against the First Boston Convertible Index.
The Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Fund's
performance is shown both with and without the imposition of sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and operating 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%
respectively, for the 1 year and 5 year returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Since inception performance for index is shown from 6/1/95.
PRINCIPAL RISK FACTOR(S): The credit standing of the issuer and other factors
may affect the investment value of a convertible security. The market value of
convertible debt securities tends to vary inversely with the level of interest
rates. Lower rated securities may be less liquid than higher quality
investments. The Fund also has exposure to financial, market and interest rate
risks. Higher yields reflect the higher credit risks associated with certain
lower rated securities in the Fund's portfolio and in some cases, the lower
market prices for those instruments. The Fund may also invest in small and
medium sized companies, which may be more susceptible to greater price
volatility than larger companies.
See accompanying index descriptions on page 32.
27
ING EQUITY AND BOND FUND Portfolio Managers' Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail,
CFA, manages the equity portion of the Fund, with a team led by James B.
Kauffman manages the fixed income portion of the Fund. Both are ING Investments,
LLC.
GOAL: The ING Equity and Bond Fund (the "Fund") seeks a balance of long-term
capital appreciation and current income by investing in both equities and bonds.
MARKET REVIEW:
EQUITIES: The last twelve months witnessed a volatile equity market as measured
by the S&P 500, and despite recent strength, the Index has yet to reach its June
2002 level of 1050. Beginning in June 2002, the market was buffeted by concerns
over the integrity of the U.S. economic and financial systems as reports of
fraud, accounting irregularities and fears of an economic slow down took center
stage. During the third quarter of 2002, the S&P 500 dropped 24% to 800,
subsequently recovered to 962 but retested the 800 level again in October. We
saw a recovery in the fourth quarter of 2002 but the market settled into a
narrow trading range before Iraqi War fears again drove the Index back to the
800 level. Since then, the successful completion of the Iraqi campaign, and
evidence that the aggressive Federal Reserve loosening appears to be leading to
an economic rebound contributred to a dramatic market ralley in May. Since the
bottom in March, the S&P 500 is up 23%.
While in the short term this may be over extended, we believe we are on the
verge of a recovery witnessed by recent strength in consumer confidence and
business surveys suggesting the worst may be over. Additionally, the recent tax
cut should spur activity in the third quarter leading to a better economy for
the last quarter of 2003 and into 2004. The market has historically anticipated
changes in the economy and we believe the strength in May may be signaling
better times ahead.
BONDS: 2002 witnessed some of the greatest volatility and sudden credit
turbulence in recent memory. As the year progressed, scores of erstwhile
investment grade names -- many of which were in the top fifty corporate issuers
by size -- plummeted to junk. Moreover, the credit default swap markets provided
hedge funds the means to exploit the illiquidity in widely held or tarnished
names.
Disappointing earnings and a relentless equity market tailspin prompted
institutional investors to seek refuge in U.S. Treasuries, mortgage-backed
securities, and higher quality emerging market debt. Geo-political uncertainties
exacerbated the flight to quality and pushed U.S. Treasuries to a forty-year low
during the year. Low rates, in turn, incited a riot of mortgage refinancing.
By the beginning of the fourth quarter U.S. domestic investment grade credit
risk premia stood at historic levels. The magnitude of the Fed's November's rate
cut surprised the markets, and risk taking returned. Hedge funds scrambled to
cover shorts in the credit default swaps market while traditional bond investors
sold Treasuries to add spread product in both high yield and investment grade
sectors. Despite the turmoil in specific sectors, bonds out-performed equities
for the third year in a row as the Lehman Brothers Aggregate Bond Index posted a
positive 10.26% in 2002.
With the advent of the first quarter of 2003, capital markets became
increasingly focused on the pending war with Iraq. Early January witnessed the
continuation of the late 2002 rallies; however, as the likelihood of hostilities
increased, investors bid up short-dated Treasuries at the expense of stocks. The
prices of gold and energy shot up dramatically.
In May of 2003 the Federal Reserve sent an unequivocal message to the markets
with the release of its new policy statement: "the probability of an unwelcome
substantial fall in inflation, though minor, exceeds that of a pickup in
inflation from its already low level." Subsequent comments from Fed officials
reiterated their concern about the slow recovery and the steps they are willing
to take to forestall deflationary expectations.
With the prospect of an extended period of accommodative monetary policy, the
Treasury market promptly rallied to forty-five year lows. Asian central banks
and our own domestic mortgage buyers also added Treasuries: the former to defend
the dollar versus their local currency, and the later to offset the evaporating
duration of their holdings.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares,
excluding sales charges, returned -0.66% compared to -8.70% for the S&P Barra
Value Index, 11.58% for the Lehman Brothers Aggregate Bond Index and 0.04% for
the Composite Index (60% S&P 500 Index / 40% Lehman Brothers Aggregate Bond
Index).
PORTFOLIO SPECIFICS:
EQUITIES: The Equity portfolio lagged the S&P Barra Value Index reflecting it's
overweight in utilities and consumer staples for the last twelve months but
benefited from its over weight in the information sector, industrials and
telecommuication services. Utilities were specifically hurt by financial fears
based on lingering Enron effects and the need to pursue equity offering to shore
up weak balance sheets.
BONDS: The Fund benefited from strict credit disciplines during 2002 -- a period
of unprecedented financial fraud and deteriorating earnings. Security selection
and sector allocation, by and large, produced positive alpha. The addition of
high yield, emerging market, and euro-denominated bonds in the fourth quarter of
the calendar year aided performance into 2003.
MARKET OUTLOOK:
EQUITIES: While the market has done well in the near term and may need to
consolidate recent gains, we believe the intermediate to longer term direction
may be higher. The combined forces of lower interest rates, tax cuts, a weaker
U.S. dollar and its positive impact on domestic exports should lay the
foundation for an improving U.S. economy as we progress through 2003 and into
2004. Recall that 2004 is a presidential election year and historically markets
do well into this event. The Equity Portfolio will continue to search for
undervalued situations where near to intermediate catalysts could unleash that
perceived value.
BONDS: Weak aggregate demand has followed the capital expenditure binge years of
the late 1990's. Ultimately the stimulative effects of negative real rates, a
weakening dollar, and tax cuts will likely boost the domestic economy out of its
lethargy. And we do not agree with the school of thought that draws parallels
between our current slow growth predicament and the decade long recession in
Japan. In the U. S. fiscal and monetary policy has been largely proactive, and
overleveraged companies have been allowed to fail.
The big question for bond investors is how long rates will stay low and when
will the economy gain traction. Given that excess capacity is high for this
stage of a "recovery" and that pricing power is weak, the outlook is murky; but
we do not anticipate a deflationary spiral. In response to these historically
low interest rates we are slightly short in duration and have moved to an
underweight in mortgages.
28
Portfolio Managers' Report ING EQUITY AND BOND FUND
- --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98
------- ------- ------- ------- ------- -------
ING Equity and Bond Fund Class A With Sales Charge $ 9,423 $ 9,342 $10,369 $12,976 $13,978 $17,749
ING Equity and Bond Fund Class A Without Sales Charge $10,000 $ 9,914 $11,004 $13,771 $14,833 $18,835
S&P Barra Value Index $10,000 $10,743 $12,576 $15,891 $19,939 $25,705
Lehman Brothers Aggregate Bond Index $10,000 $10,071 $11,227 $11,720 $12,694 $14,080
Lipper Balanced Fund Index $10,000 $10,368 $11,563 $13,468 $15,776 $18,951
Composite Index (60% S&P 500 Index / 40%
Lehman Brothers Aggregate Bond Index) $10,000 $10,286 $12,003 $14,201 $17,148 $21,036
5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- -------
ING Equity and Bond Fund Class A With Sales Charge $20,686 $20,650 $20,702 $19,567 $19,438
ING Equity and Bond Fund Class A Without Sales Charge $21,952 $21,914 $21,969 $20,765 $20,628
S&P Barra Value Index $29,068 $29,821 $31,947 $27,024 $24,674
Lehman Brothers Aggregate Bond Index $14,693 $15,002 $16,970 $18,345 $20,469
Lipper Balanced Fund Index $20,948 $22,127 $22,592 $21,485 $21,126
Composite Index (60% S&P 500 Index / 40%
Lehman Brothers Aggregate Bond Index) $24,135 $25,911 $25,577 $24,234 $24,243
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
---------------------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS B OF CLASS T
1 YEAR 5 YEAR 10 YEAR 5/31/95 3/31/00
------ ------ ------- ------- -------
Including Sales Charge:
Class A (1) -6.40% 0.64% 6.87% -- --
Class B (2) -6.15% 0.95% -- 7.54% --
Class C (3) -2.24% 1.18% 6.83% -- --
Class T (4) -4.91% -- -- -- -4.20%
Excluding Sales Charge:
Class A -0.66% 1.83% 7.51% -- --
Class B -1.29% 1.19% -- 7.54% --
Class C -1.27% 1.18% 6.83% -- --
Class T -1.03% -- -- -- -3.95%
S&P Barra Value Index -8.70% -0.81% 9.45% 8.79%(5) -5.91%(6)
Lehman Brothers Aggregate Bond Index 11.58% 7.77% 7.43% 7.80%(5) 10.19%(6)
Lipper Balanced Fund Index -1.67% 2.20% 7.77% 7.82%(5) -2.32%(6)
Composite Index (60% S&P 500 Index/40%
Lehman Brothers Aggregate Bond Index) 0.04% 2.88% 9.26% 9.18%(5) -3.06%(6)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Equity and Income Fund against the S&P Barra Value Index,
Lehman Brothers Aggregate Bond Index, Lipper Balanced Fund Index and Composite
Index (60% S&P 500 Index, 40% Lehman Brothers Aggregate Bond Index). The Indices
have no cash in their portfolios, impose no sales charges and incur no operating
expenses. An investor cannot invest directly in an index. The 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 operating 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 table and graph do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% and 2%,
respectively, for the 1 year and 5 year returns.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the 1
year return.
(4) Reflects deduction of the Class T deferred sales charge of 4% and 3%,
respectively, for the 1 year and since inception returns.
(5) Since inception performance for the index is shown from 6/1/95.
(6) Since inception performance for the index is shown from 4/1/00.
PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an
investment in equity securities. Credit, interest rate and other risks that
accompany debt investments. The Fund may invest up to 20% of its total assets in
foreign securities. International investing does pose special risks, including
currency fluctuation, economic and political risks not found in investments that
are solely domestic. Higher yields reflect the higher credit risks associated
with certain lower rated securities in the Fund's portfolio and in some cases,
the lower market prices for those instruments. High yield securities and
securities of smaller companies may be less liquid than other investments. The
use of certain derivatives may also have a leveraging effect, which may increase
the volatility of the Fund.
See accompanying index descriptions on page 32.
29
ING REAL ESTATE FUND Portfolio Managers' Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: T. Ritson Ferguson, CFA, Managing Director and Chief
Investment Officer, Kenneth D. Campbell, Managing Director, Clarion CRA
Securities, L.P. the Sub-Adviser.
GOAL: The ING Real Estate Fund (the "Fund") seeks total return through
investment in common and preferred stocks of U.S. real estate investment trusts
(REITs) and real estate companies.
MARKET OVERVIEW: Real estate securities continued their relative outperformance
versus broad equities for the year ended May 31, 2003 as real estate securities
recorded total return of +3.08% during this time period versus -8.06% for the
S&P 500 and -8.18% for small cap equities as measured by the Russell 2000 index.
This continues an outperformance streak which has persisted over the past three
years as real estate securities are +13.95% per annum for the three years ended
May 31, 2003 versus -10.86% per annum for the S&P 500 and -1.16% per annum for
small cap stocks (Russell 2000). Investors' appetite for yield and stability in
cash flows continue to generate strong funds flow into the sector as real estate
mutual funds flow in 2003 year-to-date exceeds $1 billion according to AMG data.
The sub-adviser expects continued healthy funds flow in the near to intermediate
term via both open end and closed end real estate mutual funds.
Much of the total return over the past year has been achieved during the past
three months as REITs have benefited from a combination of factors, the most
important of which are the sense that the economy may be entering a recovery
phase, which would be good for job growth and thus commercial real estate
demand, combined with an attractive current income component in an investment
landscape starved for yield.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided
a total return of 4.13% compared to the Wilshire Real Estate Securities Index
which returned 3.10% for the same period. For the period ended May 31, 2003, the
Fund's Class B shares, excluding sales changes, provided a total return of
12.77% (from November 20, 2002, commencement of operations of the class).
PORTFOLIO SPECIFICS: Property type selection was the major contributor to
relative outperformance over the past year as the retail property types (malls
and shopping centers) have significantly outperformed the other major property
groups (office and apartments). The Fund's overweights in shopping centers
(+23.8% for the year) and malls (+21.7%) combined with underweights in the
underperforming office (-1.2%) and apartments (-2.8%) have both contributed to
relative outperformance. Also contributing has been a sharp underweight in the
beleaguered hotel sector (-20.3% for the year) which is still attempting to
regain its footing following several years of weak demand induced by a weak
economy and exacerbated by international events.
MARKET OUTLOOK: We remain constructive on the outlook for returns to an actively
managed real estate stock portfolio. By our estimates, the average REIT is
trading at a 1.2% discount to the private market value of the company's real
estate. Also, REITs are still trading at about 10 times forward 4-quarter
earnings which is still well below the average REIT pricing multiple of 12 times
forward earnings. Funds flows to real estate stock funds remain strong
indicating investors still are attracted to the attractive yield and total
return potential of REITs. The size of the public real estate company universe
continues to grow. Initial Public Offerings for Maguire Properties (the largest
office space owner in Downtown Los Angeles) and American Financial Realty (an
acquirer of corporate-owned properties, primarily single-tenant bank branches
and multi-tenant office buildings whose Chairman is Lewis Ranieri, a pioneer of
mortgage backed securities) are expected in late June. With the prospect of
continued positive funds flow, reasonable valuations, and attractive dividend
yields, the investment thesis for real estate securities we believe remains
favorable.
30
Portfolio Managers' Report ING REAL ESTATE FUND
- --------------------------------------------------------------------------------
12/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
-------- ------- ------- ------- ------- ------- ------- -------
ING Real Estate Fund Class I Without Sales Charge $10,000 $10,162 $11,962 $11,079 $11,189 $13,301 $15,828 $16,482
Wilshire Real Estate Security Index $10,000 $10,148 $11,404 $10,746 $10,674 $13,043 $15,324 $15,799
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
---------------------------------------------------------------------------------------
SINCE INCEPTION SINCE INCEPTION SINCE INCEPTION SINCE INCEPTION
OF CLASS A OF CLASS B OF CLASS C OF CLASS I
1 YEAR 5 YEAR 12/20/02 11/20/02 1/17/03 12/31/96
------ ------ -------- -------- ------- --------
Including Sales Charge:
Class A(1) -- -- 6.25% -- -- --
Class B(2) -- -- -- 7.77% -- --
Class C(3) -- -- -- -- 13.56% --
Class I(4) 4.13% 6.62% -- -- -- 8.11%
Excluding Sales Charge:
Class A -- -- 12.06% -- -- --
Class B -- -- -- 12.77% -- --
Class C -- -- -- -- 15.03% --
Class I(4) 4.13% 6.62% -- -- -- 8.11%
Wilshire Real Estate Security Index 3.10% 6.74% 11.30%(5) 12.93%(6) 14.65%(7) 7.39%(8)
Based upon a $10,000 initial investment, the graph and table above illustrate
the total return of ING Real Estate Fund against the Wilshire Real Estate
Security Index. The Index has no cash in its portfolio, imposes no sales charges
and incurs no operating expenses. An investor cannot invest directly in an
index. The Fund's performance is shown both with and without the imposition of
the sales charges.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and operating expenses otherwise payable by the Fund, subject to possible
later reimbursement during a three-year period.
Total returns would have 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 PORTFOLIO PORTFOLIO
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
* Because Class A shares did not have a full year's performance during the
year ended May 31, 2003, the dollar amounts in the graph are based upon the
performance of Class I shares of the Fund. Class A shares would have
substantially similar annual returns as the Class I shares because the
classes are invested in the same portfolio of securities. Annual returns
would differ only to the extent Class I and Class A shares have different
expenses.
(1) Reflects deduction of the maximum Class A sales charge of 5.75%.
(2) Reflects deduction of the Class B deferred sales charge of 5% for the since
inception return.
(3) Reflects deduction of the Class C deferred sales charge of 1% for the since
inception return.
(4) Reflects performance of predecessor mutual fund, CRA Realty Shares
portfolio through November 4, 2002, when the reorganization was completed.
(5) Since inception for the index is shown from 01/01/03.
(6) Since inception for the index is shown from 12/01/02.
(7) Since inception for the index is shown from 02/01/03.
(8) Since inception for the index is shown from 01/01/97.
PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an
investment in real estate equities and volatility due to non-diversification of
investments. Subject to risks similar to those associated with the direct
ownership of real estate. The Fund primarily invests in common and preferred
stocks of U.S. real estate investment trusts (REITs) and real estate companies.
Risk of concentration -- because the Fund's investments are concentrated in the
real estate industry, the value of the Fund may be subject to greater volatility
than a fund with a portfolio that is less concentrated. These companies are
sensitive to factors such as changes in real estate values and property taxes,
interest rates, cash flow of underlying real estate assets, supply and demand,
and the management skill and credit worthiness of the issuer. REITs may also be
affected by tax and regulatory requirements. The Fund may invest in small- and
mid-sized companies, which may be more susceptible to price swings than larger
companies. Securities of smaller companies trade in lower volume and may be less
liquid than securities of large, more established companies.
See accompanying index descriptions on page 32.
31
INDEX DESCRIPTIONS
- --------------------------------------------------------------------------------
The DOW JONES INDUSTRIAL AVERAGE is a price-weighted average of 30 blue-chip
stocks that are generally the leaders in their industry.
The FIRST BOSTON CONVERTIBLE INDEX is an index representing the universe of
convertible securities.
The LEHMAN BROTHERS AGGREGATE BOND INDEX is a widely recognized index of
publicly issued fixed rate U.S. government, investment grade mortgage-backed and
corporate debt securities.
The MERRILL LYNCH 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 credit rating lower than
BBB-/Baa3 but are not in default.
The NASDAQ 100 FINANCIAL INDEX is a capitalization-weighted index of the 100
largest financial companies, as well as foreign issues, including American
Depositary Receipts, traded on the Nasdaq National Market System and SmallCap
Market.
The NASDAQ 100 INDEX is a modified capitalization-weighted index of the 100
largest and most active non-financial domestic and international issues listed
on the Nasdaq.
The NASDAQ COMPOSITE INDEX is a broad-based capitalization-weighted index of all
Nasdaq National Market & SmallCap stocks.
The RUSSELL 1000 GROWTH INDEX is an index that measures the performance of those
Russell 1000 Index companies with higher price-to-book ratios and higher
forecasted growth values.
The RUSSELL 200 VALUE INDEX measures the performance of those Russell 200
companies with lower price-to-book ratios and lower forecasted growth values.
The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000
Index companies with higher price-to-book ratios and higher forecasted growth
values.
The RUSSELL 2000 INDEX consists of the smallest 2,000 companies in the Russell
3000 Index.
The RUSSELL 3000 INDEX measures the performance of the 3,000 largest U.S.
companies based on total market capitalization.
The RUSSELL MIDCAP GROWTH INDEX consists of securities with capitalizations
between $450 million and $3.8 billion with greater than average growth
orientation.
The RUSSELL MIDCAP INDEX measures the performance of the 800 smallest companies
in the Russell 1000 Index.
The RUSSELL MIDCAP VALUE INDEX is an index that measures the performance of
Russell Midcap companies with lower price-to-book ratios and lower forecasted
growth values.
The S&P 500 FINANCIALS INDEX is a capitalization-weighted index of all stocks
designed to measure the performance of the financial sector of the S&P Index.
The S&P 500 INDEX is a capitalization-weighted index of 500 stocks chosen for
market size, liquidity, and industry group representation.
The S&P BARRA GROWTH INDEX is a capitalization-weighted index of all the stocks
in the S&P 500 Index that have high price-to-book ratios.
The S&P BARRA VALUE INDEX is a capitalization-weighted index of all the stocks
in the S&P 500 Index that have low price-to-book ratios.
The S&P MIDCAP 400 INDEX is a capitalization-weighted index that measures the
performance of the mid-range sector of the U.S. stock market.
The WILSHIRE REAL ESTATE SECURITY INDEX measures the performance of publicly
traded real estate securities, such as Real Estate Investment Trusts (REITs) and
Real Estate Operating Companies (REOCs). The index is capitalization-weighted.
All indices are unmanaged.
An investor cannot invest directly in an index.
32
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Class A, B, C, M and T shareholders and the Boards of Directors and Trustees
of ING Equity Trust, ING Investment Funds, Inc., and ING Mayflower Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of ING Growth + Value Fund, ING Growth
Opportunities Fund, ING LargeCap Growth Fund, ING MidCap Opportunities Fund, ING
SmallCap Opportunities Fund, ING Disciplined LargeCap Fund (formerly ING
Research Enhanced Index Fund), ING Financial Services Fund, ING Large Company
Value Fund, ING MagnaCap Fund, ING MidCap Value Fund, ING SmallCap Value Fund,
ING Tax Efficient Equity Fund, ING Convertible Fund, ING Equity and Bond Fund,
and ING Real Estate Fund as of May 31, 2003, and the statements of operations,
statements of changes in net assets, and financial highlights for all years and
periods as indicated herein for the ING Financial Services Fund, ING Real Estate
Fund, ING Large Company Value Fund, ING MagnaCap Fund, ING MidCap Value Fund,
and ING SmallCap Value Fund, the statements of operations, statements of changes
in net assets, and financial highlights for all years and periods as indicated
herein ending on or after December 31, 2000 for the ING Growth Opportunities
Fund, ING MidCap Opportunities Fund, and ING SmallCap Opportunities Fund, and
the statements of operations, statements of changes in net assets, and financial
highlights for all years and periods as indicated herein ending on or after May
31, 2001 for the ING Growth + Value Fund, ING Disciplined LargeCap Fund, and ING
Tax Efficient Equity Fund and the statements of operations, statements of
changes in net assets, and financial highlights for all years and periods as
indicated herein ending on or after June 30, 1999 for the ING LargeCap Growth
Fund, ING Convertible Fund, and ING Equity and Bond Fund. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. For all periods ending
prior to January 1, 2000 the financial highlights of the ING Growth
Opportunities Fund, ING MidCap Opportunities Fund, and ING SmallCap
Opportunities Fund were audited by other auditors whose report thereon dated
February 17, 2000 expressed an unqualified opinion on those financial
highlights. For all periods ending prior to November 1, 2000, the financial
highlights, of the ING Growth + Value Fund, ING Disciplined LargeCap Fund, and
ING Tax Efficient Equity Fund were audited by other auditors whose report
thereon dated December 5, 2000 expressed an unqualified opinion on those
financial highlights. For all periods ending prior to April 1, 1999, the
financial highlights of the ING LargeCap Growth Fund, ING Convertible Fund and
ING Equity and Income Fund were audited by other auditors whose report thereon
dated May 7, 1999 expressed an unqualified opinion on those financial
highlights.
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. Our procedures included confirmation of
securities owned as of May 31, 2003 by correspondence with the custodian and
brokers, or by other appropriate audit procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above, excluding those financial statements and financial highlights which were
indicated above as having been audited by others, present fairly, in all
material respects, the financial position of each of the aforementioned funds,
as of May 31, 2003, the results of their operations, the changes in their net
assets, and their financial highlights for the periods specified in the first
paragraph above, in conformity with accounting principles generally accepted in
the United States of America.
/s/ KPMG LLP
Boston, Massachusetts
July 11, 2003
33
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
GROWTH + GROWTH LARGECAP
VALUE OPPORTUNITIES GROWTH
FUND FUND FUND
------------- ------------- -------------
ASSETS:
Investments in securities at value* $ 199,816,760 $ 177,115,733 $ 172,895,754
Short-term investments at amortized cost 4,794,000 2,618,000 1,282,000
Cash 390 503 563
Receivables:
Investment securities sold 4,011,832 -- --
Fund shares sold 175,257 25,267 71,903
Dividends and interest 43,436 102,359 57,941
Prepaid expenses 31,562 38,672 36,008
------------- ------------- -------------
Total assets 208,873,237 179,900,534 174,344,169
------------- ------------- -------------
LIABILITIES:
Payable for investment securities purchased 814,532 1,001,030 --
Payable for fund shares redeemed 857,364 1,457,964 338,631
Payable to affiliates 466,682 337,671 254,047
Payable for trustee fees 7,039 6,124 8,968
Other accrued expenses and liabilities 343,027 268,602 377,993
------------- ------------- -------------
Total liabilities 2,488,644 3,071,391 979,639
------------- ------------- -------------
NET ASSETS $ 206,384,593 $ 176,829,143 $ 173,364,530
============= ============= =============
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 720,789,830 $ 622,948,756 $ 567,594,251
Undistributed net investment income -- -- --
Accumulated net realized loss on investments (540,538,181) (469,328,851) (426,892,932)
Net unrealized appreciation of investments 26,132,944 23,209,238 32,663,211
------------- ------------- -------------
NET ASSETS $ 206,384,593 $ 176,829,143 $ 173,364,530
============= ============= =============
* Cost of investments in securities $ 173,683,816 $ 153,906,495 $ 140,232,543
See Accompanying Notes to Financial Statements
34
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
ING ING ING
GROWTH + GROWTH LARGECAP
VALUE OPPORTUNITIES GROWTH
FUND FUND FUND
------------- ------------- -------------
CLASS A:
Net Assets $ 51,218,411 $ 49,944,101 $ 40,940,814
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.00
Shares outstanding 6,502,888 4,474,864 2,856,870
Net asset value and redemption price per share $ 7.88 $ 11.16 $ 14.33
Maximum offering price per share (5.75%)(1) $ 8.36 $ 11.84 $ 15.20
CLASS B:
Net Assets $ 105,172,828 $ 50,620,167 $ 72,574,856
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.00
Shares outstanding 14,063,729 4,873,454 5,186,003
Net asset value and redemption price per share(2) $ 7.48 $ 10.39 $ 13.99
Maximum offering price per share $ 7.48 $ 10.39 $ 13.99
CLASS C:
Net Assets $ 49,782,705 $ 24,014,717 $ 31,515,588
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.00
Shares outstanding 6,660,625 2,307,923 2,258,786
Net asset value and redemption price per share(2) $ 7.47 $ 10.41 $ 13.95
Maximum offering price per share $ 7.47 $ 10.41 $ 13.95
CLASS I:
Net Assets n/a $ 44,704,146 $ 22,155,643
Shares authorized n/a unlimited unlimited
Par value n/a $ 0.01 $ 0.00
Shares outstanding n/a 3,874,545 1,505,795
Net asset value and redemption price per share n/a $ 11.54 $ 14.71
Maximum offering price per share n/a $ 11.54 $ 14.71
CLASS Q:
Net Assets $ 210,649 $ 2,658 $ 6,177,629
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.00
Shares outstanding 26,984 240 421,358
Net asset value and redemption price per share $ 7.81 $ 11.07 $ 14.66
Maximum offering price per share $ 7.81 $ 11.07 $ 14.66
CLASS T:
Net Assets n/a $ 7,543,354 n/a
Shares authorized n/a unlimited n/a
Par value n/a $ 0.01 n/a
Shares outstanding n/a 719,377 n/a
Net asset value and redemption price per share(2) n/a $ 10.49 n/a
Maximum offering price per share n/a $ 10.49 n/a
- ----------
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
See Accompanying Notes to Financial Statements
35
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING ING
MIDCAP SMALLCAP DISCIPLINED FINANCIAL
OPPORTUNITIES OPPORTUNITIES LARGECAP SERVICES
FUND FUND FUND FUND
------------- ------------- ------------- -------------
ASSETS:
Investments in securities at value* $ 167,296,926 $ 277,580,542 $ 82,242,505 $ 296,084,235
Short-term investments at amortized cost 5,959,000 2,911,000 -- 16,339,000
Cash 944 315 28,482 908
Receivables:
Investment securities sold -- -- 931,942 1,051,490
Fund shares sold 46,262 200,168 410,096 68,249
Dividends and interest 36,956 18,754 128,854 220,985
Other -- 74,677 -- --
Prepaid expenses 31,047 52,055 29,819 18,860
------------- ------------- ------------- -------------
Total assets 173,371,135 280,837,511 83,771,698 313,783,727
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities purchased 1,877,472 195,650 764,497 3,439,842
Payable for fund shares redeemed 309,512 1,190,446 128,804 582,044
Payable to affiliates 358,871 546,709 124,697 336,922
Payable for trustee fees 6,697 6,058 2,842 7,976
Other accrued expenses and liabilities 166,140 264,151 160,438 442,282
------------- ------------- ------------- -------------
Total liabilities 2,718,692 2,203,014 1,181,278 4,809,066
------------- ------------- ------------- -------------
NET ASSETS $ 170,652,443 $ 278,634,497 $ 82,590,420 $ 308,974,661
============= ============= ============= =============
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 336,384,095 $ 630,562,076 $ 140,555,354 $ 290,263,842
Undistributed net investment income -- -- -- 693,010
Accumulated net realized loss on investments (183,783,471) (393,085,385) (59,470,517) (725,878)
Net unrealized appreciation (depreciation) of
investments 18,051,819 41,157,806 1,505,583 18,743,687
------------- ------------- ------------- -------------
NET ASSETS $ 170,652,443 $ 278,634,497 $ 82,590,420 $ 308,974,661
============= ============= ============= =============
* Cost of investments in securities $ 149,245,107 $ 236,422,736 $ 80,736,922 $ 277,340,548
See Accompanying Notes to Financial Statements
36
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
ING ING ING ING
MIDCAP SMALLCAP DISCIPLINED FINANCIAL
OPPORTUNITIES OPPORTUNITIES LARGECAP SERVICES
FUND FUND FUND FUND
------------- ------------- ------------- -------------
CLASS A:
Net Assets $ 44,009,739 $ 118,569,934 $ 7,204,515 $ 182,132,654
Shares authorized unlimited unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.01 $ 0.00
Shares outstanding 4,347,267 6,528,066 946,862 9,464,558
Net asset value and redemption price per share $ 10.12 $ 18.16 $ 7.61 $ 19.24
Maximum offering price per share (5.75%)(1) $ 10.74 $ 19.27 $ 8.07 $ 20.41
CLASS B:
Net Assets $ 43,182,807 $ 85,464,506 $ 34,357,914 $ 126,842,007
Shares authorized unlimited unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.01 $ 0.00
Shares outstanding 4,408,128 5,067,344 4,659,172 6,633,586
Net asset value and redemption price per share(2) $ 9.80 $ 16.87 $ 7.37 $ 19.12
Maximum offering price per share $ 9.80 $ 16.87 $ 7.37 $ 19.12
CLASS C:
Net Assets $ 67,730,055 $ 63,406,199 $ 21,478,271 n/a
Shares authorized unlimited unlimited unlimited n/a
Par value $ 0.01 $ 0.01 $ 0.01 n/a
Shares outstanding 6,948,484 3,767,039 2,912,637 n/a
Net asset value and redemption price per share(2) $ 9.75 $ 16.83 $ 7.37 n/a
Maximum offering price per share $ 9.75 $ 16.83 $ 7.37 n/a
CLASS I:
Net Assets $ 10,843,973 $ 8,510,032 $ 19,549,720
Shares authorized unlimited unlimited unlimited n/a
Par value $ 0.01 $ 0.01 $ 0.01 n/a
Shares outstanding 1,049,680 465,819 2,532,248 n/a
Net asset value and redemption price per share $ 10.33 $ 18.27 $ 7.72 n/a
Maximum offering price per share $ 10.33 $ 18.27 $ 7.72 n/a
CLASS Q:
Net Assets $ 4,885,869 $ 905,921 n/a n/a
Shares authorized unlimited unlimited n/a n/a
Par value $ 0.01 $ 0.01 n/a n/a
Shares outstanding 479,635 49,718 n/a n/a
Net asset value and redemption price per share $ 10.19 $ 18.22 n/a n/a
Maximum offering price per share $ 10.19 $ 18.22 n/a n/a
CLASS T:
Net Assets n/a $ 1,777,905 n/a n/a
Shares authorized n/a unlimited n/a n/a
Par value n/a $ 0.01 n/a n/a
Shares outstanding n/a 104,293 n/a n/a
Net asset value and redemption price per share(2) n/a $ 17.05 n/a n/a
Maximum offering price per share n/a $ 17.05 n/a n/a
- ----------
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
See Accompanying Notes to Financial Statements
37
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
LARGE COMPANY ING MIDCAP SMALLCAP
VALUE MAGNACAP VALUE VALUE
FUND FUND FUND FUND
------------- ------------- ------------- -------------
ASSETS:
Investments in securities at value* $ 133,646,066 $ 228,187,761 $ 37,639,860 $ 31,645,342
Short-term investments at amortized cost 4,169,000 4,312,000 1,767,000 349,000
Cash 673 155 588 109
Receivables:
Investment securities sold -- -- 799,868 --
Fund shares sold 34,081 1,901,885 222,690 87,703
Dividends and interest 332,338 521,471 51,149 32,583
Prepaid expenses 29,095 37,270 35,632 32,242
Reimbursement due from manager -- -- 7,380 4,870
------------- ------------- ------------- -------------
Total assets 138,211,253 234,960,542 40,524,167 32,151,849
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities purchased -- -- 883,984 --
Payable for fund shares redeemed 55,285 3,652,140 47,341 71,368
Payable to affiliates 123,123 253,747 55,820 46,028
Payable for trustee fees 64,875 8,819 1,913 1,118
Other accrued expenses and liabilities 136,318 292,048 58,238 56,345
------------- ------------- ------------- -------------
Total liabilities 379,601 4,206,754 1,047,296 174,859
------------- ------------- ------------- -------------
NET ASSETS $ 137,831,652 $ 230,753,788 $ 39,476,871 $ 31,976,990
============= ============= ============= =============
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 181,344,848 $ 305,810,446 $ 49,590,357 $ 36,213,792
Undistributed net investment income (accumulated
net investment loss) 772,491 695,252 (29,333) (29,333)
Accumulated net realized loss on investments (41,992,494) (75,742,327) (2,585,042) (808,792)
Net unrealized depreciation of investments (2,293,193) (9,583) (7,499,111) (3,398,677)
------------- ------------- ------------- -------------
NET ASSETS $ 137,831,652 $ 230,753,788 $ 39,476,871 $ 31,976,990
============= ============= ============= =============
* Cost of investments in securities $ 135,939,259 $ 228,197,344 $ 45,138,971 $ 35,044,019
See Accompanying Notes to Financial Statements
38
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
ING ING ING
LARGE COMPANY ING MIDCAP SMALLCAP
VALUE MAGNACAP VALUE VALUE
FUND FUND FUND FUND
------------- ------------- ------------- -------------
CLASS A:
Net Assets $ 133,145,915 $ 156,902,117 $ 15,025,992 $ 12,280,182
Shares authorized unlimited 80,000,000 unlimited unlimited
Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001
Shares outstanding 10,769,173 17,794,228 1,797,146 1,301,395
Net asset value and redemption price per share $ 12.36 $ 8.82 $ 8.36 $ 9.44
Maximum offering price per share (5.75%)(1) $ 13.11 $ 9.36 $ 8.87 $ 10.02
CLASS B:
Net Assets $ 3,538,332 $ 50,677,491 $ 12,204,760 $ 8,232,893
Shares authorized unlimited 80,000,000 unlimited unlimited
Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001
Shares outstanding 290,720 5,977,938 1,463,482 876,675
Net asset value and redemption price per share(2) $ 12.17 $ 8.48 $ 8.34 $ 9.39
Maximum offering price per share $ 12.17 $ 8.48 $ 8.34 $ 9.39
CLASS C:
Net Assets $ 1,133,146 $ 8,291,408 $ 12,034,420 $ 11,240,831
Shares authorized unlimited 20,000,000 unlimited unlimited
Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001
Shares outstanding 93,405 977,255 1,443,372 1,197,927
Net asset value and redemption price per share(2) $ 12.13 $ 8.48 $ 8.34 $ 9.38
Maximum offering price per share $ 12.13 $ 8.48 $ 8.34 $ 9.38
CLASS I:
Net Assets n/a $ 6,853 $ 197,428 $ 222,463
Shares authorized n/a 50,000,000 unlimited unlimited
Par value n/a $ 0.00 $ 0.001 $ 0.001
Shares outstanding n/a 777 23,527 23,556
Net asset value and redemption price per share n/a $ 8.82 $ 8.39 $ 9.44
Maximum offering price per share n/a $ 8.82 $ 8.39 $ 9.44
CLASS M:
Net Assets n/a $ 7,444,943 n/a n/a
Shares authorized n/a 5,000,000 n/a n/a
Par value n/a $ 0.00 n/a n/a
Shares outstanding n/a 857,721 n/a n/a
Net asset value and redemption price per share(3) n/a $ 8.68 n/a n/a
Maximum offering price per share n/a $ 8.99 n/a n/a
CLASS Q:
Net Assets $ 14,259 $ 7,430,976 $ 14,271 $ 621
Shares authorized unlimited 20,000,000 unlimited unlimited
Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001
Shares outstanding 1,154 842,392 1,707 65
Net asset value and redemption price per share $ 12.36 $ 8.82 $ 8.36 $ 9.53
Maximum offering price per share $ 12.36 $ 8.82 $ 8.36 $ 9.53
- ----------
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
(3) Maximum offering price is computed at 100/96.50 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
See Accompanying Notes to Financial Statements
39
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
TAX EFFICIENT ING EQUITY AND REAL
EQUITY CONVERTIBLE BOND ESTATE
FUND FUND FUND FUND
------------- ------------- ------------- -------------
ASSETS:
Investments in securities at value* $ 31,300,288 $ 189,580,911 $ 70,345,035 $ 122,881,843
Short-term investments at amortized cost 1,049,000 1,761,000 3,847,000 3,723,531
Cash 606 636 588 --
Foreign currencies at value** -- 1,375,627 16,388 --
Receivables:
Investment securities sold 352,601 8,162,816 1,965,047 9,566,587
Fund shares sold 433 850,447 3,475 577,263
Dividends and interest 46,082 941,490 431,235 168,774
Prepaid expenses 21,914 30,328 35,209 73,189
Reimbursement due from manager -- -- 9,946 33,544
------------- ------------- ------------- -------------
Total assets 32,770,924 202,703,255 76,653,923 137,024,731
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities purchased 127,440 7,981,513 4,177,131 8,972,920
Payable for fund shares redeemed 6,445 396,718 14,989 916,012
Payable to affiliates 35,695 291,896 93,255 85,403
Payable for trustee fees 2,668 6,681 2,360 4,313
Other accrued expenses and liabilities 57,834 212,402 83,832 112,947
------------- ------------- ------------- -------------
Total liabilities 230,082 8,889,210 4,371,567 10,091,595
------------- ------------- ------------- -------------
NET ASSETS $ 32,540,842 $ 193,814,045 $ 72,282,356 $ 126,933,136
============= ============= ============= =============
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 42,195,516 $ 281,613,140 $ 89,675,208 $ 109,309,007
Undistributed net investment income (accumulated net
investment loss) -- 1,969,917 489,189 1,409,425
Accumulated net realized loss on investments (9,221,785) (99,435,025) (14,473,208) (2,371,039)
Net unrealized appreciation (depreciation) of investments
and foreign securities (432,889) 9,666,013 (3,408,833) 18,585,743
------------- ------------- ------------- -------------
NET ASSETS $ 32,540,842 $ 193,814,045 $ 72,282,356 $ 126,933,136
============= ============= ============= =============
* Cost of investment in securities $ 31,733,177 $ 179,920,420 $ 73,764,509 $ 104,562,177
** Cost of foreign currencies $ 1,373,697 $ 15,128
See Accompanying Notes to Financial Statements
40
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
ING ING ING
TAX EFFICIENT ING EQUITY AND REAL
EQUITY CONVERTIBLE BOND ESTATE
FUND FUND FUND FUND
------------- ------------- ------------- -------------
CLASS A:
Net Assets $ 26,418,249 $ 51,008,431 $ 32,178,931 $ 981,708
Shares authorized unlimited unlimited unlimited unlimited
Par Value $ 0.001 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 3,054,742 3,147,772 2,747,082 88,758
Net asset value and redemption price per share $ 8.65 $ 16.20 $ 11.71 $ 11.06
Maximum offering price per share (5.75%)(1) $ 9.18 $ 17.19 $ 12.42 $ 11.73
CLASS B:
Net Assets $ 5,220,031 $ 72,363,716 $ 22,348,364 $ 149,053
Shares authorized unlimited unlimited unlimited unlimited
Par Value $ 0.001 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 618,851 4,068,410 1,771,673 13,434
Net asset value and redemption price per share $ 8.44 $ 17.79 $ 12.61 $ 11.10
Maximum offering price per share $ 8.44 $ 17.79 $ 12.61 $ 11.10
CLASS C:
Net Assets $ 902,562 $ 66,412,379 $ 14,239,832 $ 157,483
Shares authorized unlimited unlimited unlimited unlimited
Par Value $ 0.001 $ 0.00 $ 0.00 $ 0.00
Shares outstanding 107,709 3,996,625 1,270,582 13,852
Net asset value and redemption price per share $ 8.38 $ 16.62 $ 11.21 $ 11.37
Maximum offering price per share $ 8.38 $ 16.62 $ 11.21 $ 11.37
CLASS Q:
Net Assets n/a $ 4,029,519 $ 222,355 n/a
Shares authorized n/a unlimited unlimited n/a
Par Value n/a $ 0.00 $ 0.00 n/a
Shares outstanding n/a 256,076 19,120 n/a
Net asset value and redemption price per share n/a $ 15.74 $ 11.63 n/a
Maximum offering price per share n/a $ 15.74 $ 11.63 n/a
CLASS I:
Net Assets n/a n/a n/a $ 125,644,892
Shares authorized n/a n/a n/a unlimited
Par Value n/a n/a n/a $ 0.00
Shares outstanding n/a n/a n/a 10,971,426
Net asset value and redemption price per share n/a n/a n/a $ 11.45
Maximum offering price per share n/a n/a n/a $ 11.45
CLASS T:
Net Assets n/a n/a $ 3,292,874 n/a
Shares authorized n/a n/a unlimited n/a
Par Value n/a n/a $ 0.00 n/a
Shares outstanding n/a n/a 261,871 n/a
Net asset value and redemption price per share n/a n/a $ 12.57 n/a
Maximum offering price per share(2) n/a n/a $ 12.57 n/a
- ----------
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
(3) Maximum offering price is computed at 100/96.50 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
See Accompanying Notes to Financial Statements
41
STATEMENTS OF OPERATIONS for the year ended May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
GROWTH + GROWTH LARGECAP
VALUE OPPORTUNITIES GROWTH
FUND FUND FUND
------------- ------------- -------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 993,338 $ 736,359 $ 1,139,917
Interest 131,450 38,744 62,570
------------- ------------- -------------
Total investment income 1,124,788 775,103 1,202,487
------------- ------------- -------------
EXPENSES:
Investment management fees 2,446,841 1,865,117 1,411,271
Distribution and service fees:
Class A 183,274 181,023 156,226
Class B 1,214,839 561,674 783,154
Class C 618,262 277,053 351,769
Class Q 707 9 24,503
Class T -- 80,140 --
Transfer agent fees:
Class A 63,087 70,722 134,260
Class B 125,501 65,603 235,602
Class C 63,719 32,227 105,756
Class I -- 417 21,065
Class Q 258 -- 10,071
Class T -- 10,479 --
Administrative service fees 528,208 451,608 188,169
Shareholder reporting expense 370,476 242,036 273,368
Registration fees 68,095 72,593 72,137
Professional fees 57,917 71,743 47,781
Custody and accounting expense 80,566 64,052 68,192
Trustee fees 13,360 12,516 13,738
Miscellaneous expense 26,947 26,063 16,049
Insurance expense 6,441 5,030 4,849
------------- ------------- -------------
Total expenses 5,868,498 4,090,105 3,917,960
Less:
Net waived and reimbursed fees -- -- 303,212
------------- ------------- -------------
Net expenses 5,868,498 4,090,105 3,614,748
------------- ------------- -------------
Net investment loss (4,743,710) (3,315,002) (2,412,261)
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS:
Net realized gain (loss) on:
Investments (96,541,901) (55,971,035) (67,621,730)
Options -- -- 215,589
------------- ------------- -------------
(96,541,901) (55,971,035) (67,406,141)
Net change in unrealized appreciation of investments and options 21,655,719 7,993,868 27,230,077
------------- ------------- -------------
Net realized and unrealized loss on investments and options (74,886,182) (47,977,167) (40,176,064)
------------- ------------- -------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (79,629,892) $ (51,292,169) $ (42,588,325)
============= ============= =============
*Foreign taxes $ 3,692 $ 4,232 $ 1,956
See Accompanying Notes to Financial Statements
42
STATEMENTS OF OPERATIONS for the year ended May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING ING
MIDCAP SMALLCAP DISCIPLINED FINANCIAL
OPPORTUNITIES OPPORTUNITIES LARGECAP SERVICES
FUND FUND FUND FUND
------------- ------------- ------------- -------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 537,557 $ 176,584 $ 1,604,373 $ 6,141,620
Interest 119,238 77,461 9,790 264,941
Other -- -- 83 --
------------- ------------- ------------- -------------
Total investment income 656,795 254,045 1,614,246 6,406,561
------------- ------------- ------------- -------------
EXPENSES:
Investment management fees 1,844,018 3,072,328 621,856 2,320,797
Distribution and service fees:
Class A 138,698 376,048 23,793 453,878
Class B 469,009 967,874 374,229 1,303,483
Class C 703,533 731,979 251,645 --
Class Q 11,576 4,038 -- --
Class T -- 23,584 -- --
Transfer agent fees:
Class A 55,341 177,597 9,105 600,391
Class B 56,208 137,021 42,883 431,502
Class C 85,374 103,606 28,806 --
Class I 104 296 527 --
Class Q 56 70 -- --
Class T -- 3,508 -- --
Administrative service fees 368,961 662,980 127,997 13,848
Shareholder reporting expense 148,438 344,937 78,576 355,809
Registration fees 105,376 113,584 61,115 38,679
Professional fees 34,863 75,228 26,272 74,330
Custody and accounting expense 62,614 102,884 63,992 76,140
Trustee fees 10,532 18,681 5,762 15,084
Miscellaneous expense 16,922 35,455 9,489 13,429
Insurance expense 4,348 7,862 2,024 6,490
------------- ------------- ------------- -------------
Total expenses 4,115,971 6,959,560 1,728,071 5,703,860
Less:
Net waived and reimbursed fees 600,861 -- -- --
------------- ------------- ------------- -------------
Net expenses 3,515,110 6,959,560 1,728,071 5,703,860
------------- ------------- ------------- -------------
Net investment income (loss) (2,858,315) (6,705,515) (113,825) 702,701
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES:
Net realized gain (loss) on:
Investments (35,686,206) (136,228,953) (18,654,392) (725,878)
Future agreements -- -- (96,660) --
------------- ------------- ------------- -------------
(35,686,206) (136,228,953) (18,751,052) (725,878)
Net change in unrealized appreciation (depreciation)
of investments 3,498,927 23,893,365 4,799,759 (34,505,470)
------------- ------------- ------------- -------------
Net realized and unrealized loss on investments
and futures (32,187,279) (112,335,588) (13,951,293) (35,231,348)
------------- ------------- ------------- -------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (35,045,594) $(119,041,103) $ (14,065,118) $ (34,528,647)
============= ============= ============= =============
*Foreign taxes $ 8,003 $ 965 $ 55 $ --
See Accompanying Notes to Financial Statements
43
STATEMENTS OF OPERATIONS for the year ended May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
LARGE COMPANY ING MIDCAP SMALLCAP
VALUE MAGNACAP VALUE VALUE
FUND FUND FUND FUND
------------- ------------- ------------- -------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 2,987,094 $ 5,007,199 $ 557,715 $ 355,978
Interest 70,920 104,405 9,400 11,952
------------- ------------- ------------- -------------
Total investment income 3,058,014 5,111,604 567,115 367,930
------------- ------------- ------------- -------------
EXPENSES:
Investment management fees 966,292 1,827,489 340,332 304,618
Distribution and service fees:
Class A 328,932 475,206 37,535 33,225
Class B 35,515 541,655 100,823 75,550
Class C 12,641 73,185 88,066 94,019
Class M -- 59,689 -- --
Class Q 35 17,188 29 3
Transfer agent fees:
Class A 196,705 277,212 30,593 26,781
Class B 5,311 94,591 20,866 15,427
Class C 1,884 12,842 18,332 19,409
Class I -- -- 18 85
Class M -- 13,896 -- --
Class Q 18 206 -- --
Administrative service fees 136,403 22,309 34,033 30,462
Shareholder reporting expense 53,852 234,332 15,007 14,499
Registration fees 64,489 62,844 68,063 48,641
Professional fees 44,948 50,617 10,934 7,799
Custody and accounting expense 43,987 53,915 20,924 20,368
Trustee fees 9,301 18,032 2,150 1,820
Offering expense -- -- 86,958 86,959
Miscellaneous expense 4,474 10,171 1,055 3,811
Insurance expense 2,597 5,268 677 517
------------- ------------- ------------- -------------
Total expenses 1,907,384 3,850,647 876,395 783,993
Less:
Net waived and reimbursed fees -- -- 141,380 125,566
------------- ------------- ------------- -------------
Net expenses 1,907,384 3,850,647 735,015 658,427
------------- ------------- ------------- -------------
Net investment income (loss) 1,150,630 1,260,957 (167,900) (290,497)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (33,175,923) (73,313,713) (2,585,042) (808,791)
Net change in unrealized depreciation of investments 3,324,155 28,047,677 (7,038,519) (3,280,630)
------------- ------------- ------------- -------------
Net realized and unrealized loss on investments (29,851,768) (45,266,036) (9,623,561) (4,089,421)
------------- ------------- ------------- -------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (28,701,138) $ (44,005,079) $ (9,791,461) $ (4,379,918)
============= ============= ============= =============
* Foreign taxes $ 30,752 $ 29,242 $ -- $ --
See Accompanying Notes to Financial Statements
44
STATEMENTS OF OPERATIONS for the year ended May 31, 2003
- --------------------------------------------------------------------------------
ING ING
TAX EFFICIENT ING EQUITY AND
EQUITY CONVERTIBLE BOND
FUND FUND FUND
------------- ------------- -------------
YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
2003 2003 2003
------------- ------------- -------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 462,259 $ 2,305,647 $ 1,295,580
Interest 18,982 5,712,891 2,352,750
Other -- 31 86,683
------------- ------------- -------------
Total investment income 481,241 8,018,569 3,735,013
------------- ------------- -------------
EXPENSES:
Investment management fees 266,318 1,445,588 663,570
Distribution and service fees:
Class A 92,791 171,004 161,939
Class B 58,158 721,206 239,747
Class C 9,624 664,962 145,777
Class Q -- 13,211 465
Class T -- -- 26,019
Transfer agent fees:
Class A 46,777 102,116 89,148
Class B 10,255 150,921 46,084
Class C 1,697 139,199 28,029
Class I -- -- --
Class Q -- 3,639 339
Class T -- -- 6,670
Administrative service fees 33,290 192,745 88,476
Shareholder reporting expense 15,622 160,206 91,690
Registration fees 42,933 60,799 62,970
Professional fees 8,498 53,865 67,093
Custody and accounting expense 4,283 36,256 45,128
Trustee fees 1,221 9,377 4,320
Offering expense -- -- --
Miscellaneous expense 625 19,655 5,607
Insurance expense 728 4,084 1,827
------------- ------------- -------------
Total expenses 592,820 3,948,833 1,774,898
Less:
Net waived and reimbursed fees 59,733 -- 92,274
------------- ------------- -------------
Net expenses 533,087 3,948,833 1,682,624
------------- ------------- -------------
Net investment income (loss) (51,846) 4,069,736 2,052,389
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments (7,613,046) (1,592,033) (10,772,241)
Foreign currencies -- 42,333 1,427
------------- ------------- -------------
Net realized gain (loss) on imvestments and foreign currencies (7,613,046) (1,549,700) (10,770,814)
------------- ------------- -------------
Net change in unrealized appreciation (depreciation) on:
Investments 1,166,471 8,106,791 4,911,541
Foreign currencies -- 5,522 1,260
------------- ------------- -------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currencies 1,166,471 8,112,313 4,912,801
------------- ------------- -------------
Net realized and unrealized loss on investments and foreign
currencies (6,446,575) 6,562,613 (5,858,013)
------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,498,421) $ 10,632,349 $ (3,805,624)
============= ============= =============
*Foreign taxes $ 1,708 $ -- $ 4,563
ING
REAL ESTATE FUND
------------- -------------
SEVEN MONTHS YEAR
ENDED ENDED
MAY 31, OCTOBER 31,
2003 2002
------------- -------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 3,280,063 $ 4,787,321
Interest 27,098 48,361
Other -- --
------------- -------------
Total investment income 3,307,161 4,835,682
------------- -------------
EXPENSES:
Investment management fees 440,210 641,719
Distribution and service fees:
Class A 263 --
Class B 480 --
Class C 56 --
Class Q -- --
Class T -- --
Transfer agent fees:
Class A 238 --
Class B 86 --
Class C 13 --
Class I 70,738 33,037
Class Q -- --
Class T -- --
Administrative service fees 62,885 137,461
Shareholder reporting expense 17,775 16,703
Registration fees 8,791 12,941
Professional fees 31,167 29,769
Custody and accounting expense 21,064 13,813
Trustee fees 3,150 6,811
Offering expense 81,575 5,375
Miscellaneous expense 10,576 1,689
Insurance expense -- --
------------- -------------
Total expenses 749,067 899,318
Less:
Net waived and reimbursed fees 118,117 79
------------- -------------
Net expenses 630,950 899,239
------------- -------------
Net investment income (loss) 2,676,211 3,936,443
------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments 3,228,787 2,174,768
Foreign currencies -- --
------------- -------------
Net realized gain (loss) on imvestments and foreign currencies 3,228,787 2,174,768
------------- -------------
Net change in unrealized appreciation (depreciation) on:
Investments 11,405,743 (193,441)
Foreign currencies -- --
------------- -------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currencies 11,405,743 (193,441)
------------- -------------
Net realized and unrealized loss on investments and foreign
currencies 14,634,530 1,981,327
------------- -------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 17,310,741 $ 5,917,770
============= =============
*Foreign taxes $ -- $ --
See Accompanying Notes to Financial Statements
45
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING GROWTH + VALUE FUND
------------------------------
YEAR YEAR
ENDED ENDED
MAY 31, MAY 31,
2003 2002
------------- -------------
FROM OPERATIONS:
Net investment loss $ (4,743,710) $ (8,512,418)
Net realized loss on investments (96,541,901) (135,053,076)
Net change in unrealized appreciation (depreciation) of investments 21,655,719 (36,957,292)
------------- -------------
Net decrease in net assets resulting from operations (79,629,892) (180,522,786)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 22,504,824 118,982,140
Cost of shares redeemed (111,119,568) (233,711,496)
------------- -------------
Net decrease in net assets resulting from capital share transactions (88,614,744) (114,729,356)
------------- -------------
Net decrease in net assets (168,244,636) (295,252,142)
------------- -------------
NET ASSETS:
Beginning of year 374,629,229 669,881,371
------------- -------------
End of year $ 206,384,593 $ 374,629,229
============= =============
Undistributed net investment income at end of year $ -- $ --
============= =============
See Accompanying Notes to Financial Statements
46
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING GROWTH OPPORTUNITIES FUND ING LARGECAP GROWTH FUND
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment loss $ (3,315,002) $ (7,224,856) $ (2,412,261) $ (5,792,622)
Net realized loss on investments and options (55,971,035) (148,410,703) (67,406,141) (178,879,014)
Net change in unrealized appreciation of investments 7,993,868 8,273,970 27,230,077 22,043,801
------------- ------------- ------------- -------------
Net decrease in net assets resulting from operations (51,292,169) (147,361,589) (42,588,325) (162,627,835)
------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A -- -- -- (23,490)
Class Q -- -- -- (16,054)
------------- ------------- ------------- -------------
Total distributions -- -- -- (39,544)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 14,322,951 57,584,228 37,811,932 162,524,986
Dividends reinvested -- -- -- 30,939
------------- ------------- ------------- -------------
14,322,951 57,584,228 37,811,932 162,555,925
Cost of shares redeemed (79,882,586) (147,726,009) (101,232,282) (236,666,205)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from capital share
transactions (65,559,635) (90,141,781) (63,420,350) (74,110,280)
------------- ------------- ------------- -------------
Net decrease in net assets (116,851,804) (237,503,370) (106,008,675) (236,777,659)
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of year 293,680,947 531,184,317 279,373,205 516,150,864
------------- ------------- ------------- -------------
End of year $ 176,829,143 $ 293,680,947 $ 173,364,530 $ 279,373,205
============= ============= ============= =============
Undistributed net investment income at end of year $ -- $ -- $ -- $ --
============= ============= ============= =============
See Accompanying Notes to Financial Statements
47
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING MIDCAP OPPORTUNITIES FUND ING SMALLCAP OPPORTUNITIES FUND
------------------------------ -------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment loss $ (2,858,315) $ (1,564,711) $ (6,705,515) $ (7,943,203)
Net realized loss on investments (35,686,206) (22,181,991) (136,228,953) (116,051,246)
Net change in unrealized depreciation of investments 3,498,927 (13,180,504) 23,893,365 (59,155,762)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from operations (35,045,594) (36,927,206) (119,041,103) (183,150,211)
------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net realized gains:
Class A -- -- -- (4,420,476)
Class B -- -- -- (5,306,452)
Class C -- -- -- (2,073,539)
Class I -- -- -- (6)
Class Q -- -- -- (74,783)
Class T -- -- -- (332,277)
------------- ------------- ------------- -------------
Total distributions -- -- -- (12,207,533)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 19,074,655 23,229,928 64,613,733 169,513,918
Net proceeds from shares issued in merger -- 217,968,703 -- 191,995,534
Dividends reinvested -- -- -- 8,872,522
------------- ------------- ------------- -------------
19,074,655 241,198,631 64,613,733 370,381,974
Cost of shares redeemed (98,427,376) (45,911,969) (144,373,057) (162,003,224)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from capital
share transactions (79,352,721) 195,286,662 (79,759,324) 208,378,750
------------- ------------- ------------- -------------
Net increase (decrease) in net assets (114,398,315) 158,359,456 (198,800,427) 13,021,006
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of year 285,050,758 126,691,302 477,434,924 464,413,918
------------- ------------- ------------- -------------
End of year $ 170,652,443 $ 285,050,758 $ 278,634,497 $ 477,434,924
============= ============= ============= =============
Undistributed net investment income at end of year $ -- $ -- $ -- $ --
============= ============= ============= =============
See Accompanying Notes to Financial Statements
48
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING DISCIPLINED LARGECAP FUND ING FINANCIAL SERVICES FUND
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ (113,825) $ (532,669) $ 702,701 $ 911,107
Net realized gain (loss) on investments and futures (18,751,052) (29,106,092) (725,878) 49,364,650
Net change in unrealized appreciation (depreciation)
of investments 4,799,759 4,441,583 (34,505,470) (24,870,475)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations (14,065,118) (25,197,178) (34,528,647) 25,405,282
------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A -- -- (904,133) (3,328,116)
Class B -- -- -- (1,134,098)
Net realized gains:
Class A -- -- (11,242,235) (23,952,454)
Class B -- -- (7,757,255) (17,422,370)
------------- ------------- ------------- -------------
Total distributions -- -- (19,903,623) (45,837,038)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 10,784,368 13,127,048 26,466,948 46,429,622
Dividends reinvested -- -- 13,242,563 30,404,940
------------- ------------- ------------- -------------
10,784,368 13,127,048 39,709,511 76,834,562
Cost of shares redeemed (35,260,799) (48,152,451) (78,411,061) (89,674,778)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from capital share
transactions (24,476,431) (35,025,403) (38,701,550) (12,840,216)
------------- ------------- ------------- -------------
Net decrease in net assets (38,541,549) (60,222,581) (93,133,820) (33,271,972)
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of year 121,131,969 181,354,550 402,108,481 435,380,453
------------- ------------- ------------- -------------
End of year $ 82,590,420 $ 121,131,969 $ 308,974,661 $ 402,108,481
============= ============= ============= =============
Undistributed net investment income at end of year $ -- $ -- $ 693,010 $ 909,210
============= ============= ============= =============
See Accompanying Notes to Financial Statements
49
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING LARGE COMPANY VALUE FUND ING MAGNACAP FUND
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment income $ 1,150,630 $ 624,008 $ 1,260,957 $ 1,362,303
Net realized gain (loss) on investments (33,175,923) 3,709,737 (73,313,713) 9,984,802
Net change in unrealized depreciation of investments 3,324,155 (32,312,425) 28,047,677 (58,176,380)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from operations (28,701,138) (27,978,680) (44,005,079) (46,829,275)
------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (383,585) (48,577) (541,544) (1,450,626)
Class C -- -- -- --
Class M -- -- -- (25,317)
Class Q (51) -- (37,713) (90,550)
Net realized gains
Class A -- (3,414,346) -- (36,928,549)
Class B -- (76,886) -- (15,231,540)
Class C -- (40,009) -- (1,660,037)
Class M -- -- -- (2,235,251)
Class Q -- (375) -- (1,561,541)
Tax return of capital
Class A -- (542,803) -- --
Class B -- (12,223) -- --
Class C -- (6,360) -- --
Class Q -- (60) -- --
------------- ------------- ------------- -------------
Total distributions (383,636) (4,141,639) (579,257) (59,183,411)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 12,076,101 23,772,105 19,818,980 42,905,807
Dividends reinvested 316,244 3,625,709 509,567 47,870,369
------------- ------------- ------------- -------------
12,392,345 27,397,814 20,328,547 90,776,176
Cost of shares redeemed (25,597,217) (36,480,872) (66,540,583) (92,733,007)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from capital share
transactions (13,204,872) (9,083,058) (46,212,036) (1,956,831)
------------- ------------- ------------- -------------
Net decrease in net assets (42,289,646) (41,203,377) (90,796,372) (107,969,517)
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of year 180,121,298 221,324,675 321,550,160 429,519,677
------------- ------------- ------------- -------------
End of year $ 137,831,652 $ 180,121,298 $ 230,753,788 $ 321,550,160
============= ============= ============= =============
Undistributed net investment income at end of year $ 772,491 $ -- $ 695,252 $ --
============= ============= ============= =============
See Accompanying Notes to Financial Statements
50
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING MIDCAP VALUE FUND ING SMALLCAP VALUE FUND
------------------------------ ------------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(1) 2003 2002(1)
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment loss $ (167,900) $ (18,723) $ (290,497) $ (33,829)
Net realized gain (loss) on investments (2,585,042) 477,240 (808,791) 286,427
Net change in unrealized depreciation of investments (7,038,519) (460,592) (3,280,630) (118,047)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations (9,791,461) (2,075) (4,379,918) 134,551
------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (66,920) -- (53,921) --
Class B (10,431) -- (269) --
Class C (8,620) -- (8,732) --
Class I (1,546) -- (2,331) --
Class Q (105) -- -- --
Net realized gains:
Class A (197,711) -- (119,158) --
Class B (153,548) -- (76,523) --
Class C (125,926) -- (90,831) --
Class I (2,253) -- (2,504) --
Class Q (180) -- (6) --
------------- ------------- ------------- -------------
Total distributions (567,240) -- (354,275) --
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 20,390,316 48,636,078 16,776,369 36,135,334
Dividends reinvested 452,894 -- 266,141 --
------------- ------------- ------------- -------------
20,843,210 48,636,078 17,042,510 36,135,334
Cost of shares redeemed (17,802,172) (1,839,469) (15,157,416) (1,443,796)
------------- ------------- ------------- -------------
Net increase in net assets resulting from capital share
transactions 3,041,038 46,796,609 1,885,094 34,691,538
------------- ------------- ------------- -------------
Net increase (decrease) in net assets (7,317,663) 46,794,534 (2,849,099) 34,826,089
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of period 46,794,534 -- 34,826,089 --
------------- ------------- ------------- -------------
End of period $ 39,476,871 $ 46,794,534 $ 31,976,990 $ 34,826,089
============= ============= ============= =============
Undistributed net investment income (accumulated net
investment loss) at end of period $ (29,333) $ 45,818 $ (29,333) $ 22,825
============= ============= ============= =============
- ----------
(1) Fund commenced operations on February 1, 2002.
See Accompanying Notes to Financial Statements
51
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING TAX EFFICIENT EQUITY FUND ING CONVERTIBLE FUND
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ (51,846) $ (90,424) $ 4,069,736 $ 4,316,249
Net realized loss on investments (7,613,046) (1,193,339) (1,549,700) (94,733,125)
Net change in unrealized appreciation
(depreciation) of investments 1,166,471 (6,022,227) 8,112,313 47,508,825
------------- ------------- ------------- -------------
Net decrease in net assets resulting from
operations (6,498,421) (7,305,990) 10,632,349 (42,908,051)
------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A -- -- (1,038,306) (1,989,161)
Class B -- -- (1,007,242) (1,691,488)
Class C -- -- (1,039,451) (1,695,959)
Class Q -- -- (129,825) (462,156)
Net realized gains
Class A -- -- -- (434,317)
Class B -- -- -- (598,881)
Class C -- -- -- (546,683)
Class Q -- -- -- (78,772)
------------- ------------- ------------- -------------
Total distributions -- -- (3,214,824) (7,497,417)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 591,224 2,485,351 19,562,889 49,293,522
Dividends reinvested -- -- 2,040,333 4,837,275
------------- ------------- ------------- -------------
591,224 2,485,351 21,603,222 54,130,797
Cost of shares redeemed (6,371,872) (5,132,267) (74,420,958) (136,764,084)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from
capital share transactions (5,780,648) (2,646,916) (52,817,736) (82,633,287)
------------- ------------- ------------- -------------
Net decrease in net assets (12,279,069) (9,952,906) (45,400,211) (133,038,755)
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of year 44,819,911 54,772,817 239,214,256 372,253,011
------------- ------------- ------------- -------------
End of year $ 32,540,842 $ 44,819,911 $ 193,814,045 $ 239,214,256
============= ============= ============= =============
Undistributed net investment income at end
of year $ -- $ -- $ 1,969,917 $ 1,072,672
============= ============= ============= =============
See Accompanying Notes to Financial Statements
52
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING EQUITY AND BOND FUND ING REAL ESTATE FUND
------------------------------ -----------------------------------------------
YEAR YEAR SEVEN MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, OCTOBER 31, OCTOBER 31,
2003 2002 2003 2002 2001 (000)
------------- ------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment income $ 2,052,389 $ 3,351,411 $ 2,676,211 $ 3,936,443 $ 3,587
Net realized gain (loss) on investments (10,770,814) (1,232,233) 3,228,787 2,174,768 1,844
Net change in unrealized appreciation
(depreciation) of investments 4,912,801 (9,585,022) 11,405,743 (193,441) (466)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations (3,805,624) (7,465,844) 17,310,741 5,917,770 4,965
------------- ------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (1,077,960) (2,123,367) (3,557) -- --
Class B (368,267) (917,202) (1,521) -- --
Class C (273,453) (647,607) (74) -- --
Class I -- -- (2,053,561) (3,936,443) (3,587)
Class Q (4,292) (13,963) -- -- --
Class T (62,879) (182,065) -- -- --
Net realized gains
Class A -- (236,326) -- -- --
Class B -- (137,507) -- -- --
Class C -- (85,407) -- -- --
Class Q -- (1,525) -- -- --
Class T -- (23,977) -- -- --
In excess of net investment income
Class I -- -- -- (1,294,844) (577)
------------- ------------- ------------- ------------- -------------
Total distributions (1,786,851) (4,368,946) (2,058,713) (5,231,287) (4,164)
------------- ------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 13,090,514 36,437,605 23,221,408 31,057,798 13,726
Dividends reinvested 1,413,761 3,439,849 1,220,646 3,749,980 3,110
------------- ------------- ------------- ------------- -------------
14,504,275 39,877,454 24,442,054 34,807,778 16,836
Cost of shares redeemed (48,110,001) (44,643,957) (10,091,863) (14,351,398) (5,896)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions (33,605,726) (4,766,503) 14,350,191 20,456,380 10,940
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets (39,198,201) (16,601,293) 29,602,219 21,142,863 11,741
------------- ------------- ------------- ------------- -------------
NET ASSETS:
Beginning of period 111,480,557 128,081,850 97,330,917 76,188,054 64,447
------------- ------------- ------------- ------------- -------------
End of period $ 72,282,356 $ 111,480,557 $ 126,933,136 $ 97,330,917 $ 76,188
============= ============= ============= ============= =============
Undistributed net investment income at
end of period $ 489,189 $ 222,224 $ 1,409,425 $ 214,000 $ 161
============= ============= ============= ============= =============
See Accompanying Notes to Financial Statements
53
ING GROWTH + VALUE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
---------------------------------------------------------------------
YEAR YEAR SEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED OCTOBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.96 13.88 24.91 19.76 10.44 12.15
Income (loss) from investment operations:
Net investment loss $ (0.13) (0.15) (0.13) (0.20) (0.17) (0.11)
Net realized and unrealized gain (loss)
on investments $ (1.95) (3.77) (8.68) 7.81 9.49 (1.42)
Total from investment operations $ (2.08) (3.92) (8.81) 7.61 9.32 (1.53)
Less distributions from:
Net realized gains on investments $ -- -- 2.16 2.46 -- 0.18
Tax return of capital $ -- -- 0.06 -- -- --
Total distributions $ -- -- 2.22 2.46 -- 0.18
Net asset value, end of period $ 7.88 9.96 13.88 24.91 19.76 10.44
TOTAL RETURN(2) % (20.88) (28.24) (38.02) 40.18 89.27 (12.63)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 51,218 90,290 160,251 257,601 81,225 33,425
Ratios to average net assets:
Net expenses(3) % 1.87 1.78 1.77 1.57 1.69 1.72
Net investment loss(3) % (1.42) (1.18) (1.52) (1.22) (1.30) (0.92)
Portfolio turnover rate % 294 255 95 163 197 162
CLASS B
---------------------------------------------------------------------
YEAR YEAR SEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED OCTOBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.52 13.36 24.17 19.34 10.29 12.08
Income (loss) from investment operations:
Net investment loss $ (0.18) (0.23) (0.19) (0.36) (0.27) (0.16)
Net realized and unrealized gain (loss)
on investments $ (1.86) (3.61) (8.40) 7.65 9.32 (1.45)
Total from investment operations $ (2.04) (3.84) (8.59) 7.29 9.05 (1.61)
Less distributions from:
Net realized gains on investments $ -- -- 2.16 2.46 -- 0.18
Tax return of capital $ -- -- 0.06 -- -- --
Total distributions $ -- -- 2.22 2.46 -- 0.18
Net asset value, end of period $ 7.48 9.52 13.36 24.17 19.34 10.29
TOTAL RETURN(2) % (21.43) (28.74) (38.31) 39.33 87.95 (13.38)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 105,173 185,950 326,139 507,282 227,227 105,991
Ratios to average net assets:
Net expenses(3) % 2.57 2.48 2.47 2.27 2.39 2.45
Net investment loss(3) % (2.12) (1.88) (2.22) (1.92) (2.00) (1.67)
Portfolio turnover rate % 294 255 95 163 197 162
- ----------
(1) The fund changed its fiscal year end to May 31.
(2) Total return is calculated assuming reinvestment of dividends and capital
gain distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
54
ING GROWTH + VALUE FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
---------------------------------------------------------------------
YEAR YEAR SEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED OCTOBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.51 13.35 24.16 19.33 10.29 12.08
Income (loss) from investment operations:
Net investment loss $ (0.20) (0.25) (0.19) (0.33) (0.26) (0.16)
Net realized and unrealized gain (loss)
on investments $ (1.84) (3.59) (8.40) 7.62 9.30 (1.45)
Total from investment operations $ (2.04) (3.84) (8.59) 7.29 9.04 (1.61)
Less distributions from:
Net realized gains on investments $ -- -- 2.16 2.46 -- 0.18
Tax return of capital $ -- -- 0.06 -- -- --
Total distributions $ -- -- 2.22 2.46 -- 0.18
Net asset value, end of period $ 7.47 9.51 13.35 24.16 19.33 10.29
TOTAL RETURN(2) % (21.45) (28.76) (38.33) 39.35 87.85 (13.38)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 49,783 97,993 183,037 280,484 84,391 37,456
Ratios to average net assets:
Net expensese(3) % 2.57 2.48 2.47 2.27 2.40 2.46
Net investment loss(3) % (2.11) (1.88) (2.22) (1.92) (2.01) (1.69)
Portfolio turnover rate % 294 255 95 163 197 162
- ----------
(1) The fund changed its fiscal year end to May 31.
(2) Total return is calculated assuming reinvestment of dividends and capital
gain distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
55
ING GROWTH OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
---------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.29 18.63 25.45 33.17 26.06 21.26
Income (loss) from investment operations:
Net investment income (loss) $ (0.20) (0.27) (0.11) (0.21) (0.15) (0.08)
Net realized and unrealized gain (loss)
on investments $ (1.93) (5.07) (6.71) (6.02) 20.10 5.09
Total from investment operations $ (2.13) (5.34) (6.82) (6.23) 19.95 5.01
Less distributions from:
Net realized gains on investments $ -- -- -- 1.49 12.84 0.21
Total distributions $ -- -- -- 1.49 12.84 0.21
Net asset value, end of period $ 11.16 13.29 18.63 25.45 33.17 26.06
TOTAL RETURN(1) % (16.03) (28.66) (26.80) (19.11) 93.26 23.61
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 49,944 89,619 158,754 206,590 101,260 29,358
Ratios to average net assets:
Net expenses(3) % 1.85 1.80 1.73 1.46 1.39 1.37
Net investment loss % (1.46) (1.62) (1.34) (0.86) (0.98) (0.47)
Portfolio turnover rate % 355 473 217 326 286 98
CLASS B
---------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.45 17.58 24.09 31.70 25.46 20.93
Income (loss) from investment operations:
Net investment income (loss) $ (0.25) (0.37) (0.17) (0.35) (0.18) (0.23)
Net realized and unrealized gain (loss)
on investments $ (1.81) (4.76) (6.34) (5.77) 19.26 4.97
Total from investment operations $ (2.06) (5.13) (6.51) (6.12) 19.08 4.74
Less distributions from:
Net realized gains on investments $ -- -- -- 1.49 12.84 0.21
Total distributions $ -- -- -- 1.49 12.84 0.21
Net asset value, end of period $ 10.39 12.45 17.58 24.09 31.70 25.46
TOTAL RETURN(2) % (16.55) (29.18) (27.02) (19.66) 91.84 22.69
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 50,620 88,274 162,106 224,299 88,305 15,480
Ratios to average net assets:
Net expenses(3) % 2.55 2.50 2.43 2.16 2.10 2.13
Net investment loss(3) % (2.15) (2.32) (2.04) (1.56) (1.69) (1.26)
Portfolio turnover rate % 355 473 217 326 286 98
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than a year.
See Accompanying Notes to Financial Statements
56
ING GROWTH OPPORTUNITIES FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
---------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.48 17.62 24.13 31.75 25.48 20.91
Income (loss) from investment operations:
Net investment loss $ (0.26) (0.41) (0.17) (0.31) (0.10) (0.27)
Net realized and unrealized gain (loss)
on investments $ (1.81) (4.73) (6.34) (5.82) 19.21 5.05
Total from investment operations $ (2.07) (5.14) (6.51) (6.13) 19.11 4.78
Less distributions from:
Net realized gains on investments $ -- -- -- 1.49 12.84 0.21
Total distributions $ -- -- -- 1.49 12.84 0.21
Net asset value, end of period $ 10.41 12.48 17.62 24.13 31.75 25.48
TOTAL RETURN(2) % (16.59) (29.17) (26.98) (19.65) 91.90 22.90
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 24,015 45,901 93,537 130,389 21,006 1,625
Ratios to average net assets:
Net expenses(3) % 2.55 2.50 2.43 2.16 2.10 2.13
Net investment loss(3) % (2.15) (2.32) (2.04) (1.56) (1.69) (1.24)
Portfolio turnover rate % 355 473 217 326 286 98
CLASS T
---------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.57 17.73 24.29 31.93 25.59 21.02
Income (loss) from investment operations:
Net investment loss $ (0.25) (0.40) (0.17) (0.50) (0.39) (0.36)
Net realized and unrealized gain (loss)
on investments $ (1.83) (4.76) (6.39) (5.65) 19.57 5.14
Total from investment operations $ (2.08) (5.16) (6.56) (6.15) 19.18 4.78
Less distributions from:
Net realized gains on investments $ -- -- -- 1.49 12.84 0.21
Total distributions $ -- -- -- 1.49 12.84 0.21
Net asset value, end of period $ 10.49 12.57 17.73 24.29 31.93 25.59
TOTAL RETURN(2) % (16.55) (29.10) (27.01) (19.60) 91.72 22.79
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 7,543 13,157 29,666 48,095 83,772 52,023
Ratios to average net assets:
Net expenses(3) % 2.50 2.45 2.38 2.11 2.03 2.05
Net investment loss(3) % (2.11) (2.27) (1.99) (1.51) (1.62) (1.19)
Portfolio turnover rate % 355 473 217 326 286 98
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than a year.
See Accompanying Notes to Financial Statements
57
ING LARGECAP GROWTH FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
----------------------------------------------------------------------------
YEAR YEAR ELEVEN MONTHS YEAR THREE MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(1) 2000 1999(2) 1999
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.59 24.40 43.12 28.09 24.94 15.73
Income (loss) from investment operations:
Net investment loss $ (0.15) (0.18) (0.20) (0.22) (0.02) (0.08)
Net realized and unrealized gain
(loss) on investments $ (2.11) (7.63) (18.05) 15.63 3.17 9.77
Total from investment operations $ (2.26) (7.81) (18.25) 15.41 3.15 9.69
Less distributions from:
Net investment income $ -- 0.00* -- -- -- --
Net realized gains on investments $ -- -- 0.47 0.38 -- 0.48
Total distributions $ -- 0.00* 0.47 0.38 -- 0.48
Net asset value, end of period $ 14.33 16.59 24.40 43.12 28.09 24.94
TOTAL RETURN(3): % (13.62) (31.99) (42.67) 55.35 12.63 63.06
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 40,941 65,642 161,824 186,261 30,108 12,445
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.60 1.58 1.47 1.36 1.43 1.59
Gross expenses prior to expense
reimbursement(4) % 1.76 1.58 1.47 1.36 1.45 2.24
Net investment loss after expense
reimbursement(4)(5) % (0.96) (1.12) (0.78) (0.87) (0.56) (0.65)
Portfolio turnover rate % 291 536 331 139 27 253
CLASS B
----------------------------------------------------------------------------
YEAR YEAR ELEVEN MONTHS YEAR THREE MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(1) 2000 1999(2) 1999
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.30 24.14 42.94 28.15 25.04 15.64
Income (loss) from investment operations:
Net investment loss $ (0.24) (0.43) (0.41) (0.39) (0.05) (0.08)
Net realized and unrealized gain (loss)
on investments $ (2.07) (7.41) (17.92) 15.56 3.16 9.71
Total from investment operations $ (2.31) (7.84) (18.33) 15.17 3.11 9.63
Less distributions from:
Net investment income $ -- -- -- -- -- --
Net realized gains on investments $ -- -- 0.47 0.38 -- 0.23
Total distributions $ -- -- 0.47 0.38 -- 0.23
Net asset value, end of period $ 13.99 16.30 24.14 42.94 28.15 25.04
TOTAL RETURN(3): % (14.17) (32.48) (43.04) 55.37 12.42 62.28
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 72,575 116,738 224,572 333,256 49,057 20,039
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.25 2.23 2.12 2.01 2.08 2.24
Gross expenses prior to expense
reimbursement(4) % 2.41 2.23 2.12 2.01 2.10 2.89
Net investment loss after expense
reimbursement(4)(5) % (1.61) (1.77) (1.43) (1.52) (1.21) (1.28)
Portfolio turnover rate % 291 536 331 139 27 253
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager
of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
* Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements
58
ING LARGECAP GROWTH FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
----------------------------------------------------------------------------
YEAR YEAR ELEVEN MONTHS YEAR THREE MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(1) 2000 1999(2) 1999
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.25 24.07 42.82 28.07 24.97 15.63
Income (loss) from investment operations:
Net investment loss $ (0.25) (0.48) (0.39) (0.35) (0.06) (0.07)
Net realized and unrealized gain
(loss) on investments $ (2.05) (7.34) (17.89) 15.48 3.16 9.65
Total from investment operations $ (2.30) (7.82) (18.28) 15.13 3.10 9.58
Less distributions from:
Net realized gains on investments $ -- -- 0.47 0.38 -- 0.24
Total distributions $ -- -- 0.47 0.38 -- 0.24
Net asset value, end of period $ 13.95 16.25 24.07 42.82 28.07 24.97
TOTAL RETURN(3): % (14.15) (32.49) (43.04) 54.38 12.41 61.97
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 31,516 54,048 117,222 152,682 17,755 8,004
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.25 2.23 2.12 2.01 2.08 2.25
Gross expenses prior to expense
reimbursement(4) % 2.41 2.23 2.12 2.01 2.10 2.90
Net investment loss after expense
reimbursement(4)(5) % (1.61) (1.77) (1.43) (1.52) (1.21) (1.26)
Portfolio turnover rate % 291 536 331 139 27 253
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager
of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
See Accompanying Notes to Financial Statements
59
ING MIDCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
--------------------------------------------------------------------
YEAR YEAR FIVE MONTHS YEAR ENDED
ENDED ENDED ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998(2)
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.11 14.58 19.12 21.29 12.96 10.00
Income (loss) from investment operations:
Net investment loss $ (0.12) (0.17)* (0.11) (0.15) (0.09) (0.03)
Net realized and unrealized gain (loss)
on investments $ (0.87) (3.30) (4.43) 0.16 12.01 2.99
Total from investment operations $ (0.99) (3.47) (4.54) 0.01 11.92 2.96
Less distributions from:
Net realized gains on investments $ -- -- -- 2.18 3.59 --
Total distributions $ -- -- -- 2.18 3.59 --
Net asset value, end of period $ 10.12 11.11 14.58 19.12 21.29 12.96
TOTAL RETURN(3): % (8.91) (23.80) (23.74) (0.35) 103.24 29.60
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 44,010 68,106 24,265 25,742 6,291 610
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.50 1.77 2.06 1.66 1.74 1.80
Gross expenses prior to expense
reimbursement(4) % 1.83 1.99 2.06 1.66 1.74 2.42
Net investment loss after
expense reimbursement(4)(5) % (1.15) (1.45) (1.52) (0.96) (1.34) (1.10)
Portfolio turnover rate 345 399 182 188 201 61
CLASS B
--------------------------------------------------------------------
YEAR YEAR FIVE MONTHS YEAR ENDED
ENDED ENDED ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998(2)
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.83 14.30 18.79 21.12 12.97 10.00
Income (loss) from investment operations:
Net investment loss $ (0.20) (0.25)* (0.14) (0.24) (0.07) (0.03)
Net realized and unrealized gain (loss)
on investments $ (0.83) (3.22) (4.35) 0.09 11.81 3.00
Total from investment operations $ (1.03) (3.47) (4.49) (0.15) 11.74 2.97
Less distributions from:
Net realized gains on investments $ -- -- -- 2.18 3.59 --
Total distributions $ -- -- -- 2.18 3.59 --
Net asset value, end of period $ 9.80 10.83 14.30 18.79 21.12 12.97
TOTAL RETURN(3): % (9.51) (24.27) (23.90) (1.13) 101.73 29.70
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 43,183 69,621 28,448 35,551 8,252 140
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.20 2.47 2.76 2.36 2.40 2.50
Gross expenses prior to expense
reimbursement(4) % 2.53 2.69 2.76 2.36 2.40 3.27
Net investment loss after
expense reimbursement(4)(5) % (1.85) (2.15) (2.22) (1.66) (2.00) (2.05)
Portfolio turnover rate 345 399 182 188 201 61
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) The Fund commenced operations on August 20, 1998.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
* Per share data calculated using weighted average number of shares
outstanding throughout the period.
See Accompanying Notes to Financial Statements
60
ING MIDCAP OPPORTUNITIES FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
--------------------------------------------------------------------
YEAR YEAR FIVE MONTHS YEAR ENDED
ENDED ENDED ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998(2)
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.77 14.24 18.72 21.03 12.96 10.00
Income (loss) from investment operations:
Net investment gain (loss) $ (0.19) (0.25)* (0.14) (0.24) (0.07) (0.04)
Net realized and unrealized gain (loss)
on investments $ (0.83) (3.22) (4.34) 0.11 11.73 3.00
Total from investment operations $ (1.02) (3.47) (4.48) (0.13) 11.66 2.96
Less distributions from:
Net realized gains on investments $ -- -- -- 2.18 3.59 --
Total distributions $ -- -- -- 2.18 3.59 --
Net asset value, end of period $ 9.75 10.77 14.24 18.72 21.03 12.96
TOTAL RETURN(3): % (9.47) (24.37) (23.93) (1.03) 101.16 29.60
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 67,730 100,888 18,901 25,939 4,560 87
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 2.20 2.47 2.76 2.36 2.36 2.50
Gross expenses prior to expense
reimbursement(4) % 2.53 2.69 2.76 2.36 2.36 3.22
Net investment loss after expense
reimbursement(4)(5) % (1.85) (2.15) (2.22) (1.66) (1.98) (2.04)
Portfolio turnover rate % 345 399 182 188 201 61
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) The Fund commenced operations on August 20, 1998.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
* Per share data calculated using weighted average number of shares
outstanding throughout the period.
See Accompanying Notes to Financial Statements
61
ING SMALLCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
--------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 24.04 38.78 47.17 59.35 29.00 27.77
Income (loss) from investment operations:
Net investment loss $ (0.35) (0.51)* (0.23) (0.54) (0.32) (0.27)
Net realized and unrealized gain (loss)
on investments $ (5.53) (13.24) (8.16) (2.74) 38.23 2.23
Total from investment operations $ (5.88) (13.75) (8.39) (3.28) 37.91 1.96
Less distributions from:
Net realized gains on investments $ -- 0.99 -- 8.90 7.56 0.73
Total distributions $ -- 0.99 -- 8.90 7.56 0.73
Net asset value, end of period $ 18.16 24.04 38.78 47.17 59.35 29.00
TOTAL RETURN(2) % (24.46) (35.86) (17.79) (6.04) 146.94 7.59
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 118,570 183,810 159,641 177,286 123,377 45,461
Ratios to average net assets:
Expenses(3) % 1.88 1.81 1.69 1.45 1.43 1.47
Net investment loss(3) % (1.80) (1.70) (1.41) (1.05) (1.21) (0.70)
Portfolio turnover rate % 357 427 104 134 223 257
CLASS B
---------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 22.48 36.60 44.64 57.06 28.26 27.27
Income (loss) from investment operations:
Net investment loss $ (0.48) (0.68)* (0.33) (0.96) (0.60) (0.48)
Net realized and unrealized gain (loss)
on investments $ (5.13) (12.45) (7.71) (2.56) 36.96 2.20
Total from investment operations $ (5.61) (13.13) (8.04) (3.52) 36.36 1.72
Less distributions from:
Net realized gains on investments $ -- 0.99 -- 8.90 7.56 0.73
Total distributions $ -- 0.99 -- 8.90 7.56 0.73
Net asset value, end of period $ 16.87 22.48 36.60 44.64 57.06 28.26
TOTAL RETURN(2) % (24.96) (36.31) (18.01) (6.71) 145.24 6.84
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 85,465 154,899 206,968 266,348 264,677 124,065
Ratios to average net assets:
Expenses(3) % 2.58 2.51 2.39 2.15 2.15 2.18
Net investment loss(3) % (2.50) (2.40) (2.11) (1.75) (1.93) (1.43)
Portfolio turnover rate % 357 427 104 134 223 257
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Total return is calculated assuming reinvestment of dividends and capital
gain distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
* Per share data calculated using weighted average number of shares
outstanding throughout the period.
See Accompanying Notes to Financial Statements
62
ING SMALLCAP OPPORTUNITIES FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
--------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 22.44 36.53 44.54 56.98 28.24 27.26
Income (loss) from investment operations:
Net investment loss $ (0.49) (0.67)* (0.33) (0.97) (0.53) (0.55)
Net realized and unrealized gain
(loss) on investments $ (5.12) (12.43) (7.68) (2.57) 36.83 2.26
Total from investment operations $ (5.61) (13.10) (8.01) (3.54) 36.30 1.71
Less distributions from:
Net realized gains on investments $ -- 0.99 -- 8,90 7.56 0.73
Total distributions $ -- 0.99 -- 8.90 7.56 0.73
Net asset value, end of period $ 16.83 22.44 36.53 44.54 56.98 28.24
TOTAL RETURN(2) % (25.00) (36.30) (17.98) (6.76) 145.12 6.81
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 63,406 119,498 78,658 104,094 72,581 29,746
Ratios to average net assets:
Expenses(3) % 2.58 2.51 2.39 2.15 2.18 2.22
Net investment loss(3) % (2.50) (2.40) (2.11) (1.75) (1.96) (1.45)
Portfolio turnover rate % 357 427 104 134 223 257
CLASS T
--------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 22.71 36.94 45.04 57.39 28.36 27.34
Income (loss) from investment operations:
Net investment loss $ (0.58) (0.68)* (0.34) (0.90) (0.65) (0.51)
Net realized and unrealized gain
(loss) on investments $ (5.08) (12.56) (7.76) (2.55) 37.24 2.26
Total from investment operations $ (5.66) (13.24) (8.10) (3.45) 36.59 1.75
Less distributions from:
Net realized gains on investments $ -- 0.99 -- 8.90 7.56 0.73
Total distributions $ -- 0.99 -- 8.90 7.56 0.73
Net asset value, end of period $ 17.05 22.71 36.94 45.04 57.39 28.36
TOTAL RETURN(2) % (24.92) (36.27) (17.99) (6.52) 145.51 6.94
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 1,778 4,877 16,316 23,441 33,634 18,203
Ratios to average net assets:
Expenses(3) % 2.53 2.46 2.34 2.10 2.06 2.10
Net investment loss(3) % (2.45) (2.35) (2.06) (1.70) (1.85) (1.33)
Portfolio turnover rate % 357 427 104 134 223 257
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Total return is calculated assuming reinvestment of dividends and capital
gain distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
* Per share data calculated using weighted average number of shares
outstanding throughout the period.
See Accompanying Notes to Financial Statements
63
ING DISCIPLINED LARGECAP FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
-----------------------------------------------------------
YEAR YEAR SEVEN MONTHS PERIOD
ENDED ENDED ENDED YEAR ENDED ENDED
MAY 31, MAY 31, MAY 31, OCT. 31, OCT. 31,
2003 2002 2001(1) 2000 1999(2)
------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 8.43 9.87 11.17 11.14 10.00
Income (loss) from investment operations:
Net investment income (loss) $ 0.03 0.03 (0.01) -- 0.01
Net realized and unrealized gain (loss)
on investments $ (0.85) (1.47) (1.29) 0.18 1.13
Total from investment operations $ (0.82) (1.44) (1.30) 0.18 1.14
Less distributions from:
Net realized gains on investments $ -- -- -- 0.15 --
Total distributions $ -- -- -- 0.15 --
Net asset value, end of period $ 7.61 8.43 9.87 11.17 11.14
TOTAL RETURN(3) % (9.73) (14.59) (11.64) 1.55 11.40
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 7,205 9,883 12,748 23,571 27,091
Ratios to average net assets:
Net expenses after expense
reimbursement(4) % 1.54 1.33 1.45 1.37 1.29(5)
Gross expenses prior to expense
reimbursement(4) % 1.54 1.33 1.45 1.37 1.56
Net investment income (loss) after
expense reimbursement(4) % 0.32 0.12 (0.13) 0.01 0.23(5)
Portfolio turnover rate % 106 149 26 57 26
CLASS B
-----------------------------------------------------------
YEAR YEAR SEVEN MONTHS PERIOD
ENDED ENDED ENDED YEAR ENDED ENDED
MAY 31, MAY 31, MAY 31, OCT. 31, OCT. 31,
2003 2002 2001(1) 2000 1999(2)
------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 8.23 9.70 11.04 11.09 10.00
Income (loss) from investment operations:
Net investment income (loss) $ (0.03) (0.07) (0.05) (0.08) (0.02)
Net realized and unrealized gain (loss)
on investments $ (0.83) (1.40) (1.29) 0.18 1.11
Total from investment operations $ (0.86) (1.47) (1.34) 0.10 1.09
Less distributions from:
Net realized gains on investments $ -- -- -- 0.15 --
Total distributions $ -- -- -- 0.15 --
Net asset value, end of period $ 7.37 8.23 9.70 11.04 11.09
TOTAL RETURN(3) % (10.45) (15.15) (12.14) 0.83 10.90
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 34,358 53,185 76,726 94,028 99,249
Ratios to average net assets:
Net expenses after expense
reimbursement(4) % 2.24 2.03 2.15 2.07 1.99(5)
Gross expenses prior to expense
reimbursement(4) % 2.24 2.03 2.15 2.07 2.29
Net investment loss after expense
reimbursement(4) % (0.43) (0.58) (0.83) (0.70) (0.49)(5)
Portfolio turnover rate % 106 149 26 57 26
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) The Fund commenced operations on December 30, 1998.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) Expenses calculated net of taxes and advisor reimbursement.
See Accompanying Notes to Financial Statements
64
ING DISCIPLINED LARGECAP FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
---------------------------------------------------------
YEAR YEAR SEVEN MONTHS PERIOD
ENDED ENDED ENDED YEAR ENDED ENDED
MAY 31, MAY 31, MAY 31, OCTOBER 31, OCT. 31,
2003 2002 2001(1) 2000 1999(2)
------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 8.23 9.70 11.05 11.09 10.00
Income (loss) from investment operations:
Net investment loss $ (0.04) (0.09) (0.05) (0.08) (0.02)
Net realized and unrealized gain (loss)
on investments $ (0.82) (1.38) (1.30) 0.19 1.11
Total from investment operations $ (0.86) (1.47) (1.35) 0.11 1.09
Less distributions from:
Net realized gains on investments $ -- -- -- 0.15 --
Total distributions $ -- -- -- 0.15 --
Net asset value, end of period $ 7.37 8.23 9.70 11.05 11.09
TOTAL RETURN(3) % (10.45) (15.15) (12.22) 0.92 10.90
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 21,478 36,486 66,252 88,449 75,941
Ratios to average net assets:
Net expenses after expense reimbursement(4) % 2.24 2.03 2.15 2.07 1.99(5)
Gross expenses prior to expense
reimbursement(4) % 2.24 2.03 2.15 2.07 2.27
Net investment loss after expense
reimbursement(4) % (0.43) (0.58) (0.83) (0.70) (0.49)(5)
Portfolio turnover rate % 106 149 26 57 26
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) The Fund commenced operations on December 30, 1998.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) Expenses calculated net of taxes and advisor reimbursement.
See Accompanying Notes to Financial Statements
65
ING FINANCIAL SERVICES FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
-------------------------------------------------------------------
ELEVEN SIX
YEAR YEAR MONTHS YEAR YEAR MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2001(1) 2000 1999 1998(2)
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 22.11 23.36 16.42 24.38 27.52 25.87
Income (loss) from investment operations:
Net investment income $ 0.12 0.14 0.31 0.32 0.29 0.11
Net realized and unrealized gain (loss)
on investments $ (1.78) 1.29 7.11 (5.30) (2.70) 1.54
Total from investment operations $ (1.66) 1.43 7.42 (4.98) (2.41) 1.65
Less distributions from:
Net investment income $ 0.09 0.33 0.33 0.25 0.18 --
Net realized gains on investments $ 1.12 2.35 0.15 2.73 0.55 --
Tax return of capital $ -- -- -- -- -- --
Total distributions $ 1.21 2.68 0.48 2.98 0.73 --
Net asset value, end of period $ 19.24 22.11 23.36 16.42 24.38 27.52
TOTAL RETURN(3) % (6.98) 7.05 46.01 (22.44) (8.61) 6.38
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period ($millions) $ 182 231 252 210 403 549
Ratio to average net assets:
Expenses(4) % 1.52 1.48 1.42 1.41 1.39 1.20
Net investment income(4) % 0.54 0.54 1.48 1.46 1.09 0.94
Portfolio turnover rate % 19 43 39 10 29 2
CLASS B
-------------------------------------------------------------------
ELEVEN SIX
YEAR YEAR MONTHS YEAR YEAR MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2001(1) 2000 1999 1998(2)
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 22.03 23.28 16.35 24.21 27.40 25.85
Income (loss) from investment operations:
Net investment income (loss) $ (0.07) (0.04) 0.15 0.22 0.08 0.01
Net realized and unrealized gain (loss)
on investments $ (1.72) 1.29 7.12 (5.32) (2.66) 1.54
Total from investment operations $ (1.79) 1.25 7.27 (5.10) (2.58) 1.55
Less distributions from:
Net investment income $ -- 0.15 0.19 0.03 0.06 --
Net realized gains on investments $ 1.12 2.35 0.15 2.73 0.55 --
Tax return of capital $ -- -- -- -- -- --
Total distributions $ 1.12 2.50 0.34 2.76 0.61 --
Net asset value, end of period $ 19.12 22.03 23.28 16.35 24.21 27.40
TOTAL RETURN(3) % (7.66) 6.22 45.01 (23.00) (9.31) 6.00
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period ($millions) $ 127 171 183 148 343 360
Ratio to average net assets:
Expenses(4) % 2.27 2.23 2.17 2.16 2.14 1.95
Net investment income (loss)(4) % (0.21) (0.21) 0.73 0.71 0.34 0.19
Portfolio turnover rate % 19 43 39 10 29 2
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Effective June 30, 1998, the Financial Services Fund changed its year end
to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
66
ING LARGE COMPANY VALUE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
--------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000(2) 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.62 17.14 18.10 22.38 21.91 20.27
Income (loss) from investment operations:
Net investment income (loss) $ 0.10 (0.27) (0.03) (0.01) 0.05 --
Net realized and unrealized gain (loss)
on investments $ (2.33) (1.92) (0.93) (0.51) 3.33 4.30
Total from investment operations $ (2.23) (2.19) (0.96) (0.52) 3.38 4.30
Less distributions from:
Net investment income $ 0.03 0.00* -- -- 0.05 --
Net realized gains from investments $ -- 0.29 -- 3.76 2.86 2.66
Tax return of capital $ -- 0.04 -- -- -- --
Total distributions $ 0.03 0.33 -- 3.76 2.91 2.66
Net asset value, end of period $ 12.36 14.62 17.14 18.10 22.38 21.91
TOTAL RETURN(3) % (15.21) (12.83) (5.30) (3.13) 15.54 21.42
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $ 133,146 173,655 212,962 226,905 254,532 245,790
Ratios to average net assets:
Expenses(4) % 1.37 1.27 1.48 1.09 0.95 1.16
Net investment income (loss)(4) % 0.87 0.35 (0.32) (0.06) 0.21 0.06
Portfolio turnover rate % 103 88 54 85 86 63
CLASS B
----------------------------------------------------
YEAR YEAR FIVE MONTHS AUGUST 22,
ENDED ENDED ENDED 2000(5) THRU
MAY 31, MAY 31, MAY 31, DECEMBER 31,
2003 2002 2001(1) 2000
------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.45 17.09 18.09 24.16
Income (loss) from investment operations:
Net investment income (loss) $ 0.01 (0.34) (0.05) (0.02)
Net realized and unrealized loss on investments $ (2.29) (1.97) (0.95) (2.73)
Total from investment operations $ (2.28) (2.31) (1.00) (2.75)
Less distributions from:
Net realized gains on investments $ -- 0.29 -- 3.32
Tax return of capital $ -- 0.04 -- --
Total distributions $ -- 0.33 -- 3.32
Net asset value, end of period $ 12.17 14.45 17.09 18.09
TOTAL RETURN(3) % (15.78) (13.60) (5.53) (11.95)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $ 3,538 4,552 4,901 722
Ratios to average net assets:
Expenses(4) % 2.12 2.02 2.23 1.84
Net investment income (loss)(4) % 0.12 (0.40) (1.07) (0.81)
Portfolio turnover rate % 103 88 54 85
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Effective July 26, 2000, ING Investments, LLC. became the Investment
Manager of the Fund.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return information for less than one year is not
annualized.
(4) Annualized for periods less than one year.
(5) Commencement of offerings of shares.
* Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements
67
ING LARGE COMPANY VALUE FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
--------------------------------------------------
YEAR YEAR FIVE MONTHS SEPTEMBER 26,
ENDED ENDED ENDED 2000(2) THRU
MAY 31, MAY 31, MAY 31, DECEMBER 31,
2003 2002 2001(1) 2000
------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.42 17.04 18.05 23.40
Income (loss) from investment operations:
Net investment loss $ 0.02 (0.42) (0.03) (0.02)
Net realized and unrealized loss on investments $ (2.31) (1.87) (0.98) (2.01)
Total from investment operations $ (2.29) (2.29) (1.01) (2.03)
Less distributions from:
Net realized gains on investments $ -- 0.29 -- 3.32
Tax return of capital $ -- 0.04 -- --
Total distributions $ -- 0.33 -- 3.32
Net asset value, end of period $ 12.13 14.42 17.04 18.05
TOTAL RETURN(3) % (15.88) (13.52) (5.60) (9.30)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $ 1,133 1,895 3,462 160
Ratios to average net assets:
Expenses(4) % 2.12 2.02 2.23 1.64
Net investment income (loss)(4) % 0.12 (0.40) (1.07) (0.81)
Portfolio turnover rate % 103 88 54 85
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Commencement of offerings of shares.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return information for less than one year is not
annualized.
(4) Annualized for periods less than one year.
* Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements
68
ING MAGNACAP FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
---------------------------------------------------------------------
YEAR YEAR ELEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED JUNE 30,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.11 13.54 15.84 17.69 17.07 15.92
Income (loss) from investment operations:
Net investment income $ 0.06 0.07 0.05 0.07 0.07 0.04
Net realized and unrealized gain (loss)
on investments $ (1.32) (1.53) (0.38) (0.08) 2.37 3.02
Total from investment operations $ (1.26) (1.46) (0.33) (0.01) 2.44 3.06
Less distributions from:
Net investment income $ 0.03 0.07 0.09 0.05 0.04 0.06
Net realized gains on investments $ -- 1.90 1.88 1.79 1.78 1.85
Total distributions $ 0.03 1.97 1.97 1.84 1.82 1.91
Net asset value, end of period $ 8.82 10.11 13.54 15.84 17.69 17.07
TOTAL RETURN(2): % (12.46) (10.96) (2.77) (0.36) 15.93 20.53
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 156,902 211,602 277,722 303,864 368,508 348,759
Ratios to average net assets:
Expenses(3) % 1.45 1.34 1.31 1.29 1.35 1.37
Net investment income(3) % 0.73 0.59 0.33 0.41 0.41 0.29
Portfolio turnover rate % 110 75 92 26 48 53
CLASS B
--------------------------------------------------------------------
YEAR YEAR ELEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED JUNE 30,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.75 13.14 15.44 17.36 16.86 15.81
Income (loss) from investment operations:
Net investment loss $ 0.00* (0.02) (0.01) (0.05) (0.04) (0.04)
Net realized and unrealized gain (loss)
on investments $ (1.27) (1.47) (0.41) (0.08) 2.32 2.97
Total from investment operations $ (1.27) (1.49) (0.42) (0.13) 2.28 2.93
Less distributions from:
Net investment income $ -- -- -- -- -- 0.03
Net realized gains on investments $ -- 1.90 1.88 1.79 1.78 1.85
Total distributions $ -- 1.90 1.88 1.79 1.78 1.88
Net asset value, end of period $ 8.48 9.75 13.14 15.44 17.36 16.86
TOTAL RETURN(2): % (13.03) (11.61) (3.40) (1.11) 15.12 19.76
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 50,677 79,685 112,286 87,167 116,227 77,787
Ratios to average net assets:
Expenses(3) % 2.15 2.04 2.01 1.99 2.05 2.07
Net investment income (loss)(3) % 0.03 (0.11) (0.37) (0.29) (0.29) (0.41)
Portfolio turnover rate % 110 75 92 26 48 53
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
* Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements
69
ING MAGNACAP FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
----------------------------------------------------------
YEAR YEAR ELEVEN MONTHS YEAR JUNE 1,
ENDED ENDED ENDED ENDED 1999(2) TO
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30,
2003 2002 2001(1) 2000 1999
------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.76 13.14 15.44 17.37 16.69
Income (loss) from investment operations:
Net investment loss $ 0.00* (0.01) (0.01) (0.10) --
Net realized and unrealized gain (loss)
on investments $ (1.28) (1.47) (0.41) (0.04) 0.68
Total from investment operations $ (1.28) (1.48) (0.42) (0.14) 0.68
Less distributions from:
Net investment income $ -- -- -- -- --
Net realized gains on investments $ -- 1.90 1.88 1.79 --
Total distributions $ -- 1.90 1.88 1.79 --
Net asset value, end of period $ 8.48 9.76 13.14 15.44 17.37
TOTAL RETURN(3): % (13.11) (11.53) (3.41) (1.17) 4.07
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 8,291 9,693 10,887 3,660 601
Ratios to average net assets:
Expenses(4) % 2.15 2.04 2.01 1.99 1.12
Net investment income (loss)(4) % 0.03 (0.11) (0.37) (0.29) 0.42
Portfolio turnover rate % 110 75 92 26 48
CLASS M
--------------------------------------------------------------------
YEAR YEAR ELEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED JUNE 30,
MAY 31, MAY 31, MAY 31, -------------------------------
2003 2002 2001(1) 2000 1999 1998
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.96 13.36 15.64 17.51 16.95 15.87
Income (loss) from investment operations:
Net investment income (loss) $ 0.03 0.02 -- (0.01) (0.01) --
Net realized and unrealized gain (loss)
on investments $ (1.31) (1.50) (0.39) (0.06) 2.35 2.98
Total from investment operations $ (1.28) (1.48) (0.39) (0.07) 2.34 2.98
Less distributions from:
Net investment income $ -- 0.02 0.01 0.01 -- 0.05
Net realized gains on investments $ -- 1.90 1.88 1.79 1.78 1.85
Total distributions $ -- 1.92 1.89 1.80 1.78 1.90
Net asset value, end of period $ 8.68 9.96 13.36 15.64 17.51 16.95
TOTAL RETURN(3): % (12.85) (11.30) (3.21) (0.71) 15.41 20.00
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 7,445 12,074 17,440 13,050 16,351 14,675
Ratios to average net assets:
Expenses(4) % 1.90 1.79 1.76 1.74 1.80 1.82
Net investment income (loss)(4) % 0.28 0.14 (0.12) (0.04) (0.04) (0.16)
Portfolio turnover rate % 110 75 92 26 48 53
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Commencement of offering of shares.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
* Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements
70
ING MIDCAP VALUE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A CLASS B CLASS C
------------------- ------------------- -------------------
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(1) 2003 2002(2) 2003 2002(2)
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.28 10.00 10.27 9.87 10.26 9.87
Income (loss) from investment operations:
Net investment income (loss) $ 0.00* 0.00* (0.06) (0.01) (0.05) (0.01)
Net realized and unrealized gain (loss)
on investments $ (1.77) 0.28 (1.75) 0.41 (1.75) 0.40
Total from investment operations $ (1.77) 0.28 (1.81) 0.40 (1.80) 0.39
Less distributions from:
Net investment income $ 0.04 -- 0.01 -- 0.01 --
Net realized gains on investments $ 0.11 -- 0.11 -- 0.11 --
Total distributions $ 0.15 -- 0.12 -- 0.12 --
Net asset value, end of period $ 8.36 10.28 8.34 10.27 8.34 10.26
TOTAL RETURN(3): % (16.94) 2.80 (17.40) 4.05 (17.32) 3.95
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 15,026 25,325 12,205 11,656 12,034 9,731
Ratios to average net assets:
Net expenses after reimbursement (4)(5) % 1.75 1.61 2.50 2.36 2.50 2.36
Gross expenses prior to expense
reimbursement(4) % 2.17 3.05 2.92 3.80 2.92 3.80
Net investment income (loss) after
expense reimbursement(4)(5) % (0.10) 0.04 (0.82) (0.71) (0.81) (0.71)
Portfolio turnover rate % 72 13 72 13 72 13
- ----------
(1) The Fund commenced operations on February 1, 2002
(2) Class B and Class C commenced offering of shares on February 4, 2002.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not anualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding interest,
taxes, brokerage and extraordinary expenses subject to possible recoupment
by ING Investments, LLC within three years.
* Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements
71
ING SMALLCAP VALUE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A CLASS B CLASS C
------------------- ------------------- -------------------
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(1) 2003 2002(2) 2003 2002(3)
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.62 10.00 10.60 9.85 10.60 9.76
Income (loss) from investment operations:
Net investment loss $ (0.05) (0.01) (0.11) (0.02) (0.10) (0.01)
Net realized and unrealized gain
on investments $ (1.00) 0.63 (1.01) 0.77 (1.02) 0.85
Total from investment operations $ (1.05) 0.62 (1.12) 0.75 (1.12) 0.84
Less distributions from:
Net investment income $ 0.04 -- -- -- 0.01 --
Net realized gains on investments $ 0.09 -- 0.09 -- 0.09 --
Total distributions $ 0.13 -- 0.09 -- 0.10 --
Net asset value, end of period $ 9.44 10.62 9.39 10.60 9.38 10.60
TOTAL RETURN(4): % (9.83) 6.20 (10.53) 7.61 (10.55) 8.61
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 12,280 18,435 8,233 7,889 11,241 8,468
Ratios to average net assets:
Net expenses after reimbursement (5)(6) % 1.75 1.62 2.50 2.37 2.50 2.37
Gross expenses prior to expense
reimbursement(5) % 2.17 3.65 2.92 4.40 2.92 4.40
Net investment loss after expense
reimbursement(5)(6) % (0.54) (0.39) (1.29) (1.14) (1.28) (1.14)
Portfolio turnover rate % 54 12 54 12 54 12
- ----------
(1) The fund commenced operations on February 1, 2002
(2) Class B commenced offering of shares on February 4, 2002.
(3) Class C commenced offering of shares on February 7, 2002.
(4) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not anualized.
(5) Annualized for periods less than one year.
(6) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
See Accompanying Notes to Financial Statements
72
ING TAX EFFICIENT EQUITY FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
-----------------------------------------------------------
YEAR YEAR SEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED OCTOBER 31,
MAY 31, MAY 31, MAY 31, ----------------------
2003 2002 2001(1) 2000 1999(2)
------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.97 11.52 12.37 11.99 10.00
Income (loss) from investment operations:
Net investment income (loss) $ 0.00* -- 0.02 0.05 0.04
Net realized and unrealized gain (loss) on investments $ (1.32) (1.55) (0.84) 0.38 1.95
Total from investment operations $ (1.32) (1.55) (0.82) 0.43 1.99
Less distributions from:
Net investment income $ -- -- 0.03 0.05 --
Total distributions $ -- -- 0.03 0.05 --
Net asset value, end of period $ 8.65 9.97 11.52 12.37 11.99
TOTAL RETURN(3) % (13.24) (13.45) (6.66) 3.62 19.90
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 26,418 35,159 42,640 47,647 45,714
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 1.45 1.44 1.40 1.31 1.28
Gross expenses prior to expense reimbursement(4) % 1.65 1.63 1.78 2.22 2.40
Ratio of net investment income (loss) after expense
reimbursement(4)(5) % (0.01) (0.02) 0.25 0.36 0.49
Portfolio turnover rate % 69 27 9 14 9
CLASS B
----------------------------------------------------------
YEAR YEAR SEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED OCTOBER 31,
MAY 31, MAY 31, MAY 31, ----------------------
2003 2002 2001(1) 2000 1999(2)
------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.79 11.41 12.28 11.96 10.00
Income (loss) from investment operations:
Net investment income (loss) $ (0.07) (0.09) (0.03) (0.04) (0.01)
Net realized and unrealized gain (loss) on
investments $ (1.28) (1.53) (0.83) 0.39 1.97
Total from investment operations $ (1.35) (1.62) (0.86) 0.35 1.96
Less distributions from:
Net investment income $ -- -- 0.01 0.03 --
Total distributions $ -- -- 0.01 0.03 --
Net asset value, end of period $ 8.44 9.79 11.41 12.28 11.96
TOTAL RETURN(3) % (13.79) (14.20) (6.97) 2.94 19.60
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 5,220 8,268 9,930 8,268 7,059
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.20 2.19 2.05 1.96 1.95
Gross expenses prior to expense reimbursement(4) % 2.30 2.28 2.43 2.47 2.66
Ratio of net investment loss after expense
reimbursement(4)(5) % (0.76) (0.77) (0.40) (0.29) (0.14)
Portfolio turnover rate % 69 27 9 14 9
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) The Fund commenced operations on December 15, 1998.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than a year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
* Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements
73
ING TAX EFFICIENT EQUITY FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
-----------------------------------------------------------
YEAR YEAR SEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED OCTOBER 31,
MAY 31, MAY 31, MAY 31, ----------------------
2003 2002 2001(1) 2000 1999(2)
------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.73 11.33 12.20 11.92 10.00
Income (loss) from investment operations:
Net investment loss $ (0.07) (0.10) (0.01) (0.04) --
Net realized and unrealized gain (loss) on investments $ (1.28) (1.50) (0.85) 0.39 1.92
Total from investment operations $ (1.35) (1.60) (0.86) 0.35 1.92
Less distributions from:
Net investment income $ -- -- 0.01 0.07 --
Total distributions $ -- -- 0.01 0.07 --
Net asset value, end of period $ 8.38 9.73 11.33 12.20 11.92
TOTAL RETURN(3) % (13.88) (14.12) (7.01) 2.91 19.20
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 903 1,392 2,202 2,870 1,222
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 2.20 2.19 2.05 1.95 1.97
Gross expenses prior to expense reimbursement(4) % 2.30 2.28 2.43 2.47 2.64
Ratio of net investment loss after expense
reimbursement(4)(5) % (0.76) (0.77) (0.40) (0.32) (0.14)
Portfolio turnover rate % 69 27 9 14 9
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) The Fund commenced operations on December 15, 1998.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than a year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
See Accompanying Notes to Financial Statements
74
ING CONVERTIBLE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
--------------------------------------------------------------------
ELEVEN THREE
YEAR YEAR MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(1) 2000 1999(2) 1999
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 15.35 17.89 27.70 23.27 21.92 19.12
Income (loss) from investment operations:
Net investment income $ 0.38 0.30 0.85 0.42 0.10 0.40
Net realized and unrealized gain
(loss) on investments $ 0.78 (2.34) (5.29) 8.02 1.35 3.17
Total from investment operations $ 1.16 (2.04) (4.44) 8.44 1.45 3.57
Less distributions from:
Net investment income $ 0.31 0.41 0.51 0.32 0.10 0.41
Net realized gains on investments $ -- 0.09 4.86 3.69 -- 0.36
Total distributions $ 0.31 0.50 5.37 4.01 0.10 0.77
Net asset value, end of period $ 16.20 15.35 17.89 27.70 23.27 21.92
TOTAL RETURN(3): % 7.80 (11.44) (17.78) 39.88 6.62 19.17
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 51,008 60,692 98,896 131,218 73,133 65,742
Ratio to average net assets:
Net expenses after expense
reimbursement/recoupment(4)(5) % 1.59 1.46 1.42 1.35 1.45 1.53
Gross expenses prior to expense
reimbursement/recoupment(4) % 1.59 1.46 1.41 1.35 2.10 1.65
Net investment income after expense
reimbursement/recoupment(4)(5) % 2.57 1.93 2.20 1.78 1.82 2.08
Portfolio turnover rate % 97 100 145 129 28 138
CLASS B
--------------------------------------------------------------------
ELEVEN THREE
YEAR YEAR MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(1) 2000 1999(2) 1999
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.83 19.56 30.20 25.34 23.86 20.56
Income (loss) from investment operations:
Net investment income $ 0.35 0.24 0.49 0.29 0.07 0.29
Net realized and unrealized gain
(loss) on investments $ 0.83 (2.59) (5.49) 8.77 1.47 3.47
Total from investment operations $ 1.18 (2.35) (5.00) 9.06 1.54 3.76
Less distributions from:
Net investment income $ 0.22 0.28 0.34 0.19 0.06 0.27
Net realized gains on investments $ -- 0.10 5.30 4.01 -- 0.19
Total distributions $ 0.22 0.38 5.64 4.20 0.06 0.46
Net asset value, end of period $ 17.79 16.83 19.56 30.20 25.34 23.86
TOTAL RETURN(3): % 7.16 (12.04) (18.26) 39.21 6.47 18.52
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 72,364 88,650 125,366 139,704 68,091 58,736
Ratio to average net assets:
Net expenses after expense
reimbursement/recoupment(4)(5) % 2.24 2.11 2.07 2.00 2.10 2.18
Gross expenses prior to expense
reimbursement/recoupment(4) % 2.24 2.11 2.06 2.00 2.10 2.30
Net investment income after expense
reimbursement/recoupment(4)(5) % 1.92 1.28 1.55 1.13 1.17 1.44
Portfolio turnover rate % 97 100 145 129 28 138
- ----------
(1) The Fund changed its fiscal year end to May 31
(2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager
of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
See Accompanying Notes to Financial Statements
75
ING CONVERTIBLE FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
--------------------------------------------------------------------
ELEVEN THREE
YEAR YEAR MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY, 31 MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(1) 2000 1999(2) 1999
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 15.75 18.33 28.33 23.78 22.40 19.55
Income (loss) from investment operations:
Net investment income $ 0.32 0.22 0.58 0.28 0.07 0.28
Net realized and unrealized gain (loss)
on investments $ 0.78 (2.42) (5.26) 8.22 1.37 3.25
Total from investment operations $ 1.10 (2.20) (4.68) 8.50 1.44 3.53
Less distributions from:
Net investment income $ 0.23 0.29 0.35 0.19 0.06 0.25
Net realized gains on investments $ -- 0.09 4.97 3.76 -- 0.43
Total distributions $ 0.23 0.38 5.32 3.95 0.06 0.68
Net asset value, end of period $ 16.62 15.75 18.33 28.33 23.78 22.40
TOTAL RETURN(3): % 7.15 (12.03) (18.25) 39.24 6.45 18.45
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 66,412 81,247 118,363 156,592 100,276 95,998
Ratio to average net assets:
Net expenses after expense
reimbursement/recoupment(4)(5) % 2.24 2.11 2.07 2.00 2.10 2.18
Gross expenses prior to expense
reimbursement/recoupment(4) % 2.24 2.11 2.06 2.00 2.10 2.30
Net investment income after expense
reimbursement/recoupment(4)(5) % 1.92 1.28 1.55 1.13 1.17 1.44
Portfolio turnover rate % 97 100 145 129 28 138
- ----------
(5) The Fund changed its fiscal year end to May 31
(2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager
of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
See Accompanying Notes to Financial Statements
76
ING EQUITY AND BOND FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A
--------------------------------------------------------------------
ELEVEN THREE
YEAR YEAR MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(1) 2000 1999(2) 1999
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.06 13.30 15.04 19.23 19.03 19.53
Income (loss) from investment operations:
Net investment income $ 0.31 0.39 0.93 0.51 0.10 0.36
Net realized and unrealized gain (loss) on
investments $ (0.41) (1.13) (1.01) (0.60) 0.17 2.58
Total from investment operations $ (0.10) (0.74) (0.08) (0.09) 0.27 2.94
Less distributions from:
Net investment income $ 0.25 0.45 0.51 0.39 0.07 0.43
Net realized gains on investments $ -- 0.05 1.15 3.71 -- 3.01
Total distributions $ 0.25 0.50 1.66 4.10 0.07 3.44
Net asset value, end of period $ 11.71 12.06 13.30 15.04 19.23 19.03
TOTAL RETURN(3): % (0.66) (5.55) (0.61) (1.01) 1.42 17.10
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 32,179 57,042 61,477 63,592 9,619 9,519
Ratio to average net assets:
Net expenses after expense
reimbursement/recoupment(4)(5) % 1.60 1.48 1.32 1.40 1.49 1.59
Gross expenses prior to expense
reimbursement/recoupment(4) % 1.71 1.45 1.53 1.61 1.75 1.97
Net investment income after expense
reimbursement/recoupment(4)(5) % 2.62 3.11 3.54 3.26 2.06 2.08
Portfolio turnover rate % 129 145 76 173 63 165
CLASS B
--------------------------------------------------------------------
ELEVEN THREE
YEAR YEAR MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(1) 2000 1999(2) 1999
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.97 14.28 16.09 20.59 20.38 20.07
Income (loss) from investment operations:
Net investment income $ 0.29 0.32 0.80 0.44 0.07 0.28
Net realized and unrealized gain (loss) on
investments $ (0.47) (1.22) (0.98) (0.64) 0.18 2.74
Total from investment operations $ (0.18) (0.90) (0.18) (0.20) 0.25 3.02
Less distributions from:
Net investment income $ 0.18 0.36 0.39 0.33 0.04 0.31
Net realized gains on investments $ -- 0.05 1.24 3.97 -- 2.40
Total distributions $ 0.18 0.41 1.63 4.30 0.04 2.71
Net asset value, end of period $ 12.61 12.97 14.28 16.09 20.59 20.38
TOTAL RETURN(3): % (1.29) (6.26) (1.21) (1.58) 1.24 16.49
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 22,348 31,682 35,828 41,026 7,157 6,048
Ratio to average net assets:
Net expenses after expense
reimbursement/recoupment(4)(5) % 2.25 2.13 1.97 2.05 2.14 2.24
Gross expenses prior to expense
reimbursement/recoupment(4) % 2.36 2.10 2.18 2.26 2.40 2.62
Net investment income after expense
reimbursement/recoupment(4)(5) % 1.97 2.46 2.89 2.61 1.41 1.43
Portfolio turnover rate % 129 145 76 173 63 165
- ----------
(1) The Fund changed its fiscal year end to May 31
(2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager
of the Fund and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
See Accompanying Notes to Financial Statements
77
ING EQUITY AND BOND FUND (CONTINUED) FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS C
--------------------------------------------------------------------
ELEVEN THREE
YEAR YEAR MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(1) 2000 1999(2) 1999
------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.57 12.78 14.45 18.53 18.35 19.90
Income (loss) from investment operations:
Net investment income $ 0.17 0.34 0.74 0.45 0.06 0.26
Net realized and unrealized gain (loss)
on investments $ (0.34) (1.13) (0.91) (0.62) 0.16 2.52
Total from investment operations $ (0.17) (0.79) (0.17) (0.17) 0.22 2.78
Less distributions from:
Net investment income $ 0.19 0.37 0.39 0.34 0.04 0.28
Net realized gains on investments $ -- 0.05 1.11 3.57 -- 4.05
Total distributions $ 0.19 0.42 1.50 3.91 0.04 4.33
Net asset value, end of period $ 11.21 11.57 12.78 14.45 18.53 18.35
TOTAL RETURN(3): % (1.27) (6.20) (1.28) (1.53) 1.21 16.34
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 14,240 18,007 22,679 25,838 21,331 21,655
Ratio to average net assets:
Net expenses after expense
reimbursement/recoupment(4)(5) % 2.25 2.13 1.97 2.05 2.14 2.23
Gross expenses prior to expense
reimbursement/recoupment(4) % 2.36 2.10 2.18 2.26 2.40 2.61
Net investment income after expense
reimbursement/recoupment(4)(5) % 1.96 2.46 2.89 2.61 1.41 1.43
Portfolio turnover rate % 129 145 76 173 63 165
CLASS T
--------------------------------------------
ELEVEN
YEAR YEAR MONTHS MARCH 31,
ENDED ENDED ENDED 2000(6)TO
MAY 31, MAY 31, MAY 31, JUNE 30,
2003 2002 2001(1) 2000
------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.93 14.23 16.10 16.83
Income (loss) from investment operations:
Net investment income $ 0.29 0.28 1.00 0.09
Net realized and unrealized gain (loss) on investments $ (0.44) (1.14) (1.16) (0.82)
Total from investment operations $ (0.15) (0.86) (0.16) (0.73)
Less distributions from:
Net investment income $ 0.21 0.39 0.48 --
Net realized gains on investments $ -- 0.05 1.23 --
Total distributions $ 0.21 0.44 1.71 --
Net asset value, end of period $ 12.57 12.93 14.23 16.10
TOTAL RETURN(3): % (1.03) (6.04) (1.06) (4.34)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 3,293 4,559 7,725 10,953
Ratio to average net assets:
Net expenses after expense reimbursement/recoupment(4)(5) % 2.00 1.88 1.86 1.70
Gross expenses prior to expense reimbursement/recoupment(4) % 2.11 1.85 1.84 1.91
Net investment income after expense
reimbursement/recoupment(4)(5) % 2.22 2.71 2.77 2.96
Portfolio turnover rate % 129 145 76 173
- ----------
(1) The Fund changed its fiscal year end to May 31.
(2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager
of the Fund and the Fund changed its year end to June 30.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction
of sales charges. Total return for less than one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
(6) Commencement of offering of shares.
See Accompanying Notes to Financial Statements
78
ING REAL ESTATE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS A CLASS B CLASS C
------------ ------------ -----------
DECEMBER 20, NOVEMBER 20, JANUARY 17,
2002(1) TO 2002(1) TO 2003(1) TO
MAY 31, MAY 31, MAY 31,
2003 2003 2003
------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.06 10.00 9.96
Income from investment operations:
Net investment income $ 0.16 0.12 (0.01)*
Net realized and unrealized gain (loss) on investments $ 1.04 1.15 1.50
Total from investment operations $ 1.20 1.27 1.49
Less distribution from:
Net investment income $ 0.20 0.17 0.08
Total distributions $ 0.20 0.17 0.08
Net asset value, end of period $ 11.06 11.10 11.37
TOTAL RETURN(2): % 12.06 12.77 15.03
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000) $ 982 149 157
Ratio to average net assets:
Net expenses after expense reimbursement(3)(4) % 1.45 2.20 2.20
Gross expenses prior to expense reimbursement(3) % 1.53 2.30 2.30
Net investment income after expense reimbursement(3)(4) % 0.01 1.91 (1.62)
Portfolio turnover rate % 62 62 62
- ----------
(1) Commencement of operations of the class.
(2) Total return is calculated assuming reinvestment of dividends and capital
gains distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
* Per share data calculated using weighted average number of shares
outstanding throughout the period.
See Accompanying Notes to Financial Statements
79
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
ORGANIZATION. The ING Funds contained within this book are comprised of ING
Equity Trust ("IET"), ING Investment Funds, Inc. ("IIF") and ING Mayflower Trust
("IMT"), all of which are open-end investment management companies registered
under the Investment Company Act of 1940, as amended.
IET is a Massachusetts business trust organized in 1998 with nineteen separate
series (Portfolios). Thirteen of the Portfolios in this report are: ING Growth
Opportunities Fund ("Growth Opportunities"), ING LargeCap Growth Fund ("LargeCap
Growth"), ING MidCap Opportunities Fund ("MidCap Opportunities"), ING SmallCap
Opportunities Fund ("SmallCap Opportunities"), ING Disciplined LargeCap Fund
("Disciplined LargeCap", formerly ING Research Enhanced Index), ING Financial
Services Fund ("Financial Services"), ING Large Company Value Fund ("Large
Company Value"), ING MidCap Value Fund ("MidCap Value"), ING SmallCap Value Fund
("SmallCap Value"), ING Tax Efficient Equity Fund ("Tax Efficient Equity"), ING
Convertible Fund ("Convertible"), ING Equity and Bond Fund ("Equity and Bond",
formerly ING Equity and Income Fund) and ING Real Estate Fund ("Real Estate",
formerly CRA Realty Shares Portfolio). IIF is a Maryland Corporation organized
in 1969 with one Portfolio, ING MagnaCap Fund ("MagnaCap"). IMT is a
Massachusetts business trust organized in 1993 with two separate series
(Portfolios). One of the Portfolios in this report is ING Growth + Value Fund
("Growth + Value"). The investment objective of each Fund is described in each
Fund's prospectus.
Each Fund offers at least two of the following classes of shares: Class A, Class
B, Class C, Class I, Class M, Class Q and Class T. The separate classes of
shares differ principally in the applicable sales charges (if any), distribution
fees, shareholder servicing fees and transfer agency fees. Shareholders of each
class also bear certain expenses that pertain to that particular class. All
shareholders bear the common expenses of the Fund and earn income from the
portfolio pro rata based on the average daily net assets of each class, without
distinction between share classes. Dividends are determined separately for each
class 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 preferential dividend rights exist. Differences
in per share dividend rates generally results from the relative weighting of pro
rata income and realized gain allocations and from differences in separate class
expenses, including distribution, and shareholder servicing fees. Class B
shares, along with their pro rata reinvested dividend shares, automatically
convert to Class A shares approximately eight years after purchase.
REORGANIZATION. On December 17, 2001, the Boards of Directors/Trustees of each
of various ING Funds approved plans of reorganization which were intended to
decrease the number of corporate entities under which the ING Funds are
organized (the "Reorganization") and to align the open-end funds with similar
open-end funds that share the same prospectus. The Reorganization only resulted
in a change in corporate form of some of the ING Funds, with no change in the
substance or investment aspects of the ING Funds. The Reorganization was
consummated to align the ING Funds' corporate structures and expedite the Funds'
required filings with the Securities and Exchange Commission. Shareholders of
Growth + Value and MagnaCap did not approve the Reorganization; therefore those
Funds remain part of ING Mayflower Trust and ING Investment Funds, Inc.,
respectively.
As a result of the Reorganization, the following ING Funds reorganized into
series of ING Equity Trust: Convertible, Equity and Bond, Financial Services,
Growth Opportunities, LargeCap Growth, Large Company Value Fund, Disciplined
LargeCap, SmallCap Opportunities and Tax Efficient Equity (collectively, the
"Reorganizing Funds"). In this regard, the Board approved the creation of a new
series of ING Equity Trust to serve as "shells" (the "Shell Funds") into which
the Reorganized Funds were reorganized. The plans of reorganization provided
for, among other things, the transfer of the assets and liabilities of the
Reorganizing Funds to the Shell Funds. Prior to September 23, 2002, the
effective date of the Reorganization, the Shell Funds had only nominal assets.
For accounting purposes, each Reorganizing Fund is considered the surviving
entity, and the financial statements shown for periods prior to September 23,
2002 are the financial statements of the Reorganized Fund. MidCap Opportunities,
MidCap Value Fund and SmallCap Value were originally organized as series of ING
Equity Trust, and were not involved in the Reorganization.
80
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Prior to the Reorganization, Convertible, Equity and Bond, and LargeCap Growth
were series of ING Mutual Funds ("IMF"). IMF is a Delaware business trust
registered as an open-end management investment company organized in 1992.
Prior to the Reorganization, Financial Services was the sole series of ING
Financial Services Fund, Inc. ING Financial Services Fund, Inc. was a Maryland
corporation registered as an open-end management investment company organized in
1985.
Prior to the Reorganization, Tax Efficient Equity was a series of ING Funds
Trust ("IFT"). IFT is a Delaware business trust registered as an open-end
management investment company organized on July 30, 1998.
Prior to the Reorganization, Growth Opportunities was the sole series of ING
Growth Opportunities Fund, a Massachusetts business trust registered as an
open-end management investment company organized in 1986.
Prior to the Reorganization, SmallCap Opportunities was the sole series of ING
SmallCap Opportunities Fund, a Massachusetts business trust registered as an
open-end management investment company organized in 1986.
Prior to the Reorganization, Large Company Value was the sole series of ING
Large Company Value Fund, Inc., a Maryland corporation registered as an
open-end, diversified management investment company organized in April 1991.
Prior to the Reorganization, Disciplined LargeCap was a series of IMT. As
discussed above, IMT is a Massachusetts business trust registered as an open-end
management investment company organized in 1993.
On November 4, 2002, pursuant to an Agreement and Plan of Reorganization dated
August 20, 2002, all of the assets and liabilities of the CRA Realty Shares
Portfolio (the "Acquired Fund") were transferred to a newly created series of
the ING Equity Trust, the ING Real Estate Fund (the "Acquiring Fund") in
exchange for shares of the Acquiring Fund. These shares were then distributed to
shareholders of the Acquired Fund and the Acquired Fund was terminated.
This reorganization was accounted for as tax-free reorganization under the
Internal Revenue Code. Accordingly, no gain or loss was recognized by the
shareholders of the Acquired Fund upon the exchange of their Acquired Fund
Shares for shares of the Acquiring Fund.
Prior to November 4, 2002, Real Estate was organized as a series of The
Advisors' Inner Circle Fund, a Massachusetts business trust registered as an
open-end management investment company, established July 18, 1991.
Effective October 1, 2002, ING Funds Distributor, Inc. changed its name to ING
Funds Distributor, LLC and is a wholly owned subsidiary of ING Groep N.V.
("ING").
ING is a global financial institution active in the fields of insurance, banking
and asset management in more than 65 countries.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are consistently followed by the
Funds in the preparation of their financial statements. Such policies are in
conformity with accounting principles generally accepted in the United States of
America for investment companies.
A. SECURITY VALUATION. Investments in equity securities traded on a national
securities exchange are valued at the last reported sale price. Portfolio
securities reported by NASDAQ will be valued at NASDAQ official closing
price. Securities traded on an exchange or NASDAQ for which there has been
no sale and securities traded in the over-the-counter-market are valued at
the mean between the last reported bid and ask prices. All investments
quoted in foreign currencies will be valued daily in U.S. dollars on the
basis of the foreign currency exchange rates prevailing at the time such
valuation is determined by each Fund's custodian. Debt securities are
valued at bid prices obtained from independent services or from one or more
dealers making markets in the securities. U.S. Government obligations are
valued by using market quotations or independent pricing services which
uses prices provided by market-makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Securities for which market quotations are not readily
81
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
available are valued at their respective fair values as determined in good
faith and in accordance with policies set by the Board. Among elements of
analysis, the Board has authorized the use of one or more research services
to assist with the determination of the fair value of foreign securities in
light of significant events. Research services use statistical analyses and
quantitative models to help determine fair value as of the time a Fund
calculates its net asset value. Investments in mutual funds are valued at
the closing Net Asset Value (NAV) per share. Investments in securities
maturing in less than 60 days at the date of acquisition are valued at
amortized cost, which, when combined with accrued interest, approximates
market value.
B. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Securities transactions are
accounted for on the trade date. Realized gains and losses are reported on
the basis of identified cost of securities sold. Interest income is
recorded on an accrual basis. Dividend income is recorded on the
ex-dividend date, or for certain foreign securities, when the information
becomes available to the funds. Premium amortization and discount accretion
are determined by the effective yield method.
C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds are
maintained in U.S. dollars. Any foreign currency amounts are translated
into U.S. dollars on the following basis:
(1) Market value of investment securities, other assets and
liabilities -- at the exchange rates prevailing at the end of the
day.
(2) Purchases and sales of investment securities, income and expenses
-- at the rates of exchange prevailing on the respective dates of
such transactions.
Although the net assets and the market values are presented at the foreign
exchange rates at the end of the day, the Funds do not isolate the portion
of the results of operations resulting from changes in foreign exchange
rates on investments from the fluctuations arising from changes in market
prices of securities held. Such fluctuations are included with the net
realized and unrealized gains or losses from investments. For securities
which are subject to foreign withholding tax upon disposition, liabilities
are recorded on the statement of assets and liabilities for the estimated
tax withholding based on the securities current market value. Upon
disposition, realized gains or losses on such securities are recorded net
of foreign withholding tax. Reported net realized foreign exchange gains or
losses arise from sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities other than investments
in securities at fiscal year end, resulting from changes in the exchange
rate. Foreign security and currency transactions may involve certain
considerations and risks not typically associated with investing in U.S.
companies and the U.S. Government. These risks include but are not limited
to revaluation of currencies and future adverse political and economic
developments which could cause securities and their markets to be less
liquid and prices more volatile than those of comparable U.S. companies and
the U.S. Government.
D. FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS. Certain funds may
enter into foreign currency exchange transactions to convert to and from
different foreign currencies and to and from the U.S. dollar in connection
with the planned purchases or sales of securities. The Funds either enter
into these transactions on a spot basis at the spot rate prevailing in the
foreign currency exchange market or use forward foreign currency contracts
to purchase or sell foreign currencies. When the contract is fulfilled or
closed, gains or losses are realized. Until then, the gain or loss is
included in unrealized appreciation or depreciation. Risks may arise upon
entering into forward contracts from the potential inability of
counterparties to meet the terms of their forward contracts and
82
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
from unanticipated movements in the value of foreign currencies relative to
the U.S. dollar.
Each Fund may enter into futures contracts involving foreign currency,
interest rates, securities and security indices, for hedging purposes only.
A futures contract obligates the seller of the contract to deliver and the
purchaser of the contract to take delivery of the type of foreign currency,
financial instrument or security called for in the contract at a specified
future time for a specified price. Upon entering into such a contract, a
Fund is required to deposit and maintain as collateral such initial margin
as required by the exchange on which the contract is traded. Pursuant to
the contract, a Fund agrees to receive from or pay to the broker an amount
equal to the daily fluctuations in the value of the contract. Such receipts
or payments are known as variation margins and are recorded as unrealized
gains or losses by the Fund. When the contract is closed, the Fund records
a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
There were no open futures contracts at May 31, 2003.
E. DISTRIBUTIONS TO SHAREHOLDERS. The Funds record distributions to their
shareholders on ex-dividend date. Each Fund pays dividends, if any, as
follows:
ANNUALLY SEMI-ANNUALLY QUARTERLY
-------- ------------- ---------
Growth + Value MagnaCap Convertible
Growth Opportunities Large Company Value Equity and Bond
LargeCap Growth Real Estate
Midcap Opportunities
SmallCap Opportunities
Disciplined LargeCap
Financial Services
MidCap Value
SmallCap Value
Tax Efficient Equity
Each Fund distributes capital gains, to the extent available, annually.
F. FEDERAL INCOME TAXES. It is the policy of the Funds to comply with the
requirements of the Subchapter M of Internal Revenue Code that are
applicable to regulated investment companies and to distribute
substantially all of their net investment income and any net realized
capital gains to their shareholders. Therefore, a federal income tax or
excise tax provision is not required. In addition, by distributing during
each calendar year substantially all of its net investment income and net
realized capital gains, each Fund intends not to be subject to any federal
excise tax. The Board intends to offset any net capital gains with any
available capital loss carryforward until each carryforward has been fully
utilized or expires. In addition, no capital gain distribution shall be
made until the capital loss carryforward has been fully utilized or
expires.
G. USE OF ESTIMATES. Management of the Funds has made certain estimates and
assumptions relating to the reporting of assets, liabilities, income, and
expenses to prepare these financial statements in conformity with
accounting principles generally accepted in the United States of America.
Actual results could differ from these estimates.
H. REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements only
with government securities dealers recognized by the Board of Governors of
the Federal Reserve System or with member banks of the Federal Reserve
System. Under such agreements, the seller of the security agrees to
repurchase the agreement at a mutually agreed upon time and price. The
resale price is in excess of the purchase price and reflects an agreed upon
interest rate for the period of time the agreement is outstanding. The
period of the repurchase agreements is usually short, from overnight to one
week, while the underlying securities generally have longer maturities.
Each Fund will always receive as collateral securities acceptable to it
whose market value is equal to at least 100% of the carrying amount of the
repurchase agreements, plus accrued interest, being invested by the Fund.
The underlying collateral is valued daily on a mark to market basis to
assure that the value, including accrued interest is at least equal to the
repurchase price. If the seller defaults, a Fund might incur a loss or
delay in the realization of proceeds if the value of the collateral
securing the repurchase agreement declines, and it might incur disposition
costs in liquidating the collateral.
83
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
I. OPTIONS CONTRACTS. All Funds may purchase put and call options and may
write (sell) put options and covered call options. The Funds may engage in
option transactions as a hedge against adverse movements in the value of
portfolio holdings or to increase market exposure. Option contracts are
valued daily and unrealized gains or losses are recorded based upon the
last sales price on the principal exchange on which the options are traded.
The Funds will realize a gain or loss upon the expiration or closing of the
option contract. When an option is exercised, the proceeds on sales of the
underlying security for a written call option, the purchase cost of the
security for a written put option, or the cost of the security for a
purchased put or call option is adjusted by the amount of premium received
or paid. Realized and unrealized gains or losses on option contracts are
reflected in the accompanying financial statements. The risk in writing a
call option is that the Funds give up the opportunity for profit if the
market price of the security increases and the option is exercised. The
risk in writing a put option is that the Funds may incur a loss if the
market price of the security decreases and the option is exercised. The
risk in buying an option is that the Funds pay a premium whether or not the
option is exercised. Risks may also arise from an illiquid secondary market
or from the inability of counterparties to meet the terms of the contract.
J. SECURITIES LENDING. Each Fund had the option to temporarily loan up to 33
1/3% of its total assets to brokers, dealers or other financial
institutions in exchange for a negotiated lender's fee. The borrower is
required to fully collateralize the loans with cash, letters of credit or
U.S. Government securities. Generally, in the event of counterparty
default, the Funds have the right to use collateral to offset losses
incurred. There would be potential loss to the Funds in the event the Funds
are delayed or prevented from exercising their right to dispose of the
collateral. The Funds bear the risk of loss with respect to the investment
of collateral. Engaging in securities lending could have a leverage effect,
which may intensify the credit, market and other risks associated with
investing in a Fund. There were no securities on loan as of May 31, 2003.
K. OFFERING COSTS. Offering costs are capitalized and amortized on a straight
line basis over a period of twelve months.
NOTE 3 -- INVESTMENT TRANSACTIONS
For the year ended May 31, 2003, the cost of purchases and proceeds from the
sales of securities, excluding short-term securities, were as follows:
PURCHASES SALES
-------------- --------------
Growth+ Value $ 706,782,738 $ 801,760,722
Growth Opportunities 699,915,562 766,500,161
LargeCap Growth 541,244,697 603,507,472
MidCap Opportunities 625,749,686 708,520,580
SmallCap Opportunities 1,108,186,765 1,178,620,201
Disciplined LargeCap 94,105,244 118,416,204
Financial Services 55,603,860 98,711,637
Large Company Value 141,233,597 137,577,889
MagnaCap 254,774,488 271,259,925
MidCap Value 28,104,223 24,546,472
SmallCap Value 22,037,663 16,248,323
Tax Efficient Equity 22,535,441 28,369,745
Convertible 178,599,186 210,029,061
Equity and Bond 109,856,591 131,868,826
Real Estate 81,446,336 65,054,934
84
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The Funds entered into an Investment Management Agreement with ING Investments,
LLC (the "Manager", the "Investment Manager" or the "Adviser") a wholly-owned
subsidiary of ING. The investment management agreements compensate the Manager
with a fee, computed daily and payable monthly, based on the average daily net
assets of each Fund, at the following annual rates:
AS A PERCENT OF AVERAGE NET ASSETS
----------------------------------
Growth+ Value 1.00%
Growth Opportunities 0.95%
LargeCap Growth 0.75% on first $500 million; 0.675% on next $500
million; and 0.65% in excess of $1 billion
MidCap Opportunities 1.00%
SmallCap Opportunities 1.00%
Disciplined LargeCap 0.70%
Financial Services 1.00% on first $30 million; 0.75% on next $95
million; and 0.70% in excess of $125 million
Large Company Value 0.75% on first $100 million; 0.60% on next $50
million; 0.50% on next $100 million; and 0.40% in
excess of $250 million
MagnaCap 1.00% on first $30 million; 0.75% on next $220
million; 0.625% on next $250 million; and 0.50% in
excess of $500 million
MidCap Value 1.00%
SmallCap Value 1.00%
Tax Efficient Equity 0.80%
Convertible 0.75% on first $500 million; 0.675% on next $500
million; and 0.65% in excess of $1 billion
Equity and Bond 0.75% on first $500 million; 0.675% on next $500
million; and 0.65% in excess of $1 billion
Real Estate 0.70%
Navellier Fund Management, Inc. ("Navellier"), a registered investment advisor,
serves as Sub-Adviser to the Growth + Value Fund pursuant to a subadvisory
agreement between the Manager and Navellier. Aeltus Investment Management, Inc.
("Aeltus"), a registered investment advisor, serves as Sub-Adviser to the
Disciplined LargeCap Fund pursuant to a subadvisory agreement between the
Manager and Aeltus. Prior to August 1, 2001, J.P. Morgan Investment Management,
Inc. served as Sub-Adviser to the Fund. Brandes Investment Partners, LP
("Brandes"), a registered investment advisor, serves as Sub-Adviser to the
MidCap Value and SmallCap Value Funds pursuant to a subadvisory agreement
between the Manager and Brandes. Delta Asset Management ("Delta"), a registered
investment advisor and a wholly owned indirect subsidiary of ING, served as
Sub-Adviser to the Tax Efficient Equity Fund pursuant to a subadvisory agreement
dated October 30, 1998 between the Manager and Delta. Effective March 15, 2002,
the Manager terminated the subadvisory agreement with Delta and assumed
responsibility over the day-to-day management of the Fund directly.
Clarion CRA Securities, L.P. ("CRA"), a registered investment advisor, became
the Sub-Adviser to the Real Estate Fund pursuant a subadvisory agreement, dated
November 4, 2002, between the Manager and CRA. Prior to November 4, 2002, CRA
served as the investment advisor to Real Estate.
ING Funds Services, LLC (the "Administrator" or "IFS"), serves as administrator
to each Fund except Financial Services and MagnaCap. The Funds pay the
Administrator a fee calculated at an annual rate of 0.10% of each Funds' average
daily net assets.
Financial Services and MagnaCap have entered into a service agreement with IFS
whereby IFS will act as Shareholder Service Agent for the Funds. The agreement
provides that IFS will be compensated for incoming and outgoing shareholder
telephone calls and letters, and all reasonable out-of-pocket expenses incurred
in connection with the performance of such services. Prior to March 1, 2002, IFS
acted as Shareholder Service Agent for LargeCap Growth, Convertible and Equity
and Income.
85
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Growth + Value, Growth Opportunities, MidCap Opportunities, SmallCap
Opportunities and Disciplined LargeCap also pay IFS an annual shareholder
account servicing fee of $5.00, payable semi-annually, for each account of
beneficial owners of shares.
NOTE 5 -- DISTRIBUTION AND SERVICE FEES
Each share class of the Funds (except as noted below) 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 Funds for expenses incurred in the distribution of
each Fund's shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the
Distributor is entitled to a payment each month to reimburse or compensate
expenses incurred in the distribution and promotion of each 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 have 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 rates:
CLASS A CLASS B CLASS C CLASS I CLASS M CLASS Q CLASS T
------- ------- ------- ------- ------- ------- -------
Growth + Value 0.30% 1.00% 1.00% N/A N/A 0.25% N/A
Growth Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95%
LargeCap Growth 0.35 1.00 1.00 N/A N/A 0.25 N/A
MidCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 N/A
SmallCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95
Disciplined LargeCap 0.30 1.00 1.00 N/A N/A 0.25 N/A
Financial Services 0.25 1.00 N/A N/A N/A N/A N/A
Large Company Value 0.25 1.00 1.00 N/A N/A 0.25 N/A
MagnaCap 0.30 1.00 1.00 N/A 0.75% 0.25 N/A
MidCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A
SmallCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A
Tax Efficient Equity 0.35 1.00 1.00 N/A N/A N/A N/A
Convertible 0.35 1.00 1.00 N/A N/A 0.25 N/A
Equity and Bond 0.35 1.00 1.00 N/A N/A 0.25 0.75
Real Estate 0.25 1.00 1.00 N/A N/A 0.25 N/A
Beginning March 1, 2001, the Distributor agreed to waive 0.10% of the
Distribution fee for the Tax Efficient Equity Fund for Class A only.
For the year ended May 31, 2003, the Distributor has retained $109,775 as sales
charges from the proceeds of Class A Shares sold, $62,206 and $71,485 from the
proceeds of Class A Shares and Class C Shares redeemed, respectively and $135
from the proceeds of Class M Shares sold.
86
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
At May 31, 2003, the Funds had the following amounts recorded in payable to
affiliates on the accompanying Statements of Assets and Liabilities (see Notes
4, 5 and 7):
ACCRUED ACCRUED
INVESTMENT ACCRUED DISTRIBUTION
MANAGEMENT ADMINISTRATIVE AND SERVICE
FEES AND SERVICE FEES FEES TOTAL
---------- ---------------- ---------- ----------
Growth + Value $ 170,969 $ 154,582 $ 141,131 $ 466,682
Growth Opportunities 139,093 118,490 80,088 337,671
LargeCap Growth 137,621 14,711 101,715 254,047
MidCap Opportunities 172,245 83,444 103,182 358,871
SmallCap Opportunities 226,575 168,697 151,437 546,709
Disciplined LargeCap 48,362 27,566 48,769 124,697
Financial Services 189,110 6,389 141,423 336,922
Large Company Value 80,631 11,315 31,177 123,123
MagnaCap 154,656 5,330 93,761 253,747
MidCap Value 30,872 3,087 21,861 55,820
SmallCap Value 25,523 2,552 17,953 46,028
Tax Efficient Equity 22,447 2,689 10,559 35,695
Convertible 145,204 16,044 130,648 291,896
Equity and Bond 45,292 6,039 41,924 93,255
Real Estate 74,460 10,649 294 85,403
At May 31, 2003, State Street Bank and Trust Company and Norwest Bank owned
5.74% and 21.96% respectively, of the Growth Opportunities Fund. State Street
Bank and Trust Company also owned 5.21% of the SmallCap Opportunities Fund. ING
National Trust, a wholly-owned indirect subsidiary of ING Groep N.V., held
12.13% and 4.09% of LargeCap Growth Fund and Large Company Value Fund,
respectively. Realiastar owned 5.50% of the MidCap Opportunities Fund, and
23.76% of the Disciplined LargeCap Fund. At May 31,2003, certain non-affiliated
individuals and entities owned separately the following percentage of the Real
Estate Fund: 20.56%, 6.42%, 5.40%, 5.27% and 5.13%. ING Life Insurance & Annuity
Company, a wholly-owned indirect subsidiary of ING Groep N.V., held 60.01% of
the Tax Efficient Equity Fund. Investment activities of these shareholders could
have a material impact on the Funds.
Included in realized losses of the MagnaCap Fund is $289,895 in reimbursements
for investment losses made by the Investment Adviser.
NOTE 7 -- EXPENSE LIMITATIONS
For the following Funds, the Manager has voluntarily agreed to limit expenses,
excluding interest, taxes, brokerage and extraordinary expenses to the levels
listed below:
CLASS A CLASS B CLASS C CLASS I CLASS Q CLASS T
------- ------- ------- ------- ------- -------
LargeCap Growth(1) 1.60% 2.25% 2.25% N/A 1.50% N/A
MidCap Opportunities(2) 1.50 2.20 2.20 1.20% 1.35 N/A
Large Company Value 2.75 3.50 3.50 N/A 2.75 N/A
MidCap Value 1.75 2.50 2.50 1.50 1.75 N/A
SmallCap Value 1.75 2.50 2.50 1.50 1.75 N/A
Tax Efficient Equity(3) 1.45 2.20 2.20 N/A N/A N/A
Convertible(1) 1.60 2.25 2.25 N/A 1.50 N/A
Equity and Bond(1)(4) 1.60 2.25 2.25 N/A 1.50 2.00%
Real Estate 1.45 2.20 2.20 1.00 1.25 N/A
- ----------
(1) Prior to November 1, 2001, the expense limitation rate for Class Q was
1.25%.
(2) Prior to January 1, 2002, there was no expense limitation for the Fund.
(3) Prior to March 1, 2001, the expense limitation rates for Class A, Class B
and Class C were 1.30%, 1.95% and 1.95%, respectively.
(4) Prior to November 1, 2001, the expense limitation rate for Class T was
1.75%.
87
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Each Fund will at a later date reimburse the Manager for expenses waived during
the previous 36 months, but only if, after such reimbursement, the Fund's
expense ratio does not exceed the percentage described above. Waived and
reimbursed fees and any recoupment by the Manager of such waived and reimbursed
fees are reflected on the accompanying Statements of Operations for each Fund.
Outstanding reimbursement balances due to the Funds, if any, under their
respective expense limitation agreements are reflected in Reimbursement Due from
Manager on the accompanying Statements of Assets and Liabilities.
As of May 31, 2003, the cumulative amounts of reimbursed fees that are subject
to possible recoupment by the Manager are as follows:
LargeCap Growth $293,050
MidCap Opportunities 834,643
MidCap Value 248,002
SmallCap Value 227,214
Tax Efficient Equity 175,505
Equity and Bond 354,988
Real Estate 118,117
NOTE 8 -- LINE OF CREDIT
All of the Funds included in this report, in addition to certain other funds
managed by the Adviser, have entered into an unsecured committed revolving line
of credit agreement (the "Credit Agreement") with State Street Bank and Trust
Company for an aggregate amount of $125,000,000. The proceeds may be used only
to: (1) temporarily finance the purchase and sale of securities; (2) finance the
redemption of shares of an investor in the Funds; and (3) enable the Funds to
meet other emergency expenses as defined in the Credit Agreement. The Funds to
which the line of credit is available pay a commitment fee equal to 0.10% per
annum on the daily unused portion of the committed line amount payable quarterly
in arrears. At May 31, 2003, the Funds did not have any loans outstanding under
the line of credit.
NOTE 9 -- CAPITAL SHARES
Transactions in capital shares and dollars were as follows:
CLASS A SHARES CLASS B SHARES
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
ING GROWTH + VALUE
(NUMBER OF SHARES)
Shares sold 1,525,553 7,573,521 775,059 1,829,213
Shares redeemed (4,091,241) (10,051,567) (6,243,894) (6,707,089)
------------- ------------- ------------- -------------
Net decrease in shares outstanding (2,565,688) (2,478,046) (5,468,835) (4,877,876)
============= ============= ============= =============
ING GROWTH + VALUE ($)
Shares sold $ 12,691,301 $ 83,819,458 $ 5,705,478 $ 20,197,659
Shares redeemed (32,447,566) (111,034,969) (47,161,811) (71,726,807)
------------- ------------- ------------- -------------
Net decrease $ (19,756,265) $ (27,215,511) $ (41,456,333) $ (51,529,148)
============= ============= ============= =============
CLASS C SHARES CLASS Q SHARES
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
ING GROWTH + VALUE
(NUMBER OF SHARES)
Shares sold 555,346 1,324,639 2,650 27,404
Shares redeemed (4,193,623) (4,731,745) (15,845) (19,970)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding (3,638,277) (3,407,106) (13,195) 7,434
============= ============= ============= =============
ING GROWTH + VALUE ($)
Shares sold $ 4,087,044 $ 14,652,114 $ 21,001 $ 312,909
Shares redeemed (31,396,649) (50,714,645) (113,542) (235,075)
------------- ------------- ------------- -------------
Net increase (decrease) $ (27,309,605) $ (36,062,531) $ (92,541) $ 77,834
============= ============= ============= =============
88
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------ ------------------------------ ------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------- ------------- ------------- ------------- ------------- -------------
ING GROWTH OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold 978,264 2,688,274 237,656 599,172 180,590 580,309
Shares redeemed (3,247,365) (4,465,341) (2,452,695) (2,729,664) (1,551,613) (2,210,476)
------------- ------------- ------------- ------------- ------------- -------------
Net decrease in shares
outstanding (2,269,101) (1,777,067) (2,215,039) (2,130,492) (1,371,023) (1,630,167)
============= ============= ============= ============= ============= =============
ING GROWTH OPPORTUNITIES ($)
Shares sold $ 10,243,050 $ 40,004,026 $ 2,305,753 $ 8,476,731 $ 1,773,541 $ 8,201,102
Shares redeemed (34,151,206) (64,658,384) (24,220,971) (37,036,999) (15,424,361) (29,810,181)
------------- ------------- ------------- ------------- ------------- -------------
Net decrease $ (23,908,156) $ (24,654,358) $ (21,915,218) $ (28,560,268) $ (13,650,820) $ (21,609,079)
============= ============= ============= ============= ============= =============
CLASS T SHARES CLASS I SHARES CLASS Q SHARES
------------------------------ ------------------------------ ------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------- ------------- ------------- ------------- ------------- -------------
ING GROWTH OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold -- 1,728 53 792 -- 55,711
Shares redeemed (327,604) (627,535) (271,522) (1,013) (517) (479,835)
------------- ------------- ------------- ------------- ------------- -------------
Net decrease in shares
outstanding (327,604) (625,807) (271,469) (221) (517) (424,124)
============= ============= ============= ============= ============= =============
ING GROWTH OPPORTUNITIES ($)
Shares sold $ -- $ 21,321 $ 607 $ 13,222 $ -- $ 867,826
Shares redeemed (3,256,317) (8,967,880) (2,824,023) (14,464) (5,708) (7,238,101)
------------- ------------- ------------- ------------- ------------- -------------
Net decrease $ (3,256,317) $ (8,946,559) $ (2,823,416) $ (1,242) $ (5,708) $ (6,370,275)
============= ============= ============= ============= ============= =============
CLASS A SHARES CLASS B SHARES
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
ING LARGECAP GROWTH
(NUMBER OF SHARES)
Shares sold 1,731,633 2,658,138 408,627 855,661
Shares issued as
reinvestment of dividends -- 939 -- 124
Shares redeemed (2,830,849) (5,335,128) (2,383,990) (2,997,437)
------------- ------------- ------------- -------------
Net decrease in shares
outstanding (1,099,216) (2,676,051) (1,975,363) (2,141,652)
============= ============= ============= =============
ING LARGECAP GROWTH ($)
Shares sold $ 23,912,505 $ 52,212,562 $ 5,315,977 $ 16,971,200
Shares issued as
reinvestment of dividends -- 18,730 -- 3,107
Shares redeemed (38,399,684) (103,167,640) (31,662,290) (56,761,530)
------------- ------------- ------------- -------------
Net decrease $ (14,487,179) $ (50,936,348) $ (26,346,313) $ (39,787,223)
============= ============= ============= =============
89
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002(1) 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING LARGECAP GROWTH
(NUMBER OF SHARES)
Shares sold 224,913 639,475 289,678 1,838,570 133,122 2,029,559
Shares issued as reinvestment of
dividends -- 51 -- -- -- 404
Shares redeemed (1,291,661) (2,184,382) (325,759) (296,694) (706,874) (1,540,016)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (1,066,748) (1,544,856) (36,081) 1,541,876 (573,752) 489,947
============ ============ ============ ============ ============ ============
ING LARGECAP GROWTH ($)
Shares sold $ 2,920,608 $ 12,898,628 $ 3,894,597 $ 36,212,393 $ 1,768,245 $ 44,230,203
Shares issued as reinvestment of
dividends -- 901 -- -- -- 8,201
Shares redeemed (17,091,851) (41,155,563) (4,467,218) (5,342,391) (9,611,239) (30,239,081)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $(14,171,243) $(28,256,034) $ (572,621) $ 30,870,002 $ (7,842,994) $ 13,999,323
============ ============ ============ ============ ============ ============
- ----------
(1) Commenced offering of shares on January 8, 2002.
CLASS A SHARES CLASS B SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING MIDCAP OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold 992,635 1,348,381 266,036 360,114
Shares issued in merger -- 5,001,056 -- 4,822,131
Shares redeemed (2,775,471) (1,883,562) (2,287,890) (741,630)
------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (1,782,836) 4,465,875 (2,021,854) 4,440,615
============ ============ ============ ============
ING MIDCAP OPPORTUNITIES ($)
Shares sold $ 9,131,612 $ 15,945,265 $ 2,389,023 $ 4,209,707
Shares issued in merger -- 57,460,972 -- 54,010,417
Shares redeemed (25,266,178) (21,781,921) (20,376,679) (8,323,034)
------------ ------------ ------------ ------------
Net increase (decrease) $(16,134,566) $ 51,624,316 $(17,987,656) $ 49,897,090
============ ============ ============ ============
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING MIDCAP OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold 186,646 171,335 204,879 431 441,646 91,512
Shares issued in merger -- 8,539,378 -- -- -- 981,467
Shares redeemed (2,602,475) (673,551) (2,687,084) -- (550,075) (694,816)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (2,415,829) 8,037,162 (2,482,205) 431 (108,429) 378,163
============ ============ ============ ============ ============ ============
ING MIDCAP OPPORTUNITIES ($)
Shares sold $ 1,634,606 $ 1,957,505 $ 1,868,172 $ 5,008 $ 4,051,242 $ 1,112,443
Shares issued in merger -- 95,170,477 -- -- -- 11,326,837
Shares redeemed (23,006,547) (7,569,185) (24,766,277) -- (5,011,695) (8,237,829)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $(21,371,941) $ 89,558,797 $(22,898,105) $ 5,008 $ (960,453) $ 4,201,451
============ ============ ============ ============ ============ ============
90
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING SMALLCAP OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold 2,959,197 4,108,446 297,293 636,080 182,010 508,063
Shares issued in merger -- 2,414,351 -- 1,849,518 -- 3,423,776
Shares issued as reinvestment of
dividends -- 125,361 -- 137,050 -- 46,233
Shares redeemed (4,076,167) (3,119,480) (2,120,010) (1,386,958) (1,741,349) (805,214)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (1,116,970) 3,528,678 (1,822,717) 1,235,690 (1,559,339) 3,172,858
============ ============ ============ ============ ============ ============
ING SMALLCAP OPPORTUNITIES ($)
Shares sold $ 53,600,429 $120,715,302 $ 4,862,420 $ 17,982,622 $ 2,953,005 $ 14,450,521
Shares issued in merger -- 61,806,247 -- 44,285,046 -- 81,805,796
Shares issued as reinvestment of
dividends -- 3,576,353 -- 3,669,830 -- 1,235,346
Shares redeemed (73,261,386) (90,422,365) (35,339,503) (37,810,172) (29,151,596) (21,787,806)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $(19,660,957) $ 95,675,537 $(30,477,083) $ 28,127,326 $(26,198,591) $ 75,703,857
============ ============ ============ ============ ============ ============
CLASS T SHARES CLASS I SHARES CLASS Q SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING SMALLCAP OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold -- 334 167,562 518,042 18,182 21,261
Shares issued in merger -- -- -- -- -- 159,919
Shares issued as reinvestment of
dividends -- 11,694 -- -- -- 2,615
Shares redeemed (110,464) (238,967) (146,229) (73,562) (120,129) (105,090)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (110,464) (226,939) 21,333 444,480 (101,947) 78,705
============ ============ ============ ============ ============ ============
ING SMALLCAP OPPORTUNITIES ($)
Shares sold $ -- $ 8,901 $ 2,851,630 $ 15,648,216 $ 346,249 $ 708,356
Shares issued in merger -- -- -- -- -- 4,098,445
Shares issued as reinvestment of
dividends -- 316,205 -- 5 -- 74,783
Shares redeemed (1,899,687) (6,826,551) (2,570,785) (1,925,564) (2,150,100) (3,230,766)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $ (1,899,687) $ (6,501,445) $ 280,845 $ 13,722,657 $ (1,803,851) $ 1,650,818
============ ============ ============ ============ ============ ============
CLASS A SHARES CLASS B SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING DISCIPLINED LARGECAP
(NUMBER OF SHARES)
Shares sold 1,293,110 332,209 179,270 653,975
Shares redeemed (1,518,287) (451,951) (1,981,016) (2,101,755)
------------ ------------ ------------ ------------
Net decrease in shares
outstanding (225,177) (119,742) (1,801,746) (1,447,780)
============ ============ ============ ============
ING DISCIPLINED LARGECAP ($)
Shares sold $ 8,987,874 $ 2,956,464 $ 1,245,114 $ 5,692,149
Shares redeemed (10,542,573) (4,015,022) (13,755,648) (18,419,336)
------------ ------------ ------------ ------------
Net decrease $ (1,554,699) $ (1,058,558) $(12,510,534) $(12,727,187)
============ ============ ============ ============
91
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
---------------------------- ---------------------------- --------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2002
------------ ------------ ------------ ------------ ------------
ING DISCIPLINED LARGECAP
(NUMBER OF SHARES)
Shares sold 77,832 478,885 466 3 30,192
Shares redeemed (1,596,429) (2,874,370) (10) -- (76,493)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (1,518,597) (2,395,485) 456 3 (46,301)
============ ============ ============ ============ ============
ING DISCIPLINED LARGECAP ($)
Shares sold $ 548,074 $ 4,203,945 $ 3,306 $ 25 $ 274,465
Shares redeemed (10,962,505) (25,015,303) (73) -- (702,790)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) $(10,414,431) $(20,811,358) $ 3,233 $ 25 $ (428,325)
============ ============ ============ ============ ============
CLASS A SHARES CLASS B SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING FINANCIAL SERVICES
(NUMBER OF SHARES)
Shares sold 1,082,704 1,099,754 347,119 983,303
Shares issued as reinvestment of dividends 432,021 833,422 326,747 654,507
Shares redeemed (2,484,607) (2,285,584) (1,819,279) (1,739,227)
------------ ------------ ------------ ------------
Net decrease in shares outstanding (969,882) (352,408) (1,145,413) (101,417)
============ ============ ============ ============
ING FINANCIAL SERVICES ($)
Shares sold $ 20,078,234 $ 24,798,434 $ 6,388,714 $ 21,631,188
Shares issued as reinvestment of dividends 7,547,322 17,026,809 5,695,241 13,378,131
Shares redeemed (45,376,537) (51,066,969) (33,034,524) (38,607,809)
------------ ------------ ------------ ------------
Net decrease $(17,750,981) $ (9,241,726) $(20,950,569) $ (3,598,490)
============ ============ ============ ============
CLASS A SHARES CLASS B SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING LARGE COMPANY VALUE
(NUMBER OF SHARES)
Shares sold 869,928 1,373,253 126,112 121,663
Shares issued as reinvestment of dividends 27,501 233,778 -- 5,594
Shares redeemed (2,008,682) (2,149,663) (150,332) (99,057)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (1,111,253) (542,632) (24,220) 28,200
============ ============ ============ ============
ING LARGE COMPANY VALUE ($)
Shares sold $ 10,249,499 $ 20,940,770 $ 1,444,075 $ 1,825,895
Shares issued as reinvestment of dividends 316,244 3,503,302 -- 83,179
Shares redeemed (23,130,520) (32,730,767) (1,711,384) (1,527,433)
------------ ------------ ------------ ------------
Net increase (decrease) $(12,564,777) $ (8,286,695) $ (267,309) $ 381,641
============ ============ ============ ============
92
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS C SHARES CLASS Q SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002(1)
------------ ------------ ------------ ------------
ING LARGE COMPANY VALUE
(NUMBER OF SHARES)
Shares sold 32,926 64,684 -- 1,337
Shares issued as reinvestment of
dividends -- 2,645 -- --
Shares redeemed (70,915) (139,077) (183) --
------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (37,989) (71,748) (183) 1,337
============ ============ ============ ============
ING LARGE COMPANY VALUE ($)
Shares sold $ 382,527 $ 986,051 $ -- $ 19,389
Shares issued as reinvesment of
dividends -- 39,228 -- --
Shares redeemed (753,542) (2,222,672) (1,771) --
------------ ------------ ------------ ------------
Net increase (decrease) $ (371,015) $ (1,197,393) $ (1,771) $ 19,389
============ ============ ============ ============
CLASS A SHARES CLASS B SHARES CLASS C SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING MAGNACAP
(NUMBER OF SHARES)
Shares sold 1,637,596 2,200,329 342,031 1,165,942 455,850 491,490
Shares issued as reinvestment of
dividends 58,790 3,100,059 52 1,123,166 20 119,279
Shares redeemed (4,837,146) (4,883,156) (2,535,432) (2,663,961) (471,682) (446,035)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (3,140,760) 417,232 (2,193,349) (374,853) (15,812) 164,734
============ ============ ============ ============ ============ ============
ING MAGNACAP ($)
Shares sold $ 13,316,165 $ 24,358,517 $ 2,679,550 $ 12,626,363 $ 3,661,386 $ 5,208,521
Shares issued as reinvestment of
dividends 471,273 31,776,032 407 11,153,042 174 1,185,640
Shares redeemed (39,584,790) (54,127,863) (20,001,817) (28,380,740) (3,860,761) (4,684,503)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $(25,797,352) $ 2,006,686 $(17,321,860) $ (4,601,335) $ (199,201) $ 1,709,658
============ ============ ============ ============ ============ ============
CLASS M SHARES CLASS Q SHARES CLASS I SHARES
---------------------------- ---------------------------- --------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003
------------ ------------ ------------ ------------ ------------
ING MAGNACAP
(NUMBER OF SHARES)
Shares sold 19,464 38,778 -- 25,363 777
Shares issued as reinvestment of
dividends -- 207,863 4,708 161,336 --
Shares redeemed (374,176) (339,171) (2,564) (172,009) --
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (354,712) (92,530) 2,144 14,690 777
============ ============ ============ ============ ============
ING MAGNACAP ($)
Shares sold $ 155,322 $ 418,837 $ -- $ 293,569 $ 6,557
Shares issued as reinvestment of
dividends -- 2,103,577 37,713 1,652,078 --
Shares redeemed (3,054,885) (3,695,461) (38,330) (1,844,440) --
------------ ------------ ------------ ------------ ------------
Net increase (decrease) $ (2,899,563) $ (1,173,047) $ (617) $ 101,207 $ 6,557
============ ============ ============ ============ ============
93
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
---------------------------- ----------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(1) 2003 2002(2)
------------ ------------ ------------ ------------
ING MIDCAP VALUE
(NUMBER OF SHARES)
Shares sold 1,049,073 2,605,647 818,080 1,153,304
Shares issued as reinvestment of
dividends 34,385 -- 18,033 --
Shares redeemed (1,749,286) (142,673) (507,980) (17,955)
------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (665,828) 2,462,974 328,133 1,135,349
============ ============ ============ ============
ING MIDCAP VALUE ($)
Shares sold $ 7,733,617 $ 26,775,675 $ 6,257,727 $ 11,840,128
Shares issued as reinvestment of
dividends 232,444 -- 121,903 --
Shares redeemed (11,804,691) (1,470,743) (3,593,419) (184,720)
------------ ------------ ------------ ------------
Net increase (decrease) $ (3,838,630) $ 25,304,932 $ 2,786,211 $ 11,655,408
============ ============ ============ ============
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
---------------------------- ---------------------------- ----------------------------
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(2) 2003 2002(3) 2003 2002(4)
------------ ------------ ------------ ------------ ------------ ------------
ING MIDCAP VALUE
Shares sold 822,471 965,747 21,374 6,888 550 1,115
Shares issued as reinvestment of
dividends 13,972 -- 562 -- 42 --
Shares redeemed (341,110) (17,708) (5,297) -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net increase in shares outstanding 495,333 948,039 16,639 6,888 592 1,115
============ ============ ============ ============ ============ ============
ING MIDCAP VALUE ($)
Shares sold $ 6,239,930 $ 9,937,739 $ 154,508 $ 70,941 $ 4,534 $ 11,595
Shares issued as reinvestment of
dividends 94,463 -- 3,799 -- 285 --
Shares redeemed (2,367,968) (184,006) (36,094) -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net increase $ 3,966,425 $ 9,753,733 $ 122,213 $ 70,941 $ 4,819 $ 11,595
============ ============ ============ ============ ============ ============
- ----------
(1) Commenced offering of shares on February 1, 2002.
(2) Commenced offering of shares on February 4, 2002.
(3) Commenced offering of shares on March 4, 2002.
(4) Commenced offering of shares on April 17, 2002.
94
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
---------------------------- ----------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(1) 2003 2002(2)
------------ ------------ ------------ ------------
ING SMALL CAP VALUE
(NUMBER OF SHARES)
Shares sold 746,668 1,818,913 490,662 783,600
Shares issued as reinvestment of
dividends 16,962 -- 6,823 --
Shares redeemed (1,197,761) (83,387) (364,790) (39,620)
------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (434,131) 1,735,526 132,695 743,980
============ ============ ============ ============
ING SMALL CAP VALUE ($)
Shares sold $ 6,815,426 $ 19,106,892 $ 4,485,147 $ 8,286,464
Shares issued as reinvestment of
dividends 145,698 -- 58,605 --
Shares redeemed (10,467,147) (875,665) (3,120,196) (426,160)
------------ ------------ ------------ ------------
Net increase (decrease) $ (3,506,023) $ 18,231,227 $ 1,423,556 $ 7,860,304
============ ============ ============ ============
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
---------------------------- ---------------------------- ----------------------------
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(3) 2003 2002(4) 2003 2002(5)
------------ ------------ ------------ ------------ ------------ ------------
ING SMALL CAP VALUE
(NUMBER OF SHARES)
Shares sold 566,589 812,089 30,646 2,469 -- 760
Shares issued as reinvestment of
dividends 6,643 -- 564 -- -- --
Shares redeemed (174,091) (13,303) (10,123) -- (695) --
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding 399,141 798,786 21,087 2,469 (695) 760
============ ============ ============ ============ ============ ============
ING SMALL CAP VALUE ($)
Shares sold $ 5,189,793 $ 8,706,900 $ 286,003 $ 26,848 $ -- $ 8,230
Shares issued as reinvestment of
dividends 57,003 -- 4,835 -- -- --
Shares redeemed (1,484,104) (141,971) (78,363) -- (7,606) --
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $ 3,762,692 $ 8,564,929 $ 212,475 $ 26,848 $ (7,606) $ 8,230
============ ============ ============ ============ ============ ============
- ----------
(1) Commenced offering of shares on February 1, 2002.
(2) Commenced offering of shares on February 4, 2002.
(3) Commenced offering of shares on February 7, 2002.
(4) Commenced offering of shares on March 7, 2002.
(5) Commenced offering of shares on April 30, 2002.
CLASS A SHARES CLASS B SHARES CLASS C SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING TAX EFFICIENT EQUITY
(NUMBER OF SHARES)
Shares sold 52,162 116,135 16,842 101,337 4,153 21,565
Shares redeemed (525,395) (289,152) (242,184) (127,655) (39,527) (72,785)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease in shares outstanding (473,233) (173,017) (225,342) (26,318) (35,374) (51,220)
============ ============ ============ ============ ============ ============
ING TAX EFFICIENT EQUITY ($)
Shares sold $ 426,204 $ 1,204,789 $ 132,368 $ 1,057,889 $ 32,652 $ 222,673
Shares redeemed (4,130,250) (3,055,624) (1,924,280) (1,336,968) (317,342) (739,675)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease $ (3,704,046) $ (1,850,835) $ (1,791,912) $ (279,079) $ (284,690) $ (517,002)
============ ============ ============ ============ ============ ============
95
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING CONVERTIBLE
(NUMBER OF SHARES)
Shares sold 538,399 1,958,879 421,161 614,464
Shares issued as reinvestment of dividends 51,808 110,965 41,633 88,673
Shares redeemed (1,397,320) (3,641,803) (1,662,300) (1,844,627)
------------ ------------ ------------ ------------
Net decrease in shares outstanding (807,113) (1,571,959) (1,199,506) (1,141,490)
============ ============ ============ ============
ING CONVERTIBLE ($)
Shares sold $ 8,104,116 $ 30,523,457 $ 6,866,145 $ 10,852,858
Shares issued as reinvestment of dividends 762,272 1,758,845 674,288 1,536,619
Shares redeemed (20,483,502) (57,093,216) (26,789,834) (31,743,142)
------------ ------------ ------------ ------------
Net decrease $(11,617,114) $(24,810,914) $(19,249,401) $(19,353,665)
============ ============ ============ ============
CLASS C SHARES CLASS Q SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING CONVERTIBLE
(NUMBER OF SHARES)
Shares sold 283,725 450,714 17,167 30,682
Shares issued as reinvestment of dividends 32,094 64,090 8,275 32,307
Shares redeemed (1,478,629) (1,812,332) (347,993) (1,190,010)
------------ ------------ ------------ ------------
Net decrease in shares outstanding (1,162,810) (1,297,528) (322,551) (1,127,021)
============ ============ ============ ============
ING CONVERTIBLE ($)
Shares sold $ 4,341,342 $ 7,434,361 $ 251,286 $ 482,846
Shares issued as reinvestment of dividends 485,833 1,039,698 117,940 502,113
Shares redeemed (22,218,447) (29,432,206) (4,929,175) (18,495,520)
------------ ------------ ------------ ------------
Net decrease $(17,391,272) $(20,958,147) $ (4,559,949) $(17,510,561)
============ ============ ============ ============
CLASS A SHARES CLASS B SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING EQUITY AND BOND
(NUMBER OF SHARES)
Shares sold 804,559 2,044,167 235,194 568,337
Shares issued as reinvestment of dividends 87,922 169,074 20,392 53,496
Shares redeemed (2,874,377) (2,107,628) (926,352) (688,620)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (1,981,896) 105,613 (670,766) (66,787)
============ ============ ============ ============
ING EQUITY AND BOND ($)
Shares sold $ 8,696,083 $ 25,609,560 $ 2,763,564 $ 7,552,484
Shares issued as reinvestment of dividends 945,153 2,077,020 237,706 706,119
Shares redeemed (31,480,050) (26,287,880) (10,795,160) (9,177,528)
------------ ------------ ------------ ------------
Net increase (decrease) $(21,838,814) $ 1,398,700 $ (7,793,890) $ (918,925)
============ ============ ============ ============
96
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS C SHARES CLASS Q SHARES CLASS T SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING EQUITY AND BOND
(NUMBER OF SHARES)
Shares sold 151,062 262,677 5,355 9,956 666 325
Shares issued as reinvestment of
dividends 16,285 38,349 404 1,271 5,021 14,320
Shares redeemed (453,636) (518,494) (2,579) (23,460) (96,290) (204,914)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (286,289) (217,468) 3,180 (12,233) (90,603) (190,269)
============ ============ ============ ============ ============ ============
ING EQUITY AND BOND ($)
Shares sold $ 1,566,442 $ 3,148,057 $ 56,544 $ 123,222 $ 7,881 $ 4,282
Shares issued as reinvestment of
dividends 168,388 452,175 4,292 15,488 58,222 189,047
Shares redeemed (4,682,884) (6,149,939) (27,501) (288,266) (1,124,406) (2,740,344)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $ (2,948,054) $ (2,549,707) $ 33,335 $ (149,556) $ (1,058,303) $ (2,547,015)
============ ============ ============ ============ ============ ============
CLASS A CLASS B CLASS C CLASS I
------------ ------------ ------------ --------------------------------------------
PERIOD PERIOD PERIOD PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, OCT. 31, OCT. 31,
2003(1) 2003(3) 2003(4) 2003(2) 2002(5)(6) 2001(5)(6)
------------ ------------ ------------ ------------ ------------ ------------
ING REAL ESTATE
(NUMBER OF SHARES)
Shares sold 94,587 16,002 13,845 2,062,228 2,943 1,355
Shares issued as reinvestment of
dividends 341 28 7 115,070 343 303
Shares redeemed (6,170) (2,596) -- (962,686) (1,331) (589)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in shares
outstanding 88,758 13,434 13,852 1,214,612 1,955 1,069
============ ============ ============ ============ ============ ============
ING REAL ESTATE ($)
Shares sold $ 1,008,855 $ 165,222 $ 156,401 $ 21,890,930 $ 31,057 $ 13,726
Shares issued as reinvestment of
dividends 3,536 294 74 1,216,742 3,751 3,110
Shares redeemed (64,742) (26,513) -- (10,000,608) (14,352) (5,896)
------------ ------------ ------------ ------------ ------------ ------------
Net increase $ 947,649 $ 139,003 $ 156,475 $ 13,107,064 $ 20,456 $ 10,940
============ ============ ============ ============ ============ ============
- ----------
(1) Commenced offering of shares on December 20, 2002.
(2) Changed its fiscal year to May 31.
(3) Commenced offering of shares on November 20, 2002.
(4) Commenced offering of shares on January 17, 2003.
(5) Reflects history of a predecessor mutual fund (see Note 1)
(6) Dollar amounts in thousands.
97
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 10 -- WHEN ISSUED SECURITIES
The Equity and Income Fund, at times, may purchase FNMA/GNMA certificates on a
delayed delivery, forward or when-issued basis with payment and delivery often
taking place a month or more after the initiation of the transaction. It is the
Fund's policy to record when-issued FNMA/GNMA certificates (and the
corresponding obligation to pay for the securities) at the time the purchase
commitment becomes fixed -- generally on the trade date. It is also the Fund's
policy to segregate assets to cover its commitments for when-issued securities
on trade date.
NOTE 11 -- REORGANIZATIONS
On May 17, 2002 certain Funds, as listed below (each an: "Acquiring Fund"),
acquired the assets and certain liabilities of other Funds, also listed below
(each an "Acquired Fund"), in a tax-free reorganization in exchange for shares
of the Acquiring Fund, pursuant to a plan of reorganization approved by the
Acquired Fund's shareholders. The number and value of shares issued by the
Acquiring Fund are presented in Note 9 -- Capital Shares. Net assets and
unrealized appreciation/(depreciation) as of the reorganization dates were as
follows:
ACQUIRED FUND
ACQUIRING ACQUIRED TOTAL NET ASSETS OF TOTAL NET ASSETS OF UNREALIZED
FUND FUND ACQUIRED FUND ACQUIRING FUND APPRECIATION
---- ---- ------------- -------------- ------------
MidCap Opportunities Fund Pilgrim MidCap Growth Fund $217,968,703 $ 84,663,797 $20,262,576
SmallCap Opportunities Fund Pilgrim SmallCap Growth Fund 191,995,534 319,795,499 16,636,048
The net assets of MidCap Opportunities Fund and SmallCap Opportunities after the
acquisition were approximately $302,632,500 and $511,791,033 respectively.
NOTE 12 - FEDERAL INCOME TAXES
Dividends paid by the Funds 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 year or period ended May 31, 2003 were as
follows:
ORDINARY TAX-EXEMPT LONG-TERM RETURN
INCOME INCOME CAPITAL GAINS OF CAPITAL
----------- ----------- ------------- -----------
Growth + Value $ -- $ -- $ -- $ --
Growth Opportunities -- -- -- --
LargeCap Growth -- -- -- --
MidCap Opportunities -- -- -- --
SmallCap Opportunities -- -- -- --
Disciplined LargeCap -- -- -- --
Financial Services 1,544,833 -- 18,358,790 --
Large Company Value 383,636 -- -- --
MagnaCap 579,257 -- -- --
MidCap Value 567,240 -- -- --
SmallCap Value 354,275 -- -- --
Tax Efficient Equity -- -- -- --
Convertible 3,214,824 -- -- --
Equity and Bond 1,786,851 -- -- --
Real Estate 2,058,713 -- -- --
98
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
The tax composition of dividends and distributions to shareholders for year
ended May 31, 2002 were as follows:
ORDINARY TAX-EXEMPT LONG-TERM RETURN
INCOME INCOME CAPITAL GAINS OF CAPITAL
----------- ----------- ------------- -----------
Growth + Value $ -- $ -- $ -- $ --
Growth Opportunities -- -- -- --
LargeCap Growth 39,544 -- -- --
MidCap Opportunities -- -- -- --
SmallCap Opportunities -- -- 12,207,533 --
Disciplined LargeCap -- -- -- --
Financial Services 9,145,857 -- 36,691,181 --
Large Company Value 667,555 -- 2,912,638 561,447
MagnaCap 1,362,303 -- 57,821,108 --
MidCap Value -- -- -- --
SmallCap Value -- -- -- --
Tax Efficient Equity -- -- -- --
Convertible 5,995,821 -- 1,501,596 --
Equity and Bond 4,225,295 -- 143,651 --
Real Estate(1)(2) 4,948,496 -- -- 282,791
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, wash sale deferrals and other 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 May 31, 2003:
ACCUMULATED NET
PAID-IN UNDISTRIBUTED NET REALIZED GAINS (LOSSES)
CAPITAL INVESTMENT INCOME ON INVESTMENTS
------------ ----------------- -------------
Growth + Value $ (4,743,710) $ 4,743,710 $ --
Growth Opportunities (3,315,110) 3,315,002 108
LargeCap Growth (2,412,261) 2,412,261 --
MidCap Opportunities (2,858,218) 2,858,315 (97)
SmallCap Opportunities (6,705,515) 6,705,515 --
Disciplined LargeCap (116,588) 113,825 2,763
Financial Services 2,994 (14,767) 11,773
Large Company Value (5,497) 5,497 --
MagnaCap (13,552) 13,552 --
MidCap Value (182,749) 180,371 2,378
SmallCap Value (306,186) 303,592 2,594
Tax Efficient Equity (51,846) 51,846 --
Convertible -- 42,333 (42,333)
Equity and Bond -- 1,427 (1,427)
Real Estate(3) (1,663,184) 1,006,010 657,174
- ----------
(1) For the year ended October 31, 2002.
(2) Composition of dividends and distributions presented herein and within the
financial statements may differ from final amounts reported based on the
Fund's tax year end of December 31, 2002.
(3) For the tax year ended December 31, 2002.
99
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Capital loss carryforwards, which may be used to offset future realized capital
gains for federal income tax purposes were as follows at May 31, 2003:
AMOUNT EXPIRATION DATES
------------ ----------------
Growth + Value $521,848,512 2009-2011
Growth Opportunities 463,537,631 2009-2011
LargeCap Growth 418,624,352 2008-2011
MidCap Opportunities 183,253,255 2007-2011
SmallCap Opportunities 372,918,566 2008-2011
Disciplined LargeCap 43,471,296 2008-2011
Financial Services 561,113 2011
Large Company Value 13,580,973 2011
MagnaCap 10,576,002 2011
MidCap Value 2,489,425 2011
SmallCap Value 370,613 2011
Tax Efficient Equity 7,756,432 2007-2011
Convertible 99,314,637 2010-2011
Equity and Bond 6,627,917 2010-2011
Real Estate(4) 4,405,808 2007-2008
A portion of the amount of these losses may be limited in the future for MidCap
Opportunities and SmallCap Opportunities due to previous fund mergers.
The following represents the tax basis components of distributable earnings as
of May 31, 2003:
POST
UNDISTRIBUTED CAPITAL OCTOBER
UNDISTRIBUTED LONG-TERM UNREALIZED LOSS LOSSES
ORDINARY INCOME CAPITAL GAINS APPRECIATION CARRYFORWARDS DEFERRED
--------------- ------------- ------------- ------------- -------------
Growth + Value $ -- $ -- $ 26,132,944 $(521,848,512) (18,689,669)
Growth Opportunities -- -- 23,075,483 (463,537,631) (5,657,465)
LargeCap Growth -- -- 29,896,904 (418,624,352) (5,502,273)
MidCap Opportunities -- -- 17,883,544 (183,253,255) (361,941)
SmallCap Opportunities -- -- 38,796,880 (372,918,566) (17,805,896)
Disciplined LargeCap -- -- (3,543,180) (43,471,296) (10,950,458)
Financial Services 693,010 -- 18,578,922 (561,113) --
Large Company Value 772,491 -- (2,293,193) (13,580,973) (28,411,521)
MagnaCap 695,252 -- (316,103) (10,576,002) (64,859,805)
MidCap Value -- -- (7,499,111) (2,489,425) (95,617)
SmallCap Value -- -- (3,759,526) (370,613) (77,331)
Tax Efficient Equity -- -- (1,177,626) (7,756,432) (720,616)
Convertible 1,975,440 -- 9,540,102 (99,314,637) --
Equity and Bond 490,450 -- (3,433,610) (6,627,917) (7,821,774)
Real Estate(4) -- -- 18,414,124 (4,405,808) --
- ----------
(4) As of the tax year ended December 31, 2002.
NOTE 13 -- ILLIQUID SECURITIES
Pursuant to guidelines adopted by the Funds' Board of Directors, the following
securities have been deemed to be illiquid. The Funds currently limit investment
in illiquid securities to 15% of the Fund's net assets, at market value, at time
of purchase.
INITIAL PERCENT
ACQUISITION OF NET
FUND SECURITY SHARES DATE COST VALUE ASSETS
---- -------- ------ ---- ---------- ----- ------
Convertible Winstar Communications 51,932 11/06/98 $2,364,096 $ 0 0.00%
Equity and Bond Dayton Superior 400 08/31/01 7,446 4 0.00%
Iridium World Comm 500 08/31/01 50,507 5 0.00%
North Atlantic Trading, Inc. 370 08/31/01 0 0 0.00%
SA Telecommunications -- 08/06/96 2,000,000 0 0.00%
---------- --- ----
4,422,049 9 0.00%
========== === ====
100
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 14 -- SUBSEQUENT EVENTS
On December 10, 2002, ING Biotechnology Fund was liquidated pursuant to a Plan
of Liquidation and Dissolution of Series adopted by the Board of Trustees of ING
Equity Trust on November 6, 2002.
On January 7, 2003, the Board of Trustees of ING Funds approved a proposal to
reorganize the ING Large Company Value Fund, "Disappearing Fund" into the ING
MagnaCap Fund, "Surviving Fund" (the "2003 Reorganization"). The proposed
reorganization is subject to approval by shareholders of the Disappearing Fund.
If shareholder approval is obtained, it is expected that the 2003 Reorganization
would take place late in 2003.
Effective June 2, 2003, Wellington Management Company, LLC became the
Sub-Advisor for the LargeCap Growth Fund. Andrew J. Shilling, Vice President and
Partner is the portfolio manager.
101
ING
Growth +
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 96.8%
AGRICULTURE: 2.1%
188,600 Delta & Pine Land Co. $ 4,422,670
------------
4,422,670
------------
AIRLINES: 1.2%
337,500 @ Airtran Holdings, Inc. 2,504,250
------------
2,504,250
------------
APPAREL: 6.6%
100,500 @ Coach, Inc. 4,937,565
244,200 @ Quiksilver, Inc. 4,134,306
89,700 @ Timberland Co. 4,448,223
------------
13,520,094
------------
BANKS: 3.5%
281,200 UCBH Holdings, Inc. 7,297,140
------------
7,297,140
------------
BIOTECHNOLOGY: 3.6%
85,800 @ Genzyme Corp. 4,074,642
116,300 @ Integra LifeSciences Holdings Corp. 3,281,986
------------
7,356,628
------------
COMMERCIAL SERVICES: 4.7%
62,600 @ Apollo Group, Inc. 3,657,092
109,400 @ Iron Mountain, Inc. 4,321,300
86,100 Rollins, Inc. 1,774,521
------------
9,752,913
------------
COMPUTERS: 5.9%
123,600 @ NetScreen Technologies, Inc. 2,767,404
198,200 @ Storage Technology Corp. 5,351,400
323,600 @ Western Digital Corp. 4,051,472
------------
12,170,276
------------
DIVERSIFIED FINANCIAL SERVICES: 2.0%
55,300 Countrywide Financial Corp. 4,072,845
------------
4,072,845
------------
ELECTRONICS: 4.2%
141,800 @ Dionex Corp. 5,296,230
127,600 @ Trimble Navigation Ltd. 3,436,268
------------
8,732,498
------------
ENTERTAINMENT: 3.3%
76,400 @ International Game Technology 6,726,256
------------
6,726,256
------------
ENVIRONMENTAL CONTROL: 2.0%
247,600 @ Tetra Tech, Inc. 4,196,820
------------
4,196,820
------------
HEALTHCARE-PRODUCTS: 2.0%
243,100 @ Visx, Inc. 4,217,785
------------
4,217,785
------------
INSURANCE: 4.1%
166,300 First American Corp. 4,503,404
80,200 WR Berkley Corp. 3,949,850
------------
8,453,254
------------
INTERNET: 8.1%
117,700 @ Amazon.Com, Inc. 4,230,138
170,300 @ United Online, Inc. 3,668,262
222,400 @ Verity, Inc. 4,625,920
419,000 @ WebMD Corp. 4,164,860
------------
16,689,180
------------
OFFICE/BUSINESS EQUIPMENT: 2.1%
398,200 @ Xerox Corp. 4,352,326
------------
4,352,326
------------
OIL & GAS: 3.7%
45,600 @ Evergreen Resources, Inc. 2,428,656
69,600 Patina Oil & Gas Corp. 2,755,464
59,700 Pogo Producing Co. 2,555,160
------------
7,739,280
------------
OIL & GAS SERVICES: 2.5%
214,500 Halliburton Co. 5,120,115
------------
5,120,115
------------
PHARMACEUTICALS: 13.0%
204,200 @ BioMarin Pharmaceuticals, Inc. 2,334,006
94,500 @ Hi-Tech Pharmacal Co., Inc. 3,196,084
186,400 @ Medicines Co. 4,361,760
117,200 @ Pharmaceutical Resources, Inc. 4,809,888
213,600 @ Sepracor, Inc. 4,859,400
144,300 @@ Teva Pharmaceutical Industries ADR 7,314,423
------------
26,875,561
------------
PIPELINES: 1.5%
92,800 Questar Corp. 2,995,584
------------
2,995,584
------------
RETAIL: 4.5%
201,700 @ Tractor Supply Co. 9,137,010
------------
9,137,010
------------
SEMICONDUCTORS: 1.5%
135,000 @ DSP Group, Inc. 3,141,450
------------
3,141,450
------------
SOFTWARE: 7.1%
146,700 @ Avid Technology, Inc. 4,949,658
190,100 @ Citrix Systems, Inc. 4,149,883
269,800 @ Progress Software Corp. 5,512,014
------------
14,611,555
------------
TELECOMMUNICATIONS: 5.4%
301,100 @ Interdigital Communications Corp. 7,738,270
64,300 @@ Mobile Telesystems ADR 3,459,340
------------
11,197,610
------------
TRANSPORTATION: 2.2%
141,500 @@ UTI Worldwide, Inc. 4,533,660
------------
4,533,660
------------
Total Common Stock
(Cost $173,683,816) 199,816,760
------------
See Accompanying Notes to Financial Statements
102
ING
Growth +
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Pricipal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 2.3%
REPURCHASE AGREEMENT: 2.3%
$ 4,794,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $4,794,451 to be received
upon repurchase (Collateralized by $4,015,000
U.S. Treasury Bonds, 6.000%, Market Value
$4,893,534, due 02/15/26) $ 4,794,000
------------
Total Short-Term Investments
(Cost $4,794,000) 4,794,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $178,477,816)* 99.1% $204,610,760
OTHER ASSETS AND LIABILITIES-NET 0.9 1,773,833
----- ------------
NET ASSETS 100.0% $206,384,593
===== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 27,002,307
Gross Unrealized Depreciation (869,363)
------------
Net Unrealized Appreciation $ 26,132,944
============
See Accompanying Notes to Financial Statements
103
ING Growth
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 97.0%
APPAREL: 1.5%
53,400 @ Coach, Inc. $ 2,623,542
------------
2,623,542
------------
AUTO PARTS & EQUIPMENT: 1.0%
21,900 Johnson Controls, Inc. 1,823,175
------------
1,823,175
------------
BANKS: 4.0%
47,200 Bank of America Corp. 3,502,240
72,800 Wells Fargo & Co. 3,516,240
------------
7,018,480
------------
BIOTECHNOLOGY: 2.2%
28,600 @ Amgen, Inc. 1,850,706
78,100 @ Digene Corp. 2,022,790
------------
3,873,496
------------
COMMERCIAL SERVICES: 2.9%
43,700 @ FTI Consulting, Inc. 1,604,227
35,300 @ Kroll, Inc. 819,313
97,700 @ Pharmaceutical Product Development, Inc. 2,740,485
------------
5,164,025
------------
COMPUTERS: 11.1%
62,300 @ CACI Intl., Inc. 2,059,015
58,100 @ Dell Computer Corp. 1,817,949
345,400 @ EMC Corp. 3,737,228
110,300 Hewlett-Packard Co. 2,150,850
33,300 International Business Machines Corp. 2,931,732
215,700 @ Network Appliance, Inc. 3,673,371
131,014 @ Veritas Software Corp. 3,635,639
------------
20,005,784
------------
DIVERSIFIED FINANCIAL SERVICES: 4.8%
88,900 Citigroup, Inc. 3,646,678
62,100 JP Morgan Chase & Co. 2,040,606
23,800 SLM Corp. 2,856,000
------------
8,543,284
------------
ELECTRONICS: 1.6%
60,400 @ Gentex Corp. 1,880,856
46,400 @ Jabil Circuit, Inc. 973,936
------------
2,854,792
------------
ENERGY-ALTERNATE SOURCES: 0.4%
33,600 @ Headwaters, Inc. 638,064
------------
638,064
------------
ENGINEERING & CONSTRUCTION: 2.1%
50,000 Fluor Corp. 1,774,500
47,500 @ Jacobs Engineering Group, Inc. 1,854,400
------------
3,628,900
------------
FOOD: 2.6%
39,600 @ Dean Foods Co. 1,811,700
25,800 @ Performance Food Group Co. 933,960
62,400 Sysco Corp. 1,930,656
------------
4,676,316
------------
HEALTHCARE-PRODUCTS: 6.2%
18,800 @@ Alcon, Inc. 799,000
20,600 @ Boston Scientific Corp. 1,073,260
31,100 Johnson & Johnson 1,690,285
36,600 Medtronic, Inc. 1,783,518
51,515 @ St. Jude Medical, Inc. 2,889,992
16,400 @ Varian Medical Systems, Inc. 914,300
38,600 @ Zimmer Holdings, Inc. 1,731,596
------------
10,881,951
------------
HEALTHCARE-SERVICES: 1.9%
25,500 A Aetna, Inc. 1,464,210
19,000 UnitedHealth Group, Inc. 1,822,860
------------
3,287,070
------------
INSURANCE: 3.2%
99,700 Aflac, Inc. 3,281,127
18,200 American Intl. Group 1,053,416
27,000 WR Berkley Corp. 1,329,750
------------
5,664,293
------------
INTERNET: 6.5%
61,900 @ Amazon.Com, Inc. 2,224,686
19,037 @ eBay, Inc. 1,936,253
89,000 @ USA Interactive 3,422,050
188,900 @ WebMD Corp. 1,877,666
68,440 @ Yahoo!, Inc. 2,042,934
------------
11,503,589
------------
MACHINERY-DIVERSIFIED: 0.5%
37,800 @ Cognex Corp. 864,108
------------
864,108
------------
MEDIA: 3.7%
98,400 @ Cablevision Systems Corp. 1,905,024
61,800 @ Comcast Corp. 1,781,076
33,500 @ EchoStar Communications Corp. 1,124,930
37,800 New York Times Co. 1,810,620
------------
6,621,650
------------
MISCELLANEOUS MANUFACTURING: 1.9%
13,200 3M Co. 1,669,404
24,900 Danaher Corp. 1,666,308
------------
3,335,712
------------
OIL & GAS: 8.7%
44,915 Apache Corp. 2,960,797
98,600 Exxon Mobil Corp. 3,589,040
82,655 @,@@ Nabors Industries Ltd. 3,726,087
87,200 @ Patterson-UTI Energy, Inc. 3,190,648
85,400 XTO Energy, Inc. 1,832,684
------------
15,299,256
------------
PHARMACEUTICALS: 7.4%
54,600 @ AdvancePCS 1,813,266
64,900 @,@@ Biovail Corp. 3,026,936
30,700 @ Express Scripts, Inc. 2,009,008
49,500 @ Medimmune, Inc. 1,754,775
101,088 Omnicare, Inc. 2,744,539
55,300 Pfizer, Inc. 1,715,406
------------
13,063,930
------------
See Accompanying Notes to Financial Statements
104
ING Growth
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
RETAIL: 10.2%
28,600 @ 99 Cents Only Stores $ 908,908
106,700 @ Abercrombie & Fitch Co. 3,046,285
56,200 CBRL Group, Inc. 2,027,696
78,400 @ Chico's FAS, Inc. 1,677,760
101,800 Gap, Inc. 1,730,600
23,300 @ HOT Topic, Inc. 621,411
39,250 @ Pacific Sunwear of California 881,555
118,500 @ Staples, Inc. 2,297,715
94,900 Tiffany & Co. 3,108,924
32,300 Wal-Mart Stores, Inc. 1,699,303
------------
18,000,157
------------
SEMICONDUCTORS: 5.5%
203,900 @ Altera Corp. 3,931,192
50,600 Linear Technology Corp. 1,839,816
130,000 @ Xilinx, Inc. 3,883,100
------------
9,654,108
------------
SOFTWARE: 2.6%
45,700 First Data Corp. 1,892,894
106,600 Microsoft Corp. 2,623,426
------------
4,516,320
------------
TELECOMMUNICATIONS: 4.5%
123,300 @ Cisco Systems, Inc. 2,007,324
330,100 @ Corning, Inc. 2,413,031
66,800 @ Nextel Communications, Inc. 1,001,332
86,400 @ Utstarcom, Inc. 2,561,760
------------
7,983,447
------------
Total Common Stock
(Cost $148,823,817) 171,525,449
------------
MUTUAL FUNDS: 3.1%
EQUITY FUND: 3.1%
128,100 @ Nasdaq-100 Index Tracking Stock 3,816,099
18,300 SPDR Trust Series 1 1,774,185
------------
5,590,284
------------
Total Mutual Funds
(Cost $5,082,678) 5,590,284
------------
Total Long-Term Investments
(Cost $153,906,495) 177,115,733
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.5%
REPURCHASE AGREEMENT: 1.5%
$ 2,618,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $2,618,247 to be received
upon repurchase (Collateralized by $2,195,000
U.S. Treasury Bonds, 6.000%, Market Value
$2,675,295, due 02/15/26) $ 2,618,000
------------
Total Short-Term Investments
(Cost $2,618,000) 2,618,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $156,524,495)* 101.6% $179,733,733
OTHER ASSETS AND LIABILITIES-NET (1.6) (2,904,590)
----- ------------
NET ASSETS 100.0% $176,829,143
===== ============
@ Non-income producing security
@@ Foreign Issuer
A Related Party
* Cost for federal income tax purposes is $156,658,250. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 24,150,195
Gross Unrealized Depreciation (1,074,712)
------------
Net Unrealized Appreciation $ 23,075,483
============
See Accompanying Notes to Financial Statements
105
ING
LargeCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 96.5%
APPAREL: 1.0%
31,400 Nike, Inc. $ 1,758,086
------------
1,758,086
------------
BIOTECHNOLOGY: 3.3%
88,300 @ Amgen, Inc. 5,713,893
------------
5,713,893
------------
COMPUTERS: 11.9%
447,300 @ EMC Corp. 4,839,786
255,500 Hewlett-Packard Co. 4,982,250
93,300 International Business Machines Corp. 8,214,132
93,600 @ Veritas Software Corp. 2,597,400
------------
20,633,568
------------
COSMETICS/PERSONAL CARE: 1.9%
54,500 Avon Products, Inc. 3,321,230
------------
3,321,230
------------
DIVERSIFIED FINANCIAL SERVICES: 6.8%
43,100 Goldman Sachs Group, Inc. 3,512,650
116,100 JP Morgan Chase & Co. 3,815,046
37,300 SLM Corp. 4,476,000
------------
11,803,696
------------
HEALTHCARE-PRODUCTS: 7.1%
17,600 @@ Alcon, Inc. 748,000
50,000 @ Boston Scientific Corp. 2,605,000
90,400 @ Guidant Corp. 3,822,112
65,500 @ St. Jude Medical, Inc. 3,674,550
33,300 @ Zimmer Holdings, Inc. 1,493,838
------------
12,343,500
------------
HEALTHCARE-SERVICES: 1.9%
34,000 UnitedHealth Group, Inc. 3,261,960
------------
3,261,960
------------
INSURANCE: 2.2%
64,500 American Intl. Group 3,733,260
------------
3,733,260
------------
INTERNET: 10.8%
161,000 @ Amazon.Com, Inc. 5,786,340
61,300 @ eBay, Inc. 6,234,823
222,700 @ Yahoo!, Inc. 6,647,595
------------
18,668,758
------------
LEISURE TIME: 0.4%
18,000 Harley-Davidson, Inc. 758,880
------------
758,880
------------
MEDIA: 5.2%
210,270 @ Comcast Corp. 6,144,567
91,500 @ COX Communications, Inc. 2,834,670
------------
8,979,237
------------
MISCELLANEOUS MANUFACTURING: 4.2%
70,100 General Electric Co. 2,011,870
302,300 @@ Tyco Intl. Ltd. 5,350,710
------------
7,362,580
------------
OIL & GAS: 2.5%
65,030 Apache Corp. 4,286,777
------------
4,286,777
------------
OIL & GAS SERVICES: 2.6%
190,800 Halliburton Co. 4,554,396
------------
4,554,396
------------
PHARMACEUTICALS: 7.7%
34,700 Allergan, Inc. 2,502,217
18,800 @ Gilead Sciences, Inc. 991,888
93,800 @ Medimmune, Inc. 3,325,210
59,800 Merck & Co., Inc. 3,323,684
104,700 Pfizer, Inc. 3,247,794
------------
13,390,793
------------
RETAIL: 6.7%
294,500 Gap, Inc. 5,006,500
34,300 @ Kohl's Corp. 1,795,605
115,900 @ Staples, Inc. 2,247,301
48,100 Wal-Mart Stores, Inc. 2,530,541
------------
11,579,947
------------
SEMICONDUCTORS: 11.8%
81,100 @ Analog Devices, Inc. 3,126,405
94,600 Linear Technology Corp. 3,439,656
84,100 Maxim Integrated Products 3,297,561
133,000 @ Novellus Systems, Inc. 4,608,450
84,700 Texas Instruments, Inc. 1,736,350
139,700 @ Xilinx, Inc. 4,172,839
------------
20,381,261
------------
SOFTWARE: 4.9%
165,200 @ Microsoft Corp. 4,065,572
337,000 @ Oracle Corp. 4,384,370
------------
8,449,942
------------
TELECOMMUNICATIONS: 3.6%
267,800 @ Cisco Systems, Inc. 4,359,784
120,800 @ Nextel Communications, Inc. 1,810,792
------------
6,170,576
------------
Total Common Stock
(Cost $135,576,856) 167,152,340
------------
MUTUAL FUNDS: 3.3%
EQUITY FUND: 3.3%
42,400 @ Internet HOLDRs Trust 1,582,368
87,400 @ Nasdaq-100 Index Tracking Stock 2,603,646
52,000 Semiconductor HOLDRs Trust 1,557,400
------------
5,743,414
------------
Total Mutual Funds
(Cost $4,655,687) 5,743,414
------------
Total Long-Term Investments
(Cost $140,232,543) 172,895,754
------------
See Accompanying Notes to Financial Statements
106
ING
LargeCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 0.7%
REPURCHASE AGREEMENT: 0.7%
$ 1,282,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $1,282,121 to be received
upon repurchase (Collateralized by $1,075,000
U.S. Treasury Bonds, 6.000%, Market Value
$1,310,224, due 02/15/26) $ 1,282,000
------------
Total Short-Term Investments
(Cost $1,282,000) 1,282,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $141,514,543)* 100.5% $174,177,754
OTHER ASSETS AND LIABILITIES-NET (0.5) (813,224)
----- ------------
NET ASSETS 100.0% $173,364,530
===== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is $144,280,850. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 32,871,935
Gross Unrealized Depreciation (2,975,031)
------------
Net Unrealized Appreciation $ 29,896,904
============
See Accompanying Notes to Financial Statements
107
ING
MidCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 97.0%
APPAREL: 1.2%
41,800 @ Coach, Inc. $ 2,053,634
------------
2,053,634
------------
AUTO PARTS & EQUIPMENT: 1.0%
20,300 Johnson Controls, Inc. 1,689,975
------------
1,689,975
------------
BANKS: 0.5%
24,700 Bank of Hawaii Corp. 862,524
------------
862,524
------------
BUILDING MATERIALS: 1.0%
22,700 @ American Standard Cos., Inc. 1,679,573
------------
1,679,573
------------
COMMERCIAL SERVICES: 8.4%
70,900 @ Aramark Corp. 1,488,191
30,500 @ Career Education Corp. 1,873,005
21,800 @ Corporate Executive Board Co. 919,960
36,500 @ Education Management Corp. 1,735,210
46,400 @ FTI Consulting, Inc. 1,703,344
33,900 @ Kroll, Inc. 786,819
25,800 Paychex, Inc. 787,416
129,300 @ Pharmaceutical Product Development, Inc. 3,626,865
33,800 @ Weight Watchers Intl., Inc. 1,439,204
------------
14,360,014
------------
COMPUTERS: 7.8%
34,700 @ Affiliated Computer
Services, Inc. 1,607,998
59,800 @ CACI Intl., Inc. 1,976,390
23,100 @ Lexmark Intl., Inc. 1,718,640
225,800 @ Network Appliance, Inc. 3,845,374
28,900 Reynolds & Reynolds Co. 855,440
121,500 @ Veritas Software Corp. 3,371,625
------------
13,375,467
------------
DIVERSIFIED FINANCIAL SERVICES: 1.1%
24,300 Bear Stearns Cos., Inc. 1,877,661
------------
1,877,661
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 1.0%
104,900 @ American Power Conversion 1,626,999
------------
1,626,999
------------
ELECTRONICS: 2.9%
112,700 @ Gentex Corp. 3,509,478
66,700 @ Jabil Circuit, Inc. 1,400,033
------------
4,909,511
------------
ENGINEERING & CONSTRUCTION: 2.0%
44,700 Fluor Corp. 1,586,403
45,700 @ Jacobs Engineering Group, Inc. 1,784,128
------------
3,370,531
------------
ENVIRONMENTAL CONTROL: 0.5%
37,000 @ Republic Services, Inc. 884,670
------------
884,670
------------
FOOD: 2.6%
58,000 @ Dean Foods Co. 2,653,500
48,700 @ Performance Food Group Co. 1,762,940
------------
4,416,440
------------
HEALTHCARE-PRODUCTS: 6.0%
13,300 CR Bard, Inc. 932,995
47,800 @ St. Jude Medical, Inc. 2,681,580
73,900 @ Steris Corp. 1,666,445
60,200 @ Varian Medical Systems, Inc. 3,356,150
37,100 @ Zimmer Holdings, Inc. 1,664,306
------------
10,301,476
------------
HEALTHCARE-SERVICES: 2.9%
23,300 A Aetna, Inc. 1,337,886
91,700 Health Management Associates, Inc. 1,710,205
21,600 @ WellPoint Health Networks 1,843,344
------------
4,891,435
------------
HOME FURNISHINGS: 0.5%
12,100 Harman Intl. Industries, Inc. 897,820
------------
897,820
------------
INSURANCE: 1.0%
35,900 WR Berkley Corp. 1,768,075
------------
1,768,075
------------
INTERNET: 4.9%
110,000 @ USA Interactive 4,229,500
172,500 @ WebMD Corp. 1,714,650
80,200 @ Yahoo!, Inc. 2,393,970
------------
8,338,120
------------
MACHINERY-DIVERSIFIED: 2.1%
36,700 @ Cognex Corp. 838,962
73,300 Rockwell Automation, Inc. 1,733,545
14,600 @ Zebra Technologies Corp. 1,065,639
------------
3,638,146
------------
MEDIA: 4.6%
79,000 @ Cablevision Systems Corp. 1,529,440
83,200 @ EchoStar Communications Corp. 2,793,856
34,900 New York Times Co. 1,671,710
59,300 @ Univision Communications, Inc. 1,770,105
------------
7,765,111
------------
MISCELLANEOUS MANUFACTURING: 0.9%
23,000 Danaher Corp. 1,539,160
------------
1,539,160
------------
See Accompanying Notes to Financial Statements
108
ING
MidCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
OIL & GAS: 7.1%
26,100 Apache Corp. $ 1,720,512
33,900 Devon Energy Corp. 1,762,800
76,700 @,@@ Nabors Industries Ltd. 3,457,635
94,100 @ Patterson-UTI Energy, Inc. 3,443,119
79,300 XTO Energy, Inc. 1,701,778
------------
12,085,844
------------
OIL & GAS SERVICES: 1.3%
52,400 @ BJ Services Co. 2,133,204
------------
2,133,204
------------
PACKAGING & CONTAINERS: 0.9%
81,100 @ Pactiv Corp. 1,585,505
------------
1,585,505
------------
PHARMACEUTICALS: 9.7%
49,900 @ Advance PCS 1,657,179
23,500 Allergan, Inc. 1,694,585
62,500 @,@@ Biovail Corp. 2,915,000
62,610 @ Celgene Corp. 1,970,963
28,800 @ Express Scripts, Inc. 1,884,672
86,500 @ Medimmune, Inc. 3,066,425
29,700 Mylan Laboratories 857,736
93,800 Omnicare, Inc. 2,546,670
------------
16,593,230
------------
RETAIL: 10.4%
53,200 @ 99 Cents Only Stores 1,690,696
96,700 @ Abercrombie & Fitch Co. 2,760,785
10,100 @ Autozone, Inc. 845,168
40,900 @ Bed Bath & Beyond, Inc. 1,711,256
51,000 CBRL Group, Inc. 1,840,080
69,600 @ Chico's FAS, Inc. 1,489,440
22,500 @ HOT Topic, Inc. 600,075
62,100 @ Sonic Corp. 1,607,769
123,400 @ Staples, Inc. 2,392,726
86,700 Tiffany & Co. 2,840,292
------------
17,778,287
------------
SAVINGS & LOANS: 1.0%
63,867 New York Community
Bancorp, Inc. 1,769,107
------------
1,769,107
------------
SEMICONDUCTORS: 3.2%
196,500 @ Altera Corp. 3,788,520
47,800 Linear Technology Corp. 1,738,008
------------
5,526,528
------------
SOFTWARE: 2.9%
43,300 @ D&B Corp. 1,682,205
59,500 Fair Isaac Corp. 3,317,125
------------
4,999,330
------------
TELECOMMUNICATIONS: 3.7%
265,500 @ Corning, Inc. 1,940,805
92,900 @ Juniper Networks, Inc. 1,289,452
61,000 @ Nextel Communications, Inc. 914,390
72,600 @ Utstarcom, Inc. 2,152,590
------------
6,297,237
------------
TOYS/GAMES/HOBBIES: 1.0%
74,800 Mattel, Inc. 1,608,948
------------
1,608,948
------------
TRANSPORTATION: 2.9%
68,900 CH Robinson Worldwide, Inc. 2,561,013
67,200 Expeditors Intl. Washington, Inc. 2,347,968
------------
4,908,981
------------
Total Common Stock
(Cost $147,626,148) 165,532,543
------------
MUTUAL FUND: 1.0%
EQUITY FUND: 1.0%
20,250 MidCap SPDR Trust Series 1 1,764,383
------------
Total Mutual Fund
(Cost $1,618,959) 1,764,383
------------
Total Long-Term Investments
(Cost $149,245,107) 167,296,926
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 3.5%
REPURCHASE AGREEMENT: 3.5%
$ 5,959,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $5,959,561 to be received
upon repurchase (Collateralized by $4,990,000
U.S. Treasury Bond, 6.000%, Market Value
$6,081,877, due 02/15/26) $ 5,959,000
------------
Total Short-Term Investments
(Cost $5,959,000) 5,959,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $155,204,107)* 101.5% $173,255,926
OTHER ASSETS AND LIABILITIES-NET (1.5) (2,603,483)
----- ------------
NET ASSETS 100.0% $170,652,443
===== ============
@ Non-income producing security
@@ Foreign Issuer
A Related Party
* Cost for federal income tax purposes is $155,372,382. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 19,142,908
Gross Unrealized Depreciation (1,259,364)
------------
Net Unrealized Appreciation $ 17,883,544
============
See Accompanying Notes to Financial Statements
109
ING
SmallCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 96.8%
ADVERTISING: 0.6%
42,600 @ Getty Images, Inc. $ 1,721,040
------------
1,721,040
------------
AEROSPACE/DEFENSE: 1.0%
34,300 Engineered Support Systems, Inc. 1,351,763
57,000 @ Veridian Corp. 1,479,150
------------
2,830,913
------------
APPAREL: 0.5%
83,400 @ Quiksilver, Inc. 1,411,962
------------
1,411,962
------------
BANKS: 4.5%
160,200 @ Southwest Bancorp of Texas, Inc. 5,276,988
72,500 UCBH Holdings, Inc. 1,881,375
122,500 Westamerica Bancorporation 5,442,675
------------
12,601,038
------------
BIOTECHNOLOGY: 2.9%
133,600 @ Digene Corp. 3,460,240
56,300 @ Integra LifeSciences Holdings Corp. 1,588,786
79,000 @ Martek Biosciences Corp. 2,973,560
------------
8,022,586
------------
COMMERCIAL SERVICES: 7.5%
28,100 @ Corinthian Colleges, Inc. 1,321,824
72,000 @ Corporate Executive Board Co. 3,038,400
57,700 @ Education Management Corp. 2,743,058
65,700 @ FTI Consulting, Inc. 2,411,847
125,800 @ Kroll, Inc. 2,919,818
205,000 @ Pharmaceutical Product Development, Inc. 5,750,250
41,500 Strayer Education, Inc. 2,769,295
------------
20,954,492
------------
COMPUTERS: 7.7%
95,800 @ CACI Intl., Inc. 3,166,190
247,700 @ Cognizant Technology Solutions Corp. 5,139,775
122,700 @ Hutchinson Technology, Inc. 3,704,313
88,600 @ Micros Systems, Inc. 2,628,762
47,700 @ NetScreen Technologies, Inc. 1,068,003
47,600 Reynolds & Reynolds Co. 1,408,960
71,800 @ Sandisk Corp. 2,608,494
135,300 @ Western Digital Corp. 1,693,956
------------
21,418,453
------------
DISTRIBUTION/WHOLESALE; 1.0%
82,200 @ SCP Pool Corp. 2,647,662
------------
2,647,662
------------
DIVERSIFIED FINANCIAL SERVICES: 1.8%
68,900 @@ Doral Financial Corp. 2,913,092
72,826 @ Portfolio Recovery Associates, Inc. 2,181,867
------------
5,094,959
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 0.9%
65,600 @ Wilson Greatbatch Technologies, Inc. 2,414,080
------------
2,414,080
------------
ELECTRONICS: 1.7%
57,300 @ Benchmark Electronics, Inc. 1,629,612
104,200 @ Flir Systems, Inc. 2,971,784
------------
4,601,396
------------
ENERGY-ALTERNATE SOURCES: 1.3%
184,700 @ Headwaters, Inc. 3,507,453
------------
3,507,453
------------
ENTERTAINMENT: 1.7%
105,900 @ GTECH Holdings Corp. 3,721,326
66,200 @ Penn National Gaming, Inc. 1,108,188
------------
4,829,514
------------
ENVIRONMENTAL CONTROL: 1.0%
32,700 @ Stericycle, Inc. 1,293,612
81,200 @ Tetra Tech, Inc. 1,376,340
------------
2,669,952
------------
FOOD: 4.5%
77,200 @ American Italian Pasta Co. 3,382,904
39,900 Flowers Foods, Inc. 1,197,000
158,600 @ Performance Food Group Co. 5,741,320
77,300 @ United Natural Foods, Inc. 2,141,210
------------
12,462,434
------------
HEALTHCARE-PRODUCTS: 6.4%
63,800 @ Advanced Neuromodulation Systems, Inc. 3,060,486
56,200 @ Inamed Corp. 2,896,548
5,800 @ Kensey Nash Corp. 123,830
168,901 @ Kyphon, Inc. 2,170,378
143,700 @ Steris Corp. 3,240,435
211,200 @ Thoratec Corp. 2,899,776
99,900 @ Zoll Medical Corp. 3,312,684
------------
17,704,137
------------
HEALTHCARE-SERVICES: 4.4%
150,400 @ Amsurg Corp. 4,236,768
93,800 @ Coventry Health Care, Inc. 4,095,308
84,600 @ Curative Health Services, Inc. 1,203,858
65,400 @ Mid Atlantic Medical Services 3,132,660
------------
12,668,594
------------
HOUSEHOLD PRODUCTS/WARES: 0.5%
62,600 @ Yankee Candle Co., Inc. 1,336,510
------------
1,336,510
------------
INSURANCE: 2.8%
95,245 HCC Insurance Holdings, Inc. 2,728,769
67,700 @ Philadelphia Consolidated Holding Co. 2,769,607
81,400 @ ProAssurance Corp. 2,279,200
------------
7,777,576
------------
INTERNET: 2.9%
86,900 @ Avocent Corp. 2,568,764
130,343 @ Digital Insight Corp. 2,215,831
181,100 @ Digital River, Inc. 3,560,426
------------
8,345,021
------------
See Accompanying Notes to Financial Statements
110
ING
SmallCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
LODGING: 1.0%
117,900 @ Station Casinos, Inc. $ 2,652,750
------------
2,652,750
------------
MACHINERY-DIVERSIFIED: 1.9%
113,800 @ Cognex Corp. 2,601,468
35,900 @ Zebra Technologies Corp. 2,620,305
------------
5,221,773
------------
MISCELLANEOUS MANUFACTURING: 1.5%
32,100 Donaldson Co., Inc. 1,346,595
68,400 @ ESCO Technologies, Inc. 2,865,960
------------
4,212,555
------------
OIL & GAS: 3.5%
44,100 @ Evergreen Resources, Inc. 2,348,766
38,200 Patina Oil & Gas Corp. 1,512,338
195,400 @ Southwestern Energy Co. 2,934,908
128,800 @ Unit Corp. 2,833,600
------------
9,629,612
------------
OIL & GAS SERVICES: 1.0%
244,700 @ Key Energy Services, Inc. 2,907,036
------------
2,907,036
------------
PHARMACEUTICALS: 3.7%
101,300 Alpharma, Inc. 2,129,326
48,600 @ Celgene Corp. 1,529,928
101,500 @ Endo Pharmaceuticals Holdings, Inc. 1,600,654
141,100 @ Medicines Co. 3,301,740
39,800 @ Pharmaceutical Resources, Inc. 1,633,392
------------
10,195,040
------------
RETAIL: 9.3%
62,600 Applebees Intl., Inc. 1,921,194
162,000 CBRL Group, Inc. 5,844,960
51,000 @ Cheesecake Factory 1,730,430
153,400 @ Chico's FAS, Inc. 3,282,760
59,900 @ Dick's Sporting Goods, Inc. 1,736,501
87,600 @ HOT Topic, Inc. 2,336,292
115,700 @ MSC Industrial Direct Co. 2,197,143
112,675 @ Pacific Sunwear of California 2,530,681
36,200 @ PF Chang's China Bistro, Inc. 1,593,524
110,300 @ Sonic Corp. 2,855,667
------------
26,029,152
------------
SAVINGS & LOANS: 0.5%
54,100 Dime Community Bancshares 1,373,599
------------
1,373,599
------------
SEMICONDUCTORS: 5.1%
168,400 @ Artisan Components, Inc. 3,709,852
148,100 @ Integrated Circuit Systems, Inc. 3,863,929
102,300 @ Omnivision Technologies, Inc. 3,671,547
106,500 @ Power Integrations, Inc. 2,839,184
------------
14,084,512
------------
SOFTWARE: 6.6%
145,400 @ Avid Technology, Inc. 4,905,796
184,000 @ EPIQ Systems, Inc. 3,245,760
74,800 Global Payments, Inc. 2,543,200
34,900 @ IMPAC Medical Systems, Inc. 812,821
39,000 @ National Instruments Corp. 1,417,650
349,400 @ Packeteer, Inc. 5,408,712
------------
18,333,939
------------
TELECOMMUNICATIONS: 4.1%
67,400 @ Adtran, Inc. 3,256,094
132,350 @ Boston Communications Group 2,153,335
384,500 @ Foundry Networks, Inc. 5,917,455
------------
11,326,884
------------
TOYS/GAMES/HOBBIES: 1.2%
117,100 @ Leapfrog Enterprises, Inc. 3,387,703
------------
3,387,703
------------
TRANSPORTATION: 1.9%
111,500 @ Knight Transportation, Inc. 2,827,640
16,000 Roadway Corp. 592,000
71,400 @ Yellow Corp. 1,876,392
------------
5,296,032
------------
Total Common Stock
(Cost $229,293,463) 269,670,359
------------
MUTUAL FUNDS: 2.8%
EQUITY FUND: 2.8%
62,600 iShares Russell 2000 Growth Index Fund 2,954,094
56,300 iShares Russell 2000 Index Fund 4,956,089
------------
7,910,183
------------
Total Mutual Funds
(Cost $7,129,273) 7,910,183
------------
Total Long-Term Investments
(Cost $236,422,736) 277,580,542
------------
See Accompanying Notes to Financial Statements
111
ING
SmallCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.0%
REPURCHASE AGREEMENT: 1.0%
$ 2,911,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $2,911,274 to be received
upon repurchase (Collateralized by $2,380,000
U.S. Treasury Bonds, 6.125%, Market Value
$2,972,908, due 08/15/29) $ 2,911,000
------------
Total Short-Term Investments
(Cost $2,911,000) 2,911,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $239,333,736)* 100.7% $280,491,542
OTHER ASSETS AND LIABILITIES-NET (0.7) (1,857,045)
----- ------------
NET ASSETS 100.0% $278,634,497
===== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is $241,694,662. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 42,292,130
Gross Unrealized Depreciation (3,495,250)
------------
Net Unrealized Appreciation $ 38,796,880
============
See Accompanying Notes to Financial Statements
112
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 99.6%
ADVERTISING: 0.2%
3,400 Interpublic Group of Cos., Inc. $ 46,750
1,600 Omnicom Group 111,696
------------
158,446
------------
AEROSPACE/DEFENSE: 1.6%
7,500 Boeing Co. 230,025
1,700 General Dynamics Corp. 113,594
500 Goodrich Corp. 9,135
9,550 Lockheed Martin Corp. 443,311
1,546 Northrop Grumman Corp. 135,970
3,450 Raytheon Co. 110,538
1,650 Rockwell Collins, Inc. 37,917
3,950 United Technologies Corp. 269,588
------------
1,350,078
------------
AGRICULTURE: 1.0%
17,700 Altria Group, Inc. 731,010
2,350 Monsanto Co. 47,118
1,500 UST, Inc. 52,965
------------
831,093
------------
AIRLINES: 0.1%
6,600 Southwest Airlines Co. 106,062
------------
106,062
------------
APPAREL: 0.4%
1,800 @ Jones Apparel Group, Inc. 52,848
1,600 Liz Claiborne, Inc. 54,224
2,250 Nike, Inc. 125,978
1,200 @ Reebok Intl. Ltd. 38,040
950 VF Corp. 36,167
------------
307,257
------------
AUTO MANUFACTURERS: 0.6%
38,000 Ford Motor Co. 399,000
1,600 Paccar, Inc. 106,032
------------
505,032
------------
AUTO PARTS & EQUIPMENT: 0.2%
1,000 Cooper Tire & Rubber Co. 15,890
1,850 Dana Corp. 16,483
4,500 Delphi Corp. 39,690
700 Johnson Controls, Inc. 58,275
------------
130,338
------------
BANKS: 6.9%
3,100 AmSouth Bancorp 69,192
16,300 Bank of America Corp. 1,209,460
2,700 Bank of New York Co., Inc. 78,165
10,050 Bank One Corp. 375,468
4,100 BB&T Corp. 140,179
1,977 Charter One Financial, Inc. 60,219
1,500 Comerica, Inc. 69,405
1,000 First Tennessee National Corp. 46,760
8,850 FleetBoston Financial Corp. 261,694
1,900 Huntington Bancshares, Inc. 38,969
3,650 Keycorp 96,360
2,150 Marshall & Ilsley Corp. 64,500
3,700 Mellon Financial Corp. 100,529
13,100 National City Corp. 443,042
500 North Fork Bancorporation, Inc. 16,535
2,500 PNC Financial Services Group, Inc. 123,125
1,950 Regions Financial Corp. 68,328
3,000 SouthTrust Corp. 86,190
2,750 State Street Corp. 105,353
2,400 SunTrust Banks, Inc. 142,320
1,675 Union Planters Corp. 53,901
24,700 US Bancorp 585,390
17,100 Wachovia Corp. 687,078
14,450 Wells Fargo & Co. 697,935
750 Zions Bancorporation 38,265
------------
5,658,362
------------
BEVERAGES: 2.7%
7,600 Anheuser-Busch Cos., Inc. 399,988
650 Brown-Forman Corp. 51,259
21,000 Coca-Cola Co. 956,970
6,300 Coca-Cola Enterprises, Inc. 118,125
100 Coors (Adolph) 5,508
3,400 Pepsi Bottling Group, Inc. 69,326
14,850 PepsiCo, Inc. 656,370
------------
2,257,546
------------
BIOTECHNOLOGY: 1.0%
10,764 @ Amgen, Inc. 696,538
600 @ Biogen, Inc. 25,464
1,650 @ Chiron Corp. 72,748
1,100 @ Genzyme Corp. 52,239
------------
846,989
------------
BUILDING MATERIALS: 0.2%
750 @ American Standard Cos., Inc. 55,492
1,700 Masco Corp. 41,820
900 Vulcan Materials Co. 32,976
------------
130,288
------------
CHEMICALS: 1.5%
1,900 Air Products & Chemicals, Inc. 82,821
8,000 Dow Chemical Co. 254,400
8,750 Du Pont EI de Nemours & Co. 368,725
900 Eastman Chemical Co. 29,421
1,450 Ecolab, Inc. 77,938
600 Engelhard Corp. 15,090
350 Great Lakes Chemical Corp. 8,061
1,100 International Flavors & Fragrances, Inc. 34,529
1,500 PPG Industries, Inc. 72,945
1,500 Praxair, Inc. 89,985
3,500 Rohm & Haas Co. 113,505
1,700 Sherwin-Williams Co. 46,546
900 Sigma-Aldrich Corp. 47,079
------------
1,241,045
------------
COMMERCIAL SERVICES: 0.6%
1,600 @ Apollo Group, Inc. 93,472
4,400 @ Concord EFS, Inc. 66,528
2,100 @ Convergys Corp. 37,548
250 Deluxe Corp. 11,743
1,700 Equifax, Inc. 43,044
1,450 H&R Block, Inc. 59,363
2,500 McKesson Corp. 75,800
See Accompanying Notes to Financial Statements
113
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES (CONTINUED):
3,200 Paychex, Inc. $ 97,664
1,450 @ Quintiles Transnational Corp. 20,518
500 @ Robert Half Intl., Inc. 8,475
400 RR Donnelley & Sons Co. 9,980
------------
524,135
------------
COMPUTERS: 5.1%
3,750 @ Apple Computer, Inc. 67,387
1,550 @ Computer Sciences Corp. 61,535
38,250 @ Dell Computer Corp. 1,196,842
18,650 @ EMC Corp. 201,793
25,637 Hewlett-Packard Co. 499,921
17,900 International Business Machines Corp. 1,575,916
2,800 @ Lexmark Intl., Inc. 208,320
18,700 Seagate Technology, Inc. 1,496
38,800 @ Sun Microsystems, Inc. 168,004
2,700 @ Sungard Data Systems, Inc. 62,100
3,800 @ Unisys Corp. 42,902
5,900 @ Veritas Software Corp. 163,725
------------
4,249,941
------------
COSMETICS/PERSONAL CARE: 3.2%
400 Alberto-Culver Co. 20,440
800 Avon Products, Inc. 48,752
4,700 Colgate-Palmolive Co. 280,214
14,550 Gillette Co. 489,026
4,400 Kimberly-Clark Corp. 228,492
17,450 Procter & Gamble Co. 1,602,259
------------
2,669,183
------------
DIVERSIFIED FINANCIAL SERVICES: 8.9%
11,400 American Express Co. 474,924
1,700 Bear Stearns Cos., Inc. 131,359
3,100 Capital One Financial Corp. 149,327
4,700 Charles Schwab Corp. 45,590
44,000 Citigroup, Inc. 1,804,880
2,750 Countrywide Financial Corp. 202,537
11,750 Fannie Mae 869,500
900 Franklin Resources, Inc. 33,633
12,650 Freddie Mac 756,597
4,050 Goldman Sachs Group, Inc. 330,075
17,050 JP Morgan Chase & Co. 560,263
5,050 Lehman Brothers Holdings, Inc. 361,731
10,775 MBNA Corp. 216,039
17,050 Merrill Lynch & Co., Inc. 738,265
9,150 Morgan Stanley 418,613
3,650 @ Providian Financial Corp. 32,996
1,300 SLM Corp. 156,000
1,350 T Rowe Price Group, Inc. 49,572
------------
7,331,901
------------
ELECTRIC: 2.6%
1,350 Ameren Corp. 61,425
3,300 American Electric Power Co., Inc. 95,832
3,500 Centerpoint Energy, Inc. 33,425
3,600 Cinergy Corp. 136,584
3,800 CMS Energy Corp. 30,096
1,750 Consolidated Edison, Inc. 75,232
1,400 Constellation Energy Group, Inc. 46,410
2,750 Dominion Resources, Inc. 173,250
1,450 DTE Energy Co. 62,828
7,750 Duke Energy Corp. 150,195
2,700 @ Edison Intl. 43,956
1,850 Entergy Corp. 95,626
4,650 Exelon Corp. 266,445
2,500 FirstEnergy Corp. 92,025
1,550 FPL Group, Inc. 103,028
2,000 NiSource, Inc. 39,220
3,500 @ PG&E Corp. 59,500
2,450 PPL Corp. 99,078
2,000 Progress Energy, Inc. 94,100
1,850 Public Service Enterprise Group, Inc. 79,050
6,100 Southern Co. 192,028
2,800 TXU Corp. 56,672
3,500 Xcel Energy, Inc. 53,865
------------
2,139,870
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 0.3%
3,450 @ American Power Conversion 53,510
3,650 Emerson Electric Co. 190,895
1,550 Molex, Inc. 42,408
------------
286,813
------------
ELECTRONICS: 0.2%
1,650 Applera Corp. - Applied Biosystems Group 32,126
1,650 @ Jabil Circuit, Inc. 34,634
450 Parker Hannifin Corp. 18,194
3,850 @ Sanmina-SCI Corp. 22,022
2,300 Symbol Technologies, Inc. 30,820
800 @ Thermo Electron Corp. 16,880
1,400 @ Waters Corp. 39,704
------------
194,380
------------
ENGINEERING & CONSTRUCTION: 0.0%
1,000 Fluor Corp. 35,490
------------
35,490
------------
ENTERTAINMENT: 0.1%
750 @ International Game Technology 66,030
------------
66,030
------------
ENVIRONMENTAL CONTROL: 0.2%
3,200 @ Allied Waste Industries, Inc. 31,616
5,050 Waste Management, Inc. 128,624
------------
160,240
------------
FOOD: 2.0%
3,100 Albertson's, Inc. 64,697
5,710 Archer-Daniels-Midland Co. 68,348
4,050 Campbell Soup Co. 101,048
4,450 ConAgra Foods, Inc. 108,001
3,100 General Mills, Inc. 145,018
1,350 Hershey Foods Corp. 95,985
7,300 HJ Heinz Co. 241,411
6,100 Kellogg Co. 214,720
6,350 @ Kroger Co. 101,918
1,300 McCormick & Co., Inc. 34,970
6,600 Sara Lee Corp. 120,252
1,100 Supervalu, Inc. 21,835
5,650 Sysco Corp. 174,811
1,950 Winn-Dixie Stores, Inc. 27,573
2,000 WM Wrigley Jr Co. 113,000
------------
1,633,587
------------
See Accompanying Notes to Financial Statements
114
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER: 0.2%
500 Boise Cascade Corp. $ 12,285
4,150 International Paper Co. 152,180
750 Weyerhaeuser Co. 37,785
------------
202,250
------------
GAS: 0.2%
1,250 KeySpan Corp. 44,025
550 Nicor, Inc. 19,585
550 Peoples Energy Corp. 23,452
1,800 Sempra Energy 49,086
------------
136,148
------------
HAND/MACHINE TOOLS: 0.1%
1,750 Black & Decker Corp. 75,793
500 Snap-On, Inc. 15,205
1,150 Stanley Works 32,154
------------
123,152
------------
HEALTHCARE-PRODUCTS: 3.4%
600 Bausch & Lomb, Inc. 22,764
2,100 Becton Dickinson & Co. 84,000
2,800 Biomet, Inc. 77,000
3,550 @ Boston Scientific Corp. 184,955
900 CR Bard, Inc. 63,135
6,300 @ Guidant Corp. 266,364
25,200 Johnson & Johnson 1,369,620
10,400 Medtronic, Inc. 506,792
1,550 @ St. Jude Medical, Inc. 86,955
1,650 Stryker Corp. 111,111
1,650 @ Zimmer Holdings, Inc. 74,019
------------
2,846,715
------------
HEALTHCARE-SERVICES: 1.2%
2,200 A Aetna, Inc. 126,324
2,650 @ Anthem, Inc. 194,378
750 @ Humana, Inc. 9,742
250 @ Manor Care, Inc. 5,922
4,450 UnitedHealth Group, Inc. 426,933
3,150 @ WellPoint Health Networks 268,821
------------
1,032,120
------------
HOME BUILDERS: 0.2%
1,100 Centex Corp. 85,393
500 KB Home 31,250
200 Pulte Homes, Inc. 13,118
------------
129,761
------------
HOME FURNISHINGS: 0.1%
2,050 Leggett & Platt, Inc. 45,244
550 Whirlpool Corp. 31,295
------------
76,539
------------
HOUSEHOLD PRODUCTS/WARES: 0.2%
400 Avery Dennison Corp. 22,192
1,950 Clorox Co. 87,087
1,350 Fortune Brands, Inc. 70,740
------------
180,019
------------
HOUSEWARES: 0.1%
2,200 Newell Rubbermaid, Inc. 62,700
------------
62,700
------------
INSURANCE: 5.5%
3,600 @@ ACE Ltd. 131,400
10,600 Aflac, Inc. 348,846
15,350 Allstate Corp. 552,446
950 AMBAC Financial Group, Inc. 63,374
22,050 American Intl. Group 1,276,254
2,650 AON Corp. 67,999
1,500 Chubb Corp. 96,045
1,450 Cigna Corp. 81,345
600 Cincinnati Financial Corp. 22,272
2,150 Hartford Financial Services Group, Inc. 100,276
1,450 Jefferson-Pilot Corp. 61,176
2,350 John Hancock Financial Services, Inc. 71,088
1,600 Loews Corp. 76,960
4,600 Marsh & McLennan Cos., Inc. 230,598
1,250 MBIA, Inc. 62,562
6,200 Metlife, Inc. 173,414
1,000 MGIC Investment Corp. 54,020
6,750 Principal Financial Group 214,380
3,250 Progressive Corp. 234,000
4,650 Prudential Financial, Inc. 155,868
3,000 Safeco Corp. 108,420
1,250 Torchmark Corp. 48,275
8,605 Travelers Property Casualty Corp. 139,143
3,300 UnumProvident Corp. 42,570
1,100 @@ XL Capital Ltd. 95,755
------------
4,508,486
------------
INTERNET: 0.7%
2,700 @ eBay, Inc. 274,617
3,200 @ Symantec Corp. 144,704
4,950 @ Yahoo!, Inc. 147,758
------------
567,079
------------
IRON/STEEL: 0.0%
300 Nucor Corp. 14,292
400 United States Steel Corp. 6,300
------------
20,592
------------
LEISURE TIME: 0.2%
700 Brunswick Corp. 15,365
2,850 Harley-Davidson, Inc. 120,156
------------
135,521
------------
LODGING: 0.1%
950 @ Harrah's Entertainment, Inc. 38,085
1,650 Hilton Hotels Corp. 22,869
800 Marriott Intl., Inc. 31,280
------------
92,234
------------
MACHINERY-CONSTRUCTION & MINING: 0.2%
3,000 Caterpillar, Inc. 156,450
------------
156,450
------------
MACHINERY-DIVERSIFIED: 0.4%
5,050 Deere & Co. 220,534
1,800 Dover Corp. 54,558
2,800 Rockwell Automation, Inc. 66,220
------------
341,312
------------
See Accompanying Notes to Financial Statements
115
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MEDIA: 3.5%
37,750 @ AOL Time Warner, Inc. $ 574,555
5,250 @ Clear Channel Communications, Inc. 213,675
19,650 @ Comcast Corp. 591,662
2,300 Gannett Co., Inc. 181,700
650 Knight-Ridder, Inc. 45,786
1,800 McGraw-Hill Cos., Inc. 113,778
600 Meredith Corp. 26,382
2,650 Tribune Co. 132,182
14,950 @ Viacom, Inc. 680,524
17,800 Walt Disney Co. 349,770
------------
2,910,014
------------
METAL FABRICATE/HARDWARE: 0.0%
1,200 Worthington Industries 17,916
------------
17,916
------------
MINING: 0.3%
3,100 Alcoa, Inc. 76,291
1,650 Freeport-McMoRan Copper & Gold, Inc. 36,217
3,350 Newmont Mining Corp. 99,361
950 @ Phelps Dodge Corp. 34,627
------------
246,496
------------
MISCELLANEOUS MANUFACTURING: 5.8%
3,400 3M Co. 429,998
750 Cooper Industries Ltd. 29,918
150 Crane Co. 3,132
1,300 Danaher Corp. 86,996
6,350 Eastman Kodak Co. 194,564
700 Eaton Corp. 58,751
110,450 General Electric Co. 3,169,915
7,450 Honeywell Intl., Inc. 195,190
2,650 Illinois Tool Works, Inc. 164,432
1,400 @@ Ingersoll-Rand Co. 61,320
800 ITT Industries, Inc. 50,128
1,050 Textron, Inc. 36,592
17,000 @@ Tyco Intl., Ltd. 300,900
------------
4,781,836
------------
OFFICE/BUSINESS EQUIPMENT: 0.2%
2,100 Pitney Bowes, Inc. 80,661
8,250 @ Xerox Corp. 90,171
------------
170,832
------------
OIL & GAS: 5.0%
750 Amerada Hess Corp. 36,750
3,550 Anadarko Petroleum Corp. 174,944
1,395 Apache Corp. 91,958
1,700 Burlington Resources, Inc. 90,593
9,100 ChevronTexaco Corp. 645,554
5,978 ConocoPhillips 322,633
1,950 Devon Energy Corp. 101,400
900 EOG Resources, Inc. 38,790
56,550 Exxon Mobil Corp. 2,058,420
6,300 Marathon Oil Corp. 162,099
1,200 @,@@ Nabors Industries Ltd. 54,096
600 @ Noble Corp. 21,396
4,800 Occidental Petroleum Corp. 161,952
400 @ Rowan Cos., Inc. 9,576
700 Sunoco, Inc. 25,788
1,100 @ Transocean, Inc. 25,707
4,000 Unocal Corp. 120,360
------------
4,142,016
------------
OIL & GAS SERVICES: 0.2%
3,750 Halliburton Co. 89,513
2,000 Schlumberger Ltd. 97,240
------------
186,753
------------
PACKAGING & CONTAINERS: 0.2%
800 Ball Corp. 39,616
500 Bemis Co. 22,890
2,300 @ Pactiv Corp. 44,965
750 @ Sealed Air Corp. 32,918
------------
140,389
------------
PHARMACEUTICALS: 7.5%
13,250 Abbott Laboratories 590,287
400 AmerisourceBergen Corp. 25,076
6,700 Bristol-Myers Squibb Co. 171,520
3,950 Cardinal Health, Inc. 227,955
9,700 Eli Lilly & Co. 579,769
5,300 @ Forest Laboratories, Inc. 267,650
2,600 @ King Pharmaceuticals, Inc. 37,206
2,350 @ Medimmune, Inc. 83,308
24,350 Merck & Co., Inc. 1,353,373
67,640 Pfizer, Inc. 2,098,193
12,150 Schering-Plough Corp. 224,167
1,500 @ Watson Pharmaceuticals, Inc. 55,530
11,650 Wyeth 510,853
------------
6,224,887
------------
PIPELINES: 0.1%
1,250 Kinder Morgan, Inc. 63,812
3,100 Williams Cos., Inc. 24,521
------------
88,333
------------
REITS: 0.2%
1,400 Equity Office Properties Trust 37,674
2,500 Equity Residential 66,200
1,600 Simon Property Group, Inc. 60,192
------------
164,066
------------
RETAIL: 6.3%
3,400 @ Autonation, Inc. 47,328
350 @ Autozone, Inc. 29,288
2,750 @ Bed Bath & Beyond, Inc. 115,060
1,200 @ Big Lots, Inc. 16,332
4,000 @ Costco Wholesale Corp. 148,200
3,900 CVS Corp. 101,790
2,050 Darden Restaurants, Inc. 40,610
1,500 Dillard's, Inc. 20,040
6,900 Dollar General Corp. 129,030
1,550 Family Dollar Stores 56,498
4,150 @ Federated Department Stores 134,875
13,350 Gap, Inc. 226,950
19,700 Home Depot, Inc. 640,053
2,150 JC Penney Co., Inc. 37,238
1,150 @ Kohl's Corp. 60,203
4,550 Limited Brands 69,433
6,750 Lowe's Cos., Inc. 285,255
1,300 May Department Stores Co. 28,197
10,850 McDonald's Corp. 203,220
See Accompanying Notes to Financial Statements
116
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
RETAIL (CONTINUED):
5,300 @ Office Depot, Inc. $ 71,020
1,300 RadioShack Corp. 31,330
10,250 @ Staples, Inc. 198,748
3,200 @ Starbucks Corp. 78,851
4,600 TJX Cos., Inc. 83,720
8,950 Walgreen Co. 275,571
37,500 Wal-Mart Stores, Inc. 1,972,875
1,000 Wendy's Intl., Inc. 30,110
2,700 @ Yum! Brands, Inc. 75,492
------------
5,207,317
------------
SAVINGS & LOANS: 0.8%
1,350 Golden West Financial Corp. 105,016
13,100 Washington Mutual, Inc. 534,218
------------
639,234
------------
SEMICONDUCTORS: 2.3%
3,100 @ Altera Corp. 59,768
3,100 @ Analog Devices, Inc. 119,505
5,650 @ Applied Materials, Inc. 87,914
1,000 @ Broadcom Corp. 24,480
56,150 Intel Corp. 1,170,166
2,600 Linear Technology Corp. 94,536
3,350 @ LSI Logic Corp. 21,440
2,800 Maxim Integrated Products 109,788
1,250 @ Novellus Systems, Inc. 43,313
1,900 @ Nvidia Corp. 49,723
850 @ QLogic Corp. 42,576
2,750 @ Xilinx, Inc. 82,143
------------
1,905,352
------------
SOFTWARE: 5.9%
2,300 Adobe Systems, Inc. 81,167
550 Autodesk, Inc. 8,201
5,300 Automatic Data Processing 184,970
2,000 @ BMC Software, Inc. 33,920
2,600 @ Citrix Systems, Inc. 56,758
4,800 Computer Associates Intl., Inc. 104,016
7,150 @ Compuware Corp. 43,400
1,250 @ Electronic Arts, Inc. 85,700
6,400 First Data Corp. 265,088
1,650 @ Fiserv, Inc. 54,599
2,250 IMS Health, Inc. 40,140
1,700 @ Intuit, Inc. 78,353
1,000 @ Mercury Interactive Corp. 39,310
106,350 Microsoft Corp. 2,617,273
82,500 @ Oracle Corp. 1,073,325
1,150 @ Peoplesoft, Inc. 18,814
7,500 @ Siebel Systems, Inc. 70,425
------------
4,855,459
------------
TELECOMMUNICATIONS: 6.3%
2,600 Alltel Corp. 124,488
1,350 @ Andrew Corp. 13,419
14,860 AT&T Corp. 289,621
20,650 @ AT&T Wireless Services, Inc. 160,451
21,100 BellSouth Corp. 559,361
1,500 CenturyTel, Inc. 50,505
4,250 @ CIENA Corp. 24,437
79,200 @ Cisco Systems, Inc. 1,289,376
2,200 @ Citizens Communications Co. 27,104
2,850 @ Comverse Technology, Inc. 43,349
19,400 @ JDS Uniphase Corp. 75,078
14,900 @ Lucent Technologies, Inc. 32,929
7,800 Motorola, Inc. 66,456
19,850 @ Nextel Communications, Inc. 297,552
7,000 Qualcomm, Inc. 235,060
24,950 SBC Communications, Inc. 635,227
1,950 Scientific-Atlanta, Inc. 38,396
7,450 Sprint Corp.-FON Group 101,022
3,100 @ Tellabs, Inc. 24,614
29,150 Verizon Communications, Inc. 1,103,328
------------
5,191,773
------------
TEXTILES: 0.1%
1,450 Cintas Corp. 53,679
------------
53,679
------------
TOYS/GAMES/HOBBIES: 0.3%
2,000 Hasbro, Inc. 32,020
9,150 Mattel, Inc. 196,816
------------
228,836
------------
TRANSPORTATION: 2.0%
3,100 Burlington Northern Santa Fe Corp. 91,481
4,350 FedEx Corp. 278,313
3,400 Norfolk Southern Corp. 74,528
2,100 Union Pacific Corp. 128,079
17,200 United Parcel Service, Inc. 1,073,796
------------
1,646,197
------------
TRUCKING & LEASING: 0.0%
600 Ryder System, Inc. 15,936
------------
15,936
------------
Total Common Stock
(Cost $80,736,922) 82,242,505
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $80,736,922)* 99.6% $ 82,242,505
OTHER ASSETS AND LIABILITIES-NET 0.4 347,915
----- ------------
NET ASSETS 100.0% $ 82,590,420
===== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
A Related Party
* Cost for federal income tax purposes is $85,785,685. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 5,249,435
Gross Unrealized Depreciation (8,792,615)
------------
Net Unrealized Appreciation $ (3,543,180)
============
See Accompanying Notes to Financial Statements
117
ING
Financial Services
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 95.8%
BANKS: 32.9%
62,800 Alabama National Bancorp $ 3,014,400
135,200 Bank of America Corp. 10,031,840
199,300 Bank of New York Co., Inc. 5,769,735
249,300 Banknorth Group, Inc. 6,387,066
284,748 Charter One Financial, Inc. 8,673,424
54,300 Comerica, Inc. 2,512,461
175,361 Commerce Bancshares, Inc. 7,096,860
131,400 Compass Bancshares, Inc. 4,842,090
74,000 Fifth Third Bancorp 4,255,000
210,994 FleetBoston Financial Corp. 6,239,093
112,387 Interchange Financial Services 2,140,972
153,900 Keycorp 4,062,960
232,700 Mellon Financial Corp. 6,322,459
141,300 North Fork Bancorporation, Inc. 4,672,791
316,600 Prosperity Bancshares, Inc. 5,853,934
102,800 UCBH Holdings, Inc. 2,667,660
292,500 US Bancorp 6,932,250
212,600 Wells Fargo & Co. 10,268,580
------------
101,743,575
------------
DIVERSIFIED FINANCIAL SERVICES: 30.9%
124,100 @ Affiliated Managers Group 6,825,500
207,940 Alliance Capital Management Holding LP 7,277,900
95,000 American Express Co. 3,957,700
201,000 CIT Group, Inc. 4,821,990
411,200 Citigroup, Inc. 16,867,424
90,600 Fannie Mae 6,704,400
160,000 Freddie Mac 9,569,600
100,500 Goldman Sachs Group, Inc. 8,190,750
118,200 Janus Capital Group, Inc. 1,838,010
160,500 JP Morgan Chase & Co. 5,274,030
154,200 Lehman Brothers Holdings, Inc. 11,045,346
120,600 Merrill Lynch & Co., Inc. 5,221,980
168,700 Morgan Stanley 7,718,025
------------
95,312,655
------------
HOME BUILDERS: 3.3%
385,800 DR Horton, Inc. 10,142,682
------------
10,142,682
------------
INSURANCE: 27.1%
211,000 @@ ACE Ltd. 7,701,500
121,200 Aflac, Inc. 3,988,692
276,040 American Intl. Group 15,977,195
107,100 Delphi Financial Group 4,918,032
191,300 Hartford Financial Services Group, Inc. 8,922,232
104,700 Marsh & McLennan Cos., Inc. 5,248,611
202,700 Metlife, Inc. 5,669,519
268,700 PMI Group, Inc. 8,238,342
98,000 Prudential Financial, Inc. 3,284,960
184,600 Radian Group, Inc. 7,433,842
42,100 @@ Scottish Annuity & Life Holdings Ltd. 802,426
410,149 Travelers Property Casualty Corp. 6,691,518
57,200 @@ XL Capital Ltd. 4,979,260
------------
83,856,129
------------
SAVINGS & LOANS: 1.6%
123,325 Washington Mutual, Inc. 5,029,194
------------
5,029,194
------------
Total Common Stock
(Cost $277,340,548) 296,084,235
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 5.3%
REPURCHASE AGREEMENT: 5.3%
$16,339,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $16,340,539 to be received
upon repurchase (Collateralized by $13,675,000
U.S. Treasury Bonds, 6.000%, Market Value
$16,667,268, due 02/15/26) $ 16,339,000
------------
Total Short-Term Investments
(Cost $16,339,000) 16,339,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $293,679,548)* 101.1% $312,423,235
OTHER ASSETS AND LIABILITIES-NET (1.1) (3,448,574)
----- ------------
NET ASSETS 100.0% $308,974,661
===== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is $293,844,313. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 40,659,571
Gross Unrealized Depreciation (22,080,649)
------------
Net Unrealized Appreciation $ 18,578,922
============
See Accompanying Notes to Financial Statements
118
ING
Large Company
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 97.0%
AEROSPACE/DEFENSE: 2.0%
41,000 General Dynamics Corp. $ 2,739,620
------------
2,739,620
------------
AGRICULTURE: 3.8%
125,715 Altria Group, Inc. 5,192,030
------------
5,192,030
------------
APPAREL: 1.4%
35,000 Nike, Inc. 1,959,650
------------
1,959,650
------------
AUTO MANUFACTURERS: 2.0%
259,400 Ford Motor Co. 2,723,700
------------
2,723,700
------------
BANKS: 5.6%
50,200 Bank of America Corp. 3,724,840
82,500 Wells Fargo & Co. 3,984,750
------------
7,709,590
------------
BUILDING MATERIALS: 1.6%
90,100 Masco Corp. 2,216,460
------------
2,216,460
------------
CHEMICALS: 3.7%
100,700 Dow Chemical Co. 3,202,260
32,900 Praxair, Inc. 1,973,671
------------
5,175,931
------------
COMPUTERS: 2.1%
146,074 Hewlett-Packard Co. 2,848,443
------------
2,848,443
------------
DIVERSIFIED FINANCIAL SERVICES: 15.1%
67,200 Fannie Mae 4,972,800
84,900 Freddie Mac 5,077,869
114,800 JP Morgan Chase & Co. 3,772,328
82,500 Merrill Lynch & Co., Inc. 3,572,250
75,500 Morgan Stanley 3,454,125
------------
20,849,372
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 1.9%
49,300 Emerson Electric Co. 2,578,390
------------
2,578,390
------------
ELECTRONICS: 3.3%
229,000 @@ Koninklijke Philips Electronics NV 4,502,140
------------
4,502,140
------------
FOOD: 5.3%
73,700 @@ Nestle SA ADR 3,876,620
57,700 @@ Unilever NV 3,375,450
------------
7,252,070
------------
FOREST PRODUCTS & PAPER: 1.9%
72,100 International Paper Co. 2,643,907
------------
2,643,907
------------
HEALTHCARE-PRODUCTS: 2.1%
72,000 Beckman Coulter, Inc. 2,926,800
------------
2,926,800
------------
HEALTHCARE-SERVICES: 2.5%
204,600 @ Tenet Healthcare Corp. 3,414,774
------------
3,414,774
------------
INSURANCE: 6.9%
69,800 American Intl. Group 4,040,024
83,000 John Hancock Financial Services, Inc. 2,510,750
107,700 Metlife, Inc. 3,012,369
------------
9,563,143
------------
MEDIA: 1.4%
24,600 Gannett Co., Inc. 1,943,400
------------
1,943,400
------------
MISCELLANEOUS MANUFACTURING: 3.4%
178,500 Honeywell Intl., Inc. 4,676,700
------------
4,676,700
------------
OIL & GAS: 13.7%
72,900 Anadarko Petroleum Corp. 3,592,512
109,900 @@ BP PLC ADR 4,603,711
61,500 ChevronTexaco Corp. 4,362,810
104,500 Exxon Mobil Corp. 3,803,800
56,300 @@ Royal Dutch Petroleum Co. 2,564,465
------------
18,927,298
------------
PHARMACEUTICALS: 4.0%
122,700 Bristol-Myers Squibb Co. 3,141,120
43,700 Merck & Co., Inc. 2,428,846
------------
5,569,966
------------
RETAIL: 3.2%
82,300 May Department Stores Co. 1,785,087
136,900 McDonald's Corp. 2,564,137
------------
4,349,224
------------
SAVINGS & LOANS: 2.9%
98,200 Washington Mutual, Inc. 4,004,596
------------
4,004,596
------------
TELECOMMUNICATIONS: 4.7%
118,400 SBC Communications, Inc. 3,014,464
91,600 Verizon Communications, Inc. 3,467,060
------------
6,481,524
------------
TRANSPORTATION: 2.5%
53,100 FedEx Corp. 3,397,338
------------
3,397,338
------------
Total Common Stock
(Cost $135,939,259) 133,646,066
------------
See Accompanying Notes to Financial Statements
119
ING
Large Company
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 3.0%
REPURCHASE AGREEMENT: 3.0%
$ 4,169,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $4,169,393 to be received
upon repurchase (Collateralized by $3,405,000
U.S. Treasury Bonds, 6.125%, Market Value
$4,253,257, due 08/15/29) $ 4,169,000
------------
Total Short-Term Investments
(Cost $4,169,000) 4,169,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $140,108,259)* 100.0% $137,815,066
OTHER ASSETS AND LIABILITIES-NET 0.0 16,586
----- ------------
NET ASSETS 100.0% $137,831,652
===== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 6,106,187
Gross Unrealized Depreciation (8,399,380)
------------
Net Unrealized Depreciation $ (2,293,193)
============
See Accompanying Notes to Financial Statements
120
ING
MagnaCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 98.9%
AEROSPACE/DEFENSE: 2.6%
89,900 General Dynamics Corp. $ 6,007,118
------------
6,007,118
------------
AGRICULTURE: 3.8%
211,100 Altria Group, Inc. 8,718,430
------------
8,718,430
------------
APPAREL: 1.4%
58,800 Nike, Inc. 3,292,212
------------
3,292,212
------------
AUTO MANUFACTURERS: 2.0%
435,700 Ford Motor Co. 4,574,850
------------
4,574,850
------------
BANKS: 5.6%
84,400 Bank of America Corp. 6,262,480
138,700 Wells Fargo & Co. 6,699,210
------------
12,961,690
------------
BUILDING MATERIALS: 1.6%
151,500 Masco Corp. 3,726,900
------------
3,726,900
------------
CHEMICALS: 3.9%
169,100 Dow Chemical Co. 5,377,380
61,100 Praxair, Inc. 3,665,389
------------
9,042,769
------------
COMPUTERS: 3.1%
370,282 Hewlett-Packard Co. 7,220,499
------------
7,220,499
------------
DIVERSIFIED FINANCIAL SERVICES: 15.0%
112,800 Fannie Mae 8,347,200
142,700 Freddie Mac 8,534,887
187,700 JP Morgan Chase & Co. 6,167,822
127,900 Merrill Lynch & Co., Inc. 5,538,070
132,700 Morgan Stanley 6,071,025
------------
34,659,004
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 2.5%
110,000 Emerson Electric Co. 5,753,000
------------
5,753,000
------------
FOOD: 4.7%
119,600 @@ Nestle SA ADR 6,290,960
79,600 @@ Unilever NV 4,656,600
------------
10,947,560
------------
FOREST PRODUCTS & PAPER: 1.9%
121,200 @ International Paper Co. 4,444,404
------------
4,444,404
------------
HEALTHCARE-PRODUCTS: 2.3%
211,700 Baxter Intl., Inc. 5,364,478
------------
5,364,478
------------
HEALTHCARE-SERVICES: 2.2%
298,700 Tenet Healthcare Corp. 4,985,303
------------
4,985,303
------------
INSURANCE: 7.2%
121,300 American Intl. Group 7,020,844
181,000 Metlife, Inc. 5,062,570
132,300 Prudential Financial, Inc. 4,434,696
------------
16,518,110
------------
MEDIA: 1.6%
45,400 Gannett Co., Inc. 3,586,600
------------
3,586,600
------------
MISCELLANEOUS MANUFACTURING: 3.9%
339,400 Honeywell Intl., Inc. 8,892,280
------------
8,892,280
------------
OIL & GAS: 13.0%
129,000 Anadarko Petroleum Corp. 6,357,120
89,600 ChevronTexaco Corp. 6,356,224
108,000 ConocoPhillips 5,828,760
219,600 Exxon Mobil Corp. 7,993,440
90,000 @ Valero Energy Corp. 3,375,000
------------
29,910,544
------------
PHARMACEUTICALS: 4.2%
219,900 Bristol-Myers Squibb Co. 5,629,440
73,400 Merck & Co., Inc. 4,079,572
------------
9,709,012
------------
RETAIL: 3.4%
142,400 May Department Stores Co. 3,088,656
259,400 McDonald's Corp. 4,858,562
------------
7,947,218
------------
SAVINGS & LOANS: 3.0%
168,500 Washington Mutual, Inc. 6,871,430
------------
6,871,430
------------
SEMICONDUCTORS: 2.7%
300,000 Intel Corp. 6,252,000
------------
6,252,000
------------
TELECOMMUNICATIONS: 4.9%
199,000 SBC Communications, Inc. 5,066,540
163,000 Verizon Communications, Inc. 6,169,550
------------
11,236,090
------------
TRANSPORTATION: 2.4%
87,000 FedEx Corp. 5,566,260
------------
5,566,260
------------
Total Common Stock
(Cost $228,197,344) 228,187,761
------------
See Accompanying Notes to Financial Statements
121
ING
MagnaCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.9%
REPURCHASE AGREEMENT: 1.9%
$ 4,312,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $4,312,406 to be received
upon repurchase (Collateralized by $2,960,000
U.S. Treasury Bond, 8.125%, Market Value
$4,402,926, due 08/15/21) $ 4,312,000
------------
Total Short-Term Investments
(Cost $4,312,000) 4,312,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $232,509,344)* 100.8% $232,499,761
OTHER ASSETS AND LIABILITIES-NET (0.8) (1,745,973)
----- ------------
NET ASSETS 100.0% $230,753,788
===== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is $232,815,864. Net unrealized
depreciation consists of:
Gross Unrealized Appreciation $ 13,158,509
Gross Unrealized Depreciation (13,474,612)
------------
Net Unrealized Depreciation $ (316,103)
============
See Accompanying Notes to Financial Statements
122
ING
MidCap Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 95.3%
AGRICULTURE: 8.0%
51,140 Loews Corp. - Carolina Group $ 1,286,682
25,550 R.J. Reynolds Tobacco Holdings, Inc. 871,000
28,340 UST, Inc. 1,000,685
------------
3,158,367
------------
AIRLINES: 3.3%
97,780 @ AMR Corp. 619,925
47,300 Delta Air Lines, Inc. 631,928
------------
1,251,853
------------
APPAREL: 1.3%
58,380 @,@@ Tommy Hilfiger Corp. 496,230
------------
496,230
------------
AUTO PARTS & EQUIPMENT: 5.3%
72,600 Delphi Corp. 640,332
126,240 Goodyear Tire & Rubber Co. 823,085
105,000 Visteon Corp. 645,750
------------
2,109,167
------------
BUILDING MATERIALS: 0.8%
12,690 York Intl. Corp. 328,544
------------
328,544
------------
CHEMICALS: 4.1%
33,030 Great Lakes Chemical Corp. 760,681
30,970 Sherwin-Williams Co. 847,959
------------
1,608,640
------------
COMMERCIAL SERVICES: 1.9%
185,000 @ Service Corp. Intl. 769,600
------------
769,600
------------
COMPUTERS: 7.7%
252,000 @ Gateway, Inc. 841,680
39,850 @ NCR Corp. 999,040
106,490 @ Unisys Corp. 1,202,272
------------
3,042,992
------------
DIVERSIFIED FINANCIAL SERVICES: 3.7%
61,500 CIT Group, Inc. 1,475,385
------------
1,475,385
------------
ELECTRIC: 8.4%
43,680 Alliant Energy Corp. 872,726
46,550 @ Edison Intl. 757,834
162,000 @ Mirant Corp. 560,520
42,770 @ PG&E Corp. 727,090
70,740 @ Sierra Pacific Resources 381,996
------------
3,300,166
------------
ELECTRONICS: 2.5%
249,000 @ Solectron Corp. 996,000
------------
996,000
------------
FOOD: 8.2%
113,100 @ Del Monte Foods Co. 1,031,472
61,500 @ Smithfield Foods, Inc. 1,290,885
97,400 Tyson Foods, Inc. 925,300
------------
3,247,657
------------
HEALTHCARE-SERVICES: 0.1%
105,000 @ Healthsouth Corp. 31,500
------------
31,500
------------
HOME FURNISHINGS: 2.0%
32,820 Maytag Corp. 802,777
------------
802,777
------------
HOUSEHOLD PRODUCTS/WARES: 2.6%
37,180 @ American Greetings 659,201
24,110 Tupperware Corp. 382,867
------------
1,042,068
------------
INSURANCE: 10.6%
20,050 @ Allmerica Financial Corp. 351,076
6,060 American National Insurance 518,978
32,380 @ CNA Financial Corp. 786,186
35,030 Mony Group, Inc. 932,148
32,100 Nationwide Financial Services 1,035,546
64,770 Phoenix Cos., Inc. 544,716
------------
4,168,650
------------
IRON/STEEL: 2.2%
54,450 United States Steel Corp. 857,588
------------
857,588
------------
OFFICE/BUSINESS EQUIPMENT: 2.4%
84,960 @ Xerox Corp. 928,613
------------
928,613
------------
PIPELINES: 2.9%
66,700 Aquila, Inc. 184,759
112,400 EL Paso Corp. 977,880
------------
1,162,639
------------
RETAIL: 5.7%
57,000 Dillard's, Inc. 761,520
15,000 May Department Stores Co. 325,350
101,190 @ Toys R US, Inc. 1,177,852
------------
2,264,722
------------
SEMICONDUCTORS: 1.9%
67,400 @ Micron Technology, Inc. 762,968
------------
762,968
------------
TELECOMMUNICATIONS: 8.4%
211,460 @ Avaya, Inc. 1,399,865
360,110 @ Lucent Technologies, Inc. 795,843
143,430 @ Tellabs, Inc. 1,138,834
------------
3,334,542
------------
TOYS/GAMES/HOBBIES: 1.3%
31,180 Hasbro, Inc. 499,192
------------
499,192
------------
Total Common Stock
(Cost $45,138,971) 37,639,860
------------
See Accompanying Notes to Financial Statements
123
ING
MidCap Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 4.5%
REPURCHASE AGREEMENT: 4.5%
$ 1,767,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $1,767,166 to be received
upon repurchase (Collateralized by $1,480,000
U.S. Treasury Bonds, 6.000%, Market Value
$1,803,843, due 02/15/26) $ 1,767,000
------------
Total Short-Term Investments
(Cost $1,767,000) 1,767,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $46,905,971)* 99.8% $ 39,406,860
OTHER ASSETS AND LIABILITIES-NET 0.2 70,011
----- ------------
NET ASSETS 100.0% $ 39,476,871
===== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is the same as for fi- nancial
statement purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 3,053,847
Gross Unrealized Depreciation (10,552,958)
------------
Net Unrealized Depreciation $ (7,499,111)
============
See Accompanying Notes to Financial Statements
124
ING
SmallCap
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 99.0%
APPAREL: 7.1%
40,000 @ Nautica Enterprises, Inc. $ 422,000
60,000 Stride Rite Corp. 540,000
81,830 @,@@ Tommy Hilfiger Corp. 695,555
89,300 @ Vans, Inc. 623,314
------------
2,280,869
------------
AUTO PARTS & EQUIPMENT: 6.6%
27,600 Cooper Tire & Rubber Co. 438,564
176,399 Goodyear Tire & Rubber Co. 1,150,121
83,800 Visteon Corp. 515,370
------------
2,104,055
------------
BUILDING MATERIALS: 1.5%
18,650 York Intl. Corp. 482,848
------------
482,848
------------
CHEMICALS: 8.9%
22,570 @ Cytec Industries, Inc. 747,067
25,600 Great Lakes Chemical Corp. 589,568
9,490 Lubrizol Corp. 302,731
118,390 PolyOne Corp. 589,582
56,240 Wellman, Inc. 632,700
------------
2,861,648
------------
COMMERCIAL SERVICES: 5.7%
34,630 Kelly Services, Inc. 858,477
233,510 @ Service Corp. Intl. 971,402
------------
1,829,879
------------
COMPUTERS: 2.5%
234,700 @ Gateway, Inc. 783,898
------------
783,898
------------
ELECTRIC: 1.1%
66,940 @ Sierra Pacific Resources 361,476
------------
361,476
------------
ELECTRICAL EQUIPMENT: 3.8%
59,850 Belden, Inc. 813,960
32,700 @ Rayovac Corp. 411,693
------------
1,225,653
------------
ELECTRONICS: 4.9%
104,560 @ Kemet Corp. 1,056,056
87,400 @ Sanmina-SCI Corp. 499,928
------------
1,555,984
------------
FOOD: 4.2%
56,830 @ Del Monte Foods Co. 518,290
18,120 Sensient Technologies Corp. 410,237
19,800 @ Smithfield Foods, Inc. 415,602
------------
1,344,129
------------
HAND/MACHINE TOOLS: 1.5%
38,420 Starrett (L.S.) Co. 491,008
------------
491,008
------------
HEALTHCARE-SERVICES: 4.1%
28,400 @ Orthodontic Centers of America 225,780
27,940 @ Pacificare Health Systems 1,080,132
------------
1,305,912
------------
HOME BUILDERS: 4.0%
119,190 @ Fleetwood Enterprises, Inc. 908,228
81,300 @ National RV Holdings, Inc. 386,175
------------
1,294,403
------------
HOUSEHOLD PRODUCTS/WARES: 4.2%
48,320 @ American Greetings 856,714
31,460 Tupperware Corp. 499,585
------------
1,356,299
------------
HOUSEWARES: 1.1%
10,450 National Presto Industries, Inc. 337,849
------------
337,849
------------
INSURANCE: 5.6%
15,000 @ Allmerica Financial Corp. 262,650
3,560 American National Insurance 304,878
8,420 Landamerica Financial Group, Inc. 397,003
13,500 Mony Group, Inc. 359,235
54,010 Phoenix Cos., Inc. 454,224
------------
1,777,990
------------
IRON/STEEL: 6.0%
117,480 Ryerson Tull, Inc. 1,039,698
56,540 United States Steel Corp. 890,505
------------
1,930,203
------------
LEISURE TIME: 2.4%
78,250 @ K2, Inc. 753,548
------------
753,548
------------
MACHINERY-DIVERSIFIED: 2.1%
18,060 Tecumseh Products Co. 666,595
------------
666,595
------------
METAL FABRICATE/HARDWARE: 4.4%
23,100 Precision Castparts Corp. 675,675
124,620 @ Wolverine Tube, Inc. 735,258
------------
1,410,933
------------
MINING: 1.4%
102,500 @ Stillwater Mining Co. 438,700
------------
438,700
------------
MISCELLANEOUS MANUFACTURING: 2.5%
45,730 Trinity Industries, Inc. 791,129
------------
791,129
------------
OIL & GAS SERVICES: 1.0%
708,470 @ Seitel, Inc. 311,727
------------
311,727
------------
RETAIL: 1.7%
10,110 Blair Corp. 214,332
24,400 Dillard's, Inc. 325,984
------------
540,316
------------
SOFTWARE: 0.8%
68,000 @ Midway Games, Inc. 240,040
------------
240,040
------------
See Accompanying Notes to Financial Statements
125
ING
SmallCap
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS: 6.9%
190,980 @ Avaya, Inc. $ 1,264,287
62,770 @ Comverse Technology, Inc. 954,731
------------
2,219,018
------------
TOYS/GAMES/HOBBIES: 3.0%
59,290 Hasbro, Inc. 949,233
------------
949,233
------------
Total Common Stock
(Cost $35,044,019) 31,645,342
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.1%
REPURCHASE AGREEMENT: 1.1%
$ 349,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $349,033 to be received
upon repurchase (Collateralized by $295,000
U.S. Treasury Bonds, 6.000%, Market Value
$359,550, due 02/15/26) $ 349,000
------------
Total Short-Term Investments
(Cost $349,000) 349,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $35,393,019)* 100.1% $ 31,994,342
OTHER ASSETS AND LIABILITIES-NET (0.1) (17,352)
----- ------------
NET ASSETS 100.0% $ 31,976,990
===== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is $35,753,868. Net un- realized
depreciation consists of:
Gross Unrealized Appreciation $ 3,759,747
Gross Unrealized Depreciation (7,519,271)
------------
Net Unrealized Depreciation $ (3,759,526)
============
See Accompanying Notes to Financial Statements
126
ING
Tax Efficient
Equity
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 96.2%
AIRLINES: 2.3%
47,100 Southwest Airlines Co. $ 756,897
------------
756,897
------------
BANKS: 4.0%
9,600 Bank of America Corp. 712,320
12,500 Wells Fargo & Co. 603,750
------------
1,316,070
------------
BEVERAGES: 1.6%
10,200 Anheuser-Busch Cos., Inc. 536,826
------------
536,826
------------
CHEMICALS; 2.0%
11,000 Praxair, Inc. 659,890
------------
659,890
------------
COMPUTERS: 4.4%
32,300 Hewlett-Packard Co. 629,850
9,100 International Business Machines Corp. 801,164
------------
1,431,014
------------
DIVERSIFIED FINANCIAL SERVICES: 6.7%
21,733 Citigroup, Inc. 891,488
8,200 Fannie Mae 606,800
8,500 Goldman Sachs Group, Inc. 692,750
------------
2,191,038
------------
HEALTHCARE-PRODUCTS: 1.9%
13,000 Medtronic, Inc. 633,490
------------
633,490
------------
HEALTHCARE-SERVICES: 1.4%
14,100 @ Laboratory Corp. of America Holdings 453,315
------------
453,315
------------
HOUSEHOLD PRODUCTS/WARES: 1.7%
12,500 Clorox Co. 558,250
------------
558,250
------------
INSURANCE: 7.9%
9,700 American Intl. Group 561,436
9,400 Chubb Corp. 601,882
18,800 Lincoln National Corp. 654,240
47,095 Travelers Property Casualty Corp. 769,061
------------
2,586,619
------------
MACHINERY-CONSTRUCTION & MINING: 2.0%
12,500 Caterpillar, Inc. 651,875
------------
651,875
------------
MEDIA: 8.1%
25,000 @ Comcast Corp. 720,500
25,700 @ Univision Communications, Inc. 767,145
9,490 @ Viacom, Inc. 431,985
35,200 Walt Disney Co. 691,680
------------
2,611,310
------------
MINING: 4.0%
25,000 Freeport-McMoRan Copper & Gold, Inc. 548,750
20,000 @ Phelps Dodge Corp. 729,000
------------
1,277,750
------------
MISCELLANEOUS MANUFACTURING: 11.1%
4,500 3M Co. 569,115
16,500 Eastman Kodak Co. 505,560
24,000 General Electric Co. 688,800
15,200 Honeywell Intl., Inc. 398,240
15,200 @@ Ingersoll-Rand Co. 665,760
42,600 @@ Tyco Intl. Ltd. 754,020
------------
3,581,495
------------
OIL & GAS SERVICES: 6.0%
22,600 Baker Hughes, Inc. 746,930
15,100 Schlumberger Ltd. 734,162
10,600 @ Weatherford Intl. Ltd. 480,710
------------
1,961,802
------------
PHARMACEUTICALS: 10.1%
10,500 Abbott Laboratories 467,775
6,400 @ Barr Laboratories, Inc. 337,600
10,200 @,@@ Biovail Corp. 475,728
10,000 Eli Lilly & Co. 597,700
20,800 Pfizer, Inc. 645,216
17,100 Wyeth 749,835
------------
3,273,854
------------
RETAIL: 4.1%
13,300 @ Costco Wholesale Corp. 492,765
25,700 Gap, Inc. 436,900
12,600 Home Depot, Inc. 409,374
------------
1,339,039
------------
SEMICONDUCTORS: 5.5%
30,800 @ Applied Materials, Inc. 479,248
35,000 Intel Corp. 729,400
28,200 Texas Instruments, Inc. 578,100
------------
1,786,748
------------
SOFTWARE: 3.8%
23,600 Microsoft Corp. 580,796
50,000 @ Oracle Corp. 650,500
------------
1,231,296
------------
TELECOMMUNICATIONS: 5.9%
45,000 @ Cisco Systems, Inc. 732,600
37,500 @@ Nokia OYJ ADR 676,500
15,000 Qualcomm, Inc. 503,700
------------
1,912,800
------------
TRANSPORTATION: 1.7%
9,000 Union Pacific Corp. 548,910
------------
548,910
------------
Total Common Stock
(Cost $31,733,177) 31,300,288
------------
See Accompanying Notes to Financial Statements
127
ING
Tax Efficient
Equity
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 3.2%
REPURCHASE AGREEMENT 3.2%
$ 1,049,000 State Street Repurchase Agreement dated 05/30/03,
1.250%, due 06/02/03, $1,049,109 to be received
upon repurchase (Collateralized by $855,000 FNMA,
6.875%, Market Value $1,072,757, due 09/15/10) $ 1,049,000
------------
Total Short-Term Investments
(Cost $1,049,000) 1,049,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $32,782,177)* 99.4% $ 32,349,288
OTHER ASSETS AND LIABILITIES-NET 0.6 191,554
----- ------------
NET ASSETS 100.0% $ 32,540,842
===== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is $33,526,914. Net unrealized
depreciation consists of:
Gross Unrealized Appreciation $ 1,777,773
Gross Unrealized Depreciation (2,955,399)
------------
Net Unrealized Depreciation $ (1,177,626)
============
See Accompanying Notes to Financial Statements
128
ING
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 5.6%
AEROSPACE/DEFENSE: 0.4%
85,000 @ Titan Corp. $ 738,650
------------
738,650
------------
FOOD: 0.7%
27,905 @ Dean Foods Co. 1,276,653
------------
1,276,653
------------
HEALTHCARE-SERVICES: 1.0%
90,000 @ Community Health Systems, Inc. 1,874,700
------------
1,874,700
------------
MISCELLANEOUS MANUFACTURING: 0.5%
36,000 General Electric Co. 1,033,200
------------
1,033,200
------------
PHARMACEUTICALS: 0.4%
15,000 Cardinal Health, Inc. 865,650
------------
865,650
------------
RETAIL: 0.9%
60,000 Wendy's International, Inc. 1,806,600
------------
1,806,600
------------
SOFTWARE: 0.8%
10,000 @ Electronic Arts, Inc. 685,600
138,600 @ MSC.Software Corp. 941,094
------------
1,626,694
------------
TELECOMMUNICATIONS: 0.9%
53,000 Qualcomm, Inc. 1,779,740
------------
1,779,740
------------
Total Common Stock
(Cost $10,913,959) 11,001,887
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS: 70.1%
ADVERTISING: 1.8%
$ 992,000 # Interpublic Group of Cos., Inc., 4.500%,
due 03/15/23 $ 1,442,120
2,000,000 Young & Rubicam, Inc., 3.000%, due 01/15/05 1,987,500
------------
3,429,620
------------
AGRICULTURE: 0.9%
1,490,000 # Bunge Ltd. Finance Corp., 3.750%,
due 11/15/22 1,709,775
------------
1,709,775
------------
AIRLINES: 0.5%
992,000 # Alaska Air Group, Inc., 3.786%, due 03/21/23 1,046,560
------------
1,046,560
------------
AUTO PARTS & EQUIPMENT: 1.4%
6,000,000 Lear Corp., 4.890%, due 02/20/22 2,790,000
------------
2,790,000
------------
BIOTECHNOLOGY: 4.1%
3,300,000 Amgen, Inc., 1.250%, due 03/01/32 2,615,250
5,511,000 Millennium Pharmaceuticals, Inc., 5.500%,
due 01/15/07 5,283,671
------------
7,898,921
------------
COMPUTERS: 2.1%
2,004,000 #,@@ ASML Holding NV, 4.250%, due 11/30/04 2,006,605
1,000,000 @@ ASML Holding NV, 4.250%, due 11/30/04 1,001,300
990,000 # Electronics for Imaging, 1.500%, due 06/01/23 990,000
------------
3,997,905
------------
DISTRIBUTION/WHOLESALE: 1.8%
4,000,000 Costco Wholesale Corp., 1.180%, due 08/19/17 3,420,000
------------
3,420,000
------------
ELECTRIC: 5.8%
2,000,000 Calpine Corp., 4.000%, due 12/26/06 1,622,500
495,000 # Centerpoint Energy, Inc., 3.750%,
due 05/15/23 561,825
1,980,000 Duke Energy Corp., 1.750%, due 05/15/23 2,069,100
4,000,000 Mirant Corp., 2.500%, due 06/15/21 2,900,000
3,960,000 # PPL Energy Supply LLC, 2.625%, due 05/15/23 4,123,350
------------
11,276,775
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 0.6%
990,000 # Wilson Greatbatch Technologies, Inc., 2.250%,
due 06/15/13 1,154,588
------------
1,154,588
------------
FOOD: 3.9%
4,470,000 # General Mills, Inc., 2.000%, due 10/28/22 3,263,100
4,000,000 S,@@ Koninklijke Ahold NV, 3.000%, due 09/30/03 2,054,098
1,000,000 @@ Koninklijke Numico BV, 4.250%, due 06/26/05 1,040,539
1,000,000 @@ Numico NV, 1.500%, due 09/22/04 1,189,271
------------
7,547,008
------------
HEALTHCARE-SERVICES: 4.2%
3,000,000 Laboratory Corp. of America Holdings, 2.000%,
due 09/11/21 2,156,250
2,000,000 Quest Diagnostics, 1.750%, due 11/30/21 2,115,000
6,000,000 Universal Health Services, Inc., 0.426%,
due 06/23/20 3,832,500
------------
8,103,750
------------
INSURANCE: 0.9%
1,970,000 # AmerUs Group Co., 2.000%, due 03/06/32 1,738,525
------------
1,738,525
------------
See Accompanying Notes to Financial Statements
129
ING
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
LODGING: 2.5%
$15,000,000 @@ Four Seasons Hotels, Inc., 4.500%,
due 09/23/29 $ 4,875,000
------------
4,875,000
------------
MACHINERY-DIVERSIFIED: 0.6%
1,000,000 Briggs & Stratton, 5.000%, due 05/15/06 1,136,250
------------
1,136,250
------------
MEDIA: 3.1%
2,000,000 America Online, Inc., 3.000%, due 12/06/19 1,215,000
3,500,000 EchoStar Communications Corp., 4.875%,
due 01/01/07 3,574,375
495,000 # Sinclair Broadcast Group, Inc., 4.875%,
due 07/15/18 517,894
495,000 Sirius Satellite Radio, Inc., 3.500%,
due 06/01/08 650,925
------------
5,958,194
------------
METAL FABRICATE/HARDWARE: 0.3%
919,000 Shaw Group, Inc., 2.270%, due 05/01/21 590,458
------------
590,458
------------
MINING: 1.5%
1,500,000 @@ Inco Ltd., 3.250%, due 03/29/21 1,021,875
1,985,000 #,@@ Inco Ltd., 1.000%, due 03/14/23 1,826,200
------------
2,848,075
------------
MISCELLANEOUS MANUFACTURING: 1.1%
1,985,000 #,@@ Tyco International Group SA, 2.750%,
due 01/15/18 2,131,394
------------
2,131,394
------------
OIL & GAS: 7.6%
3,498,000 Devon Energy Corp., 4.900%, due 08/15/08 3,576,705
2,500,000 Kerr-McGee Corp., 5.250%, due 02/15/10 2,750,000
2,165,000 Nabors Industries, Inc., 2.530%, due 02/05/21 1,434,313
2,100,000 Parker Drilling Co., 5.500%, due 08/01/04 2,047,500
1,985,000 # Pride Intl., Inc., 3.250%, due 05/01/33 2,257,938
3,000,000 @@ Transocean, Inc., 1.500%, due 05/15/21 2,932,500
------------
14,998,956
------------
OIL & GAS SERVICES: 1.0%
1,975,000 Cooper Cameron Corp., 1.750%, due 05/17/21 2,014,500
------------
2,014,500
------------
PHARMACEUTICALS: 5.0%
3,000,000 Alza Corp., 3.000%, due 07/28/20 2,287,500
2,000,000 # Celgene Corp., 1.750%, due 06/01/08 2,060,000
2,000,000 Cephalon, Inc., 2.500%, due 12/15/06 1,922,500
1,000,000 Cephalon, Inc., 5.250%, due 05/01/06 1,041,250
1,985,000 # Watson Pharmaceuticals, Inc., 1.750%,
due 03/15/23 2,317,488
------------
9,628,738
------------
RETAIL: 2.1%
6,000,000 Duane Reade, Inc., 2.148%, due 04/16/22 3,075,000
990,000 # Triarc Cos., 5.000%, due 05/15/23 1,054,350
------------
4,129,350
------------
SEMICONDUCTORS: 7.0%
3,000,000 Advanced Micro Devices, Inc., 4.750%,
due 02/01/22 2,313,750
2,000,000 Analog Devices, Inc., 4.750%, due 10/01/05 2,045,000
2,475,000 #,@@ ASM International NV, 5.250%, due 05/15/10 2,666,812
3,000,000 @@ Chartered Semiconductor Manufacturing Ltd.,
2.500%, due 04/02/06 3,078,750
1,000,000 # Cypress Semiconductor Corp., 1.250%,
due 06/15/08 1,016,250
1,985,000 # Micron Technology, Inc., 2.500%, due 02/01/10 2,391,925
------------
13,512,487
------------
SOFTWARE: 3.2%
3,500,000 BEA Systems, Inc., 4.000%, due 12/15/06 3,355,625
2,500,000 First Data Corp., 2.000%, due 03/01/08 2,856,250
------------
6,211,875
------------
TELECOMMUNICATIONS: 7.1%
1,980,000 Lucent Technologies, Inc., 2.750%,
due 06/15/23 1,980,000
2,000,000 Nextel Communications, Inc., 6.000%,
due 06/01/11 2,100,000
3,000,000 # Nextel Partners, Inc., 1.500%, due 11/15/08 3,052,500
2,000,000 Tekelec, 3.250%, due 11/02/04 1,925,000
3,980,000 US Cellular Corp., 6.000%, due 06/15/15 1,805,925
1,985,000 # Utstarcom, Inc., 0.875%, due 03/01/08 2,863,363
------------
13,726,788
------------
Total Convertible Bonds
(Cost $127,437,480) 135,875,492
------------
See Accompanying Notes to Financial Statements
130
ING
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS: 1.6%
ENGINEERING & CONSTRUCTION: 1.1%
1,980,000 # Massey Energy Co., 4.750%, due 05/15/23 $ 2,093,850
------------
2,093,850
------------
INSURANCE: 0.5%
1,000,000 American Intl. Group, 0.500%, due 05/15/07 957,500
------------
957,500
------------
Total Corporate Bonds
(Cost $2,913,033) 3,051,350
------------
MUTUAL FUNDS: 3.0%
EQUITY FUND: 3.0%
60,000 SPDR Trust Series 1 5,817,000
------------
5,817,000
------------
Total Mutual Funds
(Cost $5,309,940) 5,817,000
------------
Shares Value
- --------------------------------------------------------------------------------
PREFERRED STOCK: 17.5%
AUTO MANUFACTURERS: 2.4%
55,000 @ Ford Motor Co Capital Trust II $ 2,462,350
85,000 General Motors Corp. 2,113,950
------------
4,576,300
------------
DIVERSIFIED FINANCIAL SERVICES: 1.0%
88,300 @ Gabelli Asset Management, Inc. 1,951,430
------------
1,951,430
------------
ENVIRONMENTAL CONTROL: 1.1%
34,700 @ Allied Waste Industries, Inc. 2,047,300
------------
2,047,300
------------
FOOD: 0.7%
23,164 @ Suiza Capital Trust II 1,331,930
------------
1,331,930
------------
FOREST PRODUCTS & PAPER: 0.6%
25,000 International Paper Capital 1,237,500
------------
1,237,500
------------
HEALTHCARE-SERVICES: 1.2%
25,000 @ Anthem, Inc. 2,232,500
------------
2,232,500
------------
INSURANCE: 5.9%
79,000 Hartford Financial Services Group, Inc. 4,105,584
20,000 Prudential Financial, Inc. 1,118,000
62,000 Reinsurance Group of America 3,357,300
118,000 Travelers Property Casualty Corp. 2,944,100
------------
11,524,984
------------
MEDIA: 1.1%
19,850 # News Corp. Finance Trust II 2,123,950
------------
2,123,950
------------
OIL & GAS: 0.2%
4,960 # Chesapeake Energy Corp. 323,640
------------
323,640
------------
OIL & GAS SERVICES: 1.5%
57,005 @@ Weatherford Intl. Ltd. 2,992,762
------------
2,992,762
------------
SAVINGS & LOANS: 1.0%
33,000 Washington Mutual, Inc. 1,930,500
------------
1,930,500
------------
TELECOMMUNICATIONS: 0.5%
10,000 @ Lucent Technologies, Inc. 1,038,800
1 @,X WinStar Communications, Inc., Series A --
51,931 @,X WinStar Communications, Inc., Series D --
------------
1,038,800
------------
TRANSPORTATION: 0.3%
990 # Kansas City Southern 523,586
------------
523,586
------------
Total Preferred Stock
(Cost $33,346,008) 33,835,182
------------
Total Long-Term Investments
(Cost $179,920,420) 189,580,911
------------
Pricipal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 0.9%
REPURCHASE AGREEMENT: 0.9%
$ 1,761,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $1,761,166 to be received
upon repurchase (Collateralized by $1,605,000
U.S. Treasury Bond, 5.250%, Market Value
$1,799,606, due 02/15/26) $ 1,761,000
------------
Total Short-Term Investments
(Cost $1,761,000) 1,761,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $181,681,420)* 98.7% $191,341,911
OTHER ASSETS AND LIABILITIES-NET 1.3% 2,472,134
----- ------------
NET ASSETS 100.0% $193,814,045
===== ============
@ Non-income producing security
@@ Foreign Issuer
# Securities with purchase pursuant to Rule 144A, under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. These securities have been determined to be liquid
under the guidelines established by the Fund's Board of Trustees.
X Market Value determined by ING Valuation Committee appointed by the Fund's
Board of Directors.
S Segregated securities for when-issued or delayed delivery securities held
at May 31, 2003.
* Cost for federal income tax purposes is $181,801,809. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 16,580,703
Gross Unrealized Depreciation (7,040,601)
------------
Net Unrealized Appreciation $ 9,540,102
============
See Accompanying Notes to Financial Statements
131
ING
Equity and Bond
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 53.8%
AEROSPACE/DEFENSE: 0.6%
6,500 General Dynamics Corp. $ 434,330
------------
434,330
------------
BANKS: 2.2%
10,700 Bank of America Corp. 793,940
16,700 Wells Fargo & Co. 806,610
------------
1,600,550
------------
COMMERCIAL SERVICES: 0.6%
26,700 @ Cendant Corp. 448,560
------------
448,560
------------
COMPUTERS: 1.8%
41,800 @ EMC Corp. 452,276
43,984 Hewlett-Packard Co. 857,688
------------
1,309,964
------------
COSMETICS/PERSONAL CARE: 0.9%
12,700 Kimberly-Clark Corp. 659,511
------------
659,511
------------
DIVERSIFIED FINANCIAL SERVICES: 4.3%
35,100 Citigroup, Inc. 1,439,802
5,300 Goldman Sachs Group, Inc. 431,950
13,200 JP Morgan Chase & Co. 433,752
16,800 Morgan Stanley 768,600
------------
3,074,104
------------
ELECTRIC: 0.9%
96,500 @ Reliant Resources, Inc. 646,550
------------
646,550
------------
ELECTRICAL COMPONENT & EQUIPMENT: 0.9%
12,700 Emerson Electric Co. 664,210
------------
664,210
------------
FOOD: 0.5%
19,000 Sara Lee Corp. 346,180
------------
346,180
------------
FOREST PRODUCTS & PAPER: 0.7%
12,600 Bowater, Inc. 493,794
------------
493,794
------------
HEALTHCARE-SERVICES: 1.3%
11,000 @ WellPoint Health Networks 938,740
------------
938,740
------------
INSURANCE: 7.7%
8,000 American Intl. Group 463,040
10,100 Chubb Corp. 646,703
16,900 Cigna Corp. 948,090
20,800 Hartford Financial Services Group, Inc. 970,112
19,500 Loews Corp. 937,950
16,000 St. Paul Cos. 585,280
60,450 Travelers Property Casualty Corp. 987,149
------------
5,538,324
------------
MEDIA: 3.2%
38,400 @ AOL Time Warner, Inc. 584,448
22,300 @ Comcast Corp. 671,453
13,300 @ Viacom, Inc. 605,416
21,200 Walt Disney Co. 416,580
------------
2,277,897
------------
MINING: 2.3%
47,900 Alcoa, Inc. 1,178,819
23,600 Freeport-McMoRan Copper & Gold, Inc. 518,020
------------
1,696,839
------------
MISCELLANEOUS MANUFACTURING: 1.7%
29,500 Honeywell Intl., Inc. 772,900
24,100 @@ Tyco International Ltd. 426,570
------------
1,199,470
------------
OIL & GAS: 6.9%
8,400 Amerada Hess Corp. 411,600
16,700 Anadarko Petroleum Corp. 822,976
12,668 Apache Corp. 835,075
7,900 ChevronTexaco Corp. 560,426
12,800 ConocoPhillips 690,816
11,300 Kerr-McGee Corp. 537,654
14,700 @@ Royal Dutch Petroleum Co. 669,585
20,400 @ Transocean, Inc. 476,748
------------
5,004,880
------------
OIL & GAS SERVICES: 0.7%
22,600 Halliburton Co. 539,462
------------
539,462
------------
PHARMACEUTICALS: 3.8%
7,500 @ Barr Laboratories, Inc. 395,625
24,600 @ King Pharmaceuticals, Inc. 352,026
37,275 Pfizer, Inc. 1,156,271
18,400 Wyeth 806,840
------------
2,710,762
------------
PIPELINES: 0.6%
52,700 EL Paso Corp. 458,490
------------
458,490
------------
RETAIL: 4.5%
24,200 CVS Corp. 631,620
20,100 @ Federated Department Stores 653,250
19,000 Home Depot, Inc. 617,310
48,000 McDonald's Corp. 899,040
14,600 Sears Roebuck and Co. 437,708
------------
3,238,928
------------
SAVINGS & LOANS: 1.1%
20,000 Washington Mutual, Inc. 815,600
------------
815,600
------------
SEMICONDUCTORS: 0.7%
69,300 @ Advanced Micro Devices, Inc. 504,504
------------
504,504
------------
See Accompanying Notes to Financial Statements
132
ING
Equity and Bond
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS: 5.9%
56,900 @ 3Com Corp. $ 278,810
65,000 @ AT&T Wireless Services, Inc. 505,050
175,200 @ Lucent Technologies, Inc. 387,192
25,100 SBC Communications, Inc. 639,046
170,000 @ Tellabs, Inc. 1,349,800
29,848 Verizon Communications, Inc. 1,129,747
------------
4,289,645
------------
Total Common Stock
(Cost $42,184,668) 38,891,294
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS: 0.0%
TELECOMMUNICATIONS: 0.0%
$ 2,000,000 #,X,@ SA Telecommunications, Inc., 10.000%,
due 08/15/06 $ --
------------
--
------------
Total Convertible Bonds
(Cost $2,000,000) --
------------
CORPORATE BONDS: 20.9%
AGRICULTURE: 0.1%
40,000 # Bunge Ltd. Finance Corp., 5.875%,
due 05/15/13 41,219
------------
41,219
------------
CHEMICALS: 0.8%
500,000 Dow Chemical Co., 5.750%, due 12/15/08 551,146
------------
551,146
------------
DIVERSIFIED FINANCIAL SERVICES: 3.1%
500,000 Boeing Capital Corp., 7.100%, due 09/27/05 552,290
550,000 General Motors Acceptance Corp., 6.125%,
due 09/15/06 577,143
900,000 # Goldman Sachs Group LP, 6.625%, due 12/01/04 968,760
120,000 #,@@ PF Export Receivables Master Trust, 3.748%,
due 06/01/13 122,315
------------
2,220,508
------------
ELECTRIC: 3.1%
450,000 @@ Empresa Nacional de Electricidad SA/Chile,
8.500%, due 04/01/09 473,439
450,000 Exelon Corp., 6.750%, due 05/01/11 528,105
90,000 Nisource Finance Corp., 6.150%, due 03/01/13 96,653
500,000 Progress Energy, Inc., 6.750%, due 03/01/06 556,030
500,000 @@ Tenaga Nasional BHD, 7.625%, due 04/01/11 590,479
------------
2,244,706
------------
FOOD: 0.9%
450,000 ConAgra Foods, Inc., 9.750%, due 03/01/21 648,143
------------
648,143
------------
INSURANCE: 0.1%
90,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 98,672
------------
98,672
------------
IRON/STEEL: 0.1%
50,000 Armco, Inc., 9.000%, due 09/15/07 45,250
------------
45,250
------------
MEDIA: 1.8%
40,000 AMFM, Inc., 8.000%, due 11/01/08 47,307
500,000 AOL Time Warner, Inc., 5.625%, due 05/01/05 529,746
400,000 Comcast Corp., 10.625%, due 07/15/12 523,400
100,000 Mediacom Broadband LLC, 11.000%, due 07/15/13 110,500
70,000 Time Warner, Inc., 6.950%, due 01/15/28 75,628
------------
1,286,581
------------
MULTI-NATIONAL: 0.1%
100,000 @@ Corp. Andina de Fomento CAF, 5.200%,
due 05/21/13 101,867
------------
101,867
------------
OIL & GAS: 1.7%
400,000 Conoco, Inc., 5.900%, due 04/15/04 415,094
90,000 # Enterprise Products Partners LP, 6.875%,
due 03/01/33 102,986
120,000 @@ Husky Oil Co., 8.900%, due 08/15/28 135,300
500,000 Pemex Project Funding Master Trust, 7.375%,
due 12/15/14 553,750
------------
1,207,130
------------
PIPELINES: 0.8%
130,000 CenterPoint Energy Resources Corp., 8.125%,
due 07/15/05 140,852
400,000 Kinder Morgan, Inc., 6.500%, due 09/01/12 461,053
------------
601,905
------------
SOVEREIGN: 5.0%
1,000,000 @@ Canadian Government Bond, 4.500%,
due 09/01/07 754,170
615,705 @@ Federal Republic of Brazil, 8.000%,
due 04/15/14 548,047
1,000,000 @@ German Government Bond, 4.500%,
due 08/17/07 1,255,706
500,000 @@ Mexican Government Bond, 6.375%, due 01/16/13 539,250
500,000 @@ Turkish Government Bond 11.000%, due 01/14/13 513,750
------------
3,610,923
------------
See Accompanying Notes to Financial Statements
133
ING
Equity and Bond
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS: 3.3%
$ 500,000 AT&T Wireless Services, Inc., 8.125%,
due 05/01/12 $ 608,293
500,000 Citizens Communications Co., 7.450%,
due 01/15/04 516,561
500,000 @@ France Telecom, 10.000%, due 03/01/31 689,305
500,000 Sprint Capital Corp., 8.375%, due 03/15/12 584,838
500,000 @ X WinStar Communications, Inc., 12.750%,
due 04/15/10 100
------------
2,399,097
------------
Total Corporate Bonds
(Cost $13,886,081) 15,057,147
------------
U.S. TREASURY OBLIGATIONS: 3.5%
U.S. TREASURY BOND: 1.9%
1,225,000 S 5.375%, due 02/15/31 1,423,680
------------
1,423,680
------------
U.S. TREASURY NOTES: 1.6%
505,000 S 1.625%, due 04/30/05 508,294
150,000 2.625%, due 05/15/08 152,496
500,000 S 3.625%, due 05/15/13 511,602
------------
1,172,392
------------
Total U.S. Treasury Obligations
(Cost $2,532,735) 2,596,072
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 15.1%
FEDERAL HOME LOAN BANK: 0.7%
500,000 4.500%, due 11/15/12 535,419
------------
535,419
------------
FEDERAL HOME LOAN MORTGAGE ASSOCIATION: 2.7%
459,925 5.500%, due 01/01/14 478,810
225,091 6.000%, due 04/01/14 234,212
635,558 6.500%, due 12/01/31 661,377
531,920 7.000%, due 06/01/29 558,417
------------
1,932,816
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION: 8.9%
500,000 5.000%, due 12/31/99 511,094
1,162,998 6.000%, due 01/01/32 1,208,907
584,088 6.000%, due 02/01/32 607,167
1,700,000 6.000%, due 12/31/99 1,761,095
682,775 6.500%, due 06/01/14 717,870
103,257 6.500%, due 08/01/15 108,502
373,661 6.500%, due 12/01/31 389,549
830,789 7.000%, due 03/01/15 885,339
131,488 7.500%, due 09/01/30 139,827
79,227 8.000%, due 08/01/30 85,726
------------
6,415,076
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 2.8%
1,498,412 6.500%, due 06/15/29 1,573,324
229,147 7.500%, due 11/15/29 243,852
177,250 8.000%, due 07/15/30 191,671
------------
2,008,847
------------
Total U.S. Government Agency Obligations
(Cost $10,330,789) 10,892,158
------------
OTHER ASSET-BACKED SECURITIES: 0.9%
DIVERSIFIED FINANCIAL SERVICES: 0.1%
60,000 #, @@ PF Export Receivables Master Trust 60,600
------------
60,600
------------
HOME EQUITY ABS: 0.8%
534,951 Emergent Home Equity Loan Trust 577,068
------------
577,068
------------
Total Other Asset Backed Securities
(Cost $576,043) 637,668
------------
Shares Value
- --------------------------------------------------------------------------------
MUTUAL FUNDS: 1.5%
MUTUAL FUND: 1.5%
128,416 B ING High Yield Bond Fund 1,087,687
------------
Total Mutual Funds
(Cost $1,080,920) 1,087,687
------------
PREFERRED STOCK: 1.6%
DIVERSIFIED FINANCIAL SERVICES: 1.6%
33,800 Alliance Capital
Management Holding LP 1,183,000
------------
1,183,000
------------
TELECOMMUNICATIONS: 0.0%
10 @ XO Communications, Inc. --
------------
--
------------
Total Preferred Stock
(Cost $1,115,320) 1,183,000
------------
Number of
Warrants Value
- --------------------------------------------------------------------------------
WARRANTS: 0.0%
BUILDING MATERIALS: 0.0%
400 # @ X Dayton Superior Corp. 4
Food/Beverage: 0.0%
370 @ X North Atlantic Trading Co. --
Telecommunications: 0.0%
500 @ X Iridium World Communications, Inc. 5
------------
Total Warrants
(Cost $57,953) 9
------------
Total Long-Term Investments
(Cost $73,764,509) $ 70,345,035
------------
See Accompanying Notes to Financial Statements
134
ING
Equity and Bond
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Pricipal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 5.3%
Repurchase Agreements: 5.3%
$ 3,847,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $3,847,362 to be received
upon repurchase (Collateralized by $ 3,225,000
U.S. Treasury Bond, 6.000%, Market Value
$3,930,672, due 02/15/26) $ 3,847,000
------------
Total Short-Term Investments
(Cost $3,847,000) 3,847,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $77,611,509)* 102.6% $ 74,192,035
OTHER ASSETS AND LIABILITIES-NET (2.6)% (1,909,679)
----- ------------
NET ASSETS 100.0% $ 72,282,356
===== ============
@ Non-income producing security
@@ Foreign Issuer
B Represents investments in an affiliated fund.
# Securities with purchase pursuant to Rule 144A, under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. These securities have been determined to be liquid
under the guidelines established by the Fund's Board of Trustees.
S Segregated securities for when-issued or delayed delivery securities held
at May 31, 2003.
X Market Value determined by ING Valuation Committee appointed by the Fund's
Board of Directors.
* Cost for federal income tax purposes is $77,635,027. Net unrealized
depreciation consists of:
Gross Unrealized Appreciation $ 4,818,824
Gross Unrealized Depreciation (8,261,817)
------------
Net Unrealized Depreciation $ (3,442,993)
============
See Accompanying Notes to Financial Statements
135
ING
Real Estate
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 5.1%
HOME BUILDERS: 1.0%
9,600 Lennar Corp. $ 643,680
22,000 @ Toll Brothers, Inc. 638,660
------------
1,282,340
------------
LODGING: 4.1%
232,800 Hilton Hotels Corp. 3,226,608
66,100 Starwood Hotels & Resorts Worldwide, Inc. 1,915,578
------------
5,142,186
------------
Total Common Stock
(Cost $5,962,013) 6,424,526
------------
REAL ESTATE INVESTMENT TRUSTS: 91.7%
APARTMENTS: 16.7%
23,500 Archstone-Smith Trust 558,360
168,300 Camden Property Trust 5,846,742
162,700 Equity Residential 4,308,296
107,500 Gables Residential Trust 3,170,175
104,300 Home Properties of NY, Inc. 3,744,370
210,100 United Dominion Realty Trust, Inc. 3,592,710
------------
21,220,653
------------
DIVERSIFIED FINANCIAL SERVICES: 13.7%
76,200 Colonial Properties Trust 2,667,000
155,100 iStar Financial, Inc. 5,118,300
151,161 Keystone Property Trust 3,204,072
193,900 Liberty Property Trust 6,451,053
------------
17,440,425
------------
HEALTH CARE: 4.5%
88,500 Health Care REIT, Inc. 2,633,760
213,600 Ventas, Inc. 3,022,440
------------
5,656,200
------------
HOTELS: 0.8%
107,400 @ Host Marriott Corp. 966,600
------------
966,600
------------
OFFICE PROPERTY: 27.4%
221,500 Arden Realty, Inc. 5,725,775
78,500 Boston Properties, Inc. 3,290,720
108,100 Brandywine Realty Trust 2,564,132
135,700 CarrAmerica Realty Corp. 3,769,746
119,700 Corporate Office Properties Trust 1,900,836
174,679 Equity Office Properties Trust 4,700,612
169,900 Mack-Cali Realty Corp. 5,839,463
174,200 Prentiss Properties Trust 5,027,412
182,200 Trizec Properties, Inc. 1,991,446
------------
34,810,142
------------
REGIONAL MALLS: 13.4%
83,700 CBL & Associates Properties, Inc. 3,629,232
43,000 General Growth Properties, Inc. 2,521,950
168,500 Macerich Co. 5,813,250
133,828 Simon Property Group, Inc. 5,034,609
------------
16,999,041
------------
SHOPPING CENTERS: 8.5%
159,000 Developers Diversified Realty Corp. 4,488,570
160,500 Heritage Property Investment Trust 4,429,800
55,500 Regency Centers Corp. 1,885,890
------------
10,804,260
------------
WAREHOUSE: 6.7%
150,400 Duke Realty Corp. 4,268,352
159,600 Prologis 4,291,644
------------
8,559,996
------------
Total Real Estate Investment Trusts
(Cost $98,600,164) 116,457,317
------------
Total Long-Term Investments
(Cost $104,562,177) 122,881,843
------------
rincipal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 2.9%
REPURCHASE AGREEMENT: 2.9%
$ 3,723,531 State Street Repurchase Agreement, 1.250%, due
06/02/03, $3,723,919 to be received upon
repurchase (Collateralized by $3,610,000 FNMA,
4.625%, Market Value $3,801,214, due 08/13/04) $ 3,723,531
------------
Total Short-Term Investments
(Cost $3,723,531) 3,723,531
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $108,285,708)* 99.7% $126,605,374
OTHER ASSETS AND LIABILITIES-NET 0.3 327,762
----- ------------
NET ASSETS 100.0% $126,933,136
===== ============
@ Non-income producing security
* Approximate cost for federal income tax purposes is $108,191,252. Net
unrealized appreciation consists of:
Gross Unrealized Appreciation $ 18,782,423
Gross Unrealized Depreciation (368,299)
------------
Net Unrealized Appreciation $ 18,414,124
============
See Accompanying Notes to Financial Statements
136
SHAREHOLDER MEETING INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
A special meeting of shareholders of the ING Retail Funds (formerly Pilgrim
Retail Funds) and Variable Products held May 29, 2003, at the offices of ING
Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258.
A brief description of each matter voted upon as well as the results are
outlined below:
1. To approve a Sub-Advisory Agreement for each of the ING LargeCap Growth
Fund and ING VP LargeCap Growth Portfolio, between ING Investments, LLC and
Wellington Management Company, LLP with no change in the Adviser or the
overall management fee paid by each Fund.
2. To transact such other business, not currently contemplated, that may
properly come before the Special Meeting or any adjournment(s) thereof in
the discretion of the proxies or their substitutes.
SHARES VOTED
SHARES AGAINST OR SHARES BROKER TOTAL
PROPOSAL VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED
-------- --------- -------- --------- -------- ------------
ING LargeCap Growth Fund 1 7,092,546 90,270 98,647 -- 7,281,463
ING LargeCap Growth Fund 2 6,494,145 644,779 142,539 -- 7,281,463
See Accompanying Notes to Financial Statements
137
TAX INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
Dividends paid during the year ended May 31, 2003 were as follows:
FUND NAME TYPE PER SHARE AMOUNT
- --------- ---- ----------------
Financial Services
Class A NII $ 0.0907
All Classes STCG $ 0.0376
All Classes LTCG $ 1.0774
Large Company Value
Class A NII $ 0.0333
Class Q NII $ 0.0418
MagnaCap
Class A NII $ 0.0279
Class Q NII $ 0.0450
MidCap Value
Class A NII $ 0.0362
Class B NII $ 0.0081
Class C NII $ 0.0074
Class I NII $ 0.0742
Class Q NII $ 0.0629
All Classes STCG $ 0.1081
SmallCap Value
Class A NII $ 0.0386
Class B NII $ 0.0003
Class C NII $ 0.0082
Class I NII $ 0.0794
All Classes STCG $ 0.0853
Convertible
Class A NII $ 0.3123
Class B NII $ 0.2222
Class C NII $ 0.2327
Class Q NII $ 0.3412
Equity and Bond
Class A NII $ 0.2460
Class B NII $ 0.1767
Class C NII $ 0.1948
Class Q NII $ 0.2515
Class T NII $ 0.2078
Real Estate
Class A NII $ 0.1992
Class B NII $ 0.1650
Class C NII $ 0.0814
Class I NII $ 0.2028
- ----------
NII -- Net investment income
STCG -- Short-term capital gain
LTCG -- Long-term capital gain
Of the ordinary distributions made during the fiscal periods ended May 31, 2003,
the following percentages qualify for the dividends received deductions
available to corporate shareholders; 100.00%, 100.00%, 100.00%, 18.27%, 14.04%,
58.48% and 57.24% for the ING Financial Services Fund, ING Large Company Value
Fund, ING MagnaCap Value Fund, ING MidCap Value Fund, ING SmallCap Value Fund,
ING Convertible Fund, and ING Equity and Bond Fund, respectively.
For the fiscal periods ended May 31, 2003, the following are percentages of
ordinary dividends paid by the Funds that are designated as qualifying dividend
income subject to reduced income tax rates for individuals; 13.30%, and 12.75%
for the ING Convertible Fund, and ING Equity and Bond Fund, respectively.
The above figure may differ from those cited elsewhere in this report due to
differences in the calculation of income and gains under Generally Accepted
Accounting Principles (book purposes) and Internal Revenue Service (tax
purposes).
Shareholder are strongly advised to consult their own tax advisers with respect
to the tax consequences of their Investments in the Funds. In January 2003,
shareholders, excluding corporate shareholders, received an IRS 1099 DIV
regarding the federal tax status of the dividends and distributions received by
them in calendar 2002.
See Accompanying Notes to Financial Statements
138
TRUSTEE AND OFFICER INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
The business and affairs of the Trusts are managed under the direction of the
Trusts' Board of Trustees. A Trustee who is not an interested person of the
Trusts, as defined in the 1940 Act, is an independent trustee ("Independent
Trustee"). The Trustees and Officers of the Trust are listed below. The
Statement of Additional Information includes additional information about
trustees of the Registrant and is available, without charge, upon request at
1-800-992-0180.
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
INDEPENDENT TRUSTEES
Paul S. Doherty(2) Trustee October Mr. Doherty is 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1999 - President and Partner, (February 2002 -
Scottsdale, Arizona 85258 Present Doherty, Wallace, Present).
Born: 1934 Pillsbury and Murphy,
P.C., Attorneys (1996 -
Present); Director,
Tambrands, Inc. (1993 -
1998); and Trustee of
each of the funds
managed by Northstar
Investment
Management
Corporation (1993 -
1999).
J. Michael Earley(3) Trustee February President and Chief 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - Executive Officer, (1997 - Present).
Scottsdale, Arizona 85258 Present Bankers Trust Company,
Born: 1945 N.A. (1992 - Present).
R. Barbara Gitenstein(2) Trustee February President, College of 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - New Jersey (1999 - (1997 - Present).
Scottsdale, Arizona 85258 Present Present). Formerly,
Born: 1948 Executive Vice
President and Provost,
Drake University (1992
- 1998).
Walter H. May(2) Trustee October Retired. Formerly, 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1999 - Managing Director and (February 2002 -
Scottsdale, Arizona 85258 Present Director of Marketing, Present) and Best Prep
Born: 1936 Piper Jaffray, Inc.; Charity (1991 -
Trustee of each of the Present).
funds managed by
Northstar Investment
Management
Corporation (1996 -
1999).
Jock Patton(2) Trustee August Private Investor (June 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1995 - 1997 - Present). (February 2002 -
Scottsdale, Arizona 85258 Present Formerly, Director and Present); Director,
Born: 1945 Chief Executive Officer, Hypercom, Inc. (January
Rainbow Multimedia 1999 - Present); JDA
Group, Inc. (January Software Group, Inc.
1999 - December 2001); (January 1999 -
Director of Stuart Present); Buick of
Entertainment, Inc.; Scottsdale, Inc.;
Director of Artisoft, Inc. National Airlines, Inc.;
(1994 - 1998). BG Associates, Inc.; BK
Entertainment, Inc.;
and Arizona Rotorcraft,
Inc.
139
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
David W.C. Putnam(3) Trustee October President and Director, 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1999 - F.L. Putnam Securities (February 2002 -
Scottsdale, Arizona 85258 Present Company, Inc. and its Present), Anchor
Born: 1939 affiliates; President, International Bond
Secretary and Trustee, (December 2000 -
The Principled Equity Present); Progressive
Marke Fund. Formerly, Capital Accumulation
Trustee, Trust Realty Trust (August 1998 -
Trust (December Corp.; Present); Principled
Anchor Investment Equity Market Fund
Trust; Bow 2000 - (November 1996 -
Present); Ridge Mining Present), Mercy
Company and each of Endowment
the F.L. Putnam funds Foundation (1995 -
managed by Northstar Present); Director, F.L.
Investment Foundation Putnam Investment
Management Management Company
Corporation (1994 - (December 2001 -
1999). Present); Asian
American Bank and
Trust Company (June
1992 - Present); and
Notre Dame Health
Care Center (1991 -
Present) F.L. Putnam
Securities Company,
Inc. (June 1978 -
Present); and an
Honorary Trustee,
Mercy Hospital (1973 -
Present).
Blaine E. Rieke(3) Trustee February General Partner, 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - Huntington Partners (February 2002 -
Scottsdale, Arizona 85258 Present (January 1997 - Present) and Morgan
Born: 1933 Present). Chairman of Chase Trust Co.
the Board and Trustee (January 1998 -
of each of the funds Present).
managed by ING
Investment
Management Co. LLC
(November 1998 -
February 2001).
Roger B. Vincent(3) Trustee February President, Springwell 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - (1994 - Present); and
Scottsdale, Arizona 85258 Present Present). Formerly, Director, AmeriGas
Born: 1945 Director, Tatham Propane, Inc. (1998 -
Offshore, Inc. (1996 - Present).
2000).
Richard A. Wedemeyer(2) Trustee February Retired. Mr. 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - Wedemeyer was (February 2002 -
Scottsdale, Arizona 85258 Present formerly Vice President Present) and
Born: 1936 - Finance and Touchstone Consulting
Administration, Group (1997 - Present).
Channel Corporation
(June 1996 - April
2002). Formerly, Vice
President, Operations
and Administration,
Jim Henson
Productions. (1979 -
1997); Trustee, First
Choice Funds (1997 -
2001); and of each of
the funds managed by
ING Investment
Management Co. LLC
(1998 - 2001).
140
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"
Thomas J. McInerney(4) Trustee February Chief Executive Officer, 160 Director, Hemisphere,
7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial Inc. (May 2003 -
Scottsdale, Arizona 85258 Present Services (September Present); Trustee, GCG
Born: 1956 2001 - Present); Trust (February 2002 -
General Manager and Present); Equitable Life
Chief Executive Officer, Insurance Co., Golden
ING U.S. Worksite American Life
Financial Services Insurance Co., Life
(December 2000 - Insurance Company of
Present); Member, ING Georgia, Midwestern
Americas Executive United Life Insurance
Committee (2001 - Co., ReliaStar Life
Present); President, Insurance Co., Security
Chief Executive Officer Life of Denver, Security
and Director of Connecticut Life
Northern Life Insurance Insurance Co.,
Company (March 2001 - Southland Life
October 2002), ING Insurance Co., USG
Aeltus Holding Annuity and Life
Company, Inc. (2000 - Company, and United
Present), ING Retail Life and Annuity
Holding Company Insurance Co. Inc
(1998 - Present), ING (March 2001 - Present);
Life Insurance and Director, Ameribest Life
Annuity Company Insurance Co., (March
(September 1997 - 2001 to January 2003);
November 2002) and Director, First
ING Retirement Columbine Life
Holdings, Inc. (1997 - Insurance Co. (March
Present). Formerly, 2001 to December
General Manager and 2002); Member of the
Chief Executive Officer, Board, National
ING Worksite Division Commission on
(December 2000 - Retirement Policy,
October 2001), Governor's Council on
President, ING-SCI, Inc. Economic
(August 1997 - Competitiveness and
December 2000); Technology of
President, Aetna Connecticut,
Financial Services Connecticut Business
(August 1997 - and Industry
December 2000). Association, Bushnell;
Connecticut Forum;
Metro Hartford
Chamber of Commerce;
and is Chairman,
Concerned Citizens for
Effective Government.
141
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(5) Trustee October Chairman, Hillcrest 106 Trustee, GCG; Director,
7337 E. Doubletree Ranch Rd. 1999 - Capital Partners (May Hormel Foods
Scottsdale, Arizona 85258 Present 2002-Present); Corporation (March
Born: 1939 President, Turner 2000 - Present); Shopko
Investment Company Stores, Inc. (August
(January 2002 - 1999 - Present); and
Present). Mr. Turner M.A. Mortenson
was formerly Vice Company (March 2002 -
Chairman of ING Present).
Americas (2000 - 2002);
Chairman and Chief
Executive Officer of
ReliaStar Financial
Corp. and ReliaStar
Life Insurance Company
(1993 - 2000); Chairman
of ReliaStar United
Services Life Insurance
Company (1995 - 1998);
Chairman of ReliaStar
Life Insurance Company
of New York (1995 -
2001); Chairman of
Northern Life Insurance
Company (1992 - 2001);
Chairman and Trustee of
the Northstar
affiliated investment
companies (1993 - 2001)
and Director, Northstar
Investment Management
Corporation and its
affiliates (1993 -
1999).
- ----------
(1) Trustees serve until their successors are duly elected and qualified.
(2) Valuation Committee member.
(3) Audit Committee member.
(4) Mr. 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.
(5) 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.
142
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
OFFICERS:
James M. Hennessy President and Chief February 2001 - President and Chief Executive
7337 E. Doubletree Ranch Rd., Executive Officer Present Officer of ING Capital Corporation,
Scottsdale, Arizona 85258 Chief Operating June 2000 - Present LLC, ING Funds Services, LLC, ING
Born: 1949 Officer Advisors, Inc., ING Investments,
LLC, Lexington Funds Distributor,
Senior Executive June 2000 - February Inc., Express America T.C. Inc. and
Vice President 2001 EAMC Liquidation Corp. (since
December 2001); Executive Vice
Secretary April 1995 - February President and Chief Operating
2001 Officer of ING Funds Distributor,
LLC (since June 2000). Formerly,
Executive Vice President and Chief
Operating Officer of ING
Quantitative Management, Inc.
(October 2001 to September 2002);
Senior Executive Vice President
(June 2000 to December 2000) and
Secretary (April 1995 to December
2000) of ING Capital Corporation,
LLC, ING Funds Services, LLC, ING
Investments, LLC, ING Advisors,
Inc., Express America T.C. Inc.,
and EAMC Liquidation Corp.; and
Executive Vice President, ING
Capital Corporation, LLC and its
affiliates (May 1998 to June 2000)
and Senior Vice President, ING
Capital Corporation, LLC and its
affiliates (April 1995 to April
1998).
Stanley D. Vyner Executive Vice March 2003- Present Executive Vice President, ING
7337 E. Doubletree Ranch Rd., President (For the ING Funds) Advisors, Inc. and ING Investments,
Scottsdale, Arizona 85258 LLC (July 2000 - Present) and Chief
Born: 1950 July 1996 - March Investment Officer of the
2002 (For the International Portfolios, ING
international Investments, LLC (July 1996 -
portfolios of the Present.) Formerly, President and
Pilgrim Funds) Chief Executive Officer, ING
Investments, LLC (August 1996 -
August 2002).
Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief
7337 E. Doubletree Ranch Rd., President and Present Financial Officer and Treasurer of
Scottsdale, Arizona 85258 Assistant Secretary ING Funds Services, LLC, ING Funds
Born: 1958 Distributor, LLC, ING Advisors, Inc.,
Chief Financial Officer June 1998 - Present ING Investments, LLC (December
2001 to present), Lexington Funds
Senior Vice President June 1998 - February Distributor, Inc., Express America
2002 T.C. Inc. and EAMC Liquidation
Corp. (since December 2001).
Formerly, Executive Vice President,
Chief Financial Officer and
Treasurer of ING Quantitative
Management, Inc. (December 2001 to
October 2002); Senior Vice
President, ING Funds Services, LLC,
ING Investments, LLC, and ING Funds
Distributor, LLC (June 1998 to
December 2001) and Chief Financial
Officer of Endeavor Group (April
1997 to June 1998).
143
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
OFFICERS:
Robert S. Naka Senior Vice President November 1999 - Senior Vice President and Assistant
7337 E. Doubletree Ranch Rd., Present Secretary of ING Funds Services,
Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC,
Born: 1963 Assistant Secretary July 1996 - Present ING Advisors, Inc., ING
Investments, LLC (October 2001 to
present) and Lexington Funds
Distributor, Inc. (since December
2001). Formerly, Senior Vice
President and Assistant Secretary
for ING Quantitative
Management, Inc. (October 2001
to October 2002); Vice President,
ING Investments, LLC (April 1997
to October 1999) , ING Funds
Services, LLC (February 1997 to
August 1999) and Assistant Vice
President, ING Funds Services, LLC
(August 1995 to February 1997).
Robyn L. Ichilov Vice President November 1997 - Vice President of ING Funds
7337 E. Doubletree Ranch Rd., Present Services, LLC (since October 2001)
Scottsdale, Arizona 85258 and ING Investments, LLC (since
Born: 1967 August 1997); Accounting
Manager, ING Investments, LLC
(since November 1995).
Kimberly A. Anderson Vice President and February 2001 - Vice President and Assistant
7337 E. Doubletree Ranch Rd., Secretary Present Secretary of ING Funds Services,
Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC,
Born: 1964 Assistant November 1999 - ING Advisors, Inc., ING
Vice President and February 2001 Investments, LLC (since October
Assistant Secretary 2001) and Lexington Funds
Distributor, Inc. (since December
2001). Formerly, Vice President for
ING Quantitative Management,
Inc. (October 2001 to October
2002); Assistant Vice President of
ING Funds Services, LLC (November
1999 to January 2001) and has
held various other positions with
ING Funds Services, LLC for more
than the last five years
Lauren D. Bensinger Vice President February 2003 - Vice President and Chief
7337 E. Doubletree Ranch Rd., Present Compliance Officer, ING Funds
Scottsdale, Arizona 85258 Distributor, LLC (July 1995 to
Born: 1954 Present); Vice President (February
1996 to Present) and Chief
Compliance Officer (October 2001 to
Present), ING Investments, LLC;
Vice President and Chief Compliance
Officer, ING Advisors, Inc. (July
2000 to Present); Formerly, Vice
President and Chief Compliance
Officer ING Quantitative
Management, Inc. (July 2000 to
September 2002) and Vice President
ING Fund Services, LLC (July 1995
to Present).
Todd Modic Assistant August 2001 - Present Vice-President of Financial
7337 E. Doubletree Ranch Rd., Vice President Reporting-Fund Accounting of ING
Scottsdale, Arizona 85258 Funds Services, LLC (September
Born: 1967 2002 to present). Director of
Financial Reporting of ING
Investments, LLC (March 2001 to
September 2002). Formerly, Director
of Financial Reporting, Axient
Communications, Inc. (May 2000 to
January 2001) and Director of
Finance, Rural/Metro Corporation
(March 1995 to May 2000).
144
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
OFFICERS:
Maria M. Anderson Assistant August 2001 - Present Assistant Vice President of ING
7337 E. Doubletree Ranch Rd., Vice President Funds Services, LLC (since October
Scottsdale, Arizona 85258 2001). Formerly, Manager of Fund
Born: 1958 Accounting and Fund Compliance,
ING Investments, LLC (September
1999 to November 2001); Section
Manager of Fund Accounting, Stein
Roe Mutual Funds (July 1998 to
August 1999); and Financial
Reporting Analyst, Stein Roe Mutual
Funds (August 1997 to July 1998).
Susan P. Kinens Assistant February 2003 - Assistant Vice President and
7337 E. Doubletree Ranch Rd. Vice President and Present (For the ING Assistant Secretary, ING Funds
Scottsdale, Arizona 85258 Assistant Secretary Funds) Services, LLC (December 2002 -
Born: 1976 Present); and has held various
other positions with ING Funds
Services, LLC for the last five
years.
- ----------
(1) The officers hold office until the next meeting of the Trustees and until
their successors shall have been elected and qualified.
145
ING Funds Distributor, LLC offers the funds listed below. Investors may obtain a
copy of a prospectus of any ING Fund by calling ING Funds Distributor, LLC at
(800) 992-0180. Please read the prospectus carefully before investing or sending
money.
INTERNATIONAL EQUITY DOMESTIC EQUITY VALUE FUNDS
ING Emerging Countries Fund ING Financial Services Fund
ING Foreign Fund ING Large Company Value Fund
ING International Fund ING MagnaCap Fund
ING International Growth Fund ING Tax Efficient Equity Fund
ING International SmallCap Growth Fund ING Value Opportunity Fund
ING International Value Fund ING SmallCap Value Fund
ING Precious Metals Fund ING MidCap Value Fund
ING Russia Fund
DOMESTIC EQUITY AND INCOME FUNDS
INTERNATIONAL GLOBAL EQUITY ING Equity and Bond Fund
ING Global Technology Fund ING Convertible Fund
ING Global Real Estate Fund ING Balanced Fund
ING Worldwide Growth Fund ING Growth and Income Fund
DOMESTIC EQUITY FUNDS FIXED INCOME FUNDS
ING Growth Fund ING Bond Fund
ING Growth + Value Fund ING Classic Money Market Fund*
ING Growth Opportunities Fund ING Government Fund
ING LargeCap Growth Fund ING GNMA Income Fund
ING MidCap Opportunities Fund ING High Yield Opportunity Fund
ING Small Company Fund ING High Yield Bond Fund
ING SmallCap Opportunities Fund ING Intermediate Bond Fund
ING Technology Fund ING Lexington Money Market Trust*
ING National Tax Exempt Bond Fund
DOMESTIC EQUITY INDEX FUNDS ING Money Market Fund*
ING Index Plus LargeCap Fund ING Aeltus Money Market Fund*
ING Index Plus MidCap Fund ING Strategic Bond Fund
ING Index Plus SmallCap Fund
ING Disciplined LargeCap STRATEGIC ALLOCATION FUNDS
ING Strategic Allocation Growth Fund
ING Strategic Allocation Balanced Fund
ING Strategic Allocation Income Fund
LOAN PARTICIPATION FUNDS
ING Prime Rate Trust
ING Senior Income Fund
* An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
INVESTMENT MANAGER
ING Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
ADMINISTRATOR
ING Funds Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
DISTRIBUTOR
ING Funds Distributor, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
1-800-992-0180
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141-6368
CUSTODIAN
Bank of New York
100 Colonial Center Parkway, Suite 300
Lake Mary, FL 32746
LEGAL COUNSEL
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
KPMG LLP
99 High Street
Boston, MA 02110-2371
Prospectus containing more complete information regarding the Funds, including
charges and expenses, may be obtained by calling ING Funds Distributor, LLC, at
1-800-992-0180. Please read the prospectus carefully before you invest or send
money.
[LION LOGO] DEABCAR0503-0729
ING FUNDS
ANNUAL REPORT
May 31, 2003 DOMESTIC EQUITY GROWTH FUNDS
ING Growth + Value Fund
CLASSES I AND Q ING Growth Opportunities Fund
ING LargeCap Growth Fund
ING MidCap Opportunities Fund
ING SmallCap Opportunities Fund
ING Disciplined LargeCap Fund
DOMESTIC EQUITY VALUE FUNDS
ING Large Company Value Fund
ING MagnaCap Fund
ING MidCap Value Fund
ING SmallCap Value Fund
DOMESTIC EQUITY AND INCOME FUNDS
ING Convertible Fund
ING Equity and Bond Fund
ING Real Estate Fund
[PHOTO]
[LION LOGO]
ING FUNDS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
President's Letter ........................... 1
Portfolio Managers' Reports:
Domestic Equity Growth Funds ............... 2
Domestic Equity Value Funds ................ 14
Domestic Equity and Income Funds ........... 24
Index Descriptions ........................... 28
Independent Auditors' Report ................. 29
Statements of Assets and Liabilities ......... 30
Statements of Operations ..................... 38
Statements of Changes in Net Assets .......... 42
Financial Highlights ......................... 50
Notes to Financial Statements ................ 63
Portfolios of Investments .................... 85
Trustee and Officer Information .............. 119
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
[PHOTO]
JAMES M. HENNESSY
Dear Shareholder,
It would be an understatement to refer to this past year as a challenging one
for investors. There have been many events on the geopolitical front and
numerous economic challenges that have tested investor resilience.
We are now in a period of one of the longest economic downturns in U.S. history.
Although few of us will take much comfort in the fact that we have coped with a
particularly challenging time, perhaps we should.
We at ING Funds remain optimistic about the future, preferring to see the
positives that have emerged in the wake of recent difficulties. For instance,
the quick actions on the part of the financial industry and government
regulators that followed a string of recent corporate scandals may have helped
regain investor trust and the tough new accounting standards now in place should
help permanently improve our industry.
Although I do not wish to be premature in my enthusiasm, I do believe that the
gradual market upturn of recent months supports ING Funds' long-held philosophy
that it is important to remain focused on long-term investment goals and
maintain reasonable expectations.
In recent months, we at ING Funds have made some changes to some of our fund
management teams. We have also entered into new relationships with respected
sub-advisers and are launching several new mutual funds. We have implemented
improvements to our website that make it more accessible to investors and
financial advisors alike.
We remain committed to providing quality service and innovative products to help
meet the needs of our investors, and we are excited and optimistic about the
future.
On behalf of ING Funds, I thank you for your continued support and confidence
and look forward to serving you in the future.
Sincerely,
/s/ James M. Hennessy
James M. Hennessy
President
ING Funds
July 15, 2003
1
ING GROWTH + VALUE FUND Portfolio Managers' Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: Louis Navellier, Navellier Fund Management, Inc., the
Sub-Advisor*
GOAL: ING Growth + Value Fund (the "Fund") seeks capital appreciation by
investing in a diversified portfolio of equity securities, including common and
preferred stock.
MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31,
2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad
measures of market performance) declined 7.73% and 8.06%, respectively. The
market's decline was evident in measures of mid-cap growth and small-cap growth
stocks as well. Two indices of such performance, the Russell Midcap Growth Index
fell 5.84%, and the Russell 2000 Growth Index dropped 9.59%.
The reporting period was marked by continued disappointment in the economic
numbers but strength in consumer spending, buoyed by record refinancing. During
the final months of the fiscal year, investors were focused on geopolitical
uncertainties, especially the potential for armed conflict in Iraq. Once the
coalition forces did, in fact, enter Iraq, the market began trading up off its
March 11 low. Through the first week of April, the overall market gained an
additional 4%.
Recent market leadership has centered on the technology group, with value stocks
trailing the overall market by a small margin. We have seen some institutional
investors purchasing tech stocks, hoping the sector would provide the most
leveraged upside returns if a widespread economic recovery ensues. To date,
fundamentals have not, in our opinion, justified this type of anticipatory
buying. As value investors, we are willing to forgo a small amount of short-term
upside return whenever we see this kind of speculative buying, When the markets
settle, we expect investors will once again focus on the fundamentals of
individual companies.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares provided
a total return of -20.79% compared to the Russell 3000 Index for which the total
return was -7.73%.
PORTFOLIO SPECIFICS: In the semiannual report, we stated that the Fund
underperformed the index in the first half primarily due to stock selection in
the consumer discretionary and technology sectors. In the six months since, the
Fund returned 1.81% and the index 9.34%. During this period, the source of the
underperformance was again mainly stock selection, this time in the healthcare
and technology sectors, partly offset by favorable stock selection in
industrials. Sector selection also detracted from performance. In the most
noteworthy cases, we were overweight in technology, which has performed
relatively poorly, and were underweight in the financial sector, which was a
better-than-average performer in the index. Over the last six months, sector
weights underwent significant change. Principally, we cut our underweight in
financials by one-third, halved the overweight in technology and reduced our
heavy overweight in consumer discretionary stocks to a small amount.
MARKET OUTLOOK: Value stocks have recently been trailing their growth
counterparts. While we believe this is a short-term reactionary move, equities
across the spectrum are very reasonably priced today. This, in combination with
low interest rates and fairly indifferent/low consumer sentiment, makes for one
of the best investment opportunities we have seen in at least five years. Adding
in such factors as stock market fear, post-war reconstruction uncertainty,
record low interest rates, and a business environment that has been extremely
conservative, we believe the upside potential for our equity market far exceeds
the downside risk.
* Effective June 16, 2003 ING Investments, LLC assumed direct management of
the Fund. Since that date the Fund has been managed by a team of investment
professionals led by Matthew S. Price and David C. Campbell.
2
Portfolio Managers' Report ING GROWTH + VALUE FUND
- --------------------------------------------------------------------------------
6/5/00 5/31/01 5/31/02 5/31/03
------- ------- ------- -------
ING Growth + Value Fund Class Q $10,000 $ 5,775 $ 4,103 $ 3,250
Russell 2000 Growth Index $10,000 $10,569 $10,516 $ 9,655
Russell 3000 Growth Index $10,000 $ 9,028 $ 7,902 $ 7,291
AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS ENDED MAY 31, 2003
-------------------------------
SINCE INCEPTION
1 YEAR 6/5/00
------ ------
Class Q -20.79% -31.33%
Russell 2000 Index -8.18% -1.16%(1)
Russell 3000 Index -7.73% -9.99%(1)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Growth + Value Fund against the Russell 2000 Index and the
Russell 3000 Index. The Indices have no cash in their portfolios, impose no
sales charges and incur no operating expenses. An investor cannot invest
directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Since inception performance for the index is shown from 6/1/00.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller and mid-sized companies may entail greater price volatility
than investing in stocks of larger companies. From time to time, the stock
market may not favor the mix of growth and value securities in which the Fund
invests.
See accompanying index descriptions on page 28.
3
ING GROWTH OPPORTUNITIES FUND Portfolio Managers' Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price,
CFA and David Campbell, ING Investments, LLC.*
GOAL: The Growth Opportunities Fund seeks long-term growth of capital through
investment in a portfolio consisting primarily of common stocks of U.S.
companies that the managers feel have above-average prospects for growth.
MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31,
2003. For the period, the Russell 3000 and the S&P 500 index (two broad measures
of market performance) declined 7.73% and 8.06%, respectively. The market's
decline was evident in measures of mid cap growth and small cap growth stocks as
well. The Russell Midcap Growth index fell 5.84%, and the Russell 2000 Growth
index dropped 9.59%.
The results for the six months ending May 31, 2003 were more encouraging. The
Russell 3000 Index advanced 4.92% during the six-month period and the S&P 500
moved up 3.87%. Indeed, the returns for the latest three months -- ended May 31,
2003 -- were even better. In the three-month period, the Russell 3000 index
moved up 15.90% and the S&P 500 advanced 15.05%. We think that a major part of
this advance can be attributed to a resurgence in those stocks that were most
beaten-up over the last several years. We expect, though, that as this
speculation broadens out, the advance may become more sustainable, albeit
somewhat less explosive.
MARKET OUTLOOK: After several years of declines, the stock market appeared to be
in a recovery mode from mid-March through the end of May, 2003. This seemed in
part to reflect some improvement in corporate profit trends; in addition the
market's advance may well have reflected investors' increasing optimism about
the economy's growth later this year and into 2004.
There are reasons to believe that the conditions are favorable for both the
economy and for common stocks. The combination of low interest rates (with the
possibility of even further Federal Reserve loosening) and stimulative tax cuts
could well spur an acceleration of the economy. And inflation certainly is not
an imminent concern, notwithstanding the toll that energy prices are taking on
the economy.
The Fund's investment discipline is not dependent on the forecast for the
economy. The Fund will build a diversified portfolio of mostly smaller common
stocks selected for their growth prospects, reasonable valuation, and evidence
of relative strength.
PERFORMANCE: For the year ended May 31, 2003, the ING Growth Opportunities
Fund's Class I shares had a total return of -15.64% compared to the S&P 500
index for which the total return was -8.06%.
PORTFOLIO SPECIFICS: In the semi annual report we stated that the Fund
under-performed the index in the first half year and this was primarily due to
exposure to more cyclically sensitive Technology stocks such as semiconductors.
In the six months since the date of the semi-annual report, the Fund returned
1.00% and the index 3.96%. During this period, the source of the
underperformance was mainly sector selection. We over weighted the Technology
sector, which was a laggard for most of the period and were underweight in the
Utilities and Financial sectors, which were relatively strong. Over the last six
months, sector weights underwent significant change with both the substantial
over weight in Technology and under weight in Financials more than halved.
* A team of investment professionals led by Matthew Price, CFA and David
Campbell, ING Investments, LLC assumed responsibility for the Fund on April
21, 2003.
4
Portfolio Managers' Report ING GROWTH OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
03/31/97 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ING Growth Opportunities
Fund Class I $1,000,000 $1,101,700 $1,351,700 $1,782,500 $2,859,900 $1,779,000 $1,275,500 $1,076,000
Russell 3000 Index $1,000,000 $1,124,215 $1,469,157 $1,778,067 $1,964,281 $1,756,970 $1,513,693 $1,391,622
S&P 500 Index $1,000,000 $1,120,924 $1,454,662 $1,719,251 $1,922,589 $1,735,679 $1,519,271 $1,401,816
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
-----------------------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS I OF CLASS Q
1 YEAR 5 YEAR 03/31/97 6/1/00
------ ------ -------- ------
Class I -15.64% -4.46% 1.19% --
Class Q -15.88% -- -- -28.98%
Russell 3000 Index(1) -7.73% -0.74% 5.63%(2) -9.99%
S&P 500 Index -8.06% -1.08% 5.51%(2) -10.85%
Based on a $1,000,000 initial investment, the graph and table above illustrate
the total return of ING Growth Opportunities Fund against the Russell 3000 Index
and the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales
charges and incurs no operating expenses. An investor cannot invest directly in
an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) The Fund may invest in securities of large, mid- and small-capitalization
companies, and the Russell 3000 Index tracks a larger number of companies
than the S&P 500 Index with a large range of market capitalizations.
(2) Since inception performance for the index is shown from 4/1/97.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller and mid-size companies may entail greater price volatility
than investing in stocks of larger companies. From time to time, the stock
market may not favor the growth securities in which the Fund invests.
See accompanying index descriptions on page 28.
5
ING LARGECAP GROWTH FUND Portfolio Managers' Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail,
CFA, Senior Vice President, ING Investments, LLC.*
GOAL: The ING LargeCap Growth Fund (the "Fund") seeks long-term capital
appreciation by investing in equity securities of large U.S. companies.
MARKET OVERVIEW: The S&P 500 Index posted a loss of 8.06% over the 12 months
ended May 31, 2003. Declines occurred in the first half of the period due to
accounting concerns, conflict with Iraq, and concerns regarding the strength of
the U.S. economic rebound. However, the market retraced a significant portion of
those losses this year after the successful resolution of the war and mounting
evidence of improving corporate earnings.
Within the market, leadership has swung sharply back and forth between defensive
stocks and former growth stocks. The sharp rallies of the fourth quarter of 2002
and from April 2003 have favored the smallest stocks within the index,
especially those trading at low dollar prices. For the whole period financials,
health care and information technology stocks were the strongest performers. The
utilities and consumer discretionary sectors suffered the worst performance
during the period.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided
a total return of -13.11% compared to the Russell 1000 Growth Index for which
the total return was -7.85%.
PORTFOLIO SPECIFICS: In the semi annual report we stated that underperformance
in the first half year was primarily due to the underperformance of cyclically
sensitive Technology stocks such as semiconductors. In the six-months since the
date of the semi-annual report, the Fund returned 2.80% and the index 3.83%.
During the period stock selection was neutral over all with relative gains in
the Technology and Health Care sectors more or less balancing relative losses in
Financials and Energy. Sector selection detracted slightly from performance on
balance: we held on average an over weight in Technology, which was a laggard
for most of the period, and an over weight in Energy which was generally strong,
(although, as noted, the results of our stock selections were in the opposite
direction). Over the last six months, sector weights did not undergo significant
change. The largest pair of changes was the reduction of our over weight in
Telecommunications stocks and an increase in Consumer Discretionary stocks, both
by about 3 1/2%.
MARKET OUTLOOK: While we expect the recovery to continue at a more moderate pace
as compared to prior cycles, our optimism has improved at the margin. The
economic cycle is greatly influenced by psychology and the inventory cycle.
Although the consumer has been supported by a housing refinance boom during the
down cycle, business spending has been weak. Once corporate psychology improves
to the point that pent up projects are released, the positive feedback loop of
psychology and the inventory cycle can be put into play. Inventories remain at
very low levels, so there is reason to believe that the boost to the economy
from inventory growth could be substantial.
Meanwhile, government authorities are doing everything possible to set a
recovery in motion. The combined monetary and fiscal stimulus of the Fed rate
cuts, mortgage refinancings, and the most recent tax cut will continue to inject
tremendous additional liquidity into the financial system.
In summary, the economic outlook has improved. Reduced geo-political uncertainty
and aggressive economic policy conditions have lowered investors' risk aversion
and improved capital market sentiment. This condition has reduced the financial
distress of consumers, corporations and emerging markets government borrowers
alike, setting the stage for improved growth in the quarters ahead. This
enhanced economic backdrop should bode well for corporate profit growth and
investor sentiment.
* Effective June 2, 2003, Wellington Management Company, LLP became the
Sub-Advisor. Andrew J. Shilling, Senior Vice Presidentand Partner is the
portfolio manager.
6
Portfolio Managers' Report ING LARGECAP GROWTH FUND
- --------------------------------------------------------------------------------
1/8/02 5/31/02 5/31/03
---------- ---------- ----------
ING LargeCap Growth Fund Class I $1,000,000 $ 804,700 $ 699,600
Russell 1000 Growth Index $1,000,000 $ 872,982 $ 804,453
S&P 500 Index $1,000,000 $ 935,019 $ 859,615
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
----------------------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS I OF CLASS Q
1 YEAR 5 YEAR 1/08/02 7/21/97
------ ------ ------- -------
Class I -13.11% -- -22.66% --
Class Q -13.36% -0.60% -- 3.62%
Russell 1000 Growth Index -7.85% -4.16% -14.24%(1) -1.42%(2)
S&P 500 Index -8.06% -1.08% -10.13%(1) 1.61%(2)
Based on a $1,000,000 initial investment, the graph and table above illustrate
the total return of ING LargeCap Growth Fund against the Russell 1000 Growth
Index and the S&P 500 Index. The Index has no cash in its portfolio, imposes no
sales charges and incurs no operating expenses. An investor cannot invest
directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Since inception performance for the index is shown from 1/1/02.
(2) Since inception performance for the index is shown from 8/1/97.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. From time to time, the stock market may not favor the
large company growth-oriented securities in which the Fund invests.
See accompanying index descriptions on page 28.
7
ING MIDCAP OPPORTUNITIES FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price,
CFA and David Campbell, ING Investments, LLC.*
GOAL: The ING MidCap Opportunities Fund (the "Fund") seeks long-term capital
appreciation by investing primarily in the common stock of mid-sized U.S.
companies.
MARKET OVERVIEW: The U.S. equity markets declined during the year ending May 31,
2003. For the period, the Russell MidCap Growth index declined 5.84%. Mid-sized
stocks were not alone in their decline. The Russell 2000 Growth index fell
9.59%, the S&P 500 was down 8.06% and the Dow Jones Industrials dropped 8.90%.
The NASDAQ Composite, down 1.23%, held up a little better following its steep
drop in the two preceding years.
The results for the six months ending May 31, 2003 were more encouraging. The
Russell MidCap Growth index advanced 10.00% during the six-month period. Indeed,
the returns for the latest three months -- ended May 31, 2003 -- were even
better. In the three-month period, the Russell MidCap Growth index moved up
19.27%. We think that a major part of this advance can be attributed to a
resurgence in those stocks that were most beaten-up over the last several years.
We expect, though, that as this speculation broadens out, the advance may become
more sustainable, albeit somewhat less explosive.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided
a total return of -8.50% compared to the Russell Mid Cap Growth Index for which
the total return was -5.84% and the S&P MidCap 400 Index for which the total
return was -9.14%.
PORTFOLIO SPECIFICS: In the semi annual report we stated that the Fund
outperformed the index in the first half year and this was primarily due to
stock selection in the transportation, telecommunications and financial sectors.
In the six months since the date of the semi-annual report, the Fund returned
4.01% and the index 10.00%. During this period, the source of the
underperformance was mainly stock selection in the Healthcare and Industrials
sectors. We estimate that these accounted for approximately half of the
underperformance. Sector selection also detracted from performance. We held on
average an over weight in Technology which was a laggard for most of the period
and were underweight in the Healthcare sector which was relatively strong. Over
the last six months, sector weights underwent significant change with the
substantial over weight in Technology taken to an underweight and the under
weight in Healthcare stocks reduced considerably.
MARKET OUTLOOK: After several years of declines, the stock market appeared to be
in a recovery mode from mid-March through the end of May 2003. This seemed in
part to reflect some improvement in corporate profit trends; in addition the
market's advance may well have reflected investors' increasing optimism about
the economy's growth later this year and into 2004.
There are reasons to believe that the conditions are favorable for both the
economy and for common stocks. The combination of low interest rates (with the
possibility of even further Federal Reserve loosening) and stimulative tax cuts
could well spur an acceleration of the economy. And inflation certainly is not
an imminent concern, notwithstanding the toll that energy prices are taking on
the economy.
The Fund's investment discipline is not dependent on the forecast for the
economy. The Fund will build a diversified portfolio of mostly smaller common
stocks selected for their growth prospects, reasonable valuation, and evidence
of relative strength.
* A team of investment professionals led by Matthew Price, CFA and David
Campbell, ING Investments, LLC assumed responsibility for the Fund on April
21, 2003.
8
Portfolio Manager's Report ING MIDCAP OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
8/20/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
---------- ---------- ---------- ---------- ---------- ----------
ING MidCap Opportunities Fund Class I $1,000,000 $1,553,000 $2,625,900 $2,018,900 $1,548,500 $1,416,800
S&P MidCap 400 Index $1,000,000 $1,421,786 $1,726,818 $1,915,392 $1,961,178 $1,781,995
Russell MidCap Growth Index $1,000,000 $1,452,073 $2,086,903 $1,580,120 $1,309,076 $1,232,612
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
-----------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS I OF CLASS Q
1 YEAR 8/20/98 4/4/00
------ ------- ------
Class I -8.50% 7.56% --
Class Q -8.69% -- -19.70%
Russell MidCap Growth Index(1) -5.84% 4.50%(2) -19.94%(3)
S&P MidCap 400 Index -9.14% 12.93%(2) -0.52%(3)
Based on a $1,000,000 initial investment, the graph and table above illustrate
the total return of ING MidCap Opportunities Fund against the S&P MidCap 400
Index. The Index has no cash in its portfolio, imposes no sales charges and
incurs no operating expenses. An investor cannot invest directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) The Fund normally invests in mid-cap companies that the portfolio managers
feel have above average prospects for growth. The Russell MidCap Growth
Index tracks the performance of mid-cap growth companies.
(2) Since inception performance for the index is shown from 9/1/98.
(3) Since inception performance for the index is shown from 4/1/00.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of mid-size companies may entail greater price volatility than investing
in stocks of larger companies. From time to time, the stock market may not favor
the mid-cap growth securities in which the Fund invests.
See accompanying index descriptions on page 28.
9
ING SMALLCAP OPPORTUNITIES FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price,
CFA and David Campbell, ING Investments, LLC.*
GOAL: The Small Cap Opportunities Fund (the "Fund") seeks capital appreciation
through investing primarily in common stocks of smaller, lesser-known U.S.
companies.
MARKET OVERVIEW: The U.S. equity markets declined during the year ending May 31,
2003. For the period, the Russell 2000 Growth index declined 9.59%. This small
cap growth index fared slightly worse than other broad market measures: The
Russell Midcap Growth index fell 5.84%, the S&P 500 was down 8.06% and the Dow
Jones Industrials dropped 8.90%. The NASDAQ Composite, down 1.23%, held up a
little better following its steep drop in the two preceding years.
The results for the six months ending May 31, 2003 were more encouraging. The
Russell 2000 Growth index advanced 9.00% during the six-month period. Indeed,
the returns for the latest three months -- ended May 31, 2003 -- were even
better. In the three-month period, the Russell 2000 Growth index moved up
23.64%, leading all the major market indexes. We think that a major part of this
advance can be attributed to a resurgence in those stocks that were most
beaten-up over the last several years. We expect, though, that as this
speculation broadens out, the advance may become more sustainable, albeit
somewhat less explosive
PERFORMANCE: For the year ended May 31, 2003, the ING SmallCap Opportunities
Fund's Class I shares had a total return of -24.10% compared to the Russell 2000
index for which the total return was -8.18%.
PORTFOLIO SPECIFICS: In the semi annual report we stated that underperformance
in the first half year was primarily due to exposure to consumer related stocks.
In the six-months since the date of the semi-annual report, the Fund returned
- -2.76% and the index 9.00%. During this period, the source of the
underperformance was mainly stock selection in the Health Care and Technology
sectors. We estimate that these accounted for approximately half and a quarter
of the underperformance respectively. Sector selection also detracted from
performance. We held on average an over weight in Technology, which was a
laggard for most of the period and were underweight in the Financial sector
which was relatively strong. Over the last six months, sector weights underwent
significant change with the strong over weight in Technology reduced
considerably and the under weight in Financial stocks halved.
MARKET OUTLOOK: After several years of declines, the stock market appeared to be
in a recovery mode from mid-March through the end of May 2003. This seemed in
part to reflect some improvement in corporate profit trends; in addition the
market's advance may well have reflected investors' increasing optimism about
the economy's growth later this year and into 2004.
There are reasons to believe that the conditions are favorable for both the
economy and for common stocks. The combination of low interest rates (with the
possibility of even further Federal Reserve loosening) and stimulative tax cuts
could well spur an acceleration of the economy. And inflation certainly is not
an imminent concern, notwithstanding the toll that energy prices are taking on
the economy.
The Fund's investment discipline is not dependent on the forecast for the
economy. The Fund will build a diversified portfolio of mostly smaller common
stocks selected for their growth prospects, reasonable valuation, and evidence
of relative strength.
* A team of investment professionals led by Matthew Price, CFA and David
Campbell, ING Investments, LLC assumed responsibility for the Fund on April
21, 2003.
10
Portfolio Manager's Report ING SMALLCAP OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
4/1/99 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
---------- ---------- ---------- ---------- ---------- ----------
ING SmallCap Opportunities Fund Class I $1,000,000 $ 980,500 $2,041,500 $1,741,100 $1,117,900 $ 848,500
Russell 2000 Index $1,000,000 $1,105,529 $1,215,122 $1,284,246 $1,277,778 $1,173,209
Russell 2000 Growth Index $1,000,000 $1,090,030 $1,304,660 $1,099,367 $ 925,449 $ 836,669
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
--------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS I OF CLASS Q
1 YEAR 4/1/99 4/4/00
------ ------ ------
Class I -24.10% -3.86% --
Class Q -24.30% -- -27.23%
Russell 2000 Growth Index(1) -9.59% -4.19% -18.36%(2)
Russell 2000 Index -8.18% 3.91% -4.84%(2)
Based on a $1,000,000 initial investment, the graph and table above illustrate
the total return of ING SmallCap Opportunities Fund against the Russell 2000
Growth Index and the Russell 2000 Index. The Index has no cash in its portfolio,
imposes no sales charges and incurs no operating expenses. An investor cannot
invest directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 MANAGER, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) The Fund normally invests in small-cap companies that the portfolio manager
believes have above average prospects for growth. The Russell 2000 Growth
Index tracks the performance of small-cap growth companies.
(2) Since inception performance for the index is shown from 4/1/00.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller companies may entail greater price volatility than investing
in stocks of larger companies. From time to time, the stock market may not favor
the small size growth companies in which the Fund invests.
See accompanying index descriptions on page 28.
11
ING DISCIPLINED LARGECAP FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by Hugh T.M.
Whelan, CFA, Aeltus Investment Management, Inc., the Sub-Advisor.
GOAL: The ING Disciplined LargeCap Fund (formerly, ING Research Enhanced Index
Fund) (the "Fund") seeks capital appreciation by investing at least 80% of its
net assets in stocks included in the S&P 500.
MARKET OVERVIEW: The S&P 500 Index posted a loss of 8.06% over the 12 months
ended May 31, 2003. Declines occurred in the first half of the period due to
accounting concerns, conflict with Iraq, and concerns regarding the strength of
the U.S. economic rebound. However, the market retraced a significant portion of
those losses this year after the successful resolution of the war and mounting
evidence of improving corporate earnings.
Within the market, leadership has swung sharply back and forth between defensive
stocks and former growth stocks. The sharp rallies of the fourth quarter of 2002
and from April 2003 have favored the smallest stocks within the index,
especially those trading at low dollar prices. For the whole period financials,
health care and information technology stocks were the strongest performers. The
utilities and consumer discretionary sectors suffered the worst performance
during the period.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided
a total return of -9.39%, compared to -8.06% for the S&P 500 Index.
PORTFOLIO SPECIFICS: Our return attribution analysis indicates that the bulk of
the underperformance was due to stock selection, especially in April - May of
2003. The models we use to determine our overweights and underweights measure
three things: business momentum/earnings quality, valuation, and market
recognition. In looking at what was effective and what was not, we were hurt
primarily by our market recognition variables, including price momentum, analyst
estimate revision, and short interest during the rally in 2003. This was due to
the fact that market's recent focus on small, low priced stocks represents a
sharp change in market leadership and is unsupported by our measures of positive
analyst estimate revisions. Only some of our valuation factors, like price to
free cash flow, cash as a percentage of market value, and forward P/E were
effective during the period.
While the Fund benefited from its underweights in less fundamentally attractive
stocks in 2002, this year our underweights have detracted from performance as
the stocks with the poorest fundamentals according to our measures have had the
best performance on balance. The largest individual detractors from performance
were our overweights of Home Depot and Cisco, and our underweight in AIG.
Positive contributors to performance were our underweights in Altria Group,
Baxter International, and Electronic Data Systems.
The Fund's sector allocation did not have a significant impact on performance,
as is typically the case because we maintain sector exposures that are very
close to those of our benchmark.
MARKET OUTLOOK: Our bottom-up quantitative ranking process is leading us
currently to modest overweights in industrials and financials and small
underweights in the healthcare and consumer discretionary sectors. Our fully
invested approach will continue to focus on the goal of adding performance
through strong individual stock selection -- not through sector or style
rotation -- while maintaining overall portfolio characteristics that are
representative of the S&P 500 Index.
We believe that if the current rally continues, our model will identify the
strongest performing stocks based on our research which shows that stocks with
attractive valuations, strong underlying business momentum, and clear market
recognition usually outperform stocks, which have the worst scores in these
areas over the long run.
12
Portfolio Manager's Report ING DISCIPLINED LARGECAP FUND
- --------------------------------------------------------------------------------
12/30/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
---------- ---------- ---------- ---------- ---------- ----------
ING Disciplined LargeCap Fund Class I $1,000,000 $1,074,000 $1,143,400 $1,006,600 $ 862,800 $ 781,800
S&P 500 Index $1,000,000 $1,064,741 $1,176,250 $1,052,108 $ 906,429 $ 833,331
AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS ENDED MAY 31, 2003
------------------------------
SINCE INCEPTION
1 YEAR 12/30/98
------ --------
Class I -9.39% -5.42%
S&P 500 Index -8.06% -4.04%(1)
Based on a $1,000,000 initial investment, the graph and table above illustrate
the total return of ING Disciplined LargeCap Fund against the S&P 500 Index. The
Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and expenses otherwise payable by the Fund. 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Since inception performance for the index is shown from 01/01/99.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. While equities may offer the potential for greater
long-term growth than most debt securities, they generally have higher
volatility. Derivatives are subject to the risk of changes in the market price
of the security and the risk of loss due to changes in interest rates. The use
of certain derivatives may also have a leveraging effect, which may increase the
volatility of the Fund. From time to time, the stock market may not favor the
large company growth oriented securities in which the Fund invests.
See accompanying index descriptions on page 28.
13
ING LARGE COMPANY VALUE FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by William F.
Coughlin, CFA, ING Investments, LLC.*
GOAL: The Large Company Value Fund's (the "Fund") principal objective is
long-term capital appreciation through investment in a diversified portfolio
consisting primarily of common stocks of large companies. Income is a secondary
objective.
MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31,
2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad
measures of market performance) declined 7.73% and 8.06%, respectively. The
market's decline was evident in measures of mid-cap growth and small-cap growth
stocks as well. The Russell MidCap Growth Index fell 5.84%, and the Russell 2000
Growth Index dropped 9.59%.
The reporting period was marked by continued disappointment in the economic
numbers but strength in consumer spending, buoyed by record refinancing. During
the final months of the fiscal year, investors were focused on geopolitical
uncertainties, especially the potential for armed conflict in Iraq conflict.
Once the coalition forces did, in fact, enter Iraq, the market began trading up
off its March 11 low. Through the first week of April, the overall market gained
an additional 4%.
Recent market leadership has centered on the technology group, with value stocks
trailing the overall market by a small margin. We have seen some institutional
investors purchasing tech stocks, hoping the sector would provide the most
leveraged upside returns if a widespread economic recovery ensues. To date,
fundamentals have not, in our opinion, justified this type of anticipatory
buying. As value investors, we are willing to forgo a small amount of short-term
upside return whenever we see this kind of speculative buying, When the markets
settle, we expect investors will once again focus on the fundamentals of
individual companies.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares provided
a total return of -15.15% compared to the S&P/Barra Value index for which the
total return was -8.70%.
PORTFOLIO SPECIFICS: In the semiannual report we stated that the Fund
underperformed the index in the first half year, and this was primarily due to
exposure to electric utilities. In the six months since the last semiannual
report, the Fund returned 1.98% and the index 5.61%. During this period, the
source of the underperformance was mainly sector selection. In the most
noteworthy cases, we were overweight technology when it was performing poorly,
and were underweighted in utilities, which was the best performing sector in the
index. This was partly offset by our overweight in the strong health care
sector. By contrast, the aggregate effect of stock selection was much smaller,
although some of the components were individually significant. Stock selection
in the financials and consumer discretionary sectors had an adverse effect on
performance, while stock selection in technology and telecommunications was
positive. Over the last six months, sector weights underwent significant change.
We cut our underweight in financials by two-thirds, halved the overweight in
health care and converted the overweight in technology to an underweight.
MARKET OUTLOOK: Value stocks have recently been trailing their growth
counterparts. While we believe this is a short-term reactionary move, equities
across the spectrum are very reasonably priced today. This, in combination with
low interest rates and fairly indifferent/low consumer sentiment, makes for one
of the best investment opportunities we have seen in at least five years. Adding
in such factors as stock market fear, post-war reconstruction uncertainty,
record low interest rates, and a business environment that has been extremely
conservative, we believe the upside potential for our equity market far exceeds
the downside risk.
* A team of investment professionals led by William F. Coughlin, CFA, ING
Investments, LLC assumed responsibility for the Fund on April 21, 2003.
Portfolio Manager's Report ING LARGE COMPANY VALUE FUND
- --------------------------------------------------------------------------------
10/4/01 5/31/02 5/31/03
------- ------- -------
ING Large Company Value Fund Class Q $10,000 $10,280 $ 8,723
S&P Barra Value Index $10,000 $10,433 $ 9,526
S&P 500 Index $10,000 $10,349 $ 9,515
AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS ENDED MAY 31, 2003
-------------------------------
SINCE INCEPTION
1 YEAR 10/4/01
------ -------
Class Q -15.15% -7.90%
S&P Barra Value Index(1) -8.70% 8.38%(2)
S&P 500 Index -8.06% -2.94%(2)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of the ING Large Company Value Fund against the S&P 500 Index. The
Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 MANAGER, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) The Fund normally invests in companies that the portfolio manager considers
to be undervalued compared to the overall stock market. The S&P Barra Value
Index tracks the performance of companies with low price-to-book ratios.
(2) Since inception performance for the index is shown from 10/1/01.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. In exchange for higher growth potential, investing in
stocks of smaller and mid-sized companies may entail greater price volatility
than investing in stocks of larger companies. The Fund may also invest in
foreign securities. International investing does pose special risks, including
currency fluctuations, economic and political risks not found in investments
that are solely domestic. From time to time, the stock market may not favor the
large company value securities in which the Fund invests.
See accompanying index descriptions on page 28.
15
ING MAGNACAP FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by William F.
Coughlin, CFA, ING Investments, LLC.*
GOAL: The ING MagnaCap Fund (the "Fund") seeks growth of capital, with dividend
income as a secondary consideration.
MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31,
2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad
measures of market performance) declined 7.73% and 8.06%, respectively. The
market's decline was evident in measures of mid-cap growth and small-cap growth
stocks as well. The Russell MidCap Growth Index fell 5.84%, and the Russell 2000
Growth Index dropped 9.59%.
The reporting period was marked by continued disappointment in the economic
numbers but strength in consumer spending was buoyed by record refinancing.
During the final months of the fiscal year, investors were focused on
geopolitical uncertainties, especially the potential for armed conflict in Iraq.
Once the coalition forces did, in fact, enter Iraq, the market began trading up
off its March 11 low. Through the first week of April, the overall market gained
an additional 4%.
Recent market leadership has centered on the technology group, with value stocks
trailing the overall market by a small margin. We have seen some institutional
investors purchasing tech stocks, hoping the sector would provide the most
leveraged upside returns if a widespread economic recovery ensues. To date,
fundamentals have not, in our opinion, justified this type of anticipatory
buying. As value investors, we are willing to forgo a small amount of short-term
upside return whenever we see this kind of speculative buying. When the markets
settle, we expect investors will once again focus on the fundamentals of
individual companies.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares provided
a total return of -12.27% compared to the S&P 500 Index for which the total
return was -8.06%.
PORTFOLIO SPECIFICS: In the semi-annual report we stated that the Fund
underperformed the index in the first half year, and this was primarily due to
exposure to electric utilities. In the six months since the last semi-annual
report, the Fund returned 2.92% and the index 3.96%. During this period, the
source of the underperformance was mainly sector selection, although the
components were individually small. In the largest case, we underweighted
utilities, which was the best performing sector in the index. By contrast, the
aggregate effect of stock selection was minor, although some of the components
were individually significant. Stock selection in financials and the consumer
sectors had an adverse effect on performance, while stock selection in
healthcare and industrials was positive. Over the last six months, portfolio
sector weights underwent significant change. The primary change was to move to
an overweight in financials and reduced the underweight in the consumer sectors.
This was financed by increased underweights in technology and healthcare.
MARKET OUTLOOK: Value stocks have recently been trailing their growth
counterparts. While we believe this is a short-term reactionary move, equities
across the spectrum are very reasonably priced today. This, in combination with
low interest rates and fairly indifferent/low consumer sentiment, makes for one
of the best investment opportunities we have seen in at least five years. Adding
in such factors as stock market fear, post-war reconstruction uncertainty,
record low interest rates, and a business environment that has been extremely
conservative, we believe the upside potential for our equity market far exceeds
the downside risk.
* A team of investment professionals led by William F. Coughlin, CFA, ING
Investments, LLC assumed responsibility for the Fund on April 21, 2003.
16
Portfolio Manager's Report ING MAGNACAP FUND
- --------------------------------------------------------------------------------
11/19/99 5/31/00 5/31/01 5/31/02 5/31/03
-------- ------- ------- ------- -------
ING MagnaCap Fund Class Q $10,000 $ 9,975 $ 9,482 $ 8,469 $ 7,413
S&P 500 Index $10,000 $10,290 $ 9,204 $ 7,930 $ 7,290
S&P Barra Value Index $10,000 $10,363 $11,101 $ 9,391 $ 8,574
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS I OF CLASS Q
1 YEAR 3/5/03 11/19/99
------ ------ --------
Class I -- 16.82% --
Class Q -12.27% -- -8.13%
S&P Barra Value Index(1) -8.70% 15.05%(2) -4.30%(3)
S&P 500 Index -8.06% 17.82%(2) -8.63%(3)
Based upon a $10,000 initial investment, the graph and table above illustrate
the total return of ING MagnaCap Fund against the S&P 500 Index. The Index has
no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) The Fund invests in value securities that meet the Fund's disciplined
investment criteria. The S&P Barra Value Index tracks the performance of
companies with low price-to-book ratios.
(2) Since inception performance for the index is shown from 3/1/03.
(3) Since inception performance for the index is shown from 12/1/99.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. International investing does pose special risks
including currency fluctuation, economical and political risks not found in
domestic investments.
See accompanying index descriptions on page 28.
17
Portfolio Manager's Report ING MIDCAP VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: The Mid Cap Investment Committee of Brandes Investment
Partners L.P. the Fund's sub-adviser.
GOAL: The Fund seeks long-term capital appreciation by investing at least 80% of
its assets in equity securities of U.S. issuers with equity market
capitalizations greater than $1 billion but no greater than $5 billion at the
time of purchase.
MARKET OVERVIEW: For the year ended May 31, 2003, the S&P 500 Index declined
8.06%. Similarly, the Russell MidCap Value Index, which aims to measure the
performance of medium-sized U.S. stocks, shed 5.73%.
Early in the period, U.S. equity prices retreated amid continued concerns
regarding corporate accounting improprieties and mixed economic reports. To
bolster the sluggish economy, the U.S. Federal Reserve Board cut interest rates
a half percent in November.
In early 2003, stock prices continued to languish, as consumer confidence
reached its lowest level in nearly 10 years and the unemployment rate stayed at
6%. Uncertainty surrounding U.S. military action in Iraq also weighed on
sentiment. Stocks rebounded substantially in April and May, however, as evidence
of improving corporate profits, improving consumer sentiment, and the end of
large-scale combat in Iraq paralleled strong returns.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided
a total return of -16.35% compared to the Russell MidCap Value Index for which
the total return was -5.73%.
PORTFOLIO SPECIFICS: During the year, declines for holdings in the auto
components industry had the most significant influence on the Fund's returns.
Goodyear Tire & Rubber (2.1% of the Fund) and Visteon (1.6%) were among
positions registering declines. Holdings in the airlines and insurance
industries, such as AMR (airlines -- 1.6%) and Allmerica Financial (insurance --
0.9%), also tended to decline.
While a majority of the Fund's holdings declined during the period, advances for
positions in industries such as food products and semiconductors & equipment
contributed positively to performance. Other top performers included holdings
such as PG&E (electric utilities -- 1.9%) and Lucent Technologies
(communications equipment -- 2.0%).
During the period, we sold Reebok International (textiles, apparel & luxury
goods -- 0.0%) as its market price advanced to our estimate of its intrinsic
value. In addition, we sold positions such as Comverse Technology (wireless
telecom services -- 0.0%) and Massey Energy (metals & mining -- 0.0%) to pursue
other investment opportunities.
Positions added during the year included firms such as CIT Group (diversified
financial services -- 3.8%) and El Paso (electric utilities -- 2.5%). We
purchased each new position at price levels that we believe offer significant
potential for long-term appreciation. We also added to select existing positions
at price levels that we consider attractive.
As of May 31, 2003, the Fund's most significant weightings lie in the insurance
and electric utilities industries. Keep in mind that weightings are not the
product of industry-level forecasts or opinions, but merely stem from our
company-by-company search for compelling investment opportunities.
MARKET OUTLOOK: As value investors, we offer no predictions regarding the
short-term direction of the overall market. A key teaching from Ben Graham --
widely considered the father of the value investing approach -- is that, in the
short term, the stock market is a voting machine, with a stock's price
reflecting only the stock's popularity with investors on any given day. In the
long term, however, the market is more of a weighing machine, aligning a stock's
price to reflect the fair value of the underlying business.
For value investors, this means that a stock's price and its fair value often
"detach" from one another in the short term. Because of the manic-depressive
nature of the overall market -- where sentiment can shift between sweeping,
carefree optimism and overwhelming fear and uncertainty seemingly overnight --
prices of stocks tend to fluctuate much more than the intrinsic value of the
companies they represent. This irrationality can materialize on the upside,
lifting prices to dangerously lofty heights. It can also appear on the downside,
dragging prices for select stocks to bargain levels.
We target the latter situation, purchasing stocks that are trading at discounts
to their fair values and then holding these stocks until the market recognizes
their inherent worth. By confidently approaching the short-term vagaries of the
market with rational, objective analysis, we believe we can identify compelling
investment opportunities and deliver superior long-term results.
18
Portfolio Manager's Report ING MIDCAP VALUE FUND
- --------------------------------------------------------------------------------
3/4/02 5/31/02 5/31/03
---------- ---------- ----------
ING MidCap Value Fund Class I $1,000,000 $1,009,800 $ 844,700
Russell MidCap Value Index $1,000,000 $1,048,830 $ 988,717
TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
-------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS I OF CLASS Q
1 YEAR 3/4/02 4/17/02
------ ------ -------
Class I -16.35% -12.72% --
Class Q -16.62% -- -16.71%
Russell MidCap Value Index -5.73% -0.90%(1) -5.43%(2)
Based upon a $1,000,000 initial investment, the graph and table above illustrate
the total return of ING MidCap Value Fund against the Russell MidCap Value
Index. The Index has no cash in its portfolio, imposes no sales charges and
incurs no operating expenses. An investor cannot invest directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Since inception performance for the index is shown from 3/1/02.
(2) Since inception performance for the index is shown from 5/1/02.
PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an
investment in equity securities. In exchange for higher growth potential,
investing in stocks of mid-size companies may entail greater price volatility
than investing in stocks of larger companies. From time to time, the stock
market may not favor the mid-cap value securities in which the Fund invests.
See accompanying index descriptions on page 28.
19
ING SMALLCAP VALUE FUND Portfolio Manager's Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: The SmallCap Investment Committee of Brandes Investment
Partners L.P. the Fund's sub-adviser.
GOAL: The Fund seeks long-term capital appreciation by investing at least 80% of
its assets in equity securities of U.S. issuers with equity market
capitalizations of $1.5 billion or less at the time of purchase.
MARKET OVERVIEW: For the year ended May 31, 2003, the S&P 500 Index declined
8.06%. Similarly, the Russell 200 Value Index, which aims to measure the
performance of smaller U.S. stocks, shed 8.78%.
Early in the period, U.S. equity prices retreated amid continued concerns
regarding corporate accounting improprieties and mixed economic reports. To
bolster the sluggish economy, the U.S. Federal Reserve Board cut interest rates
a half percent in November.
In early 2003, stock prices continued to languish, as consumer confidence
reached its lowest level in nearly 10 years and the unemployment rate stayed at
6%. Uncertainty surrounding U.S. military action in Iraq also weighed on
sentiment. Stocks rebounded substantially in April and May, however, as evidence
of improving corporate profits, improving consumer sentiment, and the end of
large-scale combat in Iraq paralleled strong returns.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided
a total return of -9.49% compared to the Russell 200 Value Index for which the
total return was -8.78%.
PORTFOLIO SPECIFICS: During the year, declines for holdings in the metals &
mining industry had the most significant influence on the Fund's returns.
Stillwater Mining (1.4% of the Fund) and Wolverine Tube (2.3%) were among
positions registering declines. Holdings in the textiles, apparel & luxury goods
and electrical equipment industries, such as Tommy Hilfiger (textiles, apparel &
luxury goods -- 2.2%) and Belden (electrical equipment -- 2.5%), also tended to
decline.
While a majority of the Fund's holdings declined during the period, advances for
positions in industries such as communications equipment and wireless telecom
services contributed positively to performance. Other top performers included
holdings such as Avaya (communications equipment -- 4.0%) and Fleetwood
Enterprises (household durables -- 2.8%).
During the period, we sold positions such as American Physicians Capital
(insurance) and Syms (specialty retail) as their market prices advanced to our
estimates of their intrinsic values. In addition, we sold select holdings to
pursue other investment opportunities.
Positions added during the year included firms such as Goodyear Tire & Rubber
(auto components -- 3.6%) and Gateway (computers & peripherals -- 2.5%). We
purchased each new position at price levels that we believe offer significant
potential for long-term appreciation. We also added to select existing positions
at price levels that we consider attractive.
As of May 31, 2003, the Fund's most significant weighting lies in the metals &
mining industry. Keep in mind that weightings are not the product of
industry-level forecasts or opinions, but merely stem from our
company-by-company search for compelling investment opportunities.
MARKET OUTLOOK: As value investors, we offer no predictions regarding the
short-term direction of the overall market. A key teaching from Ben Graham --
widely considered the father of the value investing approach -- is that, in the
short term, the stock market is a voting machine, with a stock's price
reflecting only the stock's popularity with investors on any given day. In the
long term, however, the market is more of a weighing machine, aligning a stock's
price to reflect the fair value of the underlying business.
For value investors, this means that a stock's price and its fair value often
"detach" from one another in the short term. Because of the manic-depressive
nature of the overall market -- where sentiment can shift between sweeping,
carefree optimism and overwhelming fear and uncertainty seemingly overnight,
prices of stocks tend to fluctuate much more than the intrinsic value of the
companies they represent. This irrationality can materialize on the upside,
lifting prices to dangerously lofty heights. It can also appear on the downside,
dragging prices for select stocks to bargain levels.
We target the latter situation, purchasing stocks that are trading at discounts
to their fair values and then holding these stocks until the market recognizes
their inherent worth. By confidently approaching the short-term vagaries of the
market with rational, objective analysis, we believe we can identify compelling
investment opportunities and deliver strong long-term results.
20
Portfolio Manager's Report ING SMALLCAP VALUE FUND
- --------------------------------------------------------------------------------
3/6/02 5/31/02 5/31/03
---------- ---------- ----------
ING SmallCap Value Fund Class I $1,000,000 $1,032,000 $ 934,100
Russell 200 Value Index $1,000,000 $1,002,333 $ 914,341
TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003
------------------------------------------------
SINCE INCEPTION SINCE INCEPTION
OF CLASS I OF CLASS Q
1 YEAR 3/7/02 4/30/02
------ ------ -------
Class I -9.49% -5.35% --
Class Q -9.47% -- -11.61%
Russell 200 Value Index -8.78% -6.91%(1) -7.45%(2)
Based upon a $1,000,000 initial investment, the graph and table above illustrate
the total return of ING SmallCap Value Fund against the Russell 200 Value Index.
The Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Since inception performance for the index is shown from 3/1/02.
(2) Since inception performance for the index is shown from 5/1/02.
PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an
investment in equity securities. In exchange for higher growth potential,
investing in stocks of smaller companies may entail greater price volatility
than investing in stocks of larger companies. From time to time, the stock
market may not favor the small cap value securities in which the Fund invests.
See accompanying index descriptions on page 28.
21
ING CONVERTIBLE FUND Portfolio Managers' Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by Anuradha Sahai,
Vice President, ING Investments, LLC.*
GOAL: The ING Convertible Fund (the "Fund") seeks to maximize long-term total
return by investing at least 80% in convertible securities consisting of capital
appreciation and current income.
MARKET OVERVIEW: The convertible indices, the S&P 500, and the NASDAQ Composite
benchmark witnessed significant volatility during the one-year period ending May
31, 2003. The economic malaise that started turning around towards the latter
half of this period was the underlying driver of the ups and downs witnessed.
Additional factors contributing to the volatility were revelations of massive
corporate accounting frauds, SEC investigations leading to reduced Wall Street
credibility and the Iraqi situation -- all in all leading to an action packed
one-year period. The credit markets were also very volatile with corporate bond
spreads widening and then remarkably tightening towards the end of this period.
The turnaround occurred following the October low with equities rallying and
credit spreads tightening on improving economic numbers and an additional
interest rate cut by the Fed.
As an asset class, convertibles outperformed stocks over the one-year period.
Initially, with the decrease in equity valuations, their bond-like feature
helped convertibles outperform equities. The strong recent up trend in equities
along with credit spread tightening helped the convertible market outperform in
the latter part of this period too.
Liquidity in the market remains good in contrast to some fixed income markets.
Hedge funds reportedly have plenty of buying power and there continues to be a
large appetite for convertible new issuance. The traditional ability to hedge
incremental holdings of convertible securities by shorting the underlying common
stock continues to allow both dealers and hedge funds to position convertibles
more easily than they can accommodate straight corporate debt. New issuance
picked up in the last couple of months with May witnessing 48 new deals raising
just over $14 billion. A number of large deals have come to market largely
resulting from issuers' reluctance to go to the equity market as stock
valuations came down and due to their inability to raise capital in the straight
debt market at attractive rates. With demand for paper high as a result of
increased inflows and companies able to raise cheap capital in the convertible
market, issuance continues to remain high.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares returned
8.11% compared to 11.20% for the First Boston Convertible Index.
PORTFOLIO SPECIFICS: The Fund performance improved from its repositioning to a
more market weighted stance. Short-term defensive posturing with respect to
equity sensitivity augmented performance. Risk management measures helped the
fund weather the significant volatility the markets witnessed and improve
risk-adjusted returns. The Fund benefited from favorable security selection in
technology, media, industrials and consumer staples sectors and had a beneficial
under weight sensitivity to the consumer discretionary sector. This was somewhat
offset by underperformance in the transportation and utilities sectors.
Underperformance versus the benchmark was largely due to the under weighting of
the fund in riskier names that outperformed towards the latter half of this
period.
MARKET OUTLOOK: We believe the recent surge in the equity markets, led by over
optimism in the strength of the economy, may be unsustainable in the near term.
Economic indicators are improving, albeit gradually. Despite the indications
that the Fed may ease further, we think the profitability outlook for firms will
only slowly improve. Businesses simply do not have much pricing power and indeed
this aspect is one of the reasons why inflation should remain under control
during the economic recovery.
In these volatile times, we believe that convertible securities are attractive
relative to comparable alternative asset classes. We continue to look for
companies across the spectrum that will benefit from a gradually recovering
economy as we expect the market will likely reward companies that typically
benefit in the recovery part of the cycle.
A bottom up approach, which relies on fundamental analysis and careful security
selection within our broader top down sector positioning strategy, continues to
be the foundation for our investment decisions.
* A team of investment professionals led by Anuradha Sahai, Vice President,
ING Investments, LLC assumed responsibility for the Fund on April 21, 2003.
22
Portfolio Managers' Report ING CONVERTIBLE FUND
- --------------------------------------------------------------------------------
8/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- ------- ------- ------- ------- -------
ING Convertible Fund Class Q $10,000 $11,761 $13,476 $16,485 $20,321 $27,740 $24,619 $21,906 $23,683
First Boston Convertible Index $10,000 $11,194 $11,980 $13,841 $15,267 $19,433 $18,421 $16,937 $18,833
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
----------------------------------------
SINCE INCEPTION
1 YEAR 5 YEAR 8/31/95
------ ------ -------
Class Q 8.11% 7.52% 11.77%
First Boston Convertible Index 11.20% 6.35% 8.51%(1)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Convertible Fund against the First Boston Convertible Index.
The Index has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and operating 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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Since inception performance for index is shown from 9/1/95.
PRINCIPAL RISK FACTOR(S): The credit standing of the issuer and other factors
may affect the investment value of a convertible security. The market value of
convertible debt securities tends to vary inversely with the level of interest
rates. Lower rated securities may be less liquid than higher quality
investments. The Fund also has exposure to financial, market and interest rate
risks. Higher yields reflect the higher credit risks associated with certain
lower rated securities in the Fund's portfolio and in some cases, the lower
market prices for those instruments. The Fund may also invest in small and
medium sized companies, which may be more susceptible to greater price
volatility than larger companies.
See accompanying index descriptions on page 28.
23
ING EQUITY AND BOND FUND Portfolio Managers' Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail,
CFA, manages the equity portion of the Fund, with a team led by James B.
Kauffman manages the fixed income portion of the Fund. Both are ING Investments,
LLC.
GOAL: The ING Equity and Bond Fund (the "Fund") seeks a balance of long-term
capital appreciation and current income by investing in both equities and bonds.
MARKET REVIEW:
EQUITIES: The last twelve months witnessed a volatile equity market as measured
by the S&P 500, and despite recent strength, the Index has yet to reach its June
2002 level of 1050. Beginning in June 2002, the market was buffeted by concerns
over the integrity of the U.S. economic and financial systems as reports of
fraud, accounting irregularities and fears of an economic slow down took center
stage. During the third quarter of 2002, the S&P 500 dropped 24% to 800,
subsequently recovered to 962 but retested the 800 level again in October. We
saw a recovery in the fourth quarter of 2002 but the market settled into a
narrow trading range before Iraqi War fears again drove the Index back to the
800 level. Since then, the successful completion of the Iraqi campaign, and
evidence that the aggressive Federal Reserve loosening appears to be leading to
an economic rebound contributred to a dramatic market ralley in May. Since the
bottom in March, the S&P 500 is up 23%.
While in the short term this may be over extended, we believe we are on the
verge of a recovery witnessed by recent strength in consumer confidence and
business surveys suggesting the worst may be over. Additionally, the recent tax
cut should spur activity in the third quarter leading to a better economy for
the last quarter of 2003 and into 2004. The market has historically anticipated
changes in the economy and we believe the strength in May may be signaling
better times ahead.
BONDS: 2002 witnessed some of the greatest volatility and sudden credit
turbulence in recent memory. As the year progressed, scores of erstwhile
investment grade names -- many of which were in the top fifty corporate issuers
by size -- plummeted to junk. Moreover, the credit default swap markets provided
hedge funds the means to exploit the illiquidity in widely held or tarnished
names.
Disappointing earnings and a relentless equity market tailspin prompted
institutional investors to seek refuge in U.S. Treasuries, mortgage-backed
securities, and higher quality emerging market debt. Geo-political uncertainties
exacerbated the flight to quality and pushed U.S. Treasuries to a forty-year low
during the year. Low rates, in turn, incited a riot of mortgage refinancing.
By the beginning of the fourth quarter U.S. domestic investment grade credit
risk premia stood at historic levels. The magnitude of the Fed's November's rate
cut surprised the markets, and risk taking returned. Hedge funds scrambled to
cover shorts in the credit default swaps market while traditional bond investors
sold Treasuries to add spread product in both high yield and investment grade
sectors. Despite the turmoil in specific sectors, bonds out-performed equities
for the third year in a row as the Lehman Brothers Aggregate Bond Index posted a
positive 10.26% in 2002.
With the advent of the first quarter of 2003, capital markets became
increasingly focused on the pending war with Iraq. Early January witnessed the
continuation of the late 2002 rallies; however, as the likelihood of hostilities
increased, investors bid up short-dated Treasuries at the expense of stocks. The
prices of gold and energy shot up dramatically.
In May of 2003 the Federal Reserve sent an unequivocal message to the markets
with the release of its new policy statement: "the probability of an unwelcome
substantial fall in inflation, though minor, exceeds that of a pickup in
inflation from its already low level." Subsequent comments from Fed officials
reiterated their concern about the slow recovery and the steps they are willing
to take to forestall deflationary expectations.
With the prospect of an extended period of accommodative monetary policy, the
Treasury market promptly rallied to forty-five year lows. Asian central banks
and our own domestic mortgage buyers also added Treasuries: the former to defend
the dollar versus their local currency, and the later to offset the evaporating
duration of their holdings.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares returned
- -0.61% compared to -8.70% for the S&P Barra Value Index, 11.58% for the Lehman
Brothers Aggregate Bond Index and 0.04% for the Composite Index (60% S&P 500
Index / 40% Lehman Brothers Aggregate Bond Index).
PORTFOLIO SPECIFICS:
EQUITIES: The Equity portfolio lagged the S&P Barra Value Index reflecting it's
overweight in utilities and consumer staples for the last twelve months but
benefited from its over weight in the information sector, industrials and
telecommuication services. Utilities were specifically hurt by financial fears
based on lingering Enron effects and the need to pursue equity offering to shore
up weak balance sheets.
BONDS: The Fund benefited from strict credit disciplines during 2002 -- a period
of unprecedented financial fraud and deteriorating earnings. Security selection
and sector allocation, by and large, produced positive alpha. The addition of
high yield, emerging market, and euro-denominated bonds in the fourth quarter of
the calendar year aided performance into 2003.
MARKET OUTLOOK:
EQUITIES: While the market has done well in the near term and may need to
consolidate recent gains, we believe the intermediate to longer term direction
may be higher. The combined forces of lower interest rates, tax cuts, a weaker
U.S. dollar and its positive impact on domestic exports should lay the
foundation for an improving U.S. economy as we progress through 2003 and into
2004. Recall that 2004 is a presidential election year and historically markets
do well into this event. The Equity Portfolio will continue to search for
undervalued situations where near to intermediate catalysts could unleash that
perceived value.
BONDS: Weak aggregate demand has followed the capital expenditure binge years of
the late 1990's. Ultimately the stimulative effects of negative real rates, a
weakening dollar, and tax cuts will likely boost the domestic economy out of its
lethargy. And we do not agree with the school of thought that draws parallels
between our current slow growth predicament and the decade long recession in
Japan. In the U. S. fiscal and monetary policy has been largely proactive, and
overleveraged companies have been allowed to fail.
The big question for bond investors is how long rates will stay low and when
will the economy gain traction. Given that excess capacity is high for this
stage of a "recovery" and that pricing power is weak, the outlook is murky; but
we do not anticipate a deflationary spiral. In response to these historically
low interest rates we are slightly short in duration and have moved to an
underweight in mortgages.
24
Portfolio Managers' Report ING EQUITY AND BOND FUND
- --------------------------------------------------------------------------------
8/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
------- ------- ------- ------- ------- ------- ------- ------- -------
ING Equity and Bond Fund Class Q $10,000 $11,233 $12,245 $15,530 $18,159 $18,183 $18,239 $17,231 $17,126
S&P Barra Value Index $10,000 $12,020 $15,082 $19,443 $21,987 $22,557 $24,165 $20,441 $18,664
Lehman Brothers Aggregate Bond Index $10,000 $10,262 $11,115 $12,328 $12,865 $13,136 $14,859 $16,063 $17,923
Lipper Balanced Fund Index $10,000 $11,346 $13,700 $16,806 $19,282 $20,701 $20,434 $19,361 $19,369
Composite Index (60% S&P 500 Index /
40% Lehman Brothers Aggregate Bond Index $10,000 $11,476 $13,443 $16,148 $17,850 $18,855 $19,251 $18,307 $15,250
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
----------------------------------------
SINCE INCEPTION
1 YEAR 5 YEAR 8/31/95
------ ------ -------
Class Q -0.61% 1.98% 7.19%
S&P Barra Value Index -8.70% -0.81% 8.38%(1)
Lehman Brothers Aggregate Bond Index 11.58% 7.77% 7.82%(1)
Lipper Balanced Fund Index -1.67% 2.20% 14.76%(1)
Composite Index (60% S&P 500 Index/40%
Lehman Brothers Aggregate Bond Index) 0.04% 2.88% 8.90%(1)
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of ING Equity and Income Fund against the S&P Barra Value Index,
Lehman Brothers Aggregate Bond Index, Lipper Balanced Fund Index and Composite
Index (60% S&P 500 Index, 40% Lehman Brothers Aggregate Bond Index). The Indices
have no cash in their portfolios, impose no sales charges and incur no operating
expenses. An investor cannot invest directly in an index.
Total returns reflect the fact that the Investment Manager has waived certain
fees and operating 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 table and graph do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
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 PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Since inception performance for the index is shown from 9/1/95.
PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an
investment in equity securities. Credit, interest rate and other risks that
accompany debt investments. The Fund may invest up to 20% of its total assets in
foreign securities. International investing does pose special risks, including
currency fluctuation, economic and political risks not found in investments that
are solely domestic. Higher yields reflect the higher credit risks associated
with certain lower rated securities in the Fund's portfolio and in some cases,
the lower market prices for those instruments. High yield securities and
securities of smaller companies may be less liquid than other investments. The
use of certain derivatives may also have a leveraging effect, which may increase
the volatility of the Fund.
See accompanying index descriptions on page 28.
25
ING REAL ESTATE FUND Portfolio Managers' Report
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT: T. Ritson Ferguson, CFA, Managing Director and Chief
Investment Officer, Kenneth D. Campbell, Managing Director, Clarion CRA
Securities, L.P. the Sub-Adviser.
GOAL: The ING Real Estate Fund (the "Fund") seeks total return through
investment in common and preferred stocks of U.S. real estate investment trusts
(REITs) and real estate companies.
MARKET OVERVIEW: Real estate securities continued their relative outperformance
versus broad equities for the year ended May 31, 2003 as real estate securities
recorded total return of +3.08% during this time period versus -8.06% for the
S&P 500 and -8.18% for small cap equities as measured by the Russell 2000 index.
This continues an outperformance streak which has persisted over the past three
years as real estate securities are +13.95% per annum for the three years ended
May 31, 2003 versus -10.86% per annum for the S&P 500 and -1.16% per annum for
small cap stocks (Russell 2000). Investors' appetite for yield and stability in
cash flows continue to generate strong funds flow into the sector as real estate
mutual funds flow in 2003 year-to-date exceeds $1 billion according to AMG data.
The sub-adviser expects continued healthy funds flow in the near to intermediate
term via both open end and closed end real estate mutual funds.
Much of the total return over the past year has been achieved during the past
three months as REITs have benefited from a combination of factors, the most
important of which are the sense that the economy may be entering a recovery
phase, which would be good for job growth and thus commercial real estate
demand, combined with an attractive current income component in an investment
landscape starved for yield.
PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided
a total return of 4.13% compared to the Wilshire Real Estate Securities Index
which returned 3.10% for the same period.
PORTFOLIO SPECIFICS: Property type selection was the major contributor to
relative outperformance over the past year as the retail property types (malls
and shopping centers) have significantly outperformed the other major property
groups (office and apartments). The Fund's overweights in shopping centers
(+23.8% for the year) and malls (+21.7%) combined with underweights in the
underperforming office (-1.2%) and apartments (-2.8%) have both contributed to
relative outperformance. Also contributing has been a sharp underweight in the
beleaguered hotel sector (-20.3% for the year) which is still attempting to
regain its footing following several years of weak demand induced by a weak
economy and exacerbated by international events.
MARKET OUTLOOK: We remain constructive on the outlook for returns to an actively
managed real estate stock portfolio. By our estimates, the average REIT is
trading at a 1.2% discount to the private market value of the company's real
estate. Also, REITs are still trading at about 10 times forward 4-quarter
earnings which is still well below the average REIT pricing multiple of 12 times
forward earnings. Funds flows to real estate stock funds remain strong
indicating investors still are attracted to the attractive yield and total
return potential of REITs. The size of the public real estate company universe
continues to grow. Initial Public Offerings for Maguire Properties (the largest
office space owner in Downtown Los Angeles) and American Financial Realty (an
acquirer of corporate-owned properties, primarily single-tenant bank branches
and multi-tenant office buildings whose Chairman is Lewis Ranieri, a pioneer of
mortgage backed securities) are expected in late June. With the prospect of
continued positive funds flow, reasonable valuations, and attractive dividend
yields, the investment thesis for real estate securities we believe remains
favorable.
26
Portfolio Managers' Report ING REAL ESTATE FUND
- --------------------------------------------------------------------------------
12/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ING Real Estate
Fund Class I $1,000,000 $1,016,200 $1,196,200 $1,107,900 $1,118,900 $1,330,100 $1,582,800 $1,648,200
Wilshire Real Estate
Security Index $1,000,000 $1,014,800 $1,140,400 $1,074,600 $1,067,400 $1,304,300 $1,532,400 $1,579,900
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED MAY 31, 2003
----------------------------------------
SINCE INCEPTION
OF CLASS I
1 YEAR 5 YEAR 12/31/96
------ ------ --------
Class I 4.13% 6.62% 8.11%
Wilshire Real Estate Security Index 3.10% 6.74% 7.39%(1)
Based upon a $1,000,000 initial investment, the graph and table above illustrate
the total return of ING Real Estate Fund against the Wilshire Real Estate
Security Index. The Index has no cash in its portfolio, imposes no sales charges
and incurs no operating expenses. An investor cannot invest directly in an
index.
Performance graph and table do not reflect the deduction of taxes that a
shareholder will pay on Fund distributions or the redemption of Fund shares.
Total returns reflect the fact that the Investment Manager has waived certain
fees and operating expenses otherwise payable by the Fund, subject to possible
later reimbursement during a three-year period.
Total returns would have 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 PORTFOLIO PORTFOLIO
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) Since inception for the index is shown from 01/01/97.
PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an
investment in real estate equities and volatility due to non-diversification of
investments. Subject to risks similar to those associated with the direct
ownership of real estate. The Fund primarily invests in common and preferred
stocks of U.S. real estate investment trusts (REITs) and real estate companies.
Risk of concentration -- because the Fund's investments are concentrated in the
real estate industry, the value of the Fund may be subject to greater volatility
than a fund with a portfolio that is less concentrated. These companies are
sensitive to factors such as changes in real estate values and property taxes,
interest rates, cash flow of underlying real estate assets, supply and demand,
and the management skill and credit worthiness of the issuer. REITs may also be
affected by tax and regulatory requirements. The Fund may invest in small- and
mid-sized companies, which may be more susceptible to price swings than larger
companies. Securities of smaller companies trade in lower volume and may be less
liquid than securities of large, more established companies.
See accompanying index descriptions on page 28.
27
INDEX DESCRIPTIONS
- --------------------------------------------------------------------------------
The DOW JONES INDUSTRIAL AVERAGE is a price-weighted average of 30 blue-chip
stocks that are generally the leaders in their industry.
The FIRST BOSTON CONVERTIBLE INDEX is an index representing the universe of
convertible securities.
The LEHMAN BROTHERS AGGREGATE BOND INDEX is a widely recognized index of
publicly issued fixed rate U.S. government, investment grade mortgage-backed and
corporate debt securities.
The MERRILL LYNCH 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 credit rating lower than
BBB-/Baa3 but are not in default.
The NASDAQ 100 FINANCIAL INDEX is a capitalization-weighted index of the 100
largest financial companies, as well as foreign issues, including American
Depositary Receipts, traded on the Nasdaq National Market System and SmallCap
Market.
The NASDAQ 100 INDEX is a modified capitalization-weighted index of the 100
largest and most active non-financial domestic and international issues listed
on the Nasdaq.
The NASDAQ COMPOSITE INDEX is a broad-based capitalization-weighted index of all
Nasdaq National Market & SmallCap stocks.
The RUSSELL 1000 GROWTH INDEX is an index that measures the performance of those
Russell 1000 Index companies with higher price-to-book ratios and higher
forecasted growth values.
The RUSSELL 200 VALUE INDEX measures the performance of those Russell 200
companies with lower price-to-book ratios and lower forecasted growth values.
The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000
Index companies with higher price-to-book ratios and higher forecasted growth
values.
The RUSSELL 2000 INDEX consists of the smallest 2,000 companies in the Russell
3000 Index.
The RUSSELL 3000 INDEX measures the performance of the 3,000 largest U.S.
companies based on total market capitalization.
The RUSSELL MIDCAP GROWTH INDEX consists of securities with capitalizations
between $450 million and $3.8 billion with greater than average growth
orientation.
The RUSSELL MIDCAP INDEX measures the performance of the 800 smallest companies
in the Russell 1000 Index.
The RUSSELL MIDCAP VALUE INDEX is an index that measures the performance of
Russell Midcap companies with lower price-to-book ratios and lower forecasted
growth values.
The S&P 500 FINANCIALS INDEX is a capitalization-weighted index of all stocks
designed to measure the performance of the financial sector of the S&P Index.
The S&P 500 INDEX is a capitalization-weighted index of 500 stocks chosen for
market size, liquidity, and industry group representation.
The S&P BARRA GROWTH INDEX is a capitalization-weighted index of all the stocks
in the S&P 500 Index that have high price-to-book ratios.
The S&P BARRA VALUE INDEX is a capitalization-weighted index of all the stocks
in the S&P 500 Index that have low price-to-book ratios.
The S&P MIDCAP 400 INDEX is a capitalization-weighted index that measures the
performance of the mid-range sector of the U.S. stock market.
The WILSHIRE REAL ESTATE SECURITY INDEX measures the performance of publicly
traded real estate securities, such as Real Estate Investment Trusts (REITs) and
Real Estate Operating Companies (REOCs). The index is capitalization-weighted.
All indices are unmanaged.
An investor cannot invest directly in an index.
28
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Class I and Q shareholders and the Boards of Directors and Trustees of ING
Equity Trust, ING Investment Funds, Inc., and ING Mayflower Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of ING Growth + Value Fund, ING Growth
Opportunities Fund, ING LargeCap Growth Fund, ING MidCap Opportunities Fund, ING
SmallCap Opportunities Fund, ING Disciplined LargeCap Fund (formerly ING
Research Enhanced Index Fund), ING Large Company Value Fund, ING MagnaCap Fund,
ING MidCap Value Fund, ING SmallCap Value Fund, ING Convertible Fund, ING Equity
and Bond Fund, and ING Real Estate Fund as of May 31, 2003, and the statements
of operations, statements of changes in net assets, and financial highlights for
all years and periods as indicated herein for the ING Real Estate Fund, ING
Large Company Value Fund, ING MagnaCap Fund, ING MidCap Value Fund, and ING
SmallCap Value Fund, the statements of operations, statements of changes in net
assets, and financial highlights for all years and periods as indicated herein
ending on or after December 31, 2000 for the ING Growth Opportunities Fund, ING
MidCap Opportunities Fund, and ING SmallCap Opportunities Fund, and the
statements of operations, statements of changes in net assets, and financial
highlights for all years and periods as indicated herein ending on or after May
31, 2001 for the ING Growth + Value Fund and ING Disciplined LargeCap Fund and
the statements of operations, statements of changes in net assets, and financial
highlights for all years and periods as indicated herein ending on or after June
30, 1999 for the ING LargeCap Growth Fund, ING Convertible Fund, and ING Equity
and Bond Fund. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. For all periods ending prior to January 1, 2000 the financial highlights
of the ING Growth Opportunities Fund, ING MidCap Opportunities Fund, and ING
SmallCap Opportunities Fund were audited by other auditors whose report thereon
dated February 17, 2000 expressed an unqualified opinion on those financial
highlights. For all periods ending prior to November 1, 2000, the financial
highlights, of the ING Growth + Value Fund and the ING Disciplined LargeCap Fund
were audited by other auditors whose report thereon dated December 5, 2000
expressed an unqualified opinion on those financial highlights. For all periods
ending prior to April 1, 1999, the financial highlights of the ING LargeCap
Growth Fund, ING Convertible Fund and ING Equity and Income Fund were audited by
other auditors whose report thereon dated May 7, 1999 expressed an unqualified
opinion on those financial highlights.
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. Our procedures included confirmation of
securities owned as of May 31, 2003 by correspondence with the custodian and
brokers, or by other appropriate audit procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above, excluding those financial statements and financial highlights which were
indicated above as having been audited by others, present fairly, in all
material respects, the financial position of each of the aforementioned funds,
as of May 31, 2003, the results of their operations, the changes in their net
assets, and their financial highlights for the periods specified in the first
paragraph above, in conformity with accounting principles generally accepted in
the United States of America.
/s/ KPMG LLP
Boston, Massachusetts
July 11, 2003
29
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
GROWTH + GROWTH LARGECAP
VALUE OPPORTUNITIES GROWTH
FUND FUND FUND
-------------- -------------- --------------
ASSETS:
Investments in securities at value* $ 199,816,760 $ 177,115,733 $ 172,895,754
Short-term investments at amortized cost 4,794,000 2,618,000 1,282,000
Cash 390 503 563
Receivables:
Investment securities sold 4,011,832 -- --
Fund shares sold 175,257 25,267 71,903
Dividends and interest 43,436 102,359 57,941
Prepaid expenses 31,562 38,672 36,008
-------------- -------------- --------------
Total assets 208,873,237 179,900,534 174,344,169
-------------- -------------- --------------
LIABILITIES:
Payable for investment securities purchased 814,532 1,001,030 --
Payable for fund shares redeemed 857,364 1,457,964 338,631
Payable to affiliates 466,682 337,671 254,047
Payable for trustee fees 7,039 6,124 8,968
Other accrued expenses and liabilities 343,027 268,602 377,993
-------------- -------------- --------------
Total liabilities 2,488,644 3,071,391 979,639
-------------- -------------- --------------
NET ASSETS $ 206,384,593 $ 176,829,143 $ 173,364,530
============== ============== ==============
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 720,789,830 $ 622,948,756 $ 567,594,251
Undistributed net investment income -- -- --
Accumulated net realized loss on investments (540,538,181) (469,328,851) (426,892,932)
Net unrealized appreciation of investments 26,132,944 23,209,238 32,663,211
-------------- -------------- --------------
NET ASSETS $ 206,384,593 $ 176,829,143 $ 173,364,530
============== ============== ==============
* Cost of investments in securities $ 173,683,816 $ 153,906,495 $ 140,232,543
See Accompanying Notes to Financial Statements
30
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
ING ING ING
GROWTH + GROWTH LARGECAP
VALUE OPPORTUNITIES GROWTH
FUND FUND FUND
------------- ------------ ------------
CLASS A:
Net Assets $ 51,218,411 $ 49,944,101 $ 40,940,814
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.00
Shares outstanding 6,502,888 4,474,864 2,856,870
Net asset value and redemption price per share $ 7.88 $ 11.16 $ 14.33
Maximum offering price per share (5.75%)(1) $ 8.36 $ 11.84 $ 15.20
CLASS B:
Net Assets $ 105,172,828 $ 50,620,167 $ 72,574,856
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.00
Shares outstanding 14,063,729 4,873,454 5,186,003
Net asset value and redemption price per share(2) $ 7.48 $ 10.39 $ 13.99
Maximum offering price per share $ 7.48 $ 10.39 $ 13.99
CLASS C:
Net Assets $ 49,782,705 $ 24,014,717 $ 31,515,588
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.00
Shares outstanding 6,660,625 2,307,923 2,258,786
Net asset value and redemption price per share(2) $ 7.47 $ 10.41 $ 13.95
Maximum offering price per share $ 7.47 $ 10.41 $ 13.95
CLASS I:
Net Assets n/a $ 44,704,146 $ 22,155,643
Shares authorized n/a unlimited unlimited
Par value n/a $ 0.01 $ 0.00
Shares outstanding n/a 3,874,545 1,505,795
Net asset value and redemption price per share n/a $ 11.54 $ 14.71
Maximum offering price per share n/a $ 11.54 $ 14.71
CLASS Q:
Net Assets $ 210,649 $ 2,658 $ 6,177,629
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.00
Shares outstanding 26,984 240 421,358
Net asset value and redemption price per share $ 7.81 $ 11.07 $ 14.66
Maximum offering price per share $ 7.81 $ 11.07 $ 14.66
CLASS T:
Net Assets n/a $ 7,543,354 n/a
Shares authorized n/a unlimited n/a
Par value n/a $ 0.01 n/a
Shares outstanding n/a 719,377 n/a
Net asset value and redemption price per share(2) n/a $ 10.49 n/a
Maximum offering price per share n/a $ 10.49 n/a
- ----------
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
See Accompanying Notes to Financial Statements
31
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
MIDCAP SMALLCAP DISCIPLINED
OPPORTUNITIES OPPORTUNITIES LARGECAP
FUND FUND FUND
-------------- -------------- -------------
ASSETS:
Investments in securities at value* $ 167,296,926 $ 277,580,542 $ 82,242,505
Short-term investments at amortized cost 5,959,000 2,911,000 --
Cash 944 315 28,482
Receivables:
Investment securities sold -- -- 931,942
Fund shares sold 46,262 200,168 410,096
Dividends and interest 36,956 18,754 128,854
Other -- 74,677 --
Prepaid expenses 31,047 52,055 29,819
-------------- -------------- -------------
Total assets 173,371,135 280,837,511 83,771,698
-------------- -------------- -------------
LIABILITIES:
Payable for investment securities purchased 1,877,472 195,650 764,497
Payable for fund shares redeemed 309,512 1,190,446 128,804
Payable to affiliates 358,871 546,709 124,697
Payable for trustee fees 6,697 6,058 2,842
Other accrued expenses and liabilities 166,140 264,151 160,438
-------------- -------------- -------------
Total liabilities 2,718,692 2,203,014 1,181,278
-------------- -------------- -------------
NET ASSETS $ 170,652,443 $ 278,634,497 $ 82,590,420
============== ============== =============
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 336,384,095 $ 630,562,076 $ 140,555,354
Undistributed net investment income -- -- --
Accumulated net realized loss on investments (183,783,471) (393,085,385) (59,470,517)
Net unrealized appreciation (depreciation) of
investments 18,051,819 41,157,806 1,505,583
-------------- -------------- -------------
NET ASSETS $ 170,652,443 $ 278,634,497 $ 82,590,420
============== ============== =============
* Cost of investments in securities $ 149,245,107 $ 236,422,736 $ 80,736,922
See Accompanying Notes to Financial Statements
32
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
ING ING ING
MIDCAP SMALLCAP DISCIPLINED
OPPORTUNITIES OPPORTUNITIES LARGECAP
FUND FUND FUND
------------ ------------ ------------
CLASS A:
Net Assets $ 44,009,739 $118,569,934 $ 7,204,515
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.01
Shares outstanding 4,347,267 6,528,066 946,862
Net asset value and redemption price per share $ 10.12 $ 18.16 $ 7.61
Maximum offering price per share (5.75%)(1) $ 10.74 $ 19.27 $ 8.07
CLASS B:
Net Assets $ 43,182,807 $ 85,464,506 $ 34,357,914
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.01
Shares outstanding 4,408,128 5,067,344 4,659,172
Net asset value and redemption price per share(2) $ 9.80 $ 16.87 $ 7.37
Maximum offering price per share $ 9.80 $ 16.87 $ 7.37
CLASS C:
Net Assets $ 67,730,055 $ 63,406,199 $ 21,478,271
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.01
Shares outstanding 6,948,484 3,767,039 2,912,637
Net asset value and redemption price per share(2) $ 9.75 $ 16.83 $ 7.37
Maximum offering price per share $ 9.75 $ 16.83 $ 7.37
CLASS I:
Net Assets $ 10,843,973 $ 8,510,032 $ 19,549,720
Shares authorized unlimited unlimited unlimited
Par value $ 0.01 $ 0.01 $ 0.01
Shares outstanding 1,049,680 465,819 2,532,248
Net asset value and redemption price per share $ 10.33 $ 18.27 $ 7.72
Maximum offering price per share $ 10.33 $ 18.27 $ 7.72
CLASS Q:
Net Assets $ 4,885,869 $ 905,921 n/a
Shares authorized unlimited unlimited n/a
Par value $ 0.01 $ 0.01 n/a
Shares outstanding 479,635 49,718 n/a
Net asset value and redemption price per share $ 10.19 $ 18.22 n/a
Maximum offering price per share $ 10.19 $ 18.22 n/a
CLASS T:
Net Assets n/a $ 1,777,905 n/a
Shares authorized n/a unlimited n/a
Par value n/a $ 0.01 n/a
Shares outstanding n/a 104,293 n/a
Net asset value and redemption price per share(2) n/a $ 17.05 n/a
Maximum offering price per share n/a $ 17.05 n/a
- ----------
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
See Accompanying Notes to Financial Statements
33
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
LARGE COMPANY ING MIDCAP SMALLCAP
VALUE MAGNACAP VALUE VALUE
FUND FUND FUND FUND
------------- ------------- ------------- -------------
ASSETS:
Investments in securities at value* $ 133,646,066 $ 228,187,761 $ 37,639,860 $ 31,645,342
Short-term investments at amortized cost 4,169,000 4,312,000 1,767,000 349,000
Cash 673 155 588 109
Receivables:
Investment securities sold -- -- 799,868 --
Fund shares sold 34,081 1,901,885 222,690 87,703
Dividends and interest 332,338 521,471 51,149 32,583
Prepaid expenses 29,095 37,270 35,632 32,242
Reimbursement due from manager -- -- 7,380 4,870
------------- ------------- ------------- -------------
Total assets 138,211,253 234,960,542 40,524,167 32,151,849
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities purchased -- -- 883,984 --
Payable for fund shares redeemed 55,285 3,652,140 47,341 71,368
Payable to affiliates 123,123 253,747 55,820 46,028
Payable for trustee fees 64,875 8,819 1,913 1,118
Other accrued expenses and liabilities 136,318 292,048 58,238 56,345
------------- ------------- ------------- -------------
Total liabilities 379,601 4,206,754 1,047,296 174,859
------------- ------------- ------------- -------------
NET ASSETS $ 137,831,652 $ 230,753,788 $ 39,476,871 $ 31,976,990
============= ============= ============= =============
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 181,344,848 $ 305,810,446 $ 49,590,357 $ 36,213,792
Undistributed net investment income (accumulated
net investment loss) 772,491 695,252 (29,333) (29,333)
Accumulated net realized loss on investments (41,992,494) (75,742,327) (2,585,042) (808,792)
Net unrealized depreciation of investments (2,293,193) (9,583) (7,499,111) (3,398,677)
------------- ------------- ------------- -------------
NET ASSETS $ 137,831,652 $ 230,753,788 $ 39,476,871 $ 31,976,990
============= ============= ============= =============
* Cost of investments in securities $ 135,939,259 $ 228,197,344 $ 45,138,971 $ 35,044,019
See Accompanying Notes to Financial Statements
34
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
ING ING ING
LARGE COMPANY ING MIDCAP SMALLCAP
VALUE MAGNACAP VALUE VALUE
FUND FUND FUND FUND
------------- ------------- ------------- -------------
CLASS A:
Net Assets $ 133,145,915 $ 156,902,117 $ 15,025,992 $ 12,280,182
Shares authorized unlimited 80,000,000 unlimited unlimited
Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001
Shares outstanding 10,769,173 17,794,228 1,797,146 1,301,395
Net asset value and redemption price per share $ 12.36 $ 8.82 $ 8.36 $ 9.44
Maximum offering price per share (5.75%)(1) $ 13.11 $ 9.36 $ 8.87 $ 10.02
CLASS B:
Net Assets $ 3,538,332 $ 50,677,491 $ 12,204,760 $ 8,232,893
Shares authorized unlimited 80,000,000 unlimited unlimited
Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001
Shares outstanding 290,720 5,977,938 1,463,482 876,675
Net asset value and redemption price per share(2) $ 12.17 $ 8.48 $ 8.34 $ 9.39
Maximum offering price per share $ 12.17 $ 8.48 $ 8.34 $ 9.39
CLASS C:
Net Assets $ 1,133,146 $ 8,291,408 $ 12,034,420 $ 11,240,831
Shares authorized unlimited 20,000,000 unlimited unlimited
Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001
Shares outstanding 93,405 977,255 1,443,372 1,197,927
Net asset value and redemption price per share(2) $ 12.13 $ 8.48 $ 8.34 $ 9.38
Maximum offering price per share $ 12.13 $ 8.48 $ 8.34 $ 9.38
CLASS I:
Net Assets n/a $ 6,853 $ 197,428 $ 222,463
Shares authorized n/a 50,000,000 unlimited unlimited
Par value n/a $ 0.00 $ 0.001 $ 0.001
Shares outstanding n/a 777 23,527 23,556
Net asset value and redemption price per share n/a $ 8.82 $ 8.39 $ 9.44
Maximum offering price per share n/a $ 8.82 $ 8.39 $ 9.44
CLASS M:
Net Assets n/a $ 7,444,943 n/a n/a
Shares authorized n/a 5,000,000 n/a n/a
Par value n/a $ 0.00 n/a n/a
Shares outstanding n/a 857,721 n/a n/a
Net asset value and redemption price per share(3) n/a $ 8.68 n/a n/a
Maximum offering price per share n/a $ 8.99 n/a n/a
CLASS Q:
Net Assets $ 14,259 $ 7,430,976 $ 14,271 $ 621
Shares authorized unlimited 20,000,000 unlimited unlimited
Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001
Shares outstanding 1,154 842,392 1,707 65
Net asset value and redemption price per share $ 12.36 $ 8.82 $ 8.36 $ 9.53
Maximum offering price per share $ 12.36 $ 8.82 $ 8.36 $ 9.53
- ----------
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
(3) Maximum offering price is computed at 100/96.50 of net asset value. On
purchases of $50,000 or more, the offering price is reduced.
See Accompanying Notes to Financial Statements
35
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003
- --------------------------------------------------------------------------------
ING ING
ING EQUITY AND REAL
CONVERTIBLE BOND ESTATE
FUND FUND FUND
------------- ------------- -------------
ASSETS:
Investments in securities at value* $ 189,580,911 $ 70,345,035 $ 122,881,843
Short-term investments at amortized cost 1,761,000 3,847,000 3,723,531
Cash 636 588 --
Foreign currencies at value** 1,375,627 16,388 --
Receivables:
Investment securities sold 8,162,816 1,965,047 9,566,587
Fund shares sold 850,447 3,475 577,263
Dividends and interest 941,490 431,235 168,774
Prepaid expenses 30,328 35,209 73,189
Reimbursement due from manager -- 9,946 33,544
------------- ------------- -------------
Total assets 202,703,255 76,653,923 137,024,731
------------- ------------- -------------
LIABILITIES:
Payable for investment securities purchased 7,981,513 4,177,131 8,972,920
Payable for fund shares redeemed 396,718 14,989 916,012
Payable to affiliates 291,896 93,255 85,403
Payable for trustee fees 6,681 2,360 4,313
Other accrued expenses and liabilities 212,402 83,832 112,947
------------- ------------- -------------
Total liabilities 8,889,210 4,371,567 10,091,595
------------- ------------- -------------
NET ASSETS $ 193,814,045 $ 72,282,356 $ 126,933,136
------------- ------------- -------------
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 281,613,140 $ 89,675,208 $ 109,309,007
Undistributed net investment income (accumulated net investment loss) 1,969,917 489,189 1,409,425
Accumulated net realized loss on investments (99,435,025) (14,473,208) (2,371,039)
Net unrealized appreciation (depreciation) of investments and foreign
securities 9,666,013 (3,408,833) 18,585,743
------------- ------------- -------------
NET ASSETS $ 193,814,045 $ 72,282,356 $ 126,933,136
============= ============= =============
* Cost of investment in securities $ 179,920,420 $ 73,764,509 $ 104,562,177
** Cost of foreign currencies $ 1,373,697 $ 15,128
See Accompanying Notes to Financial Statements
36
STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
ING ING
ING EQUITY AND REAL
CONVERTIBLE BOND ESTATE
FUND FUND FUND
-------------- -------------- --------------
CLASS A:
Net Assets $ 51,008,431 $ 32,178,931 $ 981,708
Shares authorized unlimited unlimited unlimited
Par Value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 3,147,772 2,747,082 88,758
Net asset value and redemption price per share $ 16.20 $ 11.71 $ 11.06
Maximum offering price per share (5.75%)(1) $ 17.19 $ 12.42 $ 11.73
CLASS B:
Net Assets $ 72,363,716 $ 22,348,364 $ 149,053
Shares authorized unlimited unlimited unlimited
Par Value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 4,068,410 1,771,673 13,434
Net asset value and redemption price per share $ 17.79 $ 12.61 $ 11.10
Maximum offering price per share $ 17.79 $ 12.61 $ 11.10
CLASS C:
Net Assets $ 66,412,379 $ 14,239,832 $ 157,483
Shares authorized unlimited unlimited unlimited
Par Value $ 0.00 $ 0.00 $ 0.00
Shares outstanding 3,996,625 1,270,582 13,852
Net asset value and redemption price per share $ 16.62 $ 11.21 $ 11.37
Maximum offering price per share $ 16.62 $ 11.21 $ 11.37
CLASS Q:
Net Assets $ 4,029,519 $ 222,355 n/a
Shares authorized unlimited unlimited n/a
Par Value $ 0.00 $ 0.00 n/a
Shares outstanding 256,076 19,120 n/a
Net asset value and redemption price per share $ 15.74 $ 11.63 n/a
Maximum offering price per share $ 15.74 $ 11.63 n/a
CLASS I:
Net Assets n/a n/a $ 125,644,892
Shares authorized n/a n/a unlimited
Par Value n/a n/a $ 0.00
Shares outstanding n/a n/a 10,971,426
Net asset value and redemption price per share n/a n/a $ 11.45
Maximum offering price per share n/a n/a $ 11.45
CLASS T:
Net Assets n/a $ 3,292,874 n/a
Shares authorized n/a unlimited n/a
Par Value n/a $ 0.00 n/a
Shares outstanding n/a 261,871 n/a
Net asset value and redemption price per share n/a $ 12.57 n/a
Maximum offering price per share(2) n/a $ 12.57 n/a
- ----------
(1) Maximum offering price is computed at 100/94.25 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
(2) Redemption price per share may be reduced for any applicable contingent
deferred sales charge.
(3) Maximum offering price is computed at 100/96.50 of net asset value. On
purchase of $50,000 or more, the offering price is reduced.
See Accompanying Notes to Financial Statements
37
STATEMENTS OF OPERATIONS for the year ended May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
GROWTH + GROWTH LARGECAP
VALUE OPPORTUNITIES GROWTH
FUND FUND FUND
------------ ------------ ------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 993,338 $ 736,359 $ 1,139,917
Interest 131,450 38,744 62,570
------------ ------------ ------------
Total investment income 1,124,788 775,103 1,202,487
------------ ------------ ------------
EXPENSES:
Investment management fees 2,446,841 1,865,117 1,411,271
Distribution and service fees:
Class A 183,274 181,023 156,226
Class B 1,214,839 561,674 783,154
Class C 618,262 277,053 351,769
Class Q 707 9 24,503
Class T -- 80,140 --
Transfer agent fees:
Class A 63,087 70,722 134,260
Class B 125,501 65,603 235,602
Class C 63,719 32,227 105,756
Class I -- 417 21,065
Class Q 258 -- 10,071
Class T -- 10,479 --
Administrative service fees 528,208 451,608 188,169
Shareholder reporting expense 370,476 242,036 273,368
Registration fees 68,095 72,593 72,137
Professional fees 57,917 71,743 47,781
Custody and accounting expense 80,566 64,052 68,192
Trustee fees 13,360 12,516 13,738
Miscellaneous expense 26,947 26,063 16,049
Insurance expense 6,441 5,030 4,849
------------ ------------ ------------
Total expenses 5,868,498 4,090,105 3,917,960
Less:
Net waived and reimbursed fees -- -- 303,212
------------ ------------ ------------
Net expenses 5,868,498 4,090,105 3,614,748
------------ ------------ ------------
Net investment loss (4,743,710) (3,315,002) (2,412,261)
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS:
Net realized gain (loss) on:
Investments (96,541,901) (55,971,035) (67,621,730)
Options -- -- 215,589
------------ ------------ ------------
(96,541,901) (55,971,035) (67,406,141)
Net change in unrealized appreciation of investments and options 21,655,719 7,993,868 27,230,077
------------ ------------ ------------
Net realized and unrealized loss on investments and options (74,886,182) (47,977,167) (40,176,064)
------------ ------------ ------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(79,629,892) $(51,292,169) $(42,588,325)
============ ============ ============
*Foreign taxes $ 3,692 $ 4,232 $ 1,956
See Accompanying Notes to Financial Statements
38
STATEMENTS OF OPERATIONS for the year ended May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
MIDCAP SMALLCAP DISCIPLINED
OPPORTUNITIES OPPORTUNITIES LARGECAP
FUND FUND FUND
------------- ------------- -------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 537,557 $ 176,584 $ 1,604,373
Interest 119,238 77,461 9,790
Other -- -- 83
------------- ------------- -------------
Total investment income 656,795 254,045 1,614,246
------------- ------------- -------------
EXPENSES:
Investment management fees 1,844,018 3,072,328 621,856
Distribution and service fees:
Class A 138,698 376,048 23,793
Class B 469,009 967,874 374,229
Class C 703,533 731,979 251,645
Class Q 11,576 4,038 --
Class T -- 23,584 --
Transfer agent fees:
Class A 55,341 177,597 9,105
Class B 56,208 137,021 42,883
Class C 85,374 103,606 28,806
Class I 104 296 527
Class Q 56 70 --
Class T -- 3,508 --
Administrative service fees 368,961 662,980 127,997
Shareholder reporting expense 148,438 344,937 78,576
Registration fees 105,376 113,584 61,115
Professional fees 34,863 75,228 26,272
Custody and accounting expense 62,614 102,884 63,992
Trustee fees 10,532 18,681 5,762
Miscellaneous expense 16,922 35,455 9,489
Insurance expense 4,348 7,862 2,024
------------- ------------- -------------
Total expenses 4,115,971 6,959,560 1,728,071
Less:
Net waived and reimbursed fees 600,861 -- --
------------- ------------- -------------
Net expenses 3,515,110 6,959,560 1,728,071
------------- ------------- -------------
Net investment income (loss) (2,858,315) (6,705,515) (113,825)
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES:
Net realized gain (loss) on:
Investments (35,686,206) (136,228,953) (18,654,392)
Future agreements -- -- (96,660)
------------- ------------- -------------
(35,686,206) (136,228,953) (18,751,052)
Net change in unrealized appreciation (depreciation)
of investments 3,498,927 23,893,365 4,799,759
------------- ------------- -------------
Net realized and unrealized loss on investments
and futures (32,187,279) (112,335,588) (13,951,293)
------------- ------------- -------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (35,045,594) $(119,041,103) $ (14,065,118)
============= ============= =============
*Foreign taxes $ 8,003 $ 965 $ 55
See Accompanying Notes to Financial Statements
39
STATEMENTS OF OPERATIONS for the year ended May 31, 2003
- --------------------------------------------------------------------------------
ING ING ING
LARGE COMPANY ING MIDCAP SMALLCAP
VALUE MAGNACAP VALUE VALUE
FUND FUND FUND FUND
------------ ------------ ------------ ------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 2,987,094 $ 5,007,199 $ 557,715 $ 355,978
Interest 70,920 104,405 9,400 11,952
------------ ------------ ------------ ------------
Total investment income 3,058,014 5,111,604 567,115 367,930
------------ ------------ ------------ ------------
EXPENSES:
Investment management fees 966,292 1,827,489 340,332 304,618
Distribution and service fees:
Class A 328,932 475,206 37,535 33,225
Class B 35,515 541,655 100,823 75,550
Class C 12,641 73,185 88,066 94,019
Class M -- 59,689 -- --
Class Q 35 17,188 29 3
Transfer agent fees:
Class A 196,705 277,212 30,593 26,781
Class B 5,311 94,591 20,866 15,427
Class C 1,884 12,842 18,332 19,409
Class I -- -- 18 85
Class M -- 13,896 -- --
Class Q 18 206 -- --
Administrative service fees 136,403 22,309 34,033 30,462
Shareholder reporting expense 53,852 234,332 15,007 14,499
Registration fees 64,489 62,844 68,063 48,641
Professional fees 44,948 50,617 10,934 7,799
Custody and accounting expense 43,987 53,915 20,924 20,368
Trustee fees 9,301 18,032 2,150 1,820
Offering expense -- -- 86,958 86,959
Miscellaneous expense 4,474 10,171 1,055 3,811
Insurance expense 2,597 5,268 677 517
------------ ------------ ------------ ------------
Total expenses 1,907,384 3,850,647 876,395 783,993
Less:
Net waived and reimbursed fees -- -- 141,380 125,566
------------ ------------ ------------ ------------
Net expenses 1,907,384 3,850,647 735,015 658,427
------------ ------------ ------------ ------------
Net investment income (loss) 1,150,630 1,260,957 (167,900) (290,497)
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (33,175,923) (73,313,713) (2,585,042) (808,791)
Net change in unrealized depreciation of investments 3,324,155 28,047,677 (7,038,519) (3,280,630)
------------ ------------ ------------ ------------
Net realized and unrealized loss on investments (29,851,768) (45,266,036) (9,623,561) (4,089,421)
------------ ------------ ------------ ------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(28,701,138) $(44,005,079) $ (9,791,461) $ (4,379,918)
============ ============ ============ ============
* Foreign taxes $ 30,752 $ 29,242 $ -- $ --
See Accompanying Notes to Financial Statements
40
STATEMENTS OF OPERATIONS for the year ended May 31, 2003
- --------------------------------------------------------------------------------
ING
ING EQUITY AND
CONVERTIBLE BOND ING
FUND FUND REAL ESTATE FUND
------------ ------------ ---------------------------
YEAR YEAR SEVEN MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, OCTOBER 31,
2003 2003 2003 2002
------------ ------------ ------------ ------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 2,305,647 $ 1,295,580 $ 3,280,063 $ 4,787,321
Interest 5,712,891 2,352,750 27,098 48,361
Other 31 86,683 -- --
------------ ------------ ------------ ------------
Total investment income 8,018,569 3,735,013 3,307,161 4,835,682
------------ ------------ ------------ ------------
EXPENSES:
Investment management fees 1,445,588 663,570 440,210 641,719
Distribution and service fees:
Class A 171,004 161,939 263 --
Class B 721,206 239,747 480 --
Class C 664,962 145,777 56 --
Class Q 13,211 465 -- --
Class T -- 26,019 -- --
Transfer agent fees:
Class A 102,116 89,148 238 --
Class B 150,921 46,084 86 --
Class C 139,199 28,029 13 --
Class I -- -- 70,738 33,037
Class Q 3,639 339 -- --
Class T -- 6,670 -- --
Administrative service fees 192,745 88,476 62,885 137,461
Shareholder reporting expense 160,206 91,690 17,775 16,703
Registration fees 60,799 62,970 8,791 12,941
Professional fees 53,865 67,093 31,167 29,769
Custody and accounting expense 36,256 45,128 21,064 13,813
Trustee fees 9,377 4,320 3,150 6,811
Offering expense -- -- 81,575 5,375
Miscellaneous expense 19,655 5,607 10,576 1,689
Insurance expense 4,084 1,827 -- --
------------ ------------ ------------ ------------
Total expenses 3,948,833 1,774,898 749,067 899,318
Less:
Net waived and reimbursed fees -- 92,274 118,117 79
------------ ------------ ------------ ------------
Net expenses 3,948,833 1,682,624 630,950 899,239
------------ ------------ ------------ ------------
Net investment income (loss) 4,069,736 2,052,389 2,676,211 3,936,443
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gain (loss) on:
Investments (1,592,033) (10,772,241) 3,228,787 2,174,768
Foreign currencies 42,333 1,427 -- --
------------ ------------ ------------ ------------
Net realized gain (loss) on imvestments and foreign currencies (1,549,700) (10,770,814) 3,228,787 2,174,768
------------ ------------ ------------ ------------
Net change in unrealized appreciation (depreciation) on:
Investments 8,106,791 4,911,541 11,405,743 (193,441)
Foreign currencies 5,522 1,260 -- --
------------ ------------ ------------ ------------
Net change in unrealized appreciation (depreciation)
on investments and foreign currencies 8,112,313 4,912,801 11,405,743 (193,441)
------------ ------------ ------------ ------------
Net realized and unrealized loss on investments and
foreign currencies 6,562,613 (5,858,013) 14,634,530 1,981,327
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 10,632,349 $ (3,805,624) $ 17,310,741 $ 5,917,770
============ ============ ============ ============
*Foreign taxes $ -- $ 4,563 $ -- $ --
See Accompanying Notes to Financial Statements
41
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING GROWTH + VALUE FUND
------------------------------
YEAR YEAR
ENDED ENDED
MAY 31, MAY 31,
2003 2002
------------- -------------
FROM OPERATIONS:
Net investment loss $ (4,743,710) $ (8,512,418)
Net realized loss on investments (96,541,901) (135,053,076)
Net change in unrealized appreciation (depreciation) of investments 21,655,719 (36,957,292)
------------- -------------
Net decrease in net assets resulting from operations (79,629,892) (180,522,786)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 22,504,824 118,982,140
Cost of shares redeemed (111,119,568) (233,711,496)
------------- -------------
Net decrease in net assets resulting from capital share transactions (88,614,744) (114,729,356)
------------- -------------
Net decrease in net assets (168,244,636) (295,252,142)
------------- -------------
NET ASSETS:
Beginning of year 374,629,229 669,881,371
------------- -------------
End of year $ 206,384,593 $ 374,629,229
============= =============
Undistributed net investment income at end of year $ -- $ --
============= =============
See Accompanying Notes to Financial Statements
42
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING GROWTH OPPORTUNITIES FUND ING LARGECAP GROWTH FUND
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment loss $ (3,315,002) $ (7,224,856) $ (2,412,261) $ (5,792,622)
Net realized loss on investments and options (55,971,035) (148,410,703) (67,406,141) (178,879,014)
Net change in unrealized appreciation of investments 7,993,868 8,273,970 27,230,077 22,043,801
------------- ------------- ------------- -------------
Net decrease in net assets resulting from operations (51,292,169) (147,361,589) (42,588,325) (162,627,835)
------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A -- -- -- (23,490)
Class Q -- -- -- (16,054)
------------- ------------- ------------- -------------
Total distributions -- -- -- (39,544)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 14,322,951 57,584,228 37,811,932 162,524,986
Dividends reinvested -- -- -- 30,939
------------- ------------- ------------- -------------
14,322,951 57,584,228 37,811,932 162,555,925
Cost of shares redeemed (79,882,586) (147,726,009) (101,232,282) (236,666,205)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from capital share
transactions (65,559,635) (90,141,781) (63,420,350) (74,110,280)
------------- ------------- ------------- -------------
Net decrease in net assets (116,851,804) (237,503,370) (106,008,675) (236,777,659)
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of year 293,680,947 531,184,317 279,373,205 516,150,864
------------- ------------- ------------- -------------
End of year $ 176,829,143 $ 293,680,947 $ 173,364,530 $ 279,373,205
============= ============= ============= =============
Undistributed net investment income at end of year $ -- $ -- $ -- $ --
============= ============= ============= =============
See Accompanying Notes to Financial Statements
43
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING MIDCAP OPPORTUNITIES FUND ING SMALLCAP OPPORTUNITIES FUND
------------------------------ -------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment loss $ (2,858,315) $ (1,564,711) $ (6,705,515) $ (7,943,203)
Net realized loss on investments (35,686,206) (22,181,991) (136,228,953) (116,051,246)
Net change in unrealized depreciation of investments 3,498,927 (13,180,504) 23,893,365 (59,155,762)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from operations (35,045,594) (36,927,206) (119,041,103) (183,150,211)
------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net realized gains:
Class A -- -- -- (4,420,476)
Class B -- -- -- (5,306,452)
Class C -- -- -- (2,073,539)
Class I -- -- -- (6)
Class Q -- -- -- (74,783)
Class T -- -- -- (332,277)
------------- ------------- ------------- -------------
Total distributions -- -- -- (12,207,533)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 19,074,655 23,229,928 64,613,733 169,513,918
Net proceeds from shares issued in merger -- 217,968,703 -- 191,995,534
Dividends reinvested -- -- -- 8,872,522
------------- ------------- ------------- -------------
19,074,655 241,198,631 64,613,733 370,381,974
Cost of shares redeemed (98,427,376) (45,911,969) (144,373,057) (162,003,224)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from capital
share transactions (79,352,721) 195,286,662 (79,759,324) 208,378,750
------------- ------------- ------------- -------------
Net increase (decrease) in net assets (114,398,315) 158,359,456 (198,800,427) 13,021,006
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of year 285,050,758 126,691,302 477,434,924 464,413,918
------------- ------------- ------------- -------------
End of year $ 170,652,443 $ 285,050,758 $ 278,634,497 $ 477,434,924
============= ============= ============= =============
Undistributed net investment income at end of year $ -- $ -- $ -- $ --
============= ============= ============= =============
See Accompanying Notes to Financial Statements
44
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING DISCIPLINED LARGECAP FUND
------------------------------
YEAR YEAR
ENDED ENDED
MAY 31, MAY 31,
2003 2002
------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ (113,825) $ (532,669)
Net realized gain (loss) on investments and futures (18,751,052) (29,106,092)
Net change in unrealized appreciation (depreciation)
of investments 4,799,759 4,441,583
------------- -------------
Net increase (decrease) in net assets resulting
from operations (14,065,118) (25,197,178)
------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A -- --
Class B -- --
Net realized gains:
Class A -- --
Class B -- --
------------- -------------
Total distributions -- --
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 10,784,368 13,127,048
Dividends reinvested -- --
------------- -------------
10,784,368 13,127,048
Cost of shares redeemed (35,260,799) (48,152,451)
------------- -------------
Net decrease in net assets resulting from capital share transactions (24,476,431) (35,025,403)
------------- -------------
Net decrease in net assets (38,541,549) (60,222,581)
------------- -------------
NET ASSETS:
Beginning of year 121,131,969 181,354,550
------------- -------------
End of year $ 82,590,420 $ 121,131,969
============= =============
Undistributed net investment income at end of year $ -- $ --
============= =============
See Accompanying Notes to Financial Statements
45
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING LARGE COMPANY VALUE FUND ING MAGNACAP FUND
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment income $ 1,150,630 $ 624,008 $ 1,260,957 $ 1,362,303
Net realized gain (loss) on investments (33,175,923) 3,709,737 (73,313,713) 9,984,802
Net change in unrealized depreciation of investments 3,324,155 (32,312,425) 28,047,677 (58,176,380)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from operations (28,701,138) (27,978,680) (44,005,079) (46,829,275)
------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (383,585) (48,577) (541,544) (1,450,626)
Class C -- -- -- --
Class M -- -- -- (25,317)
Class Q (51) -- (37,713) (90,550)
Net realized gains
Class A -- (3,414,346) -- (36,928,549)
Class B -- (76,886) -- (15,231,540)
Class C -- (40,009) -- (1,660,037)
Class M -- -- -- (2,235,251)
Class Q -- (375) -- (1,561,541)
Tax return of capital
Class A -- (542,803) -- --
Class B -- (12,223) -- --
Class C -- (6,360) -- --
Class Q -- (60) -- --
------------- ------------- ------------- -------------
Total distributions (383,636) (4,141,639) (579,257) (59,183,411)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 12,076,101 23,772,105 19,818,980 42,905,807
Dividends reinvested 316,244 3,625,709 509,567 47,870,369
------------- ------------- ------------- -------------
12,392,345 27,397,814 20,328,547 90,776,176
Cost of shares redeemed (25,597,217) (36,480,872) (66,540,583) (92,733,007)
------------- ------------- ------------- -------------
Net decrease in net assets resulting from capital share
transactions (13,204,872) (9,083,058) (46,212,036) (1,956,831)
------------- ------------- ------------- -------------
Net decrease in net assets (42,289,646) (41,203,377) (90,796,372) (107,969,517)
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of year 180,121,298 221,324,675 321,550,160 429,519,677
------------- ------------- ------------- -------------
End of year $ 137,831,652 $ 180,121,298 $ 230,753,788 $ 321,550,160
============= ============= ============= =============
Undistributed net investment income at end of year $ 772,491 $ -- $ 695,252 $ --
============= ============= ============= =============
See Accompanying Notes to Financial Statements
46
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING MIDCAP VALUE FUND ING SMALLCAP VALUE FUND
---------------------------- ----------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(1) 2003 2002(1)
------------ ------------ ------------ ------------
FROM OPERATIONS:
Net investment loss $ (167,900) $ (18,723) $ (290,497) $ (33,829)
Net realized gain (loss) on investments (2,585,042) 477,240 (808,791) 286,427
Net change in unrealized depreciation of investments (7,038,519) (460,592) (3,280,630) (118,047)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations (9,791,461) (2,075) (4,379,918) 134,551
------------ ------------ ------------ ------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (66,920) -- (53,921) --
Class B (10,431) -- (269) --
Class C (8,620) -- (8,732) --
Class I (1,546) -- (2,331) --
Class Q (105) -- -- --
Net realized gains:
Class A (197,711) -- (119,158) --
Class B (153,548) -- (76,523) --
Class C (125,926) -- (90,831) --
Class I (2,253) -- (2,504) --
Class Q (180) -- (6) --
------------ ------------ ------------ ------------
Total distributions (567,240) -- (354,275) --
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 20,390,316 48,636,078 16,776,369 36,135,334
Dividends reinvested 452,894 -- 266,141 --
------------ ------------ ------------ ------------
20,843,210 48,636,078 17,042,510 36,135,334
Cost of shares redeemed (17,802,172) (1,839,469) (15,157,416) (1,443,796)
------------ ------------ ------------ ------------
Net increase in net assets resulting from capital share
transactions 3,041,038 46,796,609 1,885,094 34,691,538
------------ ------------ ------------ ------------
Net increase (decrease) in net assets (7,317,663) 46,794,534 (2,849,099) 34,826,089
------------ ------------ ------------ ------------
NET ASSETS:
Beginning of period 46,794,534 -- 34,826,089 --
------------ ------------ ------------ ------------
End of period $ 39,476,871 $ 46,794,534 $ 31,976,990 $ 34,826,089
============ ============ ============ ============
Undistributed net investment income (accumulated net
investment loss) at end of period $ (29,333) $ 45,818 $ (29,333) $ 22,825
============ ============ ============ ============
- ----------
(1) Fund commenced operations on February 1, 2002.
See Accompanying Notes to Financial Statements
47
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING CONVERTIBLE FUND
------------------------------
YEAR YEAR
ENDED ENDED
MAY 31, MAY 31,
2003 2002
------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ 4,069,736 $ 4,316,249
Net realized loss on investments (1,549,700) (94,733,125)
Net change in unrealized appreciation (depreciation) of investments 8,112,313 47,508,825
------------- -------------
Net decrease in net assets resulting from operations 10,632,349 (42,908,051)
------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (1,038,306) (1,989,161)
Class B (1,007,242) (1,691,488)
Class C (1,039,451) (1,695,959)
Class Q (129,825) (462,156)
Net realized gains
Class A -- (434,317)
Class B -- (598,881)
Class C -- (546,683)
Class Q -- (78,772)
------------- -------------
Total distributions (3,214,824) (7,497,417)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 19,562,889 49,293,522
Dividends reinvested 2,040,333 4,837,275
------------- -------------
21,603,222 54,130,797
Cost of shares redeemed (74,420,958) (136,764,084)
------------- -------------
Net decrease in net assets resulting from capital share transactions (52,817,736) (82,633,287)
------------- -------------
Net decrease in net assets (45,400,211) (133,038,755)
------------- -------------
NET ASSETS:
Beginning of year 239,214,256 372,253,011
------------- -------------
End of year $ 193,814,045 $ 239,214,256
============= =============
Undistributed net investment income at end of year $ 1,969,917 $ 1,072,672
============= =============
See Accompanying Notes to Financial Statements
48
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ING EQUITY AND BOND FUND ING REAL ESTATE FUND
------------------------------ -----------------------------------------------
YEAR YEAR SEVEN MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, OCTOBER 31, OCTOBER 31,
2003 2002 2003 2002 2001 (000)
------------- ------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment income $ 2,052,389 $ 3,351,411 $ 2,676,211 $ 3,936,443 $ 3,587
Net realized gain (loss) on investments (10,770,814) (1,232,233) 3,228,787 2,174,768 1,844
Net change in unrealized appreciation
(depreciation) of investments 4,912,801 (9,585,022) 11,405,743 (193,441) (466)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations (3,805,624) (7,465,844) 17,310,741 5,917,770 4,965
------------- ------------- ------------- ------------- -------------
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (1,077,960) (2,123,367) (3,557) -- --
Class B (368,267) (917,202) (1,521) -- --
Class C (273,453) (647,607) (74) -- --
Class I -- -- (2,053,561) (3,936,443) (3,587)
Class Q (4,292) (13,963) -- -- --
Class T (62,879) (182,065) -- -- --
Net realized gains
Class A -- (236,326) -- -- --
Class B -- (137,507) -- -- --
Class C -- (85,407) -- -- --
Class Q -- (1,525) -- -- --
Class T -- (23,977) -- -- --
In excess of net investment income
Class I -- -- -- (1,294,844) (577)
------------- ------------- ------------- ------------- -------------
Total distributions (1,786,851) (4,368,946) (2,058,713) (5,231,287) (4,164)
------------- ------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 13,090,514 36,437,605 23,221,408 31,057,798 13,726
Dividends reinvested 1,413,761 3,439,849 1,220,646 3,749,980 3,110
------------- ------------- ------------- ------------- -------------
14,504,275 39,877,454 24,442,054 34,807,778 16,836
Cost of shares redeemed (48,110,001) (44,643,957) (10,091,863) (14,351,398) (5,896)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions (33,605,726) (4,766,503) 14,350,191 20,456,380 10,940
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets (39,198,201) (16,601,293) 29,602,219 21,142,863 11,741
------------- ------------- ------------- ------------- -------------
NET ASSETS:
Beginning of period 111,480,557 128,081,850 97,330,917 76,188,054 64,447
------------- ------------- ------------- ------------- -------------
End of period $ 72,282,356 $ 111,480,557 $ 126,933,136 $ 97,330,917 $ 76,188
============= ============= ============= ============= =============
Undistributed net investment income at
end of period $ 489,189 $ 222,224 $ 1,409,425 $ 214,000 $ 161
============= ============= ============= ============= =============
See Accompanying Notes to Financial Statements
49
ING GROWTH + VALUE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS Q
--------------------------------------------
YEAR YEAR SEVEN MONTHS JUNE 5,
ENDED ENDED ENDED 2000(1) TO
MAY 31, MAY 31, MAY 31, OCT. 31,
2003 2002 2001(4) 2001
------ ------ ------- ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.86 13.88 24.90 26.73
Income (loss) from investment operations:
Net investment loss $ (0.14) (0.11) (0.18) (0.05)
Net realized and unrealized loss on
investments $ (1.91) (3.91) (8.62) (1.78)
Total from investment operations $ (2.05) (4.02) (8.80) (1.83)
Less distributions from:
Net realized gains on investments $ -- -- 2.16 --
Tax return of capital $ -- -- 0.06 --
Total distributions $ -- -- 2.22 --
Net asset value, end of period $ 7.81 9.86 13.88 24.90
TOTAL RETURN(2) % (20.79) (28.96) (38.00) (6.85)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 211 396 454 1,346
Ratios to average net assets:
Expenses(3) % 1.82 1.71 1.69 1.53
Net investment loss(3) % (1.35) (0.93) (1.43) (1.19)
Portfolio turnover rate % 294 255 95 163
- ----------
(1) Commencement of operations of the class.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Fund changed its fiscal year end to May 31.
See Accompanying Notes to Financial Statements
50
ING GROWTH OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS I
----------------------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, ----------------------------------
2003 2002 2001(5) 2000 1999 1998
------ ------ ------- ------ ------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.68 19.10 26.05 33.76 26.28 21.36
Income (loss) from investment operations:
Net investment income (loss) $ (0.12) (0.19) (0.08) (0.15) (0.17) (0.05)
Net realized and unrealized gain
(loss) on investments $ (2.02) (5.23) (6.87) (6.07) 20.49 5.18
Total from investment operations $ (2.14) (5.42) (6.95) (6.22) 20.32 5.13
Less distributions from:
Net realized gains on investments $ -- -- -- 1.49 12.84 0.21
Total distributions $ -- -- -- 1.49 12.84 0.21
Net asset value, end of period $ 11.54 13.68 19.10 26.05 33.76 26.28
TOTAL RETURN(2) % (15.64) (28.38) (26.68) (18.74) 93.86 24.06
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 44,704 56,719 79,174 108,005 132,953 83,233
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.43 1.37 1.31 1.16 1.00 1.00
Gross expenses prior to expense
reimbursement(3)(4) % 1.43 1.37 1.31 1.16 1.00 1.00
Net investment income (loss) after
expense reimbursement(3) % (1.04) (1.21) (0.92) (0.56) (0.61) (0.13)
Portfolio turnover rate % 355 473 217 326 286 98
CLASS Q
------------------------------------------------
YEAR YEAR FIVE MONTHS JUNE 1,
ENDED ENDED ENDED 2000(1) TO
MAY 31, MAY 31, MAY 31, DEC. 31,
2003 2002 2001(5) 2000
------ ------ ------- ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.16 18.70 25.48 32.58
Income (loss) from investment operations:
Net investment loss $ (0.12) (0.34)* (0.10) (0.15)
Net realized and unrealized loss on
investments $ (1.97) (5.20) (6.68) (5.46)
Total from investment operations $ (2.09) (5.54) (6.78) (5.61)
Less distributions from:
Net realized gains on investments $ -- -- -- 1.49
Total distributions $ -- -- -- 1.49
Net asset value, end of period $ 11.07 13.16 18.70 25.48
TOTAL RETURN(2) % (15.88) (29.63) (26.61) (17.55)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 3 10 7,947 10,274
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.68 1.62 1.56 1.41
Gross expenses prior to expense
reimbursement(3) % 1.68 1.62 1.56 1.41
Net investment loss after
expense reimbursement(3)(4) % (1.31) (1.49) (1.17) (0.81)
Portfolio turnover rate % 355 473 217 326
- ----------
(1) Commencement of operations of Class Q.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
(4) Expenses calculated net of taxes and advisor reimbursement.
(5) The Fund changed its fiscal year end to May 31.
* Per share data calculated using weighted average number of shares
outstanding throughout the period.
See Accompanying Notes to Financial Statements
51
ING LARGECAP GROWTH FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS I
---------------------
YEAR JANUARY 8,
ENDED 2002(6) TO
MAY 31, MAY 31,
2003 2002
------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.93 21.04
Income (loss) from investment operations:
Net investment loss $ (0.06) (0.02)
Net realized and unrealized loss on investments $ (2.16) (4.09)
Total from investment operations $ (2.22) (4.11)
Net asset value, end of period $ 14.71 16.93
TOTAL RETURN(2): % (13.11) (19.53)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 22,156 26,106
Ratios to average net assets:
Net expenses after expense reimbursement/ (recoupment)(3)(4) % 1.05 0.96
Gross expenses prior to expense reimbursement/(recoupment)(3) % 1.21 0.96
Net investment loss after expense reimbursement/(recoupment)(3)(4) % (0.42) (0.43)
Portfolio turnover rate % 291 536
CLASS Q
-------------------------------------------------------------------------
ELEVEN THREE
YEAR YEAR MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(5) 2000 1999(1) 1999
------ ------ ------- ------ ------- ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.92 24.81 43.71 28.43 25.24 15.66
Income (loss) from investment operations:
Net investment loss $ (0.15) (0.44) (0.17) (0.20) (0.03) (0.02)
Net realized and unrealized gain
(loss) on investments $ (2.11) (7.44) (18.26) 15.86 3.22 9.87
Total from investment operations $ (2.26) (7.88) (18.43) 15.66 3.19 9.85
Less distributions from:
Net investment income $ -- 0.01 -- -- -- --
Net realized gains on investments $ -- -- 0.47 0.38 -- 0.27
Total distributions $ -- 0.01 0.47 0.38 -- 0.27
Net asset value, end of period $ 14.66 16.92 24.81 43.71 28.43 25.24
TOTAL RETURN(2): % (13.36) (31.77) (42.50) 55.57 12.64 63.76
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 6,178 16,840 12,534 24,838 6,044 4,908
Ratios to average net assets:
Net expenses after expense
reimbursement/(recoupment)(3)(4) % 1.31 1.21 1.19 1.26 1.23 1.26
Gross expenses prior to expense
reimbursement/(recoupment)(3) % 1.47 1.21 1.19 1.26 1.25 1.91
Net investment loss after expense
reimbursement/(recoupment)(3)(4) % (0.66) (0.76) (0.50) (0.77) (0.36) (0.28)
Portfolio turnover rate % 291 536 331 139 27 253
- ----------
(1) Effective May 24, 1999, ING Investments, LLC became the Investment Manager
of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses excluding interest,
taxes, brokerage and extraordinary expenses, subject to possible
reimbursement to ING Investments, LLC within three years.
(5) The Fund changed its fiscal year end to May 31.
(6) Commencement of operations of Class I.
See Accompanying Notes to Financial Statements
52
ING MIDCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS I
--------------------------------------------------------------------------
YEAR YEAR FIVE MONTHS YEAR ENDED AUGUST 20,
ENDED ENDED ENDED DECEMBER 31, 1998(1) TO
MAY 31, MAY 31, MAY 31, ------------------- DECEMBER 31,
2003 2002 2001(6) 2000 1999 1998
------ ------ ------- ------ ------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.29 14.73 19.26 21.34 12.99 10.00
Income (loss) from investment operations:
Net investment loss $ (0.11) (0.11)* (0.06) (0.13) (0.15) (0.02)
Net realized and unrealized gain (loss)
on investments $ (0.85) (3.33) (4.47) 0.23 12.09 3.01
Total from investment operations $ (0.96) (3.44) (4.53) 0.10 11.94 2.99
Less distributions from:
Net realized gains on investments $ -- -- -- 2.18 3.59 --
Total distributions $ -- -- -- 2.18 3.59 --
Net asset value, end of period $ 10.33 11.29 14.73 19.26 21.34 12.99
TOTAL RETURN(3): % (8.50) (23.35) (23.52) 0.08 103.19 29.90
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 10,844 39,874 52,007 68,006 67,954 33,441
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.09 1.26 1.52 1.36 1.41 1.50
Gross expenses prior to expense
reimbursement(4) % 1.41 1.50 1.52 1.36 1.41 2.01
Net investment loss after expense
reimbursement(4)(5) % (0.71) (0.95) (0.97) (0.66) (1.04) (0.70)
Portfolio turnover rate % 345 399 182 188 201 61
CLASS Q
----------------------------------------------
YEAR YEAR FIVE MONTHS APRIL 14,
ENDED ENDED ENDED 2000(2) TO
MAY 31, MAY 31, MAY 31, DECEMBER 31,
2003 2002 2001(6) 2000
------ ------ ------- ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.16 14.63 19.16 22.57
Income (loss) from investment operations:
Net investment loss $ (0.09) (0.17)* (0.08) (0.06)
Net realized and unrealized loss
on investments $ (0.88) (3.30) (4.45) (1.17)
Total from investment operations $ (0.97) (3.47) (4.53) (1.23)
Less distributions from:
Net realized gains on investments $ -- -- -- 2.18
Total distributions $ -- -- -- 2.18
Net asset value, end of period $ 10.19 11.16 14.63 19.16
TOTAL RETURN(3): % (8.69) (23.72) (23.64) (5.86)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 4,886 6,563 3,071 3,264
Ratios to average net assets:
Net expenses after expense
reimbursement(4)(5) % 1.33 1.63 1.82 1.61
Gross expenses prior to expense
reimbursement(4) % 1.66 1.69 1.82 1.61
Net investment loss after expense
reimbursement(4)(5) % (0.98) (1.35) (1.28) (0.91)
Portfolio turnover rate % 345 399 182 188
- ----------
(1) Commencement of operations of the Fund.
(2) Commencement of operations of Class Q.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses excluding interest,
taxes, brokerage and extraordinary expenses, subject to possible
reimbursement to ING Investments, LLC with three years.
(6) The Fund changed its fiscal year end to May 31.
* Per share data calculated using weighted average number of shares
outstanding throughout the period.
See Accompanying Notes to Financial Statements
53
ING SMALLCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS I
--------------------------------------------------------------
YEAR YEAR FIVE MONTHS
ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, MAY 31, MAY 31, -----------------------
2003 2002 2001(6) 2000 1999(1)
------ ------ ------- ------ -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 24.07 39.02 47.47 59.54 31.78
Income (loss) from investment operations:
Net investment loss $ (0.23) (0.36)** (0.14) (1.00) (0.08)
Net realized and unrealized gain (loss)
on investments $ (5.57) (13.60) (8.31) (2.17) 35.40
Total from investment operations $ (5.80) (13.96) (8.45) (3.17) 35.32
Less distributions from:
Net realized gains on investments $ -- 0.99 -- 8.90 7.56
Total distributions $ -- 0.99 -- 8.90 7.56
Net asset value, end of period $ 18.27 24.07 39.02 47.47 59.54
TOTAL RETURN(3) % (24.10) (36.17) (17.80) (5.21) 126.05
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 8,510 10,700 --* --* --*
Ratios to average net assets:
Net expenses after expense
reimbursement(4) % 1.46 1.41 1.31 1.15 0.47(5)
Gross expenses prior to expense
reimbursement(4) % 1.46 1.41 1.31 1.15 0.47
Net investment loss after expense
reimbursement(4) % (1.37) (1.34) (1.03) (0.75) (0.35)(5)
Portfolio turnover rate % 357 423 104 134 223
CLASS Q
------------------------------------------------
YEAR YEAR FIVE MONTHS APRIL 4,
ENDED ENDED ENDED 2000(2) TO
MAY 31, MAY 31, MAY 31, DECEMBER 31,
2003 2002 2001(6) 2000
------ ------ ------- ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 24.07 38.81 47.20 60.86
Income (loss) from investment operations:
Net investment loss $ (0.53) (0.51)** (0.20) (0.27)
Net realized and unrealized loss on
investments $ (5.32) (13.24) (8.19) (4.49)
Total from investment operations $ (5.85) (13.75) (8.39) (4.76)
Less distributions from:
Net realized gains on investments $ -- 0.99 -- 8.90
Total distributions $ -- 0.99 -- 8.90
Net asset value, end of period $ 18.22 24.07 38.81 47.20
TOTAL RETURN(3) % (24.30) (35.83) (17.78) (8.29)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 906 3,651 2,832 2,545
Ratios to average net assets:
Net expenses after expense
reimbursement(4) % 1.70 1.66 1.56 1.40
Gross expenses prior to expense
reimbursement(4) % 1.70 1.66 1.56 1.40
Net investment loss after expense
reimbursement(4) % (1.62) (1.62) (1.28) (1.10)
Portfolio turnover rate % 357 423 104 134
- ----------
(1) Commencement of operations of Class I is April 1, 1999.
(2) Commencement of operations of Class Q.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(4) Annualized for periods less than one year.
(5) Expenses calculated net of taxes and advisor reimbursement.
(6) The Fund changed its fiscal year end to May 31.
* Amount represents less than $1,000.
** Per share data calculated using weighted average number of shares
outstanding throughout the period.
See Accompanying Notes to Financial Statements
54
ING DISCIPLINED LARGECAP FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS I
------------------------------------------------------------
YEAR YEAR SEVEN MONTHS DECEMBER 31,
ENDED ENDED ENDED YEAR ENDED 1998(1) TO
MAY 31, MAY 31, MAY 31, OCT. 31, OCTOBER 31,
2003 2002 2001(5) 2000 1999
------ ------ ------- ------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 8.52 9.94 11.25 11.17 10.00
Income (loss) from investment operations:
Net investment income $ 0.05 0.04 0.02 0.04 0.06
Net realized and unrealized gain (loss) on
investments $ (0.85) (1.46) (1.33) 0.19 1.11
Total from investment operations $ (0.80) (1.42) (1.31) 0.23 1.17
Less distributions from:
Net realized gains on investments $ -- -- -- 0.15 --
Total distributions $ -- -- -- 0.15 --
Net asset value, end of period $ 7.72 8.52 9.94 11.25 11.17
TOTAL RETURN(2) % (9.39) (14.28) (11.64) 2.00 11.70
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 19,550 21,578 25,172 28,473 27,927
Ratios to average net assets:
Net expenses after expense reimbursement(3) % 1.12 1.00 1.04 1.07 0.98(4)
Gross expenses prior to expense reimbursement(3) % 1.12 1.00 1.04 1.07 1.23
Net investment income after expense
reimbursement(3) % 0.70 0.46 0.27 0.34 0.62(4)
Portfolio turnover rate % 106 149 26 57 26
- ----------
(1) Commencement of operations of the Fund.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
(4) Expenses calculated net of taxes and advisor reimbursement.
(5) The Fund changed its fiscal year end to May 31.
See Accompanying Notes to Financial Statements
55
ING LARGE COMPANY VALUE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS Q
------------------
YEAR OCTOBER 4,
ENDED 2001(1) TO
MAY 31, MAY 31,
2003 2002
------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.62 14.53
Income from investment operations:
Net investment income $ 0.11 0.07
Net realized and unrealized gain (loss)
on investments $ (2.33) 0.35
Total from investment operations $ (2.23) 0.42
Less distributions from:
Net investment income $ 0.04 --
Net realized gain on investments $ -- 0.29
Tax return of capital $ -- 0.04
Total distributions $ 0.04 0.33
Net asset value, end of period $ 12.36 14.62
TOTAL RETURN(2): % (15.15) 2.80
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 14 20
Ratios to average net assets:
Expenses(3) % 1.35 1.16
Net investment income(3) % 0.89 0.67
Portfolio turnover rate % 103 88
- ----------
(1) Commencement of operations of Class Q.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
56
ING MAGNACAP FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS I CLASS Q
---------- --------------------------------------------------
MARCH 5, YEAR YEAR ELEVEN MONTHS NOVEMBER 19,
2003(1) TO ENDED ENDED ENDED 1999(5) TO
MAY 31, MAY 31, MAY 31, MAY 31, JUNE 30,
2003 2003 2002 2001(4) 2000
------ ------ ------ ------- ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 7.55 10.11 13.55 15.84 16.26
Income (loss) from investment operations:
Net investment income $ 0.01 0.08 0.09 0.07 0.05
Net realized and unrealized loss
on investments $ 1.26 (1.32) (1.52) (0.38) (0.47)
Total from investment operations $ 1.27 (1.24) (1.43) (0.31) (0.42)
Less distributions from:
Net investment income $ -- 0.05 0.11 0.10 --
Net realized gains on investments $ -- -- 1.90 1.88 --
Total distributions $ -- 0.05 2.01 1.98 --
Net asset value, end of period $ 8.82 8.82 10.11 13.55 15.84
TOTAL RETURN(2): % 16.82 (12.27) (10.75) (2.60) (2.58)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 7 7,431 8,495 11,184 9,928
Ratios to average net assets:
Expenses(3) % 0.92 1.22 1.12 1.11 1.24
Net investment income(3) % 2.06 0.95 0.81 0.53 0.46
Portfolio turnover rate % 110 110 75 92 26
- ----------
(1) Commencement of operations of Class I.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Fund changed its fiscal year end to May 31.
(5) Commencement of operations of Class Q.
See Accompanying Notes to Financial Statements
57
ING MIDCAP VALUE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS I CLASS Q
-------------------- ---------------------
YEAR MARCH 4, YEAR APRIL 17,
ENDED 2002(1) TO ENDED 2002(2) TO
MAY, 31 MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.30 10.20 10.28 10.52
Income (loss) from investment operations:
Net investment income (loss) $ 0.01 0.01 0.00* 0.00*
Net realized and unrealized gain (loss) on investments $ (1.74) 0.09 (1.75) (0.24)
Total from investment operations $ (1.73) 0.10 (1.75) (0.24)
Less distributions from:
Net investment income $ 0.07 -- 0.06 --
Net realized gains on investments $ 0.11 -- 0.11 --
Total distributions $ 0.18 -- 0.17 --
Net asset value, end of period $ 8.39 10.30 8.36 10.28
TOTAL RETURN(3): % (16.35) 0.98 (16.62) (2.28)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 197 71 14 11
Ratios to average net assets:
Net expenses after reimbursement (4)(5) % 1.28 1.24 1.54 1.52
Gross expenses prior to expense reimbursement(4) % 1.70 2.60 1.96 2.28
Net investment income after expense reimbursement(4)(5) % 0.46 0.38 0.14 0.43
Portfolio turnover rate % 72 13 72 13
- ----------
(1) Commencement of operations of Class I.
(2) Commencement of operations of Class Q.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not anualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding interest,
taxes, brokerage and extraordinary expenses subject to possible
reimbursement to ING Investments, LLC within three years.
* Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements
58
ING SMALLCAP VALUE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period
CLASS I CLASS Q
-------------------- --------------------
YEAR MARCH 7, YEAR APRIL 30,
ENDED 2002(1) TO ENDED 2002(2) TO
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.63 10.32 10.63 11.01
Income (loss) from investment operations:
Net investment income (loss) $ (0.05) 0.00* 0.33 0.00*
Net realized and unrealized gain (loss) on investments $ (0.97) 0.31 (1.34) (0.38)
Total from investment operations $ (1.02) 0.31 (1.01) (0.38)
Less distributions from:
Net investment income $ 0.08 -- -- --
Net realized gains on investments $ 0.09 -- 0.09 --
Total distributions $ 0.17 -- 0.09 --
Net asset value, end of period $ 9.44 10.63 9.53 10.63
TOTAL RETURN(3): % (9.49) 3.00 (9.47) (3.45)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 222 26 1 8
Ratios to average net assets:
Net expenses after reimbursement (4)(5) % 1.32 1.23 1.35 1.42
Gross expenses prior to expense reimbursement(4) % 1.73 2.78 1.73 2.42
Net investment income (loss) after expense
reimbursement(4)(5) % (0.13) 0.17 (0.32) 0.00
Portfolio turnover rate % 54 12 54 12
- ----------
(1) Commencement of operations of Class I.
(2) Commencement of operations of Class Q.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not anualized.
(4) Annualized for periods less than one year.
(5) The Investment Manager has agreed to limit expenses, excluding interest,
taxes, brokerage and extraordinary expenses subject to possible
reimbursement to ING Investments, LLC within three years.
* Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements
59
ING CONVERTIBLE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS Q
---------------------------------------------------------------------
ELEVEN THREE
YEAR YEAR MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(5) 2000 1999(1) 1999
------ ------ ------- ------ ------- ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.91 17.37 26.85 22.51 21.22 18.47
Income (loss) from investment operations:
Net investment income $ 0.41 0.36 0.59 0.44 0.09 0.43
Net realized and unrealized gain (loss)
on investments $ 0.76 (2.28) (4.84) 7.82 1.31 3.09
Total from investment operations $ 1.17 (1.92) (4.25) 8.26 1.40 3.52
Less distributions from:
Net investment income $ 0.34 0.45 0.53 0.35 0.11 0.46
Net realized gains on investments $ -- 0.09 4.70 3.57 -- 0.31
Total distributions $ 0.34 0.54 5.23 3.92 0.11 0.77
Net asset value, end of period $ 15.74 14.91 17.37 26.85 22.51 21.22
TOTAL RETURN(2): % 8.11 (11.12) (17.50) 40.36 6.62 19.66
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 4,030 8,626 29,629 56,165 17,537 8,741
Ratios to average net assets:
Net expenses after expense
reimbursement/(recoupment)(3)(4) % 1.36 1.19 1.15 1.25 1.23 1.23
Gross expenses prior to expense
reimbursement/ (recoupment)(3) % 1.36 1.19 1.14 1.25 1.23 1.35
Net investment income after expense
reimbursement/(recoupment)(3)(4) % 2.78 2.23 2.47 1.88 2.04 2.37
Portfolio turnover rate % 97 100 145 129 28 138
- ----------
(1) Effective May 24, 1999, ING Investments, LLC became the Investment Manager
of the Fund, concurrently Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses, subject to possible
reimbursement to ING Investments, LLC within three years.
(5) The Fund changed its fiscal year end to May 31.
See Accompanying Notes to Financial Statements
60
ING EQUITY AND BOND FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS Q
----------------------------------------------------------
ELEVEN THREE
YEAR YEAR MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31,
2003 2002 2001(5) 2000 1999(1) 1999
------ ------ ------- ------ ------- ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.98 13.23 14.94 19.04 18.85 18.48
Income (loss) from investment operations:
Net investment income $ 0.28 0.42 0.44 0.54 0.11 0.44
Net realized and unrealized gain (loss)
on investments $ (0.38) (1.15) (0.54) (0.57) 0.16 2.50
Total from investment operations $ (0.10) (0.73) (0.10) (0.03) 0.27 2.94
Less distributions from:
Net investment income $ 0.25 0.47 0.47 0.40 0.08 0.50
Net realized gains on investments $ -- 0.05 1.14 3.67 -- 2.07
Total distributions $ 0.25 0.52 1.61 4.07 0.08 2.57
Net asset value, end of period $ 11.63 11.98 13.23 14.94 19.04 18.85
TOTAL RETURN(2): % (0.61) (5.53) (0.70) (0.60) 1.44 17.49
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 222 191 373 230 190 176
Ratios to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.50 1.40 1.25 1.30 1.25 1.25
Gross expenses prior to expense
reimbursement(3) % 1.61 1.40 1.46 1.51 1.51 1.63
Net investment income after expense
reimbursement(3)(4) % 2.70 3.31 3.61 3.36 2.30 2.41
Portfolio turnover rate % 129 145 76 173 63 165
- ----------
(1) Effective May 24, 1999, ING Investments, LLC became the Investment Manager
of the Fund; concurrently, Nicholas-Applegate Capital Management was
appointed as sub-advisor and the Fund changed its year end to June 30.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total return for less than
one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding, interest,
taxes, brokerage and extraordinary expenses, subject to possible
reimbursement to ING Investments, LLC within three years.
(5) The Fund changed its fiscal year end to May 31.
See Accompanying Notes to Financial Statements
61
ING REAL ESTATE FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period.
CLASS I
-----------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED OCTOBER 31,
MAY 31,(1) ---------------------------------------------------------
2003 2002 2001 2000 1999 1998
------ ------ ------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.98 9.77 9.57 8.24 9.10 11.49
Income from investment operations:
Net investment income $ 0.20 0.60 0.50 0.69 0.49 0.35
Net realized and unrealized gain
(loss) on investments $ 1.47 0.23 0.27 1.21 (0.80) (1.85)
Total from investment operations $ 1.67 0.83 0.77 1.90 (0.31) (1.50)
Less distributions from:
Net investment income $ 0.20 (0.62) (0.57) (0.57) (0.55) (0.40)
Capital Gains -- -- -- -- -- (0.49)
Total distributions $ 0.20 90.62) (0.57) (0.57) (0.55) (0.89)
Net asset value, end of period $ 11.45 9.98 9.77 9.57 8.24 9.10
TOTAL RETURN(2) % 16.95 8.06 7.88 23.78 (3.70) (14.16)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000) $ 125,645 97,331 76,188 64,447 55,968 55,617
Ratio to average net assets:
Net expenses after expense
reimbursement(3)(4) % 1.00 0.98 1.00 1.00 1.00 1.00
Gross expenses prior to expense
reimbursement(3) % 1.19 0.98 1.03 1.05 1.11 1.17
Net investment income after
expense reimbursement(3)(4) % 4.26 4.29 4.84 5.71 5.37 3.29
Portfolio turnover rate % 62 106 77 93 67 74
- ----------
(1) On November 4, 2002, pursuant to an Agreement and Plan of Reorganization
dated August 20, 2002, all of the assets and liabilities of the CRA Realty
Shares Portfolio were transferred to the newly created ING Real Estate Fund
in exchange for shares of the ING Real Estate Fund. The financial highlight
information presented for periods prior to November 4, 2002 reflects the
activity of the CRA Realty Shares Portfolio. The ING Real Estate Fund has
adopted a fiscal year end of May 31.
(2) Total return is calculated assuming reinvestment of dividends and capital
gain distributions at net asset value and excluding the deduction of sales
charges. Total return for less than one year is not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses, excluding interest,
taxes, brokerage and extraordinary expenses subject to possible
reimbursement to ING Investments, LLC within three years.
See Accompanying Notes to Financial Statements
62
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
ORGANIZATION. The ING Funds contained within this book are comprised of ING
Equity Trust ("IET"), ING Investment Funds, Inc. ("IIF") and ING Mayflower Trust
("IMT"), all of which are open-end investment management companies registered
under the Investment Company Act of 1940, as amended.
IET is a Massachusetts business trust organized in 1998 with nineteen separate
series (Portfolios). Thirteen of the Portfolios in this report are: ING Growth
Opportunities Fund ("Growth Opportunities"), ING LargeCap Growth Fund ("LargeCap
Growth"), ING MidCap Opportunities Fund ("MidCap Opportunities"), ING SmallCap
Opportunities Fund ("SmallCap Opportunities"), ING Disciplined LargeCap Fund
("Disciplined LargeCap", formerly ING Research Enhanced Index), ING Large
Company Value Fund ("Large Company Value"), ING MidCap Value Fund ("MidCap
Value"), ING SmallCap Value Fund ("SmallCap Value"), ING Convertible Fund
("Convertible"), ING Equity and Bond Fund ("Equity and Bond", formerly ING
Equity and Income Fund) and ING Real Estate Fund ("Real Estate", formerly CRA
Realty Shares Portfolio). IIF is a Maryland Corporation organized in 1969 with
one Portfolio, ING MagnaCap Fund ("MagnaCap"). IMT is a Massachusetts business
trust organized in 1993 with two separate series (Portfolios). One of the
Portfolios in this report is ING Growth + Value Fund ("Growth + Value"). The
investment objective of each Fund is described in each Fund's prospectus.
Each Fund offers at least two of the following classes of shares: Class A, Class
B, Class C, Class I, Class M, Class Q and Class T. The separate classes of
shares differ principally in the applicable sales charges (if any), distribution
fees, shareholder servicing fees and transfer agency fees. Shareholders of each
class also bear certain expenses that pertain to that particular class. All
shareholders bear the common expenses of the Fund and earn income from the
portfolio pro rata based on the average daily net assets of each class, without
distinction between share classes. Dividends are determined separately for each
class 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 preferential dividend rights exist. Differences
in per share dividend rates generally results from the relative weighting of pro
rata income and realized gain allocations and from differences in separate class
expenses, including distribution, and shareholder servicing fees. Class B
shares, along with their pro rata reinvested dividend shares, automatically
convert to Class A shares approximately eight years after purchase.
REORGANIZATION. On December 17, 2001, the Boards of Directors/Trustees of each
of various ING Funds approved plans of reorganization which were intended to
decrease the number of corporate entities under which the ING Funds are
organized (the "Reorganization") and to align the open-end funds with similar
open-end funds that share the same prospectus. The Reorganization only resulted
in a change in corporate form of some of the ING Funds, with no change in the
substance or investment aspects of the ING Funds. The Reorganization was
consummated to align the ING Funds' corporate structures and expedite the Funds'
required filings with the Securities and Exchange Commission. Shareholders of
Growth + Value and MagnaCap did not approve the Reorganization; therefore those
Funds remain part of ING Mayflower Trust and ING Investment Funds, Inc.,
respectively.
As a result of the Reorganization, the following ING Funds reorganized into
series of ING Equity Trust: Convertible, Equity and Bond, Growth Opportunities,
LargeCap Growth, Large Company Value Fund, Disciplined LargeCap and SmallCap
Opportunities (collectively, the "Reorganizing Funds"). In this regard, the
Board approved the creation of a new series of ING Equity Trust to serve as
"shells" (the "Shell Funds") into which the Reorganized Funds were reorganized.
The plans of reorganization provided for, among other things, the transfer of
the assets and liabilities of the Reorganizing Funds to the Shell Funds. Prior
to September 23, 2002, the effective date of the Reorganization, the Shell Funds
had only nominal assets. For accounting purposes, each Reorganizing Fund is
considered the surviving entity, and the financial statements shown for periods
prior to September 23, 2002 are the financial statements of the Reorganized
Fund. MidCap Opportunities, MidCap Value Fund and SmallCap Value were originally
organized as series of ING Equity Trust, and were not involved in the
Reorganization.
63
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Prior to the Reorganization, Convertible, Equity and Bond, and LargeCap Growth
were series of ING Mutual Funds ("IMF"). IMF is a Delaware business trust
registered as an open-end management investment company organized in 1992.
Prior to the Reorganization, Growth Opportunities was the sole series of ING
Growth Opportunities Fund, a Massachusetts business trust registered as an
open-end management investment company organized in 1986.
Prior to the Reorganization, SmallCap Opportunities was the sole series of ING
SmallCap Opportunities Fund, a Massachusetts business trust registered as an
open-end management investment company organized in 1986.
Prior to the Reorganization, Large Company Value was the sole series of ING
Large Company Value Fund, Inc., a Maryland corporation registered as an
open-end, diversified management investment company organized in April 1991.
Prior to the Reorganization, Disciplined LargeCap was a series of IMT. As
discussed above, IMT is a Massachusetts business trust registered as an open-end
management investment company organized in 1993.
On November 4, 2002, pursuant to an Agreement and Plan of Reorganization dated
August 20, 2002, all of the assets and liabilities of the CRA Realty Shares
Portfolio (the "Acquired Fund") were transferred to a newly created series of
the ING Equity Trust, the ING Real Estate Fund (the "Acquiring Fund") in
exchange for shares of the Acquiring Fund. These shares were then distributed to
shareholders of the Acquired Fund and the Acquired Fund was terminated.
This reorganization was accounted for as tax-free reorganization under the
Internal Revenue Code. Accordingly, no gain or loss was recognized by the
shareholders of the Acquired Fund upon the exchange of their Acquired Fund
Shares for shares of the Acquiring Fund.
Prior to November 4, 2002, Real Estate was organized as a series of The
Advisors' Inner Circle Fund, a Massachusetts business trust registered as an
open-end management investment company, established July 18, 1991.
Effective October 1, 2002, ING Funds Distributor, Inc. changed its name to ING
Funds Distributor, LLC and is a wholly owned subsidiary of ING Groep N.V.
("ING").
ING is a global financial institution active in the fields of insurance, banking
and asset management in more than 65 countries.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are consistently followed by the
Funds in the preparation of their financial statements. Such policies are in
conformity with accounting principles generally accepted in the United States of
America for investment companies.
A. SECURITY VALUATION. Investments in equity securities traded on a national
securities exchange are valued at the last reported sale price. Portfolio
securities reported by NASDAQ will be valued at NASDAQ official closing
price. Securities traded on an exchange or NASDAQ for which there has been
no sale and securities traded in the over-the-counter-market are valued at
the mean between the last reported bid and ask prices. All investments
quoted in foreign currencies will be valued daily in U.S. dollars on the
basis of the foreign currency exchange rates prevailing at the time such
valuation is determined by each Fund's custodian. Debt securities are
valued at bid prices obtained from independent services or from one or more
dealers making markets in the securities. U.S. Government obligations are
valued by using market quotations or independent pricing services which
uses prices provided by market-makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Securities for which market quotations are not readily
available are valued at their respective fair values as determined in good
faith and in accordance with policies set by the Board. Among elements of
analysis, the Board has authorized the use of one or more research services
to assist with the determination of the fair value of foreign securities in
light of significant events. Research services use statistical analyses and
quantitative models to help determine fair value as of the time a Fund
calculates its net asset value. Investments in
64
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
mutual funds are valued at the closing Net Asset Value (NAV) per share.
Investments in securities maturing in less than 60 days at the date of
acquisition are valued at amortized cost, which, when combined with accrued
interest, approximates market value.
B. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Securities transactions are
accounted for on the trade date. Realized gains and losses are reported on
the basis of identified cost of securities sold. Interest income is
recorded on an accrual basis. Dividend income is recorded on the
ex-dividend date, or for certain foreign securities, when the information
becomes available to the funds. Premium amortization and discount accretion
are determined by the effective yield method.
C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds are
maintained in U.S. dollars. Any foreign currency amounts are translated
into U.S. dollars on the following basis:
(1) Market value of investment securities, other assets and liabilities --
at the exchange rates prevailing at the end of the day.
(2) Purchases and sales of investment securities, income and expenses --
at the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets and the market values are presented at the foreign
exchange rates at the end of the day, the Funds do not isolate the portion
of the results of operations resulting from changes in foreign exchange
rates on investments from the fluctuations arising from changes in market
prices of securities held. Such fluctuations are included with the net
realized and unrealized gains or losses from investments. For securities
which are subject to foreign withholding tax upon disposition, liabilities
are recorded on the statement of assets and liabilities for the estimated
tax withholding based on the securities current market value. Upon
disposition, realized gains or losses on such securities are recorded net
of foreign withholding tax. Reported net realized foreign exchange gains or
losses arise from sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities other than investments
in securities at fiscal year end, resulting from changes in the exchange
rate. Foreign security and currency transactions may involve certain
considerations and risks not typically associated with investing in U.S.
companies and the U.S. Government. These risks include but are not limited
to revaluation of currencies and future adverse political and economic
developments which could cause securities and their markets to be less
liquid and prices more volatile than those of comparable U.S. companies and
the U.S. Government.
D. FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS. Certain funds may
enter into foreign currency exchange transactions to convert to and from
different foreign currencies and to and from the U.S. dollar in connection
with the planned purchases or sales of securities. The Funds either enter
into these transactions on a spot basis at the spot rate prevailing in the
foreign currency exchange market or use forward foreign currency contracts
to purchase or sell foreign currencies. When the contract is fulfilled or
closed, gains or losses are realized. Until then, the gain or loss is
included in unrealized appreciation or depreciation. Risks may arise upon
entering into forward contracts from the potential inability of
counterparties to meet the terms of their forward contracts and from
unanticipated movements in the value of foreign currencies relative to the
U.S. dollar.
Each Fund may enter into futures contracts involving foreign currency,
interest rates, securities and security indices, for hedging purposes only.
A futures contract obligates the seller of the contract to deliver and the
purchaser of the contract to take delivery of the type of foreign currency,
financial instrument or security called for in the contract at a specified
future time for a specified price. Upon entering into such a contract, a
Fund is required to
65
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
deposit and maintain as collateral such initial margin as required by the
exchange on which the contract is traded. Pursuant to the contract, a Fund
agrees to receive from or pay to the broker an amount equal to the daily
fluctuations in the value of the contract. Such receipts or payments are
known as variation margins and are recorded as unrealized gains or losses
by the Fund. When the contract is closed, the Fund records a realized gain
or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. There were no
open futures contracts at May 31, 2003.
E. DISTRIBUTIONS TO SHAREHOLDERS. The Funds record distributions to their
shareholders on ex-dividend date. Each Fund pays dividends, if any, as
follows:
ANNUALLY SEMI-ANNUALLY QUARTERLY
-------- ------------- ---------
Growth + Value MagnaCap Convertible
Growth Large Company Equity and Bond
Opportunities Value Real Estate
LargeCap
Growth
Midcap
Opportunities
SmallCap
Opportunities
Disciplined
LargeCap
MidCap Value
SmallCap Value
Each Fund distributes capital gains, to the extent available, annually.
F. FEDERAL INCOME TAXES. It is the policy of the Funds to comply with the
requirements of the Subchapter M of Internal Revenue Code that are
applicable to regulated investment companies and to distribute
substantially all of their net investment income and any net realized
capital gains to their shareholders. Therefore, a federal income tax or
excise tax provision is not required. In addition, by distributing during
each calendar year substantially all of its net investment income and net
realized capital gains, each Fund intends not to be subject to any federal
excise tax. The Board intends to offset any net capital gains with any
available capital loss carryforward until each carryforward has been fully
utilized or expires. In addition, no capital gain distribution shall be
made until the capital loss carryforward has been fully utilized or
expires.
G. USE OF ESTIMATES. Management of the Funds has made certain estimates and
assumptions relating to the reporting of assets, liabilities, income, and
expenses to prepare these financial statements in conformity with
accounting principles generally accepted in the United States of America.
Actual results could differ from these estimates.
H. REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements only
with government securities dealers recognized by the Board of Governors of
the Federal Reserve System or with member banks of the Federal Reserve
System. Under such agreements, the seller of the security agrees to
repurchase the agreement at a mutually agreed upon time and price. The
resale price is in excess of the purchase price and reflects an agreed upon
interest rate for the period of time the agreement is outstanding. The
period of the repurchase agreements is usually short, from overnight to one
week, while the underlying securities generally have longer maturities.
Each Fund will always receive as collateral securities acceptable to it
whose market value is equal to at least 100% of the carrying amount of the
repurchase agreements, plus accrued interest, being invested by the Fund.
The underlying collateral is valued daily on a mark to market basis to
assure that the value, including accrued interest is at least equal to the
repurchase price. If the seller defaults, a Fund might incur a loss or
delay in the realization of proceeds if the value of the collateral
securing the repurchase agreement declines, and it might incur disposition
costs in liquidating the collateral.
I. OPTIONS CONTRACTS. All Funds may purchase put and call options and may
write (sell) put options and covered call options. The Funds may engage in
option transactions as a hedge against adverse movements in the value of
portfolio holdings or to increase market exposure. Option contracts are
valued daily and unrealized gains or losses are recorded based upon the
last sales price on the principal exchange on which the options are traded.
The Funds will realize a gain or loss upon the expiration or closing of the
option contract. When an option is exercised, the proceeds on sales of the
underlying security for a written call option, the purchase cost of the
security for a written put option, or the cost of the security for
66
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
a purchased put or call option is adjusted by the amount of premium
received or paid. Realized and unrealized gains or losses on option
contracts are reflected in the accompanying financial statements. The risk
in writing a call option is that the Funds give up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Funds may incur a
loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Funds pay a premium
whether or not the option is exercised. Risks may also arise from an
illiquid secondary market or from the inability of counterparties to meet
the terms of the contract.
J. SECURITIES LENDING. Each Fund had the option to temporarily loan up to 33
1/3% of its total assets to brokers, dealers or other financial
institutions in exchange for a negotiated lender's fee. The borrower is
required to fully collateralize the loans with cash, letters of credit or
U.S. Government securities. Generally, in the event of counterparty
default, the Funds have the right to use collateral to offset losses
incurred. There would be potential loss to the Funds in the event the Funds
are delayed or prevented from exercising their right to dispose of the
collateral. The Funds bear the risk of loss with respect to the investment
of collateral. Engaging in securities lending could have a leverage effect,
which may intensify the credit, market and other risks associated with
investing in a Fund. There were no securities on loan as of May 31, 2003.
K. OFFERING COSTS. Offering costs are capitalized and amortized on a straight
line basis over a period of twelve months.
NOTE 3 -- INVESTMENT TRANSACTIONS
For the year ended May 31, 2003, the cost of purchases and proceeds from the
sales of securities, excluding short-term securities, were as follows:
PURCHASES SALES
--------- -----
Growth+ Value $ 706,782,738 $ 801,760,722
Growth Opportunities 699,915,562 766,500,161
LargeCap Growth 541,244,697 603,507,472
MidCap Opportunities 625,749,686 708,520,580
SmallCap Opportunities 1,108,186,765 1,178,620,201
Disciplined LargeCap 94,105,244 118,416,204
Large Company Value 141,233,597 137,577,889
MagnaCap 254,774,488 271,259,925
MidCap Value 28,104,223 24,546,472
SmallCap Value 22,037,663 16,248,323
Convertible 178,599,186 210,029,061
Equity and Bond 109,856,591 131,868,826
Real Estate 81,446,336 65,054,934
67
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The Funds entered into an Investment Management Agreement with ING Investments,
LLC (the "Manager", the "Investment Manager" or the "Adviser") a wholly-owned
subsidiary of ING. The investment management agreements compensate the Manager
with a fee, computed daily and payable monthly, based on the average daily net
assets of each Fund, at the following annual rates:
AS A PERCENT OF AVERAGE NET ASSETS
----------------------------------------------------------------------
Growth+ Value 1.00%
Growth Opportunities 0.95%
LargeCap Growth 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in
excess of $1 billion
MidCap Opportunities 1.00%
SmallCap Opportunities 1.00%
Disciplined LargeCap 0.70%
Large Company Value 0.75% on first $100 million; 0.60% on
next $50 million; 0.50% on next $100 million; and
0.40% in excess of $250 million
MagnaCap 1.00% on first $30 million; 0.75% on next $220 million; 0.625% on next
$250 million; and 0.50% in excess of $500 million
MidCap Value 1.00%
SmallCap Value 1.00%
Convertible 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in
excess of $1 billion
Equity and Bond 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in
excess of $1 billion
Real Estate 0.70%
Navellier Fund Management, Inc. ("Navellier"), a registered investment advisor,
serves as Sub-Adviser to the Growth + Value Fund pursuant to a subadvisory
agreement between the Manager and Navellier. Aeltus Investment Management, Inc.
("Aeltus"), a registered investment advisor, serves as Sub-Adviser to the
Disciplined LargeCap Fund pursuant to a subadvisory agreement between the
Manager and Aeltus. Prior to August 1, 2001, J.P. Morgan Investment Management,
Inc. served as Sub-Adviser to the Fund. Brandes Investment Partners, LP
("Brandes"), a registered investment advisor, serves as Sub-Adviser to the
MidCap Value and SmallCap Value Funds pursuant to a subadvisory agreement
between the Manager and Brandes.
Clarion CRA Securities, L.P. ("CRA"), a registered investment advisor, became
the Sub-Adviser to the Real Estate Fund pursuant a subadvisory agreement, dated
November 4, 2002, between the Manager and CRA. Prior to November 4, 2002, CRA
served as the investment advisor to Real Estate.
ING Funds Services, LLC (the "Administrator" or "IFS"), serves as administrator
to each Fund except MagnaCap. The Funds pay the Administrator a fee calculated
at an annual rate of 0.10% of each Funds' average daily net assets.
MagnaCap has entered into a service agreement with IFS whereby IFS will act as
Shareholder Service Agent for the Fund. The agreement provides that IFS will be
compensated for incoming and outgoing shareholder telephone calls and letters,
and all reasonable out-of-pocket expenses incurred in connection with the
performance of such services. Prior to March 1, 2002, IFS acted as Shareholder
Service Agent for LargeCap Growth, Convertible and Equity and Income.
Growth + Value, Growth Opportunities, MidCap Opportunities, SmallCap
Opportunities and Disciplined LargeCap also pay IFS an annual shareholder
account servicing fee of $5.00, payable semi-annually, for each account of
beneficial owners of shares.
68
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 5 -- DISTRIBUTION AND SERVICE FEES
Each share class of the Funds (except as noted below) 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 Funds for expenses incurred in the distribution of
each Fund's shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the
Distributor is entitled to a payment each month to reimburse or compensate
expenses incurred in the distribution and promotion of each 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 have 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 rates:
CLASS A CLASS B CLASS C CLASS I CLASS M CLASS Q CLASS T
------- ------- ------- ------- ------- ------- -------
Growth + Value 0.30% 1.00% 1.00% N/A N/A 0.25% N/A
Growth Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95%
LargeCap Growth 0.35 1.00 1.00 N/A N/A 0.25 N/A
MidCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 N/A
SmallCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95
Disciplined LargeCap 0.30 1.00 1.00 N/A N/A 0.25 N/A
Large Company Value 0.25 1.00 1.00 N/A N/A 0.25 N/A
MagnaCap 0.30 1.00 1.00 N/A 0.75% 0.25 N/A
MidCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A
SmallCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A
Convertible 0.35 1.00 1.00 N/A N/A 0.25 N/A
Equity and Bond 0.35 1.00 1.00 N/A N/A 0.25 0.75
Real Estate 0.25 1.00 1.00 N/A N/A 0.25 N/A
Beginning March 1, 2001, the Distributor agreed to waive 0.10% of the
Distribution fee for the Tax Efficient Equity Fund for Class A only.
For the year ended May 31, 2003, the Distributor has retained $93,181 as sales
charges from the proceeds of Class A Shares sold, $50,441 and $71,478 from the
proceeds of Class A Shares and Class C Shares redeemed, respectively and $135
from the proceeds of Class M Shares sold.
69
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
At May 31, 2003, the Funds had the following amounts recorded in payable to
affiliates on the accompanying Statements of Assets and Liabilities (see Notes
4, 5 and 7):
ACCRUED ACCRUED
INVESTMENT ACCRUED DISTRIBUTION
MANAGEMENT ADMINISTRATIVE AND SERVICE
FEES AND SERVICE FEES FEES TOTAL
---- ---------------- ---- -----
Growth + Value $ 170,969 $ 154,582 $ 141,131 $ 466,682
Growth Opportunities 139,093 118,490 80,088 337,671
LargeCap Growth 137,621 14,711 101,715 254,047
MidCap Opportunities 172,245 83,444 103,182 358,871
SmallCap Opportunities 226,575 168,697 151,437 546,709
Disciplined LargeCap 48,362 27,566 48,769 124,697
Large Company Value 80,631 11,315 31,177 123,123
MagnaCap 154,656 5,330 93,761 253,747
MidCap Value 30,872 3,087 21,861 55,820
SmallCap Value 25,523 2,552 17,953 46,028
Convertible 145,204 16,044 130,648 291,896
Equity and Bond 45,292 6,039 41,924 93,255
Real Estate 74,460 10,649 294 85,403
At May 31, 2003, State Street Bank and Trust Company and Norwest Bank owned
5.74% and 21.96% respectively, of the Growth Opportunities Fund. State Street
Bank and Trust Company also owned 5.21% of the SmallCap Opportunities Fund. ING
National Trust, a wholly-owned indirect subsidiary of ING Groep N.V., held
12.13% and 4.09% of LargeCap Growth Fund and Large Company Value Fund,
respectively. Realiastar owned 5.50% of the MidCap Opportunities Fund, and
23.76% of the Disciplined LargeCap Fund. At May 31, 2003, certain non-affiliated
individuals and entities owned separately the following percentage of the Real
Estate Fund: 20.56%, 6.42%, 5.40%, 5.27% and 5.13%. Investment activities of
these shareholders could have a material impact on the Funds.
Included in realized losses of the MagnaCap Fund is $289,895 in reimbursements
for investment losses made by the Investment Adviser.
NOTE 7 -- EXPENSE LIMITATIONS
For the following Funds, the Manager has voluntarily agreed to limit expenses,
excluding interest, taxes, brokerage and extraordinary expenses to the levels
listed below:
CLASS A CLASS B CLASS C CLASS I CLASS Q CLASS T
------- ------- ------- ------- ------- -------
LargeCap Growth(1) 1.60% 2.25% 2.25% N/A 1.50% N/A
MidCap Opportunities(2) 1.50 2.20 2.20 1.20% 1.35 N/A
Large Company Value 2.75 3.50 3.50 N/A 2.75 N/A
MidCap Value 1.75 2.50 2.50 1.50 1.75 N/A
SmallCap Value 1.75 2.50 2.50 1.50 1.75 N/A
Convertible(1) 1.60 2.25 2.25 N/A 1.50 N/A
Equity and Bond(1)(3) 1.60 2.25 2.25 N/A 1.50 2.00%
Real Estate 1.45 2.20 2.20 1.00 1.25 N/A
- ----------
(1) Prior to November 1, 2001, the expense limitation rate for Class Q was
1.25%.
(2) Prior to January 1, 2002, there was no expense limitation for the Fund.
(3) Prior to November 1, 2001, the expense limitation rate for Class T was
1.75%.
70
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Each Fund will at a later date reimburse the Manager for expenses waived during
the previous 36 months, but only if, after such reimbursement, the Fund's
expense ratio does not exceed the percentage described above. Waived and
reimbursed fees and any recoupment by the Manager of such waived and reimbursed
fees are reflected on the accompanying Statements of Operations for each Fund.
Outstanding reimbursement balances due to the Funds, if any, under their
respective expense limitation agreements are reflected in Reimbursement Due from
Manager on the accompanying Statements of Assets and Liabilities.
As of May 31, 2003, the cumulative amounts of reimbursed fees that are subject
to possible recoupment by the Manager are as follows:
LargeCap Growth $293,050
MidCap Opportunities 834,643
MidCap Value 248,002
SmallCap Value 227,214
Equity and Bond 354,988
Real Estate 118,117
NOTE 8 -- LINE OF CREDIT
All of the Funds included in this report, in addition to certain other funds
managed by the Adviser, have entered into an unsecured committed revolving line
of credit agreement (the "Credit Agreement") with State Street Bank and Trust
Company for an aggregate amount of $125,000,000. The proceeds may be used only
to: (1) temporarily finance the purchase and sale of securities; (2) finance the
redemption of shares of an investor in the Funds; and (3) enable the Funds to
meet other emergency expenses as defined in the Credit Agreement. The Funds to
which the line of credit is available pay a commitment fee equal to 0.10% per
annum on the daily unused portion of the committed line amount payable quarterly
in arrears. At May 31, 2003, the Funds did not have any loans outstanding under
the line of credit.
NOTE 9 -- CAPITAL SHARES
Transactions in capital shares and dollars were as follows:
CLASS A SHARES CLASS B SHARES
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
ING GROWTH + VALUE
(NUMBER OF SHARES)
Shares sold 1,525,553 7,573,521 775,059 1,829,213
Shares redeemed (4,091,241) (10,051,567) (6,243,894) (6,707,089)
------------- ------------- ------------- -------------
Net decrease in shares outstanding (2,565,688) (2,478,046) (5,468,835) (4,877,876)
============= ============= ============= =============
ING GROWTH + VALUE ($)
Shares sold $ 12,691,301 $ 83,819,458 $ 5,705,478 $ 20,197,659
Shares redeemed (32,447,566) (111,034,969) (47,161,811) (71,726,807)
------------- ------------- ------------- -------------
Net decrease $ (19,756,265) $ (27,215,511) $ (41,456,333) $ (51,529,148)
============= ============= ============= =============
CLASS C SHARES CLASS Q SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING GROWTH + VALUE
(NUMBER OF SHARES)
Shares sold 555,346 1,324,639 2,650 27,404
Shares redeemed (4,193,623) (4,731,745) (15,845) (19,970)
------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (3,638,277) (3,407,106) (13,195) 7,434
============ ============ ============ ============
ING GROWTH + VALUE ($)
Shares sold $ 4,087,044 $ 14,652,114 $ 21,001 $ 312,909
Shares redeemed (31,396,649) (50,714,645) (113,542) (235,075)
------------ ------------ ------------ ------------
Net increase (decrease) $(27,309,605) $(36,062,531) $ (92,541) $ 77,834
============ ============ ============ ============
71
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING GROWTH OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold 978,264 2,688,274 237,656 599,172 180,590 580,309
Shares redeemed (3,247,365) (4,465,341) (2,452,695) (2,729,664) (1,551,613) (2,210,476)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease in shares
outstanding (2,269,101) (1,777,067) (2,215,039) (2,130,492) (1,371,023) (1,630,167)
============ ============ ============ ============ ============ ============
ING GROWTH OPPORTUNITIES ($)
Shares sold $ 10,243,050 $ 40,004,026 $ 2,305,753 $ 8,476,731 $ 1,773,541 $ 8,201,102
Shares redeemed (34,151,206) (64,658,384) (24,220,971) (37,036,999) (15,424,361) (29,810,181)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease $(23,908,156) $(24,654,358) $(21,915,218) $(28,560,268) $(13,650,820) $(21,609,079)
============ ============ ============ ============ ============ ============
CLASS T SHARES CLASS I SHARES CLASS Q SHARES
--------------------------- --------------------------- ---------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
----------- ----------- ----------- ----------- ----------- -----------
ING GROWTH OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold -- 1,728 53 792 -- 55,711
Shares redeemed (327,604) (627,535) (271,522) (1,013) (517) (479,835)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease in shares
outstanding (327,604) (625,807) (271,469) (221) (517) (424,124)
=========== =========== =========== =========== =========== ===========
ING GROWTH OPPORTUNITIES ($)
Shares sold $ -- $ 21,321 $ 607 $ 13,222 $ -- $ 867,826
Shares redeemed (3,256,317) (8,967,880) (2,824,023) (14,464) (5,708) (7,238,101)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease $(3,256,317) $(8,946,559) $(2,823,416) $ (1,242) $ (5,708) $(6,370,275)
=========== =========== =========== =========== =========== ===========
CLASS A SHARES CLASS B SHARES
------------------------------ ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------- ------------- ------------- -------------
ING LARGECAP GROWTH
(NUMBER OF SHARES)
Shares sold 1,731,633 2,658,138 408,627 855,661
Shares issued as
reinvestment of dividends -- 939 -- 124
Shares redeemed (2,830,849) (5,335,128) (2,383,990) (2,997,437)
------------- ------------- ------------- -------------
Net decrease in shares
outstanding (1,099,216) (2,676,051) (1,975,363) (2,141,652)
============= ============= ============= =============
ING LARGECAP GROWTH ($)
Shares sold $ 23,912,505 $ 52,212,562 $ 5,315,977 $ 16,971,200
Shares issued as
reinvestment of dividends -- 18,730 -- 3,107
Shares redeemed (38,399,684) (103,167,640) (31,662,290) (56,761,530)
------------- ------------- ------------- -------------
Net decrease $ (14,487,179) $ (50,936,348) $ (26,346,313) $ (39,787,223)
============= ============= ============= =============
72
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002(1) 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING LARGECAP GROWTH
(NUMBER OF SHARES)
Shares sold 224,913 639,475 289,678 1,838,570 133,122 2,029,559
Shares issued as reinvestment of
dividends -- 51 -- -- -- 404
Shares redeemed (1,291,661) (2,184,382) (325,759) (296,694) (706,874) (1,540,016)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (1,066,748) (1,544,856) (36,081) 1,541,876 (573,752) 489,947
============ ============ ============ ============ ============ ============
ING LARGECAP GROWTH ($)
Shares sold $ 2,920,608 $ 12,898,628 $ 3,894,597 $ 36,212,393 $ 1,768,245 $ 44,230,203
Shares issued as reinvestment of
dividends -- 901 -- -- -- 8,201
Shares redeemed (17,091,851) (41,155,563) (4,467,218) (5,342,391) (9,611,239) (30,239,081)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $(14,171,243) $(28,256,034) $ (572,621) $ 30,870,002 $ (7,842,994) $ 13,999,323
============ ============ ============ ============ ============ ============
- ----------
(1) Commenced offering of shares on January 8, 2002.
CLASS A SHARES CLASS B SHARES
---------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING MIDCAP OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold 992,635 1,348,381 266,036 360,114
Shares issued in merger -- 5,001,056 -- 4,822,131
Shares redeemed (2,775,471) (1,883,562) (2,287,890) (741,630)
------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (1,782,836) 4,465,875 (2,021,854) 4,440,615
============ ============ ============ ============
ING MIDCAP OPPORTUNITIES ($)
Shares sold $ 9,131,612 $ 15,945,265 $ 2,389,023 $ 4,209,707
Shares issued in merger -- 57,460,972 -- 54,010,417
Shares redeemed (25,266,178) (21,781,921) (20,376,679) (8,323,034)
------------ ------------ ------------ ------------
Net increase (decrease) $(16,134,566) $ 51,624,316 $(17,987,656) $ 49,897,090
============ ============ ============ ============
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
---------------------------- ---------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING MIDCAP OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold 186,646 171,335 204,879 431 441,646 91,512
Shares issued in merger -- 8,539,378 -- -- -- 981,467
Shares redeemed (2,602,475) (673,551) (2,687,084) -- (550,075) (694,816)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (2,415,829) 8,037,162 (2,482,205) 431 (108,429) 378,163
============ ============ ============ ============ ============ ============
ING MIDCAP OPPORTUNITIES ($)
Shares sold $ 1,634,606 $ 1,957,505 $ 1,868,172 $ 5,008 $ 4,051,242 $ 1,112,443
Shares issued in merger -- 95,170,477 -- -- -- 11,326,837
Shares redeemed (23,006,547) (7,569,185) (24,766,277) -- (5,011,695) (8,237,829)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $(21,371,941) $ 89,558,797 $(22,898,105) $ 5,008 $ (960,453) $ 4,201,451
============ ============ ============ ============ ============ ============
73
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------------- ----------------------------- -----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------- ------------- ------------- ------------- ------------- -------------
ING SMALLCAP OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold 2,959,197 4,108,446 297,293 636,080 182,010 508,063
Shares issued in merger -- 2,414,351 -- 1,849,518 -- 3,423,776
Shares issued as reinvestment of
dividends -- 125,361 -- 137,050 -- 46,233
Shares redeemed (4,076,167) (3,119,480) (2,120,010) (1,386,958) (1,741,349) (805,214)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in shares
outstanding (1,116,970) 3,528,678 (1,822,717) 1,235,690 (1,559,339) 3,172,858
============= ============= ============= ============= ============= =============
ING SMALLCAP OPPORTUNITIES ($)
Shares sold $ 53,600,429 $ 120,715,302 $ 4,862,420 $ 17,982,622 $ 2,953,005 $ 14,450,521
Shares issued in merger -- 61,806,247 -- 44,285,046 -- 81,805,796
Shares issued as reinvestment of
dividends -- 3,576,353 -- 3,669,830 -- 1,235,346
Shares redeemed (73,261,386) (90,422,365) (35,339,503) (37,810,172) (29,151,596) (21,787,806)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) $ (19,660,957) $ 95,675,537 $ (30,477,083) $ 28,127,326 $ (26,198,591) $ 75,703,857
============= ============= ============= ============= ============= =============
CLASS T SHARES CLASS I SHARES CLASS Q SHARES
----------------------------- ----------------------------- -----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------- ------------- ------------- ------------- ------------- -------------
ING SMALLCAP OPPORTUNITIES
(NUMBER OF SHARES)
Shares sold -- 334 167,562 518,042 18,182 21,261
Shares issued in merger -- -- -- -- -- 159,919
Shares issued as reinvestment of
dividends -- 11,694 -- -- -- 2,615
Shares redeemed (110,464) (238,967) (146,229) (73,562) (120,129) (105,090)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in shares
outstanding (110,464) (226,939) 21,333 444,480 (101,947) 78,705
============= ============= ============= ============= ============= =============
ING SMALLCAP OPPORTUNITIES ($)
Shares sold $ -- $ 8,901 $ 2,851,630 $ 15,648,216 $ 346,249 $ 708,356
Shares issued in merger -- -- -- -- -- 4,098,445
Shares issued as reinvestment of
dividends -- 316,205 -- 5 -- 74,783
Shares redeemed (1,899,687) (6,826,551) (2,570,785) (1,925,564) (2,150,100) (3,230,766)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) $ (1,899,687) $ (6,501,445) $ 280,845 $ 13,722,657 $ (1,803,851) $ 1,650,818
============= ============= ============= ============= ============= =============
CLASS A SHARES CLASS B SHARES
--------------------------- ---------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING DISCIPLINED LARGECAP
(NUMBER OF SHARES)
Shares sold 1,293,110 332,209 179,270 653,975
Shares redeemed (1,518,287) (451,951) (1,981,016) (2,101,755)
------------ ------------ ------------ ------------
Net decrease in shares
outstanding (225,177) (119,742) (1,801,746) (1,447,780)
============ ============ ============ ============
ING DISCIPLINED LARGECAP ($)
Shares sold $ 8,987,874 $ 2,956,464 $ 1,245,114 $ 5,692,149
Shares redeemed (10,542,573) (4,015,022) (13,755,648) (18,419,336)
------------ ------------ ------------ ------------
Net decrease $ (1,554,699) $ (1,058,558) $(12,510,534) $(12,727,187)
============ ============ ============ ============
74
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
--------------------------- --------------------------- --------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2002
------------ ------------ ------------ ------------ ------------
ING DISCIPLINED LARGECAP
(NUMBER OF SHARES)
Shares sold 77,832 478,885 466 3 30,192
Shares redeemed (1,596,429) (2,874,370) (10) -- (76,493)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (1,518,597) (2,395,485) 456 3 (46,301)
============ ============ ============ ============ ============
ING DISCIPLINED LARGECAP ($)
Shares sold $ 548,074 $ 4,203,945 $ 3,306 $ 25 $ 274,465
Shares redeemed (10,962,505) (25,015,303) (73) -- (702,790)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) $(10,414,431) $(20,811,358) $ 3,233 $ 25 $ (428,325)
============ ============ ============ ============ ============
CLASS A SHARES CLASS B SHARES
--------------------------- ---------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING LARGE COMPANY VALUE
(NUMBER OF SHARES)
Shares sold 869,928 1,373,253 126,112 121,663
Shares issued as reinvestment of dividends 27,501 233,778 -- 5,594
Shares redeemed (2,008,682) (2,149,663) (150,332) (99,057)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (1,111,253) (542,632) (24,220) 28,200
============ ============ ============ ============
ING LARGE COMPANY VALUE ($)
Shares sold $ 10,249,499 $ 20,940,770 $ 1,444,075 $ 1,825,895
Shares issued as reinvestment of dividends 316,244 3,503,302 -- 83,179
Shares redeemed (23,130,520) (32,730,767) (1,711,384) (1,527,433)
------------ ------------ ------------ ------------
Net increase (decrease) $(12,564,777) $ (8,286,695) $ (267,309) $ 381,641
============ ============ ============ ============
CLASS C SHARES CLASS Q SHARES
--------------------------- ---------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING LARGE COMPANY VALUE
(NUMBER OF SHARES)
Shares sold 32,926 64,684 -- 1,337
Shares issued as reinvestment of dividends -- 2,645 -- --
Shares redeemed (70,915) (139,077) (183) --
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (37,989) (71,748) (183) 1,337
============ ============ ============ ============
ING LARGE COMPANY VALUE ($)
Shares sold $ 382,527 $ 986,051 $ -- $ 19,389
Shares issued as reinvesment of dividends -- 39,228 -- --
Shares redeemed (753,542) (2,222,672) (1,771) --
------------ ------------ ------------ ------------
Net increase (decrease) $ (371,015) $ (1,197,393) $ (1,771) $ 19,389
============ ============ ============ ============
75
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------------------- --------------------------- ---------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING MAGNACAP
(NUMBER OF SHARES)
Shares sold 1,637,596 2,200,329 342,031 1,165,942 455,850 491,490
Shares issued as reinvestment of
dividends 58,790 3,100,059 52 1,123,166 20 119,279
Shares redeemed (4,837,146) (4,883,156) (2,535,432) (2,663,961) (471,682) (446,035)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (3,140,760) 417,232 (2,193,349) (374,853) (15,812) 164,734
============ ============ ============ ============ ============ ============
ING MAGNACAP ($)
Shares sold $ 13,316,165 $ 24,358,517 $ 2,679,550 $ 12,626,363 $ 3,661,386 $ 5,208,521
Shares issued as reinvestment of
dividends 471,273 31,776,032 407 11,153,042 174 1,185,640
Shares redeemed (39,584,790) (54,127,863) (20,001,817) (28,380,740) (3,860,761) (4,684,503)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $(25,797,352) $ 2,006,686 $(17,321,860) $ (4,601,335) $ (199,201) $ 1,709,658
============ ============ ============ ============ ============ ============
CLASS M SHARES CLASS Q SHARES CLASS I SHARES
------------------------- ------------------------- --------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003
----------- ----------- ----------- ----------- -----------
ING MAGNACAP
(NUMBER OF SHARES)
Shares sold 19,464 38,778 -- 25,363 777
Shares issued as reinvestment of
dividends -- 207,863 4,708 161,336 --
Shares redeemed (374,176) (339,171) (2,564) (172,009) --
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in shares
outstanding (354,712) (92,530) 2,144 14,690 777
=========== =========== =========== =========== ===========
ING MAGNACAP ($)
Shares sold $ 155,322 $ 418,837 $ -- $ 293,569 $ 6,557
Shares issued as reinvestment of
dividends -- 2,103,577 37,713 1,652,078 --
Shares redeemed (3,054,885) (3,695,461) (38,330) (1,844,440) --
----------- ----------- ----------- ----------- -----------
Net increase (decrease) $(2,899,563) $(1,173,047) $ (617) $ 101,207 $ 6,557
=========== =========== =========== =========== ===========
76
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
--------------------------- ---------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(1) 2003 2002(2)
------------ ------------ ------------ ------------
ING MIDCAP VALUE
(NUMBER OF SHARES)
Shares sold 1,049,073 2,605,647 818,080 1,153,304
Shares issued as reinvestment of
dividends 34,385 -- 18,033 --
Shares redeemed (1,749,286) (142,673) (507,980) (17,955)
------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (665,828) 2,462,974 328,133 1,135,349
============ ============ ============ ============
ING MIDCAP VALUE ($)
Shares sold $ 7,733,617 $ 26,775,675 $ 6,257,727 $ 11,840,128
Shares issued as reinvestment of
dividends 232,444 -- 121,903 --
Shares redeemed (11,804,691) (1,470,743) (3,593,419) (184,720)
------------ ------------ ------------ ------------
Net increase (decrease) $ (3,838,630) $ 25,304,932 $ 2,786,211 $ 11,655,408
============ ============ ============ ============
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
---------------------------- -------------------------- -------------------------
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(2) 2003 2002(3) 2003 2002(4)
----------- ----------- ----------- ----------- ----------- -----------
ING MIDCAP VALUE
Shares sold 822,471 965,747 21,374 6,888 550 1,115
Shares issued as reinvestment of
dividends 13,972 -- 562 -- 42 --
Shares redeemed (341,110) (17,708) (5,297) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase in shares outstanding 495,333 948,039 16,639 6,888 592 1,115
=========== =========== =========== =========== =========== ===========
ING MIDCAP VALUE ($)
Shares sold $ 6,239,930 $ 9,937,739 $ 154,508 $ 70,941 $ 4,534 $ 11,595
Shares issued as reinvestment of
dividends 94,463 -- 3,799 -- 285 --
Shares redeemed (2,367,968) (184,006) (36,094) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase $ 3,966,425 $ 9,753,733 $ 122,213 $ 70,941 $ 4,819 $ 11,595
=========== =========== =========== =========== =========== ===========
- ----------
(1) Commenced offering of shares on February 1, 2002.
(2) Commenced offering of shares on February 4, 2002.
(3) Commenced offering of shares on March 4, 2002.
(4) Commenced offering of shares on April 17, 2002.
77
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
--------------------------- ---------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(1) 2003 2002(2)
------------ ------------ ------------ ------------
ING SMALL CAP VALUE
(NUMBER OF SHARES)
Shares sold 746,668 1,818,913 490,662 783,600
Shares issued as reinvestment of
dividends 16,962 -- 6,823 --
Shares redeemed (1,197,761) (83,387) (364,790) (39,620)
------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (434,131) 1,735,526 132,695 743,980
============ ============ ============ ============
ING SMALL CAP VALUE ($)
Shares sold $ 6,815,426 $ 19,106,892 $ 4,485,147 $ 8,286,464
Shares issued as reinvestment of
dividends 145,698 -- 58,605 --
Shares redeemed (10,467,147) (875,665) (3,120,196) (426,160)
------------ ------------ ------------ ------------
Net increase (decrease) $ (3,506,023) $ 18,231,227 $ 1,423,556 $ 7,860,304
============ ============ ============ ============
CLASS C SHARES CLASS I SHARES CLASS Q SHARES
------------------------- ------------------------- -------------------------
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002(3) 2003 2002(4) 2003 2002(5)
----------- ----------- ----------- ----------- ----------- -----------
ING SMALL CAP VALUE
(NUMBER OF SHARES)
Shares sold 566,589 812,089 30,646 2,469 -- 760
Shares issued as reinvestment of
dividends 6,643 -- 564 -- -- --
Shares redeemed (174,091) (13,303) (10,123) -- (695) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in shares
outstanding 399,141 798,786 21,087 2,469 (695) 760
=========== =========== =========== =========== =========== ===========
ING SMALL CAP VALUE ($)
Shares sold $ 5,189,793 $ 8,706,900 $ 286,003 $ 26,848 $ -- $ 8,230
Shares issued as reinvestment of
dividends 57,003 -- 4,835 -- -- --
Shares redeemed (1,484,104) (141,971) (78,363) -- (7,606) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) $ 3,762,692 $ 8,564,929 $ 212,475 $ 26,848 $ (7,606) $ 8,230
=========== =========== =========== =========== =========== ===========
- ----------
(1) Commenced offering of shares on February 1, 2002.
(2) Commenced offering of shares on February 4, 2002.
(3) Commenced offering of shares on February 7, 2002.
(4) Commenced offering of shares on March 7, 2002.
(5) Commenced offering of shares on April 30, 2002.
78
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
--------------------------- ---------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING CONVERTIBLE
(NUMBER OF SHARES)
Shares sold 538,399 1,958,879 421,161 614,464
Shares issued as reinvestment of dividends 51,808 110,965 41,633 88,673
Shares redeemed (1,397,320) (3,641,803) (1,662,300) (1,844,627)
------------ ------------ ------------ ------------
Net decrease in shares outstanding (807,113) (1,571,959) (1,199,506) (1,141,490)
============ ============ ============ ============
ING CONVERTIBLE ($)
Shares sold $ 8,104,116 $ 30,523,457 $ 6,866,145 $ 10,852,858
Shares issued as reinvestment of dividends 762,272 1,758,845 674,288 1,536,619
Shares redeemed (20,483,502) (57,093,216) (26,789,834) (31,743,142)
------------ ------------ ------------ ------------
Net decrease $(11,617,114) $(24,810,914) $(19,249,401) $(19,353,665)
============ ============ ============ ============
CLASS C SHARES CLASS Q SHARES
--------------------------- ---------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING CONVERTIBLE
(NUMBER OF SHARES)
Shares sold 283,725 450,714 17,167 30,682
Shares issued as reinvestment of dividends 32,094 64,090 8,275 32,307
Shares redeemed (1,478,629) (1,812,332) (347,993) (1,190,010)
------------ ------------ ------------ ------------
Net decrease in shares outstanding (1,162,810) (1,297,528) (322,551) (1,127,021)
============ ============ ============ ============
ING CONVERTIBLE ($)
Shares sold $ 4,341,342 $ 7,434,361 $ 251,286 $ 482,846
Shares issued as reinvestment of dividends 485,833 1,039,698 117,940 502,113
Shares redeemed (22,218,447) (29,432,206) (4,929,175) (18,495,520)
------------ ------------ ------------ ------------
Net decrease $(17,391,272) $(20,958,147) $ (4,559,949) $(17,510,561)
============ ============ ============ ============
CLASS A SHARES CLASS B SHARES
--------------------------- ---------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
ING EQUITY AND BOND
(NUMBER OF SHARES)
Shares sold 804,559 2,044,167 235,194 568,337
Shares issued as reinvestment of dividends 87,922 169,074 20,392 53,496
Shares redeemed (2,874,377) (2,107,628) (926,352) (688,620)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (1,981,896) 105,613 (670,766) (66,787)
============ ============ ============ ============
ING EQUITY AND BOND ($)
Shares sold $ 8,696,083 $ 25,609,560 $ 2,763,564 $ 7,552,484
Shares issued as reinvestment of dividends 945,153 2,077,020 237,706 706,119
Shares redeemed (31,480,050) (26,287,880) (10,795,160) (9,177,528)
------------ ------------ ------------ ------------
Net increase (decrease) $(21,838,814) $ 1,398,700 $ (7,793,890) $ (918,925)
============ ============ ============ ============
79
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
CLASS C SHARES CLASS Q SHARES CLASS T SHARES
--------------------------- --------------------------- ---------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2003 2002 2003 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
ING EQUITY AND BOND
(NUMBER OF SHARES)
Shares sold 151,062 262,677 5,355 9,956 666 325
Shares issued as reinvestment of
dividends 16,285 38,349 404 1,271 5,021 14,320
Shares redeemed (453,636) (518,494) (2,579) (23,460) (96,290) (204,914)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in shares
outstanding (286,289) (217,468) 3,180 (12,233) (90,603) (190,269)
============ ============ ============ ============ ============ ============
ING EQUITY AND BOND ($)
Shares sold $ 1,566,442 $ 3,148,057 $ 56,544 $ 123,222 $ 7,881 $ 4,282
Shares issued as reinvestment of
dividends 168,388 452,175 4,292 15,488 58,222 189,047
Shares redeemed (4,682,884) (6,149,939) (27,501) (288,266) (1,124,406) (2,740,344)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) $ (2,948,054) $ (2,549,707) $ 33,335 $ (149,556) $ (1,058,303) $ (2,547,015)
============ ============ ============ ============ ============ ============
CLASS A CLASS B CLASS C CLASS I
------------ ------------ ------------ ------------------------------------------
PERIOD PERIOD PERIOD PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, OCT. 31, OCT. 31,
2003(1) 2003(3) 2003(4) 2003(2) 2002(5)(6) 2001(5)(6)
------------ ------------ ------------ ------------ ------------ ------------
ING REAL ESTATE
(NUMBER OF SHARES)
Shares sold 94,587 16,002 13,845 2,062,228 2,943 1,355
Shares issued as reinvestment of
dividends 341 28 7 115,070 343 303
Shares redeemed (6,170) (2,596) -- (962,686) (1,331) (589)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in shares
outstanding 88,758 13,434 13,852 1,214,612 1,955 1,069
============ ============ ============ ============ ============ ============
ING REAL ESTATE ($)
Shares sold $ 1,008,855 $ 165,222 $ 156,401 $ 21,890,930 $ 31,057 $ 13,726
Shares issued as reinvestment of
dividends 3,536 294 74 1,216,742 3,751 3,110
Shares redeemed (64,742) (26,513) -- (10,000,608) (14,352) (5,896)
------------ ------------ ------------ ------------ ------------ ------------
Net increase $ 947,649 $ 139,003 $ 156,475 $ 13,107,064 $ 20,456 $ 10,940
============ ============ ============ ============ ============ ============
- ----------
(1) Commenced offering of shares on December 20, 2002.
(2) Changed its fiscal year to May 31.
(3) Commenced offering of shares on November 20, 2002.
(4) Commenced offering of shares on January 17, 2003.
(5) Reflects history of a predecessor mutual fund (see Note 1)
(6) Dollar amounts in thousands.
80
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 10 -- WHEN ISSUED SECURITIES
The Equity and Income Fund, at times, may purchase FNMA/GNMA certificates on a
delayed delivery, forward or when-issued basis with payment and delivery often
taking place a month or more after the initiation of the transaction. It is the
Fund's policy to record when-issued FNMA/GNMA certificates (and the
corresponding obligation to pay for the securities) at the time the purchase
commitment becomes fixed -- generally on the trade date. It is also the Fund's
policy to segregate assets to cover its commitments for when-issued securities
on trade date.
NOTE 11 -- REORGANIZATIONS
On May 17, 2002 certain Funds, as listed below (each an: "Acquiring Fund"),
acquired the assets and certain liabilities of other Funds, also listed below
(each an "Acquired Fund"), in a tax-free reorganization in exchange for shares
of the Acquiring Fund, pursuant to a plan of reorganization approved by the
Acquired Fund's shareholders. The number and value of shares issued by the
Acquiring Fund are presented in Note 9 -- Capital Shares. Net assets and
unrealized appreciation/(depreciation) as of the reorganization dates were as
follows:
ACQUIRED FUND
ACQUIRING ACQUIRED TOTAL NET ASSETS OF TOTAL NET ASSETS OF UNREALIZED
FUND FUND ACQUIRED FUND ACQUIRING FUND APPRECIATION
---- ---- ------------- -------------- ------------
MidCap Pilgrim MidCap $217,968,703 $ 84,663,797 $20,262,576
Opportunities Growth Fund
Fund
SmallCap Pilgrim SmallCap 191,995,534 319,795,499 16,636,048
Opportunities Growth Fund
Fund
The net assets of MidCap Opportunities Fund and SmallCap Opportunities after the
acquisition were approximately $302,632,500 and $511,791,033 respectively.
NOTE 12 - FEDERAL INCOME TAXES
Dividends paid by the Funds 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 year or period ended May 31, 2003 were as
follows:
ORDINARY TAX-EXEMPT LONG-TERM RETURN
INCOME INCOME CAPITAL GAINS OF CAPITAL
------ ------ ------------- ----------
Growth + Value $ -- $ -- $ -- $ --
Growth Opportunities -- -- -- --
LargeCap Growth -- -- -- --
MidCap Opportunities -- -- -- --
SmallCap Opportunities -- -- -- --
Disciplined LargeCap -- -- -- --
Large Company Value 383,636 -- -- --
MagnaCap 579,257 -- -- --
MidCap Value 567,240 -- -- --
SmallCap Value 354,275 -- -- --
Convertible 3,214,824 -- -- --
Equity and Bond 1,786,851 -- -- --
Real Estate 2,058,713 -- -- --
81
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
The tax composition of dividends and distributions to shareholders for year
ended May 31, 2002 were as follows:
ORDINARY TAX-EXEMPT LONG-TERM RETURN
INCOME INCOME CAPITAL GAINS OF CAPITAL
------ ------ ------------- ----------
Growth + Value $ -- $ -- $ -- $ --
Growth Opportunities -- -- -- --
LargeCap Growth 39,544 -- -- --
MidCap Opportunities -- -- -- --
SmallCap Opportunities -- -- 12,207,533 --
Disciplined LargeCap -- -- -- --
Large Company Value 667,555 -- 2,912,638 561,447
MagnaCap 1,362,303 -- 57,821,108 --
MidCap Value -- -- -- --
SmallCap Value -- -- -- --
Convertible 5,995,821 -- 1,501,596 --
Equity and Bond 4,225,295 -- 143,651 --
Real Estate(1)(2) 4,948,496 -- -- 282,791
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, wash sale deferrals and other 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 May 31, 2003:
ACCUMULATED NET
PAID-IN UNDISTRIBUTED NET REALIZED GAINS (LOSSES)
CAPITAL INVESTMENT INCOME ON INVESTMENTS
------- ----------------- --------------
Growth + Value $ (4,743,710) $4,743,710 $ --
Growth Opportunities (3,315,110) 3,315,002 108
LargeCap Growth (2,412,261) 2,412,261 --
MidCap Opportunities (2,858,218) 2,858,315 (97)
SmallCap Opportunities (6,705,515) 6,705,515 --
Disciplined LargeCap (116,588) 113,825 2,763
Large Company Value (5,497) 5,497 --
MagnaCap (13,552) 13,552 --
MidCap Value (182,749) 180,371 2,378
SmallCap Value (306,186) 303,592 2,594
Convertible -- 42,333 (42,333)
Equity and Bond -- 1,427 (1,427)
Real Estate(3) (1,663,184) 1,006,010 657,174
- ----------
(1) For the year ended October 31, 2002.
(2) Composition of dividends and distributions presented herein and within the
financial statements may differ from final amounts reported based on the
Fund's tax year end of December 31, 2002.
(3) For the tax year ended December 31, 2002.
82
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Capital loss carryforwards, which may be used to offset future realized capital
gains for federal income tax purposes were as follows at May 31, 2003:
AMOUNT EXPIRATION DATES
------ ----------------
Growth + Value $521,848,512 2009-2011
Growth Opportunities 463,537,631 2009-2011
LargeCap Growth 418,624,352 2008-2011
MidCap Opportunities 183,253,255 2007-2011
SmallCap Opportunities 372,918,566 2008-2011
Disciplined LargeCap 43,471,296 2008-2011
Large Company Value 13,580,973 2011
MagnaCap 10,576,002 2011
MidCap Value 2,489,425 2011
SmallCap Value 370,613 2011
Convertible 99,314,637 2010-2011
Equity and Bond 6,627,917 2010-2011
Real Estate(4) 4,405,808 2007-2008
A portion of the amount of these losses may be limited in the future for MidCap
Opportunities and SmallCap Opportunities due to previous fund mergers.
The following represents the tax basis components of distributable earnings as
of May 31, 2003:
POST
UNDISTRIBUTED CAPITAL OCTOBER
UNDISTRIBUTED LONG-TERM UNREALIZED LOSS LOSSES
ORDINARY INCOME CAPITAL GAINS APPRECIATION CARRYFORWARDS DEFERRED
--------------- ------------- ------------ ------------- --------
Growth + Value $ -- $ -- $ 26,132,944 $ (521,848,512) (18,689,669)
Growth Opportunities -- -- 23,075,483 (463,537,631) (5,657,465)
LargeCap Growth -- -- 29,896,904 (418,624,352) (5,502,273)
MidCap Opportunities -- -- 17,883,544 (183,253,255) (361,941)
SmallCap Opportunities -- -- 38,796,880 (372,918,566) (17,805,896)
Disciplined LargeCap -- -- (3,543,180) (43,471,296) (10,950,458)
Large Company Value 772,491 -- (2,293,193) (13,580,973) (28,411,521)
MagnaCap 695,252 -- (316,103) (10,576,002) (64,859,805)
MidCap Value -- -- (7,499,111) (2,489,425) (95,617)
SmallCap Value -- -- (3,759,526) (370,613) (77,331)
Convertible 1,975,440 -- 9,540,102 (99,314,637) --
Equity and Bond 490,450 -- (3,433,610) (6,627,917) (7,821,774)
Real Estate(4) -- -- 18,414,124 (4,405,808) --
- ----------
(4) For the tax year ended December 31, 2002.
NOTE 13 -- ILLIQUID SECURITIES
Pursuant to guidelines adopted by the Funds' Board of Directors, the following
securities have been deemed to be illiquid. The Funds currently limit investment
in illiquid securities to 15% of the Fund's net assets, at market value, at time
of purchase.
INITIAL PERCENT
ACQUISITION OF NET
FUND SECURITY SHARES DATE COST VALUE ASSETS
---- -------- ------ ---- ---- ----- ------
Convertible Winstar Communications 51,932 11/06/98 $2,364,096 $ 0 0.00%
Equity and Bond Dayton Superior 400 08/31/01 7,446 4 0.00%
Iridium World Comm 500 08/31/01 50,507 5 0.00%
North Atlantic Trading, Inc. 370 08/31/01 0 0 0.00%
SA Telecommunications -- 08/06/96 2,000,000 0 0.00%
---------- --- ----
4,422,049 9 0.00%
========== === ====
83
NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
NOTE 14 -- SUBSEQUENT EVENTS
On December 10, 2002, ING Biotechnology Fund was liquidated pursuant to a Plan
of Liquidation and Dissolution of Series adopted by the Board of Trustees of ING
Equity Trust on November 6, 2002.
On January 7, 2003, the Board of Trustees of ING Funds approved a proposal to
reorganize the ING Large Company Value Fund, "Disappearing Fund" into the ING
MagnaCap Fund, "Surviving Fund" (the "2003 Reorganization"). The proposed
reorganization is subject to approval by shareholders of the Disappearing Fund.
If shareholder approval is obtained, it is expected that the 2003 Reorganization
would take place late in 2003.
Effective June 2, 2003, Wellington Management Company, LLP became the
Sub-Advisor for the LargeCap Growth Fund. Andrew J. Shilling, Vice President and
Partner is the portfolio manager.
84
ING
Growth +
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 96.8%
AGRICULTURE: 2.1%
188,600 Delta & Pine Land Co. $ 4,422,670
------------
4,422,670
------------
AIRLINES: 1.2%
337,500 @ Airtran Holdings, Inc. 2,504,250
------------
2,504,250
------------
APPAREL: 6.6%
100,500 @ Coach, Inc. 4,937,565
244,200 @ Quiksilver, Inc. 4,134,306
89,700 @ Timberland Co. 4,448,223
------------
13,520,094
------------
BANKS: 3.5%
281,200 UCBH Holdings, Inc. 7,297,140
------------
7,297,140
------------
BIOTECHNOLOGY: 3.6%
85,800 @ Genzyme Corp. 4,074,642
116,300 @ Integra LifeSciences Holdings Corp. 3,281,986
------------
7,356,628
------------
COMMERCIAL SERVICES: 4.7%
62,600 @ Apollo Group, Inc. 3,657,092
109,400 @ Iron Mountain, Inc. 4,321,300
86,100 Rollins, Inc. 1,774,521
------------
9,752,913
------------
COMPUTERS: 5.9%
123,600 @ NetScreen Technologies, Inc. 2,767,404
198,200 @ Storage Technology Corp. 5,351,400
323,600 @ Western Digital Corp. 4,051,472
------------
12,170,276
------------
DIVERSIFIED FINANCIAL SERVICES: 2.0%
55,300 Countrywide Financial Corp. 4,072,845
------------
4,072,845
------------
ELECTRONICS: 4.2%
141,800 @ Dionex Corp. 5,296,230
127,600 @ Trimble Navigation Ltd. 3,436,268
------------
8,732,498
------------
ENTERTAINMENT: 3.3%
76,400 @ International Game Technology 6,726,256
------------
6,726,256
------------
ENVIRONMENTAL CONTROL: 2.0%
247,600 @ Tetra Tech, Inc. 4,196,820
------------
4,196,820
------------
HEALTHCARE-PRODUCTS: 2.0%
243,100 @ Visx, Inc. 4,217,785
------------
4,217,785
------------
INSURANCE: 4.1%
166,300 First American Corp. 4,503,404
80,200 WR Berkley Corp. 3,949,850
------------
8,453,254
------------
INTERNET: 8.1%
117,700 @ Amazon.Com, Inc. 4,230,138
170,300 @ United Online, Inc. 3,668,262
222,400 @ Verity, Inc. 4,625,920
419,000 @ WebMD Corp. 4,164,860
------------
16,689,180
------------
OFFICE/BUSINESS EQUIPMENT: 2.1%
398,200 @ Xerox Corp. 4,352,326
------------
4,352,326
------------
OIL & GAS: 3.7%
45,600 @ Evergreen Resources, Inc. 2,428,656
69,600 Patina Oil & Gas Corp. 2,755,464
59,700 Pogo Producing Co. 2,555,160
------------
7,739,280
------------
OIL & GAS SERVICES: 2.5%
214,500 Halliburton Co. 5,120,115
------------
5,120,115
------------
PHARMACEUTICALS: 13.0%
204,200 @ BioMarin Pharmaceuticals, Inc. 2,334,006
94,500 @ Hi-Tech Pharmacal Co., Inc. 3,196,084
186,400 @ Medicines Co. 4,361,760
117,200 @ Pharmaceutical Resources, Inc. 4,809,888
213,600 @ Sepracor, Inc. 4,859,400
144,300 @@ Teva Pharmaceutical Industries ADR 7,314,423
------------
26,875,561
------------
PIPELINES: 1.5%
92,800 Questar Corp. 2,995,584
------------
2,995,584
------------
RETAIL: 4.5%
201,700 @ Tractor Supply Co. 9,137,010
------------
9,137,010
------------
SEMICONDUCTORS: 1.5%
135,000 @ DSP Group, Inc. 3,141,450
------------
3,141,450
------------
SOFTWARE: 7.1%
146,700 @ Avid Technology, Inc. 4,949,658
190,100 @ Citrix Systems, Inc. 4,149,883
269,800 @ Progress Software Corp. 5,512,014
------------
14,611,555
------------
TELECOMMUNICATIONS: 5.4%
301,100 @ Interdigital Communications Corp. 7,738,270
64,300 @@ Mobile Telesystems ADR 3,459,340
------------
11,197,610
------------
TRANSPORTATION: 2.2%
141,500 @@ UTI Worldwide, Inc. 4,533,660
------------
4,533,660
------------
Total Common Stock
(Cost $173,683,816) 199,816,760
------------
See Accompanying Notes to Financial Statements
85
ING
Growth +
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Pricipal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 2.3%
REPURCHASE AGREEMENT: 2.3%
$ 4,794,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $4,794,451 to be received
upon repurchase (Collateralized by $4,015,000
U.S. Treasury Bonds, 6.000%, Market Value
$4,893,534, due 02/15/26) $ 4,794,000
------------
Total Short-Term Investments
(Cost $4,794,000) 4,794,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $178,477,816)* 99.1% $204,610,760
OTHER ASSETS AND LIABILITIES-NET 0.9 1,773,833
----- ------------
NET ASSETS 100.0% $206,384,593
===== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 27,002,307
Gross Unrealized Depreciation (869,363)
------------
Net Unrealized Appreciation $ 26,132,944
============
See Accompanying Notes to Financial Statements
86
ING Growth
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 97.0%
APPAREL: 1.5%
53,400 @ Coach, Inc. $ 2,623,542
------------
2,623,542
------------
AUTO PARTS & EQUIPMENT: 1.0%
21,900 Johnson Controls, Inc. 1,823,175
------------
1,823,175
------------
BANKS: 4.0%
47,200 Bank of America Corp. 3,502,240
72,800 Wells Fargo & Co. 3,516,240
------------
7,018,480
------------
BIOTECHNOLOGY: 2.2%
28,600 @ Amgen, Inc. 1,850,706
78,100 @ Digene Corp. 2,022,790
------------
3,873,496
------------
COMMERCIAL SERVICES: 2.9%
43,700 @ FTI Consulting, Inc. 1,604,227
35,300 @ Kroll, Inc. 819,313
97,700 @ Pharmaceutical Product Development, Inc. 2,740,485
------------
5,164,025
------------
COMPUTERS: 11.1%
62,300 @ CACI Intl., Inc. 2,059,015
58,100 @ Dell Computer Corp. 1,817,949
345,400 @ EMC Corp. 3,737,228
110,300 Hewlett-Packard Co. 2,150,850
33,300 International Business Machines Corp. 2,931,732
215,700 @ Network Appliance, Inc. 3,673,371
131,014 @ Veritas Software Corp. 3,635,639
------------
20,005,784
------------
DIVERSIFIED FINANCIAL SERVICES: 4.8%
88,900 Citigroup, Inc. 3,646,678
62,100 JP Morgan Chase & Co. 2,040,606
23,800 SLM Corp. 2,856,000
------------
8,543,284
------------
ELECTRONICS: 1.6%
60,400 @ Gentex Corp. 1,880,856
46,400 @ Jabil Circuit, Inc. 973,936
------------
2,854,792
------------
ENERGY-ALTERNATE SOURCES: 0.4%
33,600 @ Headwaters, Inc. 638,064
------------
638,064
------------
ENGINEERING & CONSTRUCTION: 2.1%
50,000 Fluor Corp. 1,774,500
47,500 @ Jacobs Engineering Group, Inc. 1,854,400
------------
3,628,900
------------
FOOD: 2.6%
39,600 @ Dean Foods Co. 1,811,700
25,800 @ Performance Food Group Co. 933,960
62,400 Sysco Corp. 1,930,656
------------
4,676,316
------------
HEALTHCARE-PRODUCTS: 6.2%
18,800 @@ Alcon, Inc. 799,000
20,600 @ Boston Scientific Corp. 1,073,260
31,100 Johnson & Johnson 1,690,285
36,600 Medtronic, Inc. 1,783,518
51,515 @ St. Jude Medical, Inc. 2,889,992
16,400 @ Varian Medical Systems, Inc. 914,300
38,600 @ Zimmer Holdings, Inc. 1,731,596
------------
10,881,951
------------
HEALTHCARE-SERVICES: 1.9%
25,500 A Aetna, Inc. 1,464,210
19,000 UnitedHealth Group, Inc. 1,822,860
------------
3,287,070
------------
INSURANCE: 3.2%
99,700 Aflac, Inc. 3,281,127
18,200 American Intl. Group 1,053,416
27,000 WR Berkley Corp. 1,329,750
------------
5,664,293
------------
INTERNET: 6.5%
61,900 @ Amazon.Com, Inc. 2,224,686
19,037 @ eBay, Inc. 1,936,253
89,000 @ USA Interactive 3,422,050
188,900 @ WebMD Corp. 1,877,666
68,440 @ Yahoo!, Inc. 2,042,934
------------
11,503,589
------------
MACHINERY-DIVERSIFIED: 0.5%
37,800 @ Cognex Corp. 864,108
------------
864,108
------------
MEDIA: 3.7%
98,400 @ Cablevision Systems Corp. 1,905,024
61,800 @ Comcast Corp. 1,781,076
33,500 @ EchoStar Communications Corp. 1,124,930
37,800 New York Times Co. 1,810,620
------------
6,621,650
------------
MISCELLANEOUS MANUFACTURING: 1.9%
13,200 3M Co. 1,669,404
24,900 Danaher Corp. 1,666,308
------------
3,335,712
------------
OIL & GAS: 8.7%
44,915 Apache Corp. 2,960,797
98,600 Exxon Mobil Corp. 3,589,040
82,655 @,@@ Nabors Industries Ltd. 3,726,087
87,200 @ Patterson-UTI Energy, Inc. 3,190,648
85,400 XTO Energy, Inc. 1,832,684
------------
15,299,256
------------
PHARMACEUTICALS: 7.4%
54,600 @ AdvancePCS 1,813,266
64,900 @,@@ Biovail Corp. 3,026,936
30,700 @ Express Scripts, Inc. 2,009,008
49,500 @ Medimmune, Inc. 1,754,775
101,088 Omnicare, Inc. 2,744,539
55,300 Pfizer, Inc. 1,715,406
------------
13,063,930
------------
See Accompanying Notes to Financial Statements
87
ING Growth
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
RETAIL: 10.2%
28,600 @ 99 Cents Only Stores $ 908,908
106,700 @ Abercrombie & Fitch Co. 3,046,285
56,200 CBRL Group, Inc. 2,027,696
78,400 @ Chico's FAS, Inc. 1,677,760
101,800 Gap, Inc. 1,730,600
23,300 @ HOT Topic, Inc. 621,411
39,250 @ Pacific Sunwear of California 881,555
118,500 @ Staples, Inc. 2,297,715
94,900 Tiffany & Co. 3,108,924
32,300 Wal-Mart Stores, Inc. 1,699,303
------------
18,000,157
------------
SEMICONDUCTORS: 5.5%
203,900 @ Altera Corp. 3,931,192
50,600 Linear Technology Corp. 1,839,816
130,000 @ Xilinx, Inc. 3,883,100
------------
9,654,108
------------
SOFTWARE: 2.6%
45,700 First Data Corp. 1,892,894
106,600 Microsoft Corp. 2,623,426
------------
4,516,320
------------
TELECOMMUNICATIONS: 4.5%
123,300 @ Cisco Systems, Inc. 2,007,324
330,100 @ Corning, Inc. 2,413,031
66,800 @ Nextel Communications, Inc. 1,001,332
86,400 @ Utstarcom, Inc. 2,561,760
------------
7,983,447
------------
Total Common Stock
(Cost $148,823,817) 171,525,449
------------
MUTUAL FUNDS: 3.1%
EQUITY FUND: 3.1%
128,100 @ Nasdaq-100 Index Tracking Stock 3,816,099
18,300 SPDR Trust Series 1 1,774,185
------------
5,590,284
------------
Total Mutual Funds
(Cost $5,082,678) 5,590,284
------------
Total Long-Term Investments
(Cost $153,906,495) 177,115,733
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.5%
REPURCHASE AGREEMENT: 1.5%
$ 2,618,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $2,618,247 to be received
upon repurchase (Collateralized by $2,195,000
U.S. Treasury Bonds, 6.000%, Market Value
$2,675,295, due 02/15/26) $ 2,618,000
------------
Total Short-Term Investments
(Cost $2,618,000) 2,618,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $156,524,495)* 101.6% $179,733,733
OTHER ASSETS AND LIABILITIES-NET (1.6) (2,904,590)
----- ------------
NET ASSETS 100.0% $176,829,143
===== ============
@ Non-income producing security
@@ Foreign Issuer
A Related Party
* Cost for federal income tax purposes is $156,658,250. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 24,150,195
Gross Unrealized Depreciation (1,074,712)
------------
Net Unrealized Appreciation $ 23,075,483
============
See Accompanying Notes to Financial Statements
88
ING
LargeCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 96.5%
APPAREL: 1.0%
31,400 Nike, Inc. $ 1,758,086
------------
1,758,086
------------
BIOTECHNOLOGY: 3.3%
88,300 @ Amgen, Inc. 5,713,893
------------
5,713,893
------------
COMPUTERS: 11.9%
447,300 @ EMC Corp. 4,839,786
255,500 Hewlett-Packard Co. 4,982,250
93,300 International Business Machines Corp. 8,214,132
93,600 @ Veritas Software Corp. 2,597,400
------------
20,633,568
------------
COSMETICS/PERSONAL CARE: 1.9%
54,500 Avon Products, Inc. 3,321,230
------------
3,321,230
------------
DIVERSIFIED FINANCIAL SERVICES: 6.8%
43,100 Goldman Sachs Group, Inc. 3,512,650
116,100 JP Morgan Chase & Co. 3,815,046
37,300 SLM Corp. 4,476,000
------------
11,803,696
------------
HEALTHCARE-PRODUCTS: 7.1%
17,600 @@ Alcon, Inc. 748,000
50,000 @ Boston Scientific Corp. 2,605,000
90,400 @ Guidant Corp. 3,822,112
65,500 @ St. Jude Medical, Inc. 3,674,550
33,300 @ Zimmer Holdings, Inc. 1,493,838
------------
12,343,500
------------
HEALTHCARE-SERVICES: 1.9%
34,000 UnitedHealth Group, Inc. 3,261,960
------------
3,261,960
------------
INSURANCE: 2.2%
64,500 American Intl. Group 3,733,260
------------
3,733,260
------------
INTERNET: 10.8%
161,000 @ Amazon.Com, Inc. 5,786,340
61,300 @ eBay, Inc. 6,234,823
222,700 @ Yahoo!, Inc. 6,647,595
------------
18,668,758
------------
LEISURE TIME: 0.4%
18,000 Harley-Davidson, Inc. 758,880
------------
758,880
------------
MEDIA: 5.2%
210,270 @ Comcast Corp. 6,144,567
91,500 @ COX Communications, Inc. 2,834,670
------------
8,979,237
------------
MISCELLANEOUS MANUFACTURING: 4.2%
70,100 General Electric Co. 2,011,870
302,300 @@ Tyco Intl. Ltd. 5,350,710
------------
7,362,580
------------
OIL & GAS: 2.5%
65,030 Apache Corp. 4,286,777
------------
4,286,777
------------
OIL & GAS SERVICES: 2.6%
190,800 Halliburton Co. 4,554,396
------------
4,554,396
------------
PHARMACEUTICALS: 7.7%
34,700 Allergan, Inc. 2,502,217
18,800 @ Gilead Sciences, Inc. 991,888
93,800 @ Medimmune, Inc. 3,325,210
59,800 Merck & Co., Inc. 3,323,684
104,700 Pfizer, Inc. 3,247,794
------------
13,390,793
------------
RETAIL: 6.7%
294,500 Gap, Inc. 5,006,500
34,300 @ Kohl's Corp. 1,795,605
115,900 @ Staples, Inc. 2,247,301
48,100 Wal-Mart Stores, Inc. 2,530,541
------------
11,579,947
------------
SEMICONDUCTORS: 11.8%
81,100 @ Analog Devices, Inc. 3,126,405
94,600 Linear Technology Corp. 3,439,656
84,100 Maxim Integrated Products 3,297,561
133,000 @ Novellus Systems, Inc. 4,608,450
84,700 Texas Instruments, Inc. 1,736,350
139,700 @ Xilinx, Inc. 4,172,839
------------
20,381,261
------------
SOFTWARE: 4.9%
165,200 @ Microsoft Corp. 4,065,572
337,000 @ Oracle Corp. 4,384,370
------------
8,449,942
------------
TELECOMMUNICATIONS: 3.6%
267,800 @ Cisco Systems, Inc. 4,359,784
120,800 @ Nextel Communications, Inc. 1,810,792
------------
6,170,576
------------
Total Common Stock
(Cost $135,576,856) 167,152,340
------------
MUTUAL FUNDS: 3.3%
EQUITY FUND: 3.3%
42,400 @ Internet HOLDRs Trust 1,582,368
87,400 @ Nasdaq-100 Index Tracking Stock 2,603,646
52,000 Semiconductor HOLDRs Trust 1,557,400
------------
5,743,414
------------
Total Mutual Funds
(Cost $4,655,687) 5,743,414
------------
Total Long-Term Investments
(Cost $140,232,543) 172,895,754
------------
See Accompanying Notes to Financial Statements
89
ING
LargeCap
Growth
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 0.7%
REPURCHASE AGREEMENT: 0.7%
$ 1,282,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $1,282,121 to be received
upon repurchase (Collateralized by $1,075,000
U.S. Treasury Bonds, 6.000%, Market Value
$1,310,224, due 02/15/26) $ 1,282,000
------------
Total Short-Term Investments
(Cost $1,282,000) 1,282,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $141,514,543)* 100.5% $174,177,754
OTHER ASSETS AND LIABILITIES-NET (0.5) (813,224)
----- ------------
NET ASSETS 100.0% $173,364,530
===== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is $144,280,850. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 32,871,935
Gross Unrealized Depreciation (2,975,031)
------------
Net Unrealized Appreciation $ 29,896,904
============
See Accompanying Notes to Financial Statements
90
ING
MidCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 97.0%
APPAREL: 1.2%
41,800 @ Coach, Inc. $ 2,053,634
------------
2,053,634
------------
AUTO PARTS & EQUIPMENT: 1.0%
20,300 Johnson Controls, Inc. 1,689,975
------------
1,689,975
------------
BANKS: 0.5%
24,700 Bank of Hawaii Corp. 862,524
------------
862,524
------------
BUILDING MATERIALS: 1.0%
22,700 @ American Standard Cos., Inc. 1,679,573
------------
1,679,573
------------
COMMERCIAL SERVICES: 8.4%
70,900 @ Aramark Corp. 1,488,191
30,500 @ Career Education Corp. 1,873,005
21,800 @ Corporate Executive Board Co. 919,960
36,500 @ Education Management Corp. 1,735,210
46,400 @ FTI Consulting, Inc. 1,703,344
33,900 @ Kroll, Inc. 786,819
25,800 Paychex, Inc. 787,416
129,300 @ Pharmaceutical Product Development, Inc. 3,626,865
33,800 @ Weight Watchers Intl., Inc. 1,439,204
------------
14,360,014
------------
COMPUTERS: 7.8%
34,700 @ Affiliated Computer
Services, Inc. 1,607,998
59,800 @ CACI Intl., Inc. 1,976,390
23,100 @ Lexmark Intl., Inc. 1,718,640
225,800 @ Network Appliance, Inc. 3,845,374
28,900 Reynolds & Reynolds Co. 855,440
121,500 @ Veritas Software Corp. 3,371,625
------------
13,375,467
------------
DIVERSIFIED FINANCIAL SERVICES: 1.1%
24,300 Bear Stearns Cos., Inc. 1,877,661
------------
1,877,661
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 1.0%
104,900 @ American Power Conversion 1,626,999
------------
1,626,999
------------
ELECTRONICS: 2.9%
112,700 @ Gentex Corp. 3,509,478
66,700 @ Jabil Circuit, Inc. 1,400,033
------------
4,909,511
------------
ENGINEERING & CONSTRUCTION: 2.0%
44,700 Fluor Corp. 1,586,403
45,700 @ Jacobs Engineering Group, Inc. 1,784,128
------------
3,370,531
------------
ENVIRONMENTAL CONTROL: 0.5%
37,000 @ Republic Services, Inc. 884,670
------------
884,670
------------
FOOD: 2.6%
58,000 @ Dean Foods Co. 2,653,500
48,700 @ Performance Food Group Co. 1,762,940
------------
4,416,440
------------
HEALTHCARE-PRODUCTS: 6.0%
13,300 CR Bard, Inc. 932,995
47,800 @ St. Jude Medical, Inc. 2,681,580
73,900 @ Steris Corp. 1,666,445
60,200 @ Varian Medical Systems, Inc. 3,356,150
37,100 @ Zimmer Holdings, Inc. 1,664,306
------------
10,301,476
------------
HEALTHCARE-SERVICES: 2.9%
23,300 A Aetna, Inc. 1,337,886
91,700 Health Management Associates, Inc. 1,710,205
21,600 @ WellPoint Health Networks 1,843,344
------------
4,891,435
------------
HOME FURNISHINGS: 0.5%
12,100 Harman Intl. Industries, Inc. 897,820
------------
897,820
------------
INSURANCE: 1.0%
35,900 WR Berkley Corp. 1,768,075
------------
1,768,075
------------
INTERNET: 4.9%
110,000 @ USA Interactive 4,229,500
172,500 @ WebMD Corp. 1,714,650
80,200 @ Yahoo!, Inc. 2,393,970
------------
8,338,120
------------
MACHINERY-DIVERSIFIED: 2.1%
36,700 @ Cognex Corp. 838,962
73,300 Rockwell Automation, Inc. 1,733,545
14,600 @ Zebra Technologies Corp. 1,065,639
------------
3,638,146
------------
MEDIA: 4.6%
79,000 @ Cablevision Systems Corp. 1,529,440
83,200 @ EchoStar Communications Corp. 2,793,856
34,900 New York Times Co. 1,671,710
59,300 @ Univision Communications, Inc. 1,770,105
------------
7,765,111
------------
MISCELLANEOUS MANUFACTURING: 0.9%
23,000 Danaher Corp. 1,539,160
------------
1,539,160
------------
See Accompanying Notes to Financial Statements
91
ING
MidCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
OIL & GAS: 7.1%
26,100 Apache Corp. $ 1,720,512
33,900 Devon Energy Corp. 1,762,800
76,700 @,@@ Nabors Industries Ltd. 3,457,635
94,100 @ Patterson-UTI Energy, Inc. 3,443,119
79,300 XTO Energy, Inc. 1,701,778
------------
12,085,844
------------
OIL & GAS SERVICES: 1.3%
52,400 @ BJ Services Co. 2,133,204
------------
2,133,204
------------
PACKAGING & CONTAINERS: 0.9%
81,100 @ Pactiv Corp. 1,585,505
------------
1,585,505
------------
PHARMACEUTICALS: 9.7%
49,900 @ Advance PCS 1,657,179
23,500 Allergan, Inc. 1,694,585
62,500 @,@@ Biovail Corp. 2,915,000
62,610 @ Celgene Corp. 1,970,963
28,800 @ Express Scripts, Inc. 1,884,672
86,500 @ Medimmune, Inc. 3,066,425
29,700 Mylan Laboratories 857,736
93,800 Omnicare, Inc. 2,546,670
------------
16,593,230
------------
RETAIL: 10.4%
53,200 @ 99 Cents Only Stores 1,690,696
96,700 @ Abercrombie & Fitch Co. 2,760,785
10,100 @ Autozone, Inc. 845,168
40,900 @ Bed Bath & Beyond, Inc. 1,711,256
51,000 CBRL Group, Inc. 1,840,080
69,600 @ Chico's FAS, Inc. 1,489,440
22,500 @ HOT Topic, Inc. 600,075
62,100 @ Sonic Corp. 1,607,769
123,400 @ Staples, Inc. 2,392,726
86,700 Tiffany & Co. 2,840,292
------------
17,778,287
------------
SAVINGS & LOANS: 1.0%
63,867 New York Community
Bancorp, Inc. 1,769,107
------------
1,769,107
------------
SEMICONDUCTORS: 3.2%
196,500 @ Altera Corp. 3,788,520
47,800 Linear Technology Corp. 1,738,008
------------
5,526,528
------------
SOFTWARE: 2.9%
43,300 @ D&B Corp. 1,682,205
59,500 Fair Isaac Corp. 3,317,125
------------
4,999,330
------------
TELECOMMUNICATIONS: 3.7%
265,500 @ Corning, Inc. 1,940,805
92,900 @ Juniper Networks, Inc. 1,289,452
61,000 @ Nextel Communications, Inc. 914,390
72,600 @ Utstarcom, Inc. 2,152,590
------------
6,297,237
------------
TOYS/GAMES/HOBBIES: 1.0%
74,800 Mattel, Inc. 1,608,948
------------
1,608,948
------------
TRANSPORTATION: 2.9%
68,900 CH Robinson Worldwide, Inc. 2,561,013
67,200 Expeditors Intl. Washington, Inc. 2,347,968
------------
4,908,981
------------
Total Common Stock
(Cost $147,626,148) 165,532,543
------------
MUTUAL FUND: 1.0%
EQUITY FUND: 1.0%
20,250 MidCap SPDR Trust Series 1 1,764,383
------------
Total Mutual Fund
(Cost $1,618,959) 1,764,383
------------
Total Long-Term Investments
(Cost $149,245,107) 167,296,926
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 3.5%
REPURCHASE AGREEMENT: 3.5%
$ 5,959,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $5,959,561 to be received
upon repurchase (Collateralized by $4,990,000
U.S. Treasury Bond, 6.000%, Market Value
$6,081,877, due 02/15/26) $ 5,959,000
------------
Total Short-Term Investments
(Cost $5,959,000) 5,959,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $155,204,107)* 101.5% $173,255,926
OTHER ASSETS AND LIABILITIES-NET (1.5) (2,603,483)
----- ------------
NET ASSETS 100.0% $170,652,443
===== ============
@ Non-income producing security
@@ Foreign Issuer
A Related Party
* Cost for federal income tax purposes is $155,372,382. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 19,142,908
Gross Unrealized Depreciation (1,259,364)
------------
Net Unrealized Appreciation $ 17,883,544
============
See Accompanying Notes to Financial Statements
92
ING
SmallCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 96.8%
ADVERTISING: 0.6%
42,600 @ Getty Images, Inc. $ 1,721,040
------------
1,721,040
------------
AEROSPACE/DEFENSE: 1.0%
34,300 Engineered Support Systems, Inc. 1,351,763
57,000 @ Veridian Corp. 1,479,150
------------
2,830,913
------------
APPAREL: 0.5%
83,400 @ Quiksilver, Inc. 1,411,962
------------
1,411,962
------------
BANKS: 4.5%
160,200 @ Southwest Bancorp of Texas, Inc. 5,276,988
72,500 UCBH Holdings, Inc. 1,881,375
122,500 Westamerica Bancorporation 5,442,675
------------
12,601,038
------------
BIOTECHNOLOGY: 2.9%
133,600 @ Digene Corp. 3,460,240
56,300 @ Integra LifeSciences Holdings Corp. 1,588,786
79,000 @ Martek Biosciences Corp. 2,973,560
------------
8,022,586
------------
COMMERCIAL SERVICES: 7.5%
28,100 @ Corinthian Colleges, Inc. 1,321,824
72,000 @ Corporate Executive Board Co. 3,038,400
57,700 @ Education Management Corp. 2,743,058
65,700 @ FTI Consulting, Inc. 2,411,847
125,800 @ Kroll, Inc. 2,919,818
205,000 @ Pharmaceutical Product Development, Inc. 5,750,250
41,500 Strayer Education, Inc. 2,769,295
------------
20,954,492
------------
COMPUTERS: 7.7%
95,800 @ CACI Intl., Inc. 3,166,190
247,700 @ Cognizant Technology Solutions Corp. 5,139,775
122,700 @ Hutchinson Technology, Inc. 3,704,313
88,600 @ Micros Systems, Inc. 2,628,762
47,700 @ NetScreen Technologies, Inc. 1,068,003
47,600 Reynolds & Reynolds Co. 1,408,960
71,800 @ Sandisk Corp. 2,608,494
135,300 @ Western Digital Corp. 1,693,956
------------
21,418,453
------------
DISTRIBUTION/WHOLESALE; 1.0%
82,200 @ SCP Pool Corp. 2,647,662
------------
2,647,662
------------
DIVERSIFIED FINANCIAL SERVICES: 1.8%
68,900 @@ Doral Financial Corp. 2,913,092
72,826 @ Portfolio Recovery Associates, Inc. 2,181,867
------------
5,094,959
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 0.9%
65,600 @ Wilson Greatbatch Technologies, Inc. 2,414,080
------------
2,414,080
------------
ELECTRONICS: 1.7%
57,300 @ Benchmark Electronics, Inc. 1,629,612
104,200 @ Flir Systems, Inc. 2,971,784
------------
4,601,396
------------
ENERGY-ALTERNATE SOURCES: 1.3%
184,700 @ Headwaters, Inc. 3,507,453
------------
3,507,453
------------
ENTERTAINMENT: 1.7%
105,900 @ GTECH Holdings Corp. 3,721,326
66,200 @ Penn National Gaming, Inc. 1,108,188
------------
4,829,514
------------
ENVIRONMENTAL CONTROL: 1.0%
32,700 @ Stericycle, Inc. 1,293,612
81,200 @ Tetra Tech, Inc. 1,376,340
------------
2,669,952
------------
FOOD: 4.5%
77,200 @ American Italian Pasta Co. 3,382,904
39,900 Flowers Foods, Inc. 1,197,000
158,600 @ Performance Food Group Co. 5,741,320
77,300 @ United Natural Foods, Inc. 2,141,210
------------
12,462,434
------------
HEALTHCARE-PRODUCTS: 6.4%
63,800 @ Advanced Neuromodulation Systems, Inc. 3,060,486
56,200 @ Inamed Corp. 2,896,548
5,800 @ Kensey Nash Corp. 123,830
168,901 @ Kyphon, Inc. 2,170,378
143,700 @ Steris Corp. 3,240,435
211,200 @ Thoratec Corp. 2,899,776
99,900 @ Zoll Medical Corp. 3,312,684
------------
17,704,137
------------
HEALTHCARE-SERVICES: 4.4%
150,400 @ Amsurg Corp. 4,236,768
93,800 @ Coventry Health Care, Inc. 4,095,308
84,600 @ Curative Health Services, Inc. 1,203,858
65,400 @ Mid Atlantic Medical Services 3,132,660
------------
12,668,594
------------
HOUSEHOLD PRODUCTS/WARES: 0.5%
62,600 @ Yankee Candle Co., Inc. 1,336,510
------------
1,336,510
------------
INSURANCE: 2.8%
95,245 HCC Insurance Holdings, Inc. 2,728,769
67,700 @ Philadelphia Consolidated Holding Co. 2,769,607
81,400 @ ProAssurance Corp. 2,279,200
------------
7,777,576
------------
INTERNET: 2.9%
86,900 @ Avocent Corp. 2,568,764
130,343 @ Digital Insight Corp. 2,215,831
181,100 @ Digital River, Inc. 3,560,426
------------
8,345,021
------------
See Accompanying Notes to Financial Statements
93
ING
SmallCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
LODGING: 1.0%
117,900 @ Station Casinos, Inc. $ 2,652,750
------------
2,652,750
------------
MACHINERY-DIVERSIFIED: 1.9%
113,800 @ Cognex Corp. 2,601,468
35,900 @ Zebra Technologies Corp. 2,620,305
------------
5,221,773
------------
MISCELLANEOUS MANUFACTURING: 1.5%
32,100 Donaldson Co., Inc. 1,346,595
68,400 @ ESCO Technologies, Inc. 2,865,960
------------
4,212,555
------------
OIL & GAS: 3.5%
44,100 @ Evergreen Resources, Inc. 2,348,766
38,200 Patina Oil & Gas Corp. 1,512,338
195,400 @ Southwestern Energy Co. 2,934,908
128,800 @ Unit Corp. 2,833,600
------------
9,629,612
------------
OIL & GAS SERVICES: 1.0%
244,700 @ Key Energy Services, Inc. 2,907,036
------------
2,907,036
------------
PHARMACEUTICALS: 3.7%
101,300 Alpharma, Inc. 2,129,326
48,600 @ Celgene Corp. 1,529,928
101,500 @ Endo Pharmaceuticals Holdings, Inc. 1,600,654
141,100 @ Medicines Co. 3,301,740
39,800 @ Pharmaceutical Resources, Inc. 1,633,392
------------
10,195,040
------------
RETAIL: 9.3%
62,600 Applebees Intl., Inc. 1,921,194
162,000 CBRL Group, Inc. 5,844,960
51,000 @ Cheesecake Factory 1,730,430
153,400 @ Chico's FAS, Inc. 3,282,760
59,900 @ Dick's Sporting Goods, Inc. 1,736,501
87,600 @ HOT Topic, Inc. 2,336,292
115,700 @ MSC Industrial Direct Co. 2,197,143
112,675 @ Pacific Sunwear of California 2,530,681
36,200 @ PF Chang's China Bistro, Inc. 1,593,524
110,300 @ Sonic Corp. 2,855,667
------------
26,029,152
------------
SAVINGS & LOANS: 0.5%
54,100 Dime Community Bancshares 1,373,599
------------
1,373,599
------------
SEMICONDUCTORS: 5.1%
168,400 @ Artisan Components, Inc. 3,709,852
148,100 @ Integrated Circuit Systems, Inc. 3,863,929
102,300 @ Omnivision Technologies, Inc. 3,671,547
106,500 @ Power Integrations, Inc. 2,839,184
------------
14,084,512
------------
SOFTWARE: 6.6%
145,400 @ Avid Technology, Inc. 4,905,796
184,000 @ EPIQ Systems, Inc. 3,245,760
74,800 Global Payments, Inc. 2,543,200
34,900 @ IMPAC Medical Systems, Inc. 812,821
39,000 @ National Instruments Corp. 1,417,650
349,400 @ Packeteer, Inc. 5,408,712
------------
18,333,939
------------
TELECOMMUNICATIONS: 4.1%
67,400 @ Adtran, Inc. 3,256,094
132,350 @ Boston Communications Group 2,153,335
384,500 @ Foundry Networks, Inc. 5,917,455
------------
11,326,884
------------
TOYS/GAMES/HOBBIES: 1.2%
117,100 @ Leapfrog Enterprises, Inc. 3,387,703
------------
3,387,703
------------
TRANSPORTATION: 1.9%
111,500 @ Knight Transportation, Inc. 2,827,640
16,000 Roadway Corp. 592,000
71,400 @ Yellow Corp. 1,876,392
------------
5,296,032
------------
Total Common Stock
(Cost $229,293,463) 269,670,359
------------
MUTUAL FUNDS: 2.8%
EQUITY FUND: 2.8%
62,600 iShares Russell 2000 Growth Index Fund 2,954,094
56,300 iShares Russell 2000 Index Fund 4,956,089
------------
7,910,183
------------
Total Mutual Funds
(Cost $7,129,273) 7,910,183
------------
Total Long-Term Investments
(Cost $236,422,736) 277,580,542
------------
See Accompanying Notes to Financial Statements
94
ING
SmallCap
Opportunities
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.0%
REPURCHASE AGREEMENT: 1.0%
$ 2,911,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $2,911,274 to be received
upon repurchase (Collateralized by $2,380,000
U.S. Treasury Bonds, 6.125%, Market Value
$2,972,908, due 08/15/29) $ 2,911,000
------------
Total Short-Term Investments
(Cost $2,911,000) 2,911,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $239,333,736)* 100.7% $280,491,542
OTHER ASSETS AND LIABILITIES-NET (0.7) (1,857,045)
----- ------------
NET ASSETS 100.0% $278,634,497
===== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is $241,694,662. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 42,292,130
Gross Unrealized Depreciation (3,495,250)
------------
Net Unrealized Appreciation $ 38,796,880
============
See Accompanying Notes to Financial Statements
95
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 99.6%
ADVERTISING: 0.2%
3,400 Interpublic Group of Cos., Inc. $ 46,750
1,600 Omnicom Group 111,696
------------
158,446
------------
AEROSPACE/DEFENSE: 1.6%
7,500 Boeing Co. 230,025
1,700 General Dynamics Corp. 113,594
500 Goodrich Corp. 9,135
9,550 Lockheed Martin Corp. 443,311
1,546 Northrop Grumman Corp. 135,970
3,450 Raytheon Co. 110,538
1,650 Rockwell Collins, Inc. 37,917
3,950 United Technologies Corp. 269,588
------------
1,350,078
------------
AGRICULTURE: 1.0%
17,700 Altria Group, Inc. 731,010
2,350 Monsanto Co. 47,118
1,500 UST, Inc. 52,965
------------
831,093
------------
AIRLINES: 0.1%
6,600 Southwest Airlines Co. 106,062
------------
106,062
------------
APPAREL: 0.4%
1,800 @ Jones Apparel Group, Inc. 52,848
1,600 Liz Claiborne, Inc. 54,224
2,250 Nike, Inc. 125,978
1,200 @ Reebok Intl. Ltd. 38,040
950 VF Corp. 36,167
------------
307,257
------------
AUTO MANUFACTURERS: 0.6%
38,000 Ford Motor Co. 399,000
1,600 Paccar, Inc. 106,032
------------
505,032
------------
AUTO PARTS & EQUIPMENT: 0.2%
1,000 Cooper Tire & Rubber Co. 15,890
1,850 Dana Corp. 16,483
4,500 Delphi Corp. 39,690
700 Johnson Controls, Inc. 58,275
------------
130,338
------------
BANKS: 6.9%
3,100 AmSouth Bancorp 69,192
16,300 Bank of America Corp. 1,209,460
2,700 Bank of New York Co., Inc. 78,165
10,050 Bank One Corp. 375,468
4,100 BB&T Corp. 140,179
1,977 Charter One Financial, Inc. 60,219
1,500 Comerica, Inc. 69,405
1,000 First Tennessee National Corp. 46,760
8,850 FleetBoston Financial Corp. 261,694
1,900 Huntington Bancshares, Inc. 38,969
3,650 Keycorp 96,360
2,150 Marshall & Ilsley Corp. 64,500
3,700 Mellon Financial Corp. 100,529
13,100 National City Corp. 443,042
500 North Fork Bancorporation, Inc. 16,535
2,500 PNC Financial Services Group, Inc. 123,125
1,950 Regions Financial Corp. 68,328
3,000 SouthTrust Corp. 86,190
2,750 State Street Corp. 105,353
2,400 SunTrust Banks, Inc. 142,320
1,675 Union Planters Corp. 53,901
24,700 US Bancorp 585,390
17,100 Wachovia Corp. 687,078
14,450 Wells Fargo & Co. 697,935
750 Zions Bancorporation 38,265
------------
5,658,362
------------
BEVERAGES: 2.7%
7,600 Anheuser-Busch Cos., Inc. 399,988
650 Brown-Forman Corp. 51,259
21,000 Coca-Cola Co. 956,970
6,300 Coca-Cola Enterprises, Inc. 118,125
100 Coors (Adolph) 5,508
3,400 Pepsi Bottling Group, Inc. 69,326
14,850 PepsiCo, Inc. 656,370
------------
2,257,546
------------
BIOTECHNOLOGY: 1.0%
10,764 @ Amgen, Inc. 696,538
600 @ Biogen, Inc. 25,464
1,650 @ Chiron Corp. 72,748
1,100 @ Genzyme Corp. 52,239
------------
846,989
------------
BUILDING MATERIALS: 0.2%
750 @ American Standard Cos., Inc. 55,492
1,700 Masco Corp. 41,820
900 Vulcan Materials Co. 32,976
------------
130,288
------------
CHEMICALS: 1.5%
1,900 Air Products & Chemicals, Inc. 82,821
8,000 Dow Chemical Co. 254,400
8,750 Du Pont EI de Nemours & Co. 368,725
900 Eastman Chemical Co. 29,421
1,450 Ecolab, Inc. 77,938
600 Engelhard Corp. 15,090
350 Great Lakes Chemical Corp. 8,061
1,100 International Flavors & Fragrances, Inc. 34,529
1,500 PPG Industries, Inc. 72,945
1,500 Praxair, Inc. 89,985
3,500 Rohm & Haas Co. 113,505
1,700 Sherwin-Williams Co. 46,546
900 Sigma-Aldrich Corp. 47,079
------------
1,241,045
------------
COMMERCIAL SERVICES: 0.6%
1,600 @ Apollo Group, Inc. 93,472
4,400 @ Concord EFS, Inc. 66,528
2,100 @ Convergys Corp. 37,548
250 Deluxe Corp. 11,743
1,700 Equifax, Inc. 43,044
1,450 H&R Block, Inc. 59,363
2,500 McKesson Corp. 75,800
See Accompanying Notes to Financial Statements
96
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES (CONTINUED):
3,200 Paychex, Inc. $ 97,664
1,450 @ Quintiles Transnational Corp. 20,518
500 @ Robert Half Intl., Inc. 8,475
400 RR Donnelley & Sons Co. 9,980
------------
524,135
------------
COMPUTERS: 5.1%
3,750 @ Apple Computer, Inc. 67,387
1,550 @ Computer Sciences Corp. 61,535
38,250 @ Dell Computer Corp. 1,196,842
18,650 @ EMC Corp. 201,793
25,637 Hewlett-Packard Co. 499,921
17,900 International Business Machines Corp. 1,575,916
2,800 @ Lexmark Intl., Inc. 208,320
18,700 Seagate Technology, Inc. 1,496
38,800 @ Sun Microsystems, Inc. 168,004
2,700 @ Sungard Data Systems, Inc. 62,100
3,800 @ Unisys Corp. 42,902
5,900 @ Veritas Software Corp. 163,725
------------
4,249,941
------------
COSMETICS/PERSONAL CARE: 3.2%
400 Alberto-Culver Co. 20,440
800 Avon Products, Inc. 48,752
4,700 Colgate-Palmolive Co. 280,214
14,550 Gillette Co. 489,026
4,400 Kimberly-Clark Corp. 228,492
17,450 Procter & Gamble Co. 1,602,259
------------
2,669,183
------------
DIVERSIFIED FINANCIAL SERVICES: 8.9%
11,400 American Express Co. 474,924
1,700 Bear Stearns Cos., Inc. 131,359
3,100 Capital One Financial Corp. 149,327
4,700 Charles Schwab Corp. 45,590
44,000 Citigroup, Inc. 1,804,880
2,750 Countrywide Financial Corp. 202,537
11,750 Fannie Mae 869,500
900 Franklin Resources, Inc. 33,633
12,650 Freddie Mac 756,597
4,050 Goldman Sachs Group, Inc. 330,075
17,050 JP Morgan Chase & Co. 560,263
5,050 Lehman Brothers Holdings, Inc. 361,731
10,775 MBNA Corp. 216,039
17,050 Merrill Lynch & Co., Inc. 738,265
9,150 Morgan Stanley 418,613
3,650 @ Providian Financial Corp. 32,996
1,300 SLM Corp. 156,000
1,350 T Rowe Price Group, Inc. 49,572
------------
7,331,901
------------
ELECTRIC: 2.6%
1,350 Ameren Corp. 61,425
3,300 American Electric Power Co., Inc. 95,832
3,500 Centerpoint Energy, Inc. 33,425
3,600 Cinergy Corp. 136,584
3,800 CMS Energy Corp. 30,096
1,750 Consolidated Edison, Inc. 75,232
1,400 Constellation Energy Group, Inc. 46,410
2,750 Dominion Resources, Inc. 173,250
1,450 DTE Energy Co. 62,828
7,750 Duke Energy Corp. 150,195
2,700 @ Edison Intl. 43,956
1,850 Entergy Corp. 95,626
4,650 Exelon Corp. 266,445
2,500 FirstEnergy Corp. 92,025
1,550 FPL Group, Inc. 103,028
2,000 NiSource, Inc. 39,220
3,500 @ PG&E Corp. 59,500
2,450 PPL Corp. 99,078
2,000 Progress Energy, Inc. 94,100
1,850 Public Service Enterprise Group, Inc. 79,050
6,100 Southern Co. 192,028
2,800 TXU Corp. 56,672
3,500 Xcel Energy, Inc. 53,865
------------
2,139,870
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 0.3%
3,450 @ American Power Conversion 53,510
3,650 Emerson Electric Co. 190,895
1,550 Molex, Inc. 42,408
------------
286,813
------------
ELECTRONICS: 0.2%
1,650 Applera Corp. - Applied Biosystems Group 32,126
1,650 @ Jabil Circuit, Inc. 34,634
450 Parker Hannifin Corp. 18,194
3,850 @ Sanmina-SCI Corp. 22,022
2,300 Symbol Technologies, Inc. 30,820
800 @ Thermo Electron Corp. 16,880
1,400 @ Waters Corp. 39,704
------------
194,380
------------
ENGINEERING & CONSTRUCTION: 0.0%
1,000 Fluor Corp. 35,490
------------
35,490
------------
ENTERTAINMENT: 0.1%
750 @ International Game Technology 66,030
------------
66,030
------------
ENVIRONMENTAL CONTROL: 0.2%
3,200 @ Allied Waste Industries, Inc. 31,616
5,050 Waste Management, Inc. 128,624
------------
160,240
------------
FOOD: 2.0%
3,100 Albertson's, Inc. 64,697
5,710 Archer-Daniels-Midland Co. 68,348
4,050 Campbell Soup Co. 101,048
4,450 ConAgra Foods, Inc. 108,001
3,100 General Mills, Inc. 145,018
1,350 Hershey Foods Corp. 95,985
7,300 HJ Heinz Co. 241,411
6,100 Kellogg Co. 214,720
6,350 @ Kroger Co. 101,918
1,300 McCormick & Co., Inc. 34,970
6,600 Sara Lee Corp. 120,252
1,100 Supervalu, Inc. 21,835
5,650 Sysco Corp. 174,811
1,950 Winn-Dixie Stores, Inc. 27,573
2,000 WM Wrigley Jr Co. 113,000
------------
1,633,587
------------
See Accompanying Notes to Financial Statements
97
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER: 0.2%
500 Boise Cascade Corp. $ 12,285
4,150 International Paper Co. 152,180
750 Weyerhaeuser Co. 37,785
------------
202,250
------------
GAS: 0.2%
1,250 KeySpan Corp. 44,025
550 Nicor, Inc. 19,585
550 Peoples Energy Corp. 23,452
1,800 Sempra Energy 49,086
------------
136,148
------------
HAND/MACHINE TOOLS: 0.1%
1,750 Black & Decker Corp. 75,793
500 Snap-On, Inc. 15,205
1,150 Stanley Works 32,154
------------
123,152
------------
HEALTHCARE-PRODUCTS: 3.4%
600 Bausch & Lomb, Inc. 22,764
2,100 Becton Dickinson & Co. 84,000
2,800 Biomet, Inc. 77,000
3,550 @ Boston Scientific Corp. 184,955
900 CR Bard, Inc. 63,135
6,300 @ Guidant Corp. 266,364
25,200 Johnson & Johnson 1,369,620
10,400 Medtronic, Inc. 506,792
1,550 @ St. Jude Medical, Inc. 86,955
1,650 Stryker Corp. 111,111
1,650 @ Zimmer Holdings, Inc. 74,019
------------
2,846,715
------------
HEALTHCARE-SERVICES: 1.2%
2,200 A Aetna, Inc. 126,324
2,650 @ Anthem, Inc. 194,378
750 @ Humana, Inc. 9,742
250 @ Manor Care, Inc. 5,922
4,450 UnitedHealth Group, Inc. 426,933
3,150 @ WellPoint Health Networks 268,821
------------
1,032,120
------------
HOME BUILDERS: 0.2%
1,100 Centex Corp. 85,393
500 KB Home 31,250
200 Pulte Homes, Inc. 13,118
------------
129,761
------------
HOME FURNISHINGS: 0.1%
2,050 Leggett & Platt, Inc. 45,244
550 Whirlpool Corp. 31,295
------------
76,539
------------
HOUSEHOLD PRODUCTS/WARES: 0.2%
400 Avery Dennison Corp. 22,192
1,950 Clorox Co. 87,087
1,350 Fortune Brands, Inc. 70,740
------------
180,019
------------
HOUSEWARES: 0.1%
2,200 Newell Rubbermaid, Inc. 62,700
------------
62,700
------------
INSURANCE: 5.5%
3,600 @@ ACE Ltd. 131,400
10,600 Aflac, Inc. 348,846
15,350 Allstate Corp. 552,446
950 AMBAC Financial Group, Inc. 63,374
22,050 American Intl. Group 1,276,254
2,650 AON Corp. 67,999
1,500 Chubb Corp. 96,045
1,450 Cigna Corp. 81,345
600 Cincinnati Financial Corp. 22,272
2,150 Hartford Financial Services Group, Inc. 100,276
1,450 Jefferson-Pilot Corp. 61,176
2,350 John Hancock Financial Services, Inc. 71,088
1,600 Loews Corp. 76,960
4,600 Marsh & McLennan Cos., Inc. 230,598
1,250 MBIA, Inc. 62,562
6,200 Metlife, Inc. 173,414
1,000 MGIC Investment Corp. 54,020
6,750 Principal Financial Group 214,380
3,250 Progressive Corp. 234,000
4,650 Prudential Financial, Inc. 155,868
3,000 Safeco Corp. 108,420
1,250 Torchmark Corp. 48,275
8,605 Travelers Property Casualty Corp. 139,143
3,300 UnumProvident Corp. 42,570
1,100 @@ XL Capital Ltd. 95,755
------------
4,508,486
------------
INTERNET: 0.7%
2,700 @ eBay, Inc. 274,617
3,200 @ Symantec Corp. 144,704
4,950 @ Yahoo!, Inc. 147,758
------------
567,079
------------
IRON/STEEL: 0.0%
300 Nucor Corp. 14,292
400 United States Steel Corp. 6,300
------------
20,592
------------
LEISURE TIME: 0.2%
700 Brunswick Corp. 15,365
2,850 Harley-Davidson, Inc. 120,156
------------
135,521
------------
LODGING: 0.1%
950 @ Harrah's Entertainment, Inc. 38,085
1,650 Hilton Hotels Corp. 22,869
800 Marriott Intl., Inc. 31,280
------------
92,234
------------
MACHINERY-CONSTRUCTION & MINING: 0.2%
3,000 Caterpillar, Inc. 156,450
------------
156,450
------------
MACHINERY-DIVERSIFIED: 0.4%
5,050 Deere & Co. 220,534
1,800 Dover Corp. 54,558
2,800 Rockwell Automation, Inc. 66,220
------------
341,312
------------
See Accompanying Notes to Financial Statements
98
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MEDIA: 3.5%
37,750 @ AOL Time Warner, Inc. $ 574,555
5,250 @ Clear Channel Communications, Inc. 213,675
19,650 @ Comcast Corp. 591,662
2,300 Gannett Co., Inc. 181,700
650 Knight-Ridder, Inc. 45,786
1,800 McGraw-Hill Cos., Inc. 113,778
600 Meredith Corp. 26,382
2,650 Tribune Co. 132,182
14,950 @ Viacom, Inc. 680,524
17,800 Walt Disney Co. 349,770
------------
2,910,014
------------
METAL FABRICATE/HARDWARE: 0.0%
1,200 Worthington Industries 17,916
------------
17,916
------------
MINING: 0.3%
3,100 Alcoa, Inc. 76,291
1,650 Freeport-McMoRan Copper & Gold, Inc. 36,217
3,350 Newmont Mining Corp. 99,361
950 @ Phelps Dodge Corp. 34,627
------------
246,496
------------
MISCELLANEOUS MANUFACTURING: 5.8%
3,400 3M Co. 429,998
750 Cooper Industries Ltd. 29,918
150 Crane Co. 3,132
1,300 Danaher Corp. 86,996
6,350 Eastman Kodak Co. 194,564
700 Eaton Corp. 58,751
110,450 General Electric Co. 3,169,915
7,450 Honeywell Intl., Inc. 195,190
2,650 Illinois Tool Works, Inc. 164,432
1,400 @@ Ingersoll-Rand Co. 61,320
800 ITT Industries, Inc. 50,128
1,050 Textron, Inc. 36,592
17,000 @@ Tyco Intl., Ltd. 300,900
------------
4,781,836
------------
OFFICE/BUSINESS EQUIPMENT: 0.2%
2,100 Pitney Bowes, Inc. 80,661
8,250 @ Xerox Corp. 90,171
------------
170,832
------------
OIL & GAS: 5.0%
750 Amerada Hess Corp. 36,750
3,550 Anadarko Petroleum Corp. 174,944
1,395 Apache Corp. 91,958
1,700 Burlington Resources, Inc. 90,593
9,100 ChevronTexaco Corp. 645,554
5,978 ConocoPhillips 322,633
1,950 Devon Energy Corp. 101,400
900 EOG Resources, Inc. 38,790
56,550 Exxon Mobil Corp. 2,058,420
6,300 Marathon Oil Corp. 162,099
1,200 @,@@ Nabors Industries Ltd. 54,096
600 @ Noble Corp. 21,396
4,800 Occidental Petroleum Corp. 161,952
400 @ Rowan Cos., Inc. 9,576
700 Sunoco, Inc. 25,788
1,100 @ Transocean, Inc. 25,707
4,000 Unocal Corp. 120,360
------------
4,142,016
------------
OIL & GAS SERVICES: 0.2%
3,750 Halliburton Co. 89,513
2,000 Schlumberger Ltd. 97,240
------------
186,753
------------
PACKAGING & CONTAINERS: 0.2%
800 Ball Corp. 39,616
500 Bemis Co. 22,890
2,300 @ Pactiv Corp. 44,965
750 @ Sealed Air Corp. 32,918
------------
140,389
------------
PHARMACEUTICALS: 7.5%
13,250 Abbott Laboratories 590,287
400 AmerisourceBergen Corp. 25,076
6,700 Bristol-Myers Squibb Co. 171,520
3,950 Cardinal Health, Inc. 227,955
9,700 Eli Lilly & Co. 579,769
5,300 @ Forest Laboratories, Inc. 267,650
2,600 @ King Pharmaceuticals, Inc. 37,206
2,350 @ Medimmune, Inc. 83,308
24,350 Merck & Co., Inc. 1,353,373
67,640 Pfizer, Inc. 2,098,193
12,150 Schering-Plough Corp. 224,167
1,500 @ Watson Pharmaceuticals, Inc. 55,530
11,650 Wyeth 510,853
------------
6,224,887
------------
PIPELINES: 0.1%
1,250 Kinder Morgan, Inc. 63,812
3,100 Williams Cos., Inc. 24,521
------------
88,333
------------
REITS: 0.2%
1,400 Equity Office Properties Trust 37,674
2,500 Equity Residential 66,200
1,600 Simon Property Group, Inc. 60,192
------------
164,066
------------
RETAIL: 6.3%
3,400 @ Autonation, Inc. 47,328
350 @ Autozone, Inc. 29,288
2,750 @ Bed Bath & Beyond, Inc. 115,060
1,200 @ Big Lots, Inc. 16,332
4,000 @ Costco Wholesale Corp. 148,200
3,900 CVS Corp. 101,790
2,050 Darden Restaurants, Inc. 40,610
1,500 Dillard's, Inc. 20,040
6,900 Dollar General Corp. 129,030
1,550 Family Dollar Stores 56,498
4,150 @ Federated Department Stores 134,875
13,350 Gap, Inc. 226,950
19,700 Home Depot, Inc. 640,053
2,150 JC Penney Co., Inc. 37,238
1,150 @ Kohl's Corp. 60,203
4,550 Limited Brands 69,433
6,750 Lowe's Cos., Inc. 285,255
1,300 May Department Stores Co. 28,197
10,850 McDonald's Corp. 203,220
See Accompanying Notes to Financial Statements
99
ING Disciplined
LargeCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
RETAIL (CONTINUED):
5,300 @ Office Depot, Inc. $ 71,020
1,300 RadioShack Corp. 31,330
10,250 @ Staples, Inc. 198,748
3,200 @ Starbucks Corp. 78,851
4,600 TJX Cos., Inc. 83,720
8,950 Walgreen Co. 275,571
37,500 Wal-Mart Stores, Inc. 1,972,875
1,000 Wendy's Intl., Inc. 30,110
2,700 @ Yum! Brands, Inc. 75,492
------------
5,207,317
------------
SAVINGS & LOANS: 0.8%
1,350 Golden West Financial Corp. 105,016
13,100 Washington Mutual, Inc. 534,218
------------
639,234
------------
SEMICONDUCTORS: 2.3%
3,100 @ Altera Corp. 59,768
3,100 @ Analog Devices, Inc. 119,505
5,650 @ Applied Materials, Inc. 87,914
1,000 @ Broadcom Corp. 24,480
56,150 Intel Corp. 1,170,166
2,600 Linear Technology Corp. 94,536
3,350 @ LSI Logic Corp. 21,440
2,800 Maxim Integrated Products 109,788
1,250 @ Novellus Systems, Inc. 43,313
1,900 @ Nvidia Corp. 49,723
850 @ QLogic Corp. 42,576
2,750 @ Xilinx, Inc. 82,143
------------
1,905,352
------------
SOFTWARE: 5.9%
2,300 Adobe Systems, Inc. 81,167
550 Autodesk, Inc. 8,201
5,300 Automatic Data Processing 184,970
2,000 @ BMC Software, Inc. 33,920
2,600 @ Citrix Systems, Inc. 56,758
4,800 Computer Associates Intl., Inc. 104,016
7,150 @ Compuware Corp. 43,400
1,250 @ Electronic Arts, Inc. 85,700
6,400 First Data Corp. 265,088
1,650 @ Fiserv, Inc. 54,599
2,250 IMS Health, Inc. 40,140
1,700 @ Intuit, Inc. 78,353
1,000 @ Mercury Interactive Corp. 39,310
106,350 Microsoft Corp. 2,617,273
82,500 @ Oracle Corp. 1,073,325
1,150 @ Peoplesoft, Inc. 18,814
7,500 @ Siebel Systems, Inc. 70,425
------------
4,855,459
------------
TELECOMMUNICATIONS: 6.3%
2,600 Alltel Corp. 124,488
1,350 @ Andrew Corp. 13,419
14,860 AT&T Corp. 289,621
20,650 @ AT&T Wireless Services, Inc. 160,451
21,100 BellSouth Corp. 559,361
1,500 CenturyTel, Inc. 50,505
4,250 @ CIENA Corp. 24,437
79,200 @ Cisco Systems, Inc. 1,289,376
2,200 @ Citizens Communications Co. 27,104
2,850 @ Comverse Technology, Inc. 43,349
19,400 @ JDS Uniphase Corp. 75,078
14,900 @ Lucent Technologies, Inc. 32,929
7,800 Motorola, Inc. 66,456
19,850 @ Nextel Communications, Inc. 297,552
7,000 Qualcomm, Inc. 235,060
24,950 SBC Communications, Inc. 635,227
1,950 Scientific-Atlanta, Inc. 38,396
7,450 Sprint Corp.-FON Group 101,022
3,100 @ Tellabs, Inc. 24,614
29,150 Verizon Communications, Inc. 1,103,328
------------
5,191,773
------------
TEXTILES: 0.1%
1,450 Cintas Corp. 53,679
------------
53,679
------------
TOYS/GAMES/HOBBIES: 0.3%
2,000 Hasbro, Inc. 32,020
9,150 Mattel, Inc. 196,816
------------
228,836
------------
TRANSPORTATION: 2.0%
3,100 Burlington Northern Santa Fe Corp. 91,481
4,350 FedEx Corp. 278,313
3,400 Norfolk Southern Corp. 74,528
2,100 Union Pacific Corp. 128,079
17,200 United Parcel Service, Inc. 1,073,796
------------
1,646,197
------------
TRUCKING & LEASING: 0.0%
600 Ryder System, Inc. 15,936
------------
15,936
------------
Total Common Stock
(Cost $80,736,922) 82,242,505
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $80,736,922)* 99.6% $ 82,242,505
OTHER ASSETS AND LIABILITIES-NET 0.4 347,915
----- ------------
NET ASSETS 100.0% $ 82,590,420
===== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
A Related Party
* Cost for federal income tax purposes is $85,785,685. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 5,249,435
Gross Unrealized Depreciation (8,792,615)
------------
Net Unrealized Appreciation $ (3,543,180)
============
See Accompanying Notes to Financial Statements
100
ING
Large Company
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 97.0%
AEROSPACE/DEFENSE: 2.0%
41,000 General Dynamics Corp. $ 2,739,620
------------
2,739,620
------------
AGRICULTURE: 3.8%
125,715 Altria Group, Inc. 5,192,030
------------
5,192,030
------------
APPAREL: 1.4%
35,000 Nike, Inc. 1,959,650
------------
1,959,650
------------
AUTO MANUFACTURERS: 2.0%
259,400 Ford Motor Co. 2,723,700
------------
2,723,700
------------
BANKS: 5.6%
50,200 Bank of America Corp. 3,724,840
82,500 Wells Fargo & Co. 3,984,750
------------
7,709,590
------------
BUILDING MATERIALS: 1.6%
90,100 Masco Corp. 2,216,460
------------
2,216,460
------------
CHEMICALS: 3.7%
100,700 Dow Chemical Co. 3,202,260
32,900 Praxair, Inc. 1,973,671
------------
5,175,931
------------
COMPUTERS: 2.1%
146,074 Hewlett-Packard Co. 2,848,443
------------
2,848,443
------------
DIVERSIFIED FINANCIAL SERVICES: 15.1%
67,200 Fannie Mae 4,972,800
84,900 Freddie Mac 5,077,869
114,800 JP Morgan Chase & Co. 3,772,328
82,500 Merrill Lynch & Co., Inc. 3,572,250
75,500 Morgan Stanley 3,454,125
------------
20,849,372
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 1.9%
49,300 Emerson Electric Co. 2,578,390
------------
2,578,390
------------
ELECTRONICS: 3.3%
229,000 @@ Koninklijke Philips Electronics NV 4,502,140
------------
4,502,140
------------
FOOD: 5.3%
73,700 @@ Nestle SA ADR 3,876,620
57,700 @@ Unilever NV 3,375,450
------------
7,252,070
------------
FOREST PRODUCTS & PAPER: 1.9%
72,100 International Paper Co. 2,643,907
------------
2,643,907
------------
HEALTHCARE-PRODUCTS: 2.1%
72,000 Beckman Coulter, Inc. 2,926,800
------------
2,926,800
------------
HEALTHCARE-SERVICES: 2.5%
204,600 @ Tenet Healthcare Corp. 3,414,774
------------
3,414,774
------------
INSURANCE: 6.9%
69,800 American Intl. Group 4,040,024
83,000 John Hancock Financial Services, Inc. 2,510,750
107,700 Metlife, Inc. 3,012,369
------------
9,563,143
------------
MEDIA: 1.4%
24,600 Gannett Co., Inc. 1,943,400
------------
1,943,400
------------
MISCELLANEOUS MANUFACTURING: 3.4%
178,500 Honeywell Intl., Inc. 4,676,700
------------
4,676,700
------------
OIL & GAS: 13.7%
72,900 Anadarko Petroleum Corp. 3,592,512
109,900 @@ BP PLC ADR 4,603,711
61,500 ChevronTexaco Corp. 4,362,810
104,500 Exxon Mobil Corp. 3,803,800
56,300 @@ Royal Dutch Petroleum Co. 2,564,465
------------
18,927,298
------------
PHARMACEUTICALS: 4.0%
122,700 Bristol-Myers Squibb Co. 3,141,120
43,700 Merck & Co., Inc. 2,428,846
------------
5,569,966
------------
RETAIL: 3.2%
82,300 May Department Stores Co. 1,785,087
136,900 McDonald's Corp. 2,564,137
------------
4,349,224
------------
SAVINGS & LOANS: 2.9%
98,200 Washington Mutual, Inc. 4,004,596
------------
4,004,596
------------
TELECOMMUNICATIONS: 4.7%
118,400 SBC Communications, Inc. 3,014,464
91,600 Verizon Communications, Inc. 3,467,060
------------
6,481,524
------------
TRANSPORTATION: 2.5%
53,100 FedEx Corp. 3,397,338
------------
3,397,338
------------
Total Common Stock
(Cost $135,939,259) 133,646,066
------------
See Accompanying Notes to Financial Statements
101
ING
Large Company
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 3.0%
REPURCHASE AGREEMENT: 3.0%
$ 4,169,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $4,169,393 to be received
upon repurchase (Collateralized by $3,405,000
U.S. Treasury Bonds, 6.125%, Market Value
$4,253,257, due 08/15/29) $ 4,169,000
------------
Total Short-Term Investments
(Cost $4,169,000) 4,169,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $140,108,259)* 100.0% $137,815,066
OTHER ASSETS AND LIABILITIES-NET 0.0 16,586
----- ------------
NET ASSETS 100.0% $137,831,652
===== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 6,106,187
Gross Unrealized Depreciation (8,399,380)
------------
Net Unrealized Depreciation $ (2,293,193)
============
See Accompanying Notes to Financial Statements
102
ING
MagnaCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 98.9%
AEROSPACE/DEFENSE: 2.6%
89,900 General Dynamics Corp. $ 6,007,118
------------
6,007,118
------------
AGRICULTURE: 3.8%
211,100 Altria Group, Inc. 8,718,430
------------
8,718,430
------------
APPAREL: 1.4%
58,800 Nike, Inc. 3,292,212
------------
3,292,212
------------
AUTO MANUFACTURERS: 2.0%
435,700 Ford Motor Co. 4,574,850
------------
4,574,850
------------
BANKS: 5.6%
84,400 Bank of America Corp. 6,262,480
138,700 Wells Fargo & Co. 6,699,210
------------
12,961,690
------------
BUILDING MATERIALS: 1.6%
151,500 Masco Corp. 3,726,900
------------
3,726,900
------------
CHEMICALS: 3.9%
169,100 Dow Chemical Co. 5,377,380
61,100 Praxair, Inc. 3,665,389
------------
9,042,769
------------
COMPUTERS: 3.1%
370,282 Hewlett-Packard Co. 7,220,499
------------
7,220,499
------------
DIVERSIFIED FINANCIAL SERVICES: 15.0%
112,800 Fannie Mae 8,347,200
142,700 Freddie Mac 8,534,887
187,700 JP Morgan Chase & Co. 6,167,822
127,900 Merrill Lynch & Co., Inc. 5,538,070
132,700 Morgan Stanley 6,071,025
------------
34,659,004
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 2.5%
110,000 Emerson Electric Co. 5,753,000
------------
5,753,000
------------
FOOD: 4.7%
119,600 @@ Nestle SA ADR 6,290,960
79,600 @@ Unilever NV 4,656,600
------------
10,947,560
------------
FOREST PRODUCTS & PAPER: 1.9%
121,200 @ International Paper Co. 4,444,404
------------
4,444,404
------------
HEALTHCARE-PRODUCTS: 2.3%
211,700 Baxter Intl., Inc. 5,364,478
------------
5,364,478
------------
HEALTHCARE-SERVICES: 2.2%
298,700 Tenet Healthcare Corp. 4,985,303
------------
4,985,303
------------
INSURANCE: 7.2%
121,300 American Intl. Group 7,020,844
181,000 Metlife, Inc. 5,062,570
132,300 Prudential Financial, Inc. 4,434,696
------------
16,518,110
------------
MEDIA: 1.6%
45,400 Gannett Co., Inc. 3,586,600
------------
3,586,600
------------
MISCELLANEOUS MANUFACTURING: 3.9%
339,400 Honeywell Intl., Inc. 8,892,280
------------
8,892,280
------------
OIL & GAS: 13.0%
129,000 Anadarko Petroleum Corp. 6,357,120
89,600 ChevronTexaco Corp. 6,356,224
108,000 ConocoPhillips 5,828,760
219,600 Exxon Mobil Corp. 7,993,440
90,000 @ Valero Energy Corp. 3,375,000
------------
29,910,544
------------
PHARMACEUTICALS: 4.2%
219,900 Bristol-Myers Squibb Co. 5,629,440
73,400 Merck & Co., Inc. 4,079,572
------------
9,709,012
------------
RETAIL: 3.4%
142,400 May Department Stores Co. 3,088,656
259,400 McDonald's Corp. 4,858,562
------------
7,947,218
------------
SAVINGS & LOANS: 3.0%
168,500 Washington Mutual, Inc. 6,871,430
------------
6,871,430
------------
SEMICONDUCTORS: 2.7%
300,000 Intel Corp. 6,252,000
------------
6,252,000
------------
TELECOMMUNICATIONS: 4.9%
199,000 SBC Communications, Inc. 5,066,540
163,000 Verizon Communications, Inc. 6,169,550
------------
11,236,090
------------
TRANSPORTATION: 2.4%
87,000 FedEx Corp. 5,566,260
------------
5,566,260
------------
Total Common Stock
(Cost $228,197,344) 228,187,761
------------
See Accompanying Notes to Financial Statements
103
ING
MagnaCap
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.9%
REPURCHASE AGREEMENT: 1.9%
$ 4,312,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $4,312,406 to be received
upon repurchase (Collateralized by $2,960,000
U.S. Treasury Bond, 8.125%, Market Value
$4,402,926, due 08/15/21) $ 4,312,000
------------
Total Short-Term Investments
(Cost $4,312,000) 4,312,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $232,509,344)* 100.8% $232,499,761
OTHER ASSETS AND LIABILITIES-NET (0.8) (1,745,973)
----- ------------
NET ASSETS 100.0% $230,753,788
===== ============
@ Non-income producing security
@@ Foreign Issuer
ADR American Depository Receipt
* Cost for federal income tax purposes is $232,815,864. Net unrealized
depreciation consists of:
Gross Unrealized Appreciation $ 13,158,509
Gross Unrealized Depreciation (13,474,612)
------------
Net Unrealized Depreciation $ (316,103)
============
See Accompanying Notes to Financial Statements
104
ING
MidCap Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 95.3%
AGRICULTURE: 8.0%
51,140 Loews Corp. - Carolina Group $ 1,286,682
25,550 R.J. Reynolds Tobacco Holdings, Inc. 871,000
28,340 UST, Inc. 1,000,685
------------
3,158,367
------------
AIRLINES: 3.3%
97,780 @ AMR Corp. 619,925
47,300 Delta Air Lines, Inc. 631,928
------------
1,251,853
------------
APPAREL: 1.3%
58,380 @,@@ Tommy Hilfiger Corp. 496,230
------------
496,230
------------
AUTO PARTS & EQUIPMENT: 5.3%
72,600 Delphi Corp. 640,332
126,240 Goodyear Tire & Rubber Co. 823,085
105,000 Visteon Corp. 645,750
------------
2,109,167
------------
BUILDING MATERIALS: 0.8%
12,690 York Intl. Corp. 328,544
------------
328,544
------------
CHEMICALS: 4.1%
33,030 Great Lakes Chemical Corp. 760,681
30,970 Sherwin-Williams Co. 847,959
------------
1,608,640
------------
COMMERCIAL SERVICES: 1.9%
185,000 @ Service Corp. Intl. 769,600
------------
769,600
------------
COMPUTERS: 7.7%
252,000 @ Gateway, Inc. 841,680
39,850 @ NCR Corp. 999,040
106,490 @ Unisys Corp. 1,202,272
------------
3,042,992
------------
DIVERSIFIED FINANCIAL SERVICES: 3.7%
61,500 CIT Group, Inc. 1,475,385
------------
1,475,385
------------
ELECTRIC: 8.4%
43,680 Alliant Energy Corp. 872,726
46,550 @ Edison Intl. 757,834
162,000 @ Mirant Corp. 560,520
42,770 @ PG&E Corp. 727,090
70,740 @ Sierra Pacific Resources 381,996
------------
3,300,166
------------
ELECTRONICS: 2.5%
249,000 @ Solectron Corp. 996,000
------------
996,000
------------
FOOD: 8.2%
113,100 @ Del Monte Foods Co. 1,031,472
61,500 @ Smithfield Foods, Inc. 1,290,885
97,400 Tyson Foods, Inc. 925,300
------------
3,247,657
------------
HEALTHCARE-SERVICES: 0.1%
105,000 @ Healthsouth Corp. 31,500
------------
31,500
------------
HOME FURNISHINGS: 2.0%
32,820 Maytag Corp. 802,777
------------
802,777
------------
HOUSEHOLD PRODUCTS/WARES: 2.6%
37,180 @ American Greetings 659,201
24,110 Tupperware Corp. 382,867
------------
1,042,068
------------
INSURANCE: 10.6%
20,050 @ Allmerica Financial Corp. 351,076
6,060 American National Insurance 518,978
32,380 @ CNA Financial Corp. 786,186
35,030 Mony Group, Inc. 932,148
32,100 Nationwide Financial Services 1,035,546
64,770 Phoenix Cos., Inc. 544,716
------------
4,168,650
------------
IRON/STEEL: 2.2%
54,450 United States Steel Corp. 857,588
------------
857,588
------------
OFFICE/BUSINESS EQUIPMENT: 2.4%
84,960 @ Xerox Corp. 928,613
------------
928,613
------------
PIPELINES: 2.9%
66,700 Aquila, Inc. 184,759
112,400 EL Paso Corp. 977,880
------------
1,162,639
------------
RETAIL: 5.7%
57,000 Dillard's, Inc. 761,520
15,000 May Department Stores Co. 325,350
101,190 @ Toys R US, Inc. 1,177,852
------------
2,264,722
------------
SEMICONDUCTORS: 1.9%
67,400 @ Micron Technology, Inc. 762,968
------------
762,968
------------
TELECOMMUNICATIONS: 8.4%
211,460 @ Avaya, Inc. 1,399,865
360,110 @ Lucent Technologies, Inc. 795,843
143,430 @ Tellabs, Inc. 1,138,834
------------
3,334,542
------------
TOYS/GAMES/HOBBIES: 1.3%
31,180 Hasbro, Inc. 499,192
------------
499,192
------------
Total Common Stock
(Cost $45,138,971) 37,639,860
------------
See Accompanying Notes to Financial Statements
105
ING
MidCap Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 4.5%
REPURCHASE AGREEMENT: 4.5%
$ 1,767,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $1,767,166 to be received
upon repurchase (Collateralized by $1,480,000
U.S. Treasury Bonds, 6.000%, Market Value
$1,803,843, due 02/15/26) $ 1,767,000
------------
Total Short-Term Investments
(Cost $1,767,000) 1,767,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $46,905,971)* 99.8% $ 39,406,860
OTHER ASSETS AND LIABILITIES-NET 0.2 70,011
----- ------------
NET ASSETS 100.0% $ 39,476,871
===== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is the same as for fi- nancial
statement purposes. Net unrealized depreciation consists of:
Gross Unrealized Appreciation $ 3,053,847
Gross Unrealized Depreciation (10,552,958)
------------
Net Unrealized Depreciation $ (7,499,111)
============
See Accompanying Notes to Financial Statements
106
ING
SmallCap
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 99.0%
APPAREL: 7.1%
40,000 @ Nautica Enterprises, Inc. $ 422,000
60,000 Stride Rite Corp. 540,000
81,830 @,@@ Tommy Hilfiger Corp. 695,555
89,300 @ Vans, Inc. 623,314
------------
2,280,869
------------
AUTO PARTS & EQUIPMENT: 6.6%
27,600 Cooper Tire & Rubber Co. 438,564
176,399 Goodyear Tire & Rubber Co. 1,150,121
83,800 Visteon Corp. 515,370
------------
2,104,055
------------
BUILDING MATERIALS: 1.5%
18,650 York Intl. Corp. 482,848
------------
482,848
------------
CHEMICALS: 8.9%
22,570 @ Cytec Industries, Inc. 747,067
25,600 Great Lakes Chemical Corp. 589,568
9,490 Lubrizol Corp. 302,731
118,390 PolyOne Corp. 589,582
56,240 Wellman, Inc. 632,700
------------
2,861,648
------------
COMMERCIAL SERVICES: 5.7%
34,630 Kelly Services, Inc. 858,477
233,510 @ Service Corp. Intl. 971,402
------------
1,829,879
------------
COMPUTERS: 2.5%
234,700 @ Gateway, Inc. 783,898
------------
783,898
------------
ELECTRIC: 1.1%
66,940 @ Sierra Pacific Resources 361,476
------------
361,476
------------
ELECTRICAL EQUIPMENT: 3.8%
59,850 Belden, Inc. 813,960
32,700 @ Rayovac Corp. 411,693
------------
1,225,653
------------
ELECTRONICS: 4.9%
104,560 @ Kemet Corp. 1,056,056
87,400 @ Sanmina-SCI Corp. 499,928
------------
1,555,984
------------
FOOD: 4.2%
56,830 @ Del Monte Foods Co. 518,290
18,120 Sensient Technologies Corp. 410,237
19,800 @ Smithfield Foods, Inc. 415,602
------------
1,344,129
------------
HAND/MACHINE TOOLS: 1.5%
38,420 Starrett (L.S.) Co. 491,008
------------
491,008
------------
HEALTHCARE-SERVICES: 4.1%
28,400 @ Orthodontic Centers of America 225,780
27,940 @ Pacificare Health Systems 1,080,132
------------
1,305,912
------------
HOME BUILDERS: 4.0%
119,190 @ Fleetwood Enterprises, Inc. 908,228
81,300 @ National RV Holdings, Inc. 386,175
------------
1,294,403
------------
HOUSEHOLD PRODUCTS/WARES: 4.2%
48,320 @ American Greetings 856,714
31,460 Tupperware Corp. 499,585
------------
1,356,299
------------
HOUSEWARES: 1.1%
10,450 National Presto Industries, Inc. 337,849
------------
337,849
------------
INSURANCE: 5.6%
15,000 @ Allmerica Financial Corp. 262,650
3,560 American National Insurance 304,878
8,420 Landamerica Financial Group, Inc. 397,003
13,500 Mony Group, Inc. 359,235
54,010 Phoenix Cos., Inc. 454,224
------------
1,777,990
------------
IRON/STEEL: 6.0%
117,480 Ryerson Tull, Inc. 1,039,698
56,540 United States Steel Corp. 890,505
------------
1,930,203
------------
LEISURE TIME: 2.4%
78,250 @ K2, Inc. 753,548
------------
753,548
------------
MACHINERY-DIVERSIFIED: 2.1%
18,060 Tecumseh Products Co. 666,595
------------
666,595
------------
METAL FABRICATE/HARDWARE: 4.4%
23,100 Precision Castparts Corp. 675,675
124,620 @ Wolverine Tube, Inc. 735,258
------------
1,410,933
------------
MINING: 1.4%
102,500 @ Stillwater Mining Co. 438,700
------------
438,700
------------
MISCELLANEOUS MANUFACTURING: 2.5%
45,730 Trinity Industries, Inc. 791,129
------------
791,129
------------
OIL & GAS SERVICES: 1.0%
708,470 @ Seitel, Inc. 311,727
------------
311,727
------------
RETAIL: 1.7%
10,110 Blair Corp. 214,332
24,400 Dillard's, Inc. 325,984
------------
540,316
------------
SOFTWARE: 0.8%
68,000 @ Midway Games, Inc. 240,040
------------
240,040
------------
See Accompanying Notes to Financial Statements
107
ING
SmallCap
Value
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS: 6.9%
190,980 @ Avaya, Inc. $ 1,264,287
62,770 @ Comverse Technology, Inc. 954,731
------------
2,219,018
------------
TOYS/GAMES/HOBBIES: 3.0%
59,290 Hasbro, Inc. 949,233
------------
949,233
------------
Total Common Stock
(Cost $35,044,019) 31,645,342
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.1%
REPURCHASE AGREEMENT: 1.1%
$ 349,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $349,033 to be received
upon repurchase (Collateralized by $295,000
U.S. Treasury Bonds, 6.000%, Market Value
$359,550, due 02/15/26) $ 349,000
------------
Total Short-Term Investments
(Cost $349,000) 349,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $35,393,019)* 100.1% $ 31,994,342
OTHER ASSETS AND LIABILITIES-NET (0.1) (17,352)
----- ------------
NET ASSETS 100.0% $ 31,976,990
===== ============
@ Non-income producing security
@@ Foreign Issuer
* Cost for federal income tax purposes is $35,753,868. Net un- realized
depreciation consists of:
Gross Unrealized Appreciation $ 3,759,747
Gross Unrealized Depreciation (7,519,271)
------------
Net Unrealized Depreciation $ (3,759,526)
============
See Accompanying Notes to Financial Statements
108
ING
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 5.6%
AEROSPACE/DEFENSE: 0.4%
85,000 @ Titan Corp. $ 738,650
------------
738,650
------------
FOOD: 0.7%
27,905 @ Dean Foods Co. 1,276,653
------------
1,276,653
------------
HEALTHCARE-SERVICES: 1.0%
90,000 @ Community Health Systems, Inc. 1,874,700
------------
1,874,700
------------
MISCELLANEOUS MANUFACTURING: 0.5%
36,000 General Electric Co. 1,033,200
------------
1,033,200
------------
PHARMACEUTICALS: 0.4%
15,000 Cardinal Health, Inc. 865,650
------------
865,650
------------
RETAIL: 0.9%
60,000 Wendy's International, Inc. 1,806,600
------------
1,806,600
------------
SOFTWARE: 0.8%
10,000 @ Electronic Arts, Inc. 685,600
138,600 @ MSC.Software Corp. 941,094
------------
1,626,694
------------
TELECOMMUNICATIONS: 0.9%
53,000 Qualcomm, Inc. 1,779,740
------------
1,779,740
------------
Total Common Stock
(Cost $10,913,959) 11,001,887
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS: 70.1%
ADVERTISING: 1.8%
$ 992,000 # Interpublic Group of Cos., Inc., 4.500%,
due 03/15/23 $ 1,442,120
2,000,000 Young & Rubicam, Inc., 3.000%, due 01/15/05 1,987,500
------------
3,429,620
------------
AGRICULTURE: 0.9%
1,490,000 # Bunge Ltd. Finance Corp., 3.750%,
due 11/15/22 1,709,775
------------
1,709,775
------------
AIRLINES: 0.5%
992,000 # Alaska Air Group, Inc., 3.786%, due 03/21/23 1,046,560
------------
1,046,560
------------
AUTO PARTS & EQUIPMENT: 1.4%
6,000,000 Lear Corp., 4.890%, due 02/20/22 2,790,000
------------
2,790,000
------------
BIOTECHNOLOGY: 4.1%
3,300,000 Amgen, Inc., 1.250%, due 03/01/32 2,615,250
5,511,000 Millennium Pharmaceuticals, Inc., 5.500%,
due 01/15/07 5,283,671
------------
7,898,921
------------
COMPUTERS: 2.1%
2,004,000 #,@@ ASML Holding NV, 4.250%, due 11/30/04 2,006,605
1,000,000 @@ ASML Holding NV, 4.250%, due 11/30/04 1,001,300
990,000 # Electronics for Imaging, 1.500%, due 06/01/23 990,000
------------
3,997,905
------------
DISTRIBUTION/WHOLESALE: 1.8%
4,000,000 Costco Wholesale Corp., 1.180%, due 08/19/17 3,420,000
------------
3,420,000
------------
ELECTRIC: 5.8%
2,000,000 Calpine Corp., 4.000%, due 12/26/06 1,622,500
495,000 # Centerpoint Energy, Inc., 3.750%,
due 05/15/23 561,825
1,980,000 Duke Energy Corp., 1.750%, due 05/15/23 2,069,100
4,000,000 Mirant Corp., 2.500%, due 06/15/21 2,900,000
3,960,000 # PPL Energy Supply LLC, 2.625%, due 05/15/23 4,123,350
------------
11,276,775
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 0.6%
990,000 # Wilson Greatbatch Technologies, Inc., 2.250%,
due 06/15/13 1,154,588
------------
1,154,588
------------
FOOD: 3.9%
4,470,000 # General Mills, Inc., 2.000%, due 10/28/22 3,263,100
4,000,000 S,@@ Koninklijke Ahold NV, 3.000%, due 09/30/03 2,054,098
1,000,000 @@ Koninklijke Numico BV, 4.250%, due 06/26/05 1,040,539
1,000,000 @@ Numico NV, 1.500%, due 09/22/04 1,189,271
------------
7,547,008
------------
HEALTHCARE-SERVICES: 4.2%
3,000,000 Laboratory Corp. of America Holdings, 2.000%,
due 09/11/21 2,156,250
2,000,000 Quest Diagnostics, 1.750%, due 11/30/21 2,115,000
6,000,000 Universal Health Services, Inc., 0.426%,
due 06/23/20 3,832,500
------------
8,103,750
------------
INSURANCE: 0.9%
1,970,000 # AmerUs Group Co., 2.000%, due 03/06/32 1,738,525
------------
1,738,525
------------
See Accompanying Notes to Financial Statements
109
ING
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
LODGING: 2.5%
$15,000,000 @@ Four Seasons Hotels, Inc., 4.500%,
due 09/23/29 $ 4,875,000
------------
4,875,000
------------
MACHINERY-DIVERSIFIED: 0.6%
1,000,000 Briggs & Stratton, 5.000%, due 05/15/06 1,136,250
------------
1,136,250
------------
MEDIA: 3.1%
2,000,000 America Online, Inc., 3.000%, due 12/06/19 1,215,000
3,500,000 EchoStar Communications Corp., 4.875%,
due 01/01/07 3,574,375
495,000 # Sinclair Broadcast Group, Inc., 4.875%,
due 07/15/18 517,894
495,000 Sirius Satellite Radio, Inc., 3.500%,
due 06/01/08 650,925
------------
5,958,194
------------
METAL FABRICATE/HARDWARE: 0.3%
919,000 Shaw Group, Inc., 2.270%, due 05/01/21 590,458
------------
590,458
------------
MINING: 1.5%
1,500,000 @@ Inco Ltd., 3.250%, due 03/29/21 1,021,875
1,985,000 #,@@ Inco Ltd., 1.000%, due 03/14/23 1,826,200
------------
2,848,075
------------
MISCELLANEOUS MANUFACTURING: 1.1%
1,985,000 #,@@ Tyco International Group SA, 2.750%,
due 01/15/18 2,131,394
------------
2,131,394
------------
OIL & GAS: 7.6%
3,498,000 Devon Energy Corp., 4.900%, due 08/15/08 3,576,705
2,500,000 Kerr-McGee Corp., 5.250%, due 02/15/10 2,750,000
2,165,000 Nabors Industries, Inc., 2.530%, due 02/05/21 1,434,313
2,100,000 Parker Drilling Co., 5.500%, due 08/01/04 2,047,500
1,985,000 # Pride Intl., Inc., 3.250%, due 05/01/33 2,257,938
3,000,000 @@ Transocean, Inc., 1.500%, due 05/15/21 2,932,500
------------
14,998,956
------------
OIL & GAS SERVICES: 1.0%
1,975,000 Cooper Cameron Corp., 1.750%, due 05/17/21 2,014,500
------------
2,014,500
------------
PHARMACEUTICALS: 5.0%
3,000,000 Alza Corp., 3.000%, due 07/28/20 2,287,500
2,000,000 # Celgene Corp., 1.750%, due 06/01/08 2,060,000
2,000,000 Cephalon, Inc., 2.500%, due 12/15/06 1,922,500
1,000,000 Cephalon, Inc., 5.250%, due 05/01/06 1,041,250
1,985,000 # Watson Pharmaceuticals, Inc., 1.750%,
due 03/15/23 2,317,488
------------
9,628,738
------------
RETAIL: 2.1%
6,000,000 Duane Reade, Inc., 2.148%, due 04/16/22 3,075,000
990,000 # Triarc Cos., 5.000%, due 05/15/23 1,054,350
------------
4,129,350
------------
SEMICONDUCTORS: 7.0%
3,000,000 Advanced Micro Devices, Inc., 4.750%,
due 02/01/22 2,313,750
2,000,000 Analog Devices, Inc., 4.750%, due 10/01/05 2,045,000
2,475,000 #,@@ ASM International NV, 5.250%, due 05/15/10 2,666,812
3,000,000 @@ Chartered Semiconductor Manufacturing Ltd.,
2.500%, due 04/02/06 3,078,750
1,000,000 # Cypress Semiconductor Corp., 1.250%,
due 06/15/08 1,016,250
1,985,000 # Micron Technology, Inc., 2.500%, due 02/01/10 2,391,925
------------
13,512,487
------------
SOFTWARE: 3.2%
3,500,000 BEA Systems, Inc., 4.000%, due 12/15/06 3,355,625
2,500,000 First Data Corp., 2.000%, due 03/01/08 2,856,250
------------
6,211,875
------------
TELECOMMUNICATIONS: 7.1%
1,980,000 Lucent Technologies, Inc., 2.750%,
due 06/15/23 1,980,000
2,000,000 Nextel Communications, Inc., 6.000%,
due 06/01/11 2,100,000
3,000,000 # Nextel Partners, Inc., 1.500%, due 11/15/08 3,052,500
2,000,000 Tekelec, 3.250%, due 11/02/04 1,925,000
3,980,000 US Cellular Corp., 6.000%, due 06/15/15 1,805,925
1,985,000 # Utstarcom, Inc., 0.875%, due 03/01/08 2,863,363
------------
13,726,788
------------
Total Convertible Bonds
(Cost $127,437,480) 135,875,492
------------
See Accompanying Notes to Financial Statements
110
ING
Convertible
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS: 1.6%
ENGINEERING & CONSTRUCTION: 1.1%
1,980,000 # Massey Energy Co., 4.750%, due 05/15/23 $ 2,093,850
------------
2,093,850
------------
INSURANCE: 0.5%
1,000,000 American Intl. Group, 0.500%, due 05/15/07 957,500
------------
957,500
------------
Total Corporate Bonds
(Cost $2,913,033) 3,051,350
------------
MUTUAL FUNDS: 3.0%
EQUITY FUND: 3.0%
60,000 SPDR Trust Series 1 5,817,000
------------
5,817,000
------------
Total Mutual Funds
(Cost $5,309,940) 5,817,000
------------
Shares Value
- --------------------------------------------------------------------------------
PREFERRED STOCK: 17.5%
AUTO MANUFACTURERS: 2.4%
55,000 @ Ford Motor Co Capital Trust II $ 2,462,350
85,000 General Motors Corp. 2,113,950
------------
4,576,300
------------
DIVERSIFIED FINANCIAL SERVICES: 1.0%
88,300 @ Gabelli Asset Management, Inc. 1,951,430
------------
1,951,430
------------
ENVIRONMENTAL CONTROL: 1.1%
34,700 @ Allied Waste Industries, Inc. 2,047,300
------------
2,047,300
------------
FOOD: 0.7%
23,164 @ Suiza Capital Trust II 1,331,930
------------
1,331,930
------------
FOREST PRODUCTS & PAPER: 0.6%
25,000 International Paper Capital 1,237,500
------------
1,237,500
------------
HEALTHCARE-SERVICES: 1.2%
25,000 @ Anthem, Inc. 2,232,500
------------
2,232,500
------------
INSURANCE: 5.9%
79,000 Hartford Financial Services Group, Inc. 4,105,584
20,000 Prudential Financial, Inc. 1,118,000
62,000 Reinsurance Group of America 3,357,300
118,000 Travelers Property Casualty Corp. 2,944,100
------------
11,524,984
------------
MEDIA: 1.1%
19,850 # News Corp. Finance Trust II 2,123,950
------------
2,123,950
------------
OIL & GAS: 0.2%
4,960 # Chesapeake Energy Corp. 323,640
------------
323,640
------------
OIL & GAS SERVICES: 1.5%
57,005 @@ Weatherford Intl. Ltd. 2,992,762
------------
2,992,762
------------
SAVINGS & LOANS: 1.0%
33,000 Washington Mutual, Inc. 1,930,500
------------
1,930,500
------------
TELECOMMUNICATIONS: 0.5%
10,000 @ Lucent Technologies, Inc. 1,038,800
1 @,X WinStar Communications, Inc., Series A --
51,931 @,X WinStar Communications, Inc., Series D --
------------
1,038,800
------------
TRANSPORTATION: 0.3%
990 # Kansas City Southern 523,586
------------
523,586
------------
Total Preferred Stock
(Cost $33,346,008) 33,835,182
------------
Total Long-Term Investments
(Cost $179,920,420) 189,580,911
------------
Pricipal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 0.9%
REPURCHASE AGREEMENT: 0.9%
$ 1,761,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $1,761,166 to be received
upon repurchase (Collateralized by $1,605,000
U.S. Treasury Bond, 5.250%, Market Value
$1,799,606, due 02/15/26) $ 1,761,000
------------
Total Short-Term Investments
(Cost $1,761,000) 1,761,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $181,681,420)* 98.7% $191,341,911
OTHER ASSETS AND LIABILITIES-NET 1.3% 2,472,134
----- ------------
NET ASSETS 100.0% $193,814,045
===== ============
@ Non-income producing security
@@ Foreign Issuer
# Securities with purchase pursuant to Rule 144A, under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. These securities have been determined to be liquid
under the guidelines established by the Fund's Board of Trustees.
X Market Value determined by ING Valuation Committee appointed by the Fund's
Board of Directors.
S Segregated securities for when-issued or delayed delivery securities held
at May 31, 2003.
* Cost for federal income tax purposes is $181,801,809. Net unrealized
appreciation consists of:
Gross Unrealized Appreciation $ 16,580,703
Gross Unrealized Depreciation (7,040,601)
------------
Net Unrealized Appreciation $ 9,540,102
============
See Accompanying Notes to Financial Statements
111
ING
Equity and Bond
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 53.8%
AEROSPACE/DEFENSE: 0.6%
6,500 General Dynamics Corp. $ 434,330
------------
434,330
------------
BANKS: 2.2%
10,700 Bank of America Corp. 793,940
16,700 Wells Fargo & Co. 806,610
------------
1,600,550
------------
COMMERCIAL SERVICES: 0.6%
26,700 @ Cendant Corp. 448,560
------------
448,560
------------
COMPUTERS: 1.8%
41,800 @ EMC Corp. 452,276
43,984 Hewlett-Packard Co. 857,688
------------
1,309,964
------------
COSMETICS/PERSONAL CARE: 0.9%
12,700 Kimberly-Clark Corp. 659,511
------------
659,511
------------
DIVERSIFIED FINANCIAL SERVICES: 4.3%
35,100 Citigroup, Inc. 1,439,802
5,300 Goldman Sachs Group, Inc. 431,950
13,200 JP Morgan Chase & Co. 433,752
16,800 Morgan Stanley 768,600
------------
3,074,104
------------
ELECTRIC: 0.9%
96,500 @ Reliant Resources, Inc. 646,550
------------
646,550
------------
ELECTRICAL COMPONENT & EQUIPMENT: 0.9%
12,700 Emerson Electric Co. 664,210
------------
664,210
------------
FOOD: 0.5%
19,000 Sara Lee Corp. 346,180
------------
346,180
------------
FOREST PRODUCTS & PAPER: 0.7%
12,600 Bowater, Inc. 493,794
------------
493,794
------------
HEALTHCARE-SERVICES: 1.3%
11,000 @ WellPoint Health Networks 938,740
------------
938,740
------------
INSURANCE: 7.7%
8,000 American Intl. Group 463,040
10,100 Chubb Corp. 646,703
16,900 Cigna Corp. 948,090
20,800 Hartford Financial Services Group, Inc. 970,112
19,500 Loews Corp. 937,950
16,000 St. Paul Cos. 585,280
60,450 Travelers Property Casualty Corp. 987,149
------------
5,538,324
------------
MEDIA: 3.2%
38,400 @ AOL Time Warner, Inc. 584,448
22,300 @ Comcast Corp. 671,453
13,300 @ Viacom, Inc. 605,416
21,200 Walt Disney Co. 416,580
------------
2,277,897
------------
MINING: 2.3%
47,900 Alcoa, Inc. 1,178,819
23,600 Freeport-McMoRan Copper & Gold, Inc. 518,020
------------
1,696,839
------------
MISCELLANEOUS MANUFACTURING: 1.7%
29,500 Honeywell Intl., Inc. 772,900
24,100 @@ Tyco International Ltd. 426,570
------------
1,199,470
------------
OIL & GAS: 6.9%
8,400 Amerada Hess Corp. 411,600
16,700 Anadarko Petroleum Corp. 822,976
12,668 Apache Corp. 835,075
7,900 ChevronTexaco Corp. 560,426
12,800 ConocoPhillips 690,816
11,300 Kerr-McGee Corp. 537,654
14,700 @@ Royal Dutch Petroleum Co. 669,585
20,400 @ Transocean, Inc. 476,748
------------
5,004,880
------------
OIL & GAS SERVICES: 0.7%
22,600 Halliburton Co. 539,462
------------
539,462
------------
PHARMACEUTICALS: 3.8%
7,500 @ Barr Laboratories, Inc. 395,625
24,600 @ King Pharmaceuticals, Inc. 352,026
37,275 Pfizer, Inc. 1,156,271
18,400 Wyeth 806,840
------------
2,710,762
------------
PIPELINES: 0.6%
52,700 EL Paso Corp. 458,490
------------
458,490
------------
RETAIL: 4.5%
24,200 CVS Corp. 631,620
20,100 @ Federated Department Stores 653,250
19,000 Home Depot, Inc. 617,310
48,000 McDonald's Corp. 899,040
14,600 Sears Roebuck and Co. 437,708
------------
3,238,928
------------
SAVINGS & LOANS: 1.1%
20,000 Washington Mutual, Inc. 815,600
------------
815,600
------------
SEMICONDUCTORS: 0.7%
69,300 @ Advanced Micro Devices, Inc. 504,504
------------
504,504
------------
See Accompanying Notes to Financial Statements
112
ING
Equity and Bond
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS: 5.9%
56,900 @ 3Com Corp. $ 278,810
65,000 @ AT&T Wireless Services, Inc. 505,050
175,200 @ Lucent Technologies, Inc. 387,192
25,100 SBC Communications, Inc. 639,046
170,000 @ Tellabs, Inc. 1,349,800
29,848 Verizon Communications, Inc. 1,129,747
------------
4,289,645
------------
Total Common Stock
(Cost $42,184,668) 38,891,294
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS: 0.0%
TELECOMMUNICATIONS: 0.0%
$ 2,000,000 #,X,@ SA Telecommunications, Inc., 10.000%,
due 08/15/06 $ --
------------
--
------------
Total Convertible Bonds
(Cost $2,000,000) --
------------
CORPORATE BONDS: 20.9%
AGRICULTURE: 0.1%
40,000 # Bunge Ltd. Finance Corp., 5.875%,
due 05/15/13 41,219
------------
41,219
------------
CHEMICALS: 0.8%
500,000 Dow Chemical Co., 5.750%, due 12/15/08 551,146
------------
551,146
------------
DIVERSIFIED FINANCIAL SERVICES: 3.1%
500,000 Boeing Capital Corp., 7.100%, due 09/27/05 552,290
550,000 General Motors Acceptance Corp., 6.125%,
due 09/15/06 577,143
900,000 # Goldman Sachs Group LP, 6.625%, due 12/01/04 968,760
120,000 #,@@ PF Export Receivables Master Trust, 3.748%,
due 06/01/13 122,315
------------
2,220,508
------------
ELECTRIC: 3.1%
450,000 @@ Empresa Nacional de Electricidad SA/Chile,
8.500%, due 04/01/09 473,439
450,000 Exelon Corp., 6.750%, due 05/01/11 528,105
90,000 Nisource Finance Corp., 6.150%, due 03/01/13 96,653
500,000 Progress Energy, Inc., 6.750%, due 03/01/06 556,030
500,000 @@ Tenaga Nasional BHD, 7.625%, due 04/01/11 590,479
------------
2,244,706
------------
FOOD: 0.9%
450,000 ConAgra Foods, Inc., 9.750%, due 03/01/21 648,143
------------
648,143
------------
INSURANCE: 0.1%
90,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 98,672
------------
98,672
------------
IRON/STEEL: 0.1%
50,000 Armco, Inc., 9.000%, due 09/15/07 45,250
------------
45,250
------------
MEDIA: 1.8%
40,000 AMFM, Inc., 8.000%, due 11/01/08 47,307
500,000 AOL Time Warner, Inc., 5.625%, due 05/01/05 529,746
400,000 Comcast Corp., 10.625%, due 07/15/12 523,400
100,000 Mediacom Broadband LLC, 11.000%, due 07/15/13 110,500
70,000 Time Warner, Inc., 6.950%, due 01/15/28 75,628
------------
1,286,581
------------
MULTI-NATIONAL: 0.1%
100,000 @@ Corp. Andina de Fomento CAF, 5.200%,
due 05/21/13 101,867
------------
101,867
------------
OIL & GAS: 1.7%
400,000 Conoco, Inc., 5.900%, due 04/15/04 415,094
90,000 # Enterprise Products Partners LP, 6.875%,
due 03/01/33 102,986
120,000 @@ Husky Oil Co., 8.900%, due 08/15/28 135,300
500,000 Pemex Project Funding Master Trust, 7.375%,
due 12/15/14 553,750
------------
1,207,130
------------
PIPELINES: 0.8%
130,000 CenterPoint Energy Resources Corp., 8.125%,
due 07/15/05 140,852
400,000 Kinder Morgan, Inc., 6.500%, due 09/01/12 461,053
------------
601,905
------------
SOVEREIGN: 5.0%
1,000,000 @@ Canadian Government Bond, 4.500%,
due 09/01/07 754,170
615,705 @@ Federal Republic of Brazil, 8.000%,
due 04/15/14 548,047
1,000,000 @@ German Government Bond, 4.500%,
due 08/17/07 1,255,706
500,000 @@ Mexican Government Bond, 6.375%, due 01/16/13 539,250
500,000 @@ Turkish Government Bond 11.000%, due 01/14/13 513,750
------------
3,610,923
------------
See Accompanying Notes to Financial Statements
113
ING
Equity and Bond
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS: 3.3%
$ 500,000 AT&T Wireless Services, Inc., 8.125%,
due 05/01/12 $ 608,293
500,000 Citizens Communications Co., 7.450%,
due 01/15/04 516,561
500,000 @@ France Telecom, 10.000%, due 03/01/31 689,305
500,000 Sprint Capital Corp., 8.375%, due 03/15/12 584,838
500,000 @ X WinStar Communications, Inc., 12.750%,
due 04/15/10 100
------------
2,399,097
------------
Total Corporate Bonds
(Cost $13,886,081) 15,057,147
------------
U.S. TREASURY OBLIGATIONS: 3.5%
U.S. TREASURY BOND: 1.9%
1,225,000 S 5.375%, due 02/15/31 1,423,680
------------
1,423,680
------------
U.S. TREASURY NOTES: 1.6%
505,000 S 1.625%, due 04/30/05 508,294
150,000 2.625%, due 05/15/08 152,496
500,000 S 3.625%, due 05/15/13 511,602
------------
1,172,392
------------
Total U.S. Treasury Obligations
(Cost $2,532,735) 2,596,072
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 15.1%
FEDERAL HOME LOAN BANK: 0.7%
500,000 4.500%, due 11/15/12 535,419
------------
535,419
------------
FEDERAL HOME LOAN MORTGAGE ASSOCIATION: 2.7%
459,925 5.500%, due 01/01/14 478,810
225,091 6.000%, due 04/01/14 234,212
635,558 6.500%, due 12/01/31 661,377
531,920 7.000%, due 06/01/29 558,417
------------
1,932,816
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION: 8.9%
500,000 5.000%, due 12/31/99 511,094
1,162,998 6.000%, due 01/01/32 1,208,907
584,088 6.000%, due 02/01/32 607,167
1,700,000 6.000%, due 12/31/99 1,761,095
682,775 6.500%, due 06/01/14 717,870
103,257 6.500%, due 08/01/15 108,502
373,661 6.500%, due 12/01/31 389,549
830,789 7.000%, due 03/01/15 885,339
131,488 7.500%, due 09/01/30 139,827
79,227 8.000%, due 08/01/30 85,726
------------
6,415,076
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 2.8%
1,498,412 6.500%, due 06/15/29 1,573,324
229,147 7.500%, due 11/15/29 243,852
177,250 8.000%, due 07/15/30 191,671
------------
2,008,847
------------
Total U.S. Government Agency Obligations
(Cost $10,330,789) 10,892,158
------------
OTHER ASSET-BACKED SECURITIES: 0.9%
DIVERSIFIED FINANCIAL SERVICES: 0.1%
60,000 #, @@ PF Export Receivables Master Trust 60,600
------------
60,600
------------
HOME EQUITY ABS: 0.8%
534,951 Emergent Home Equity Loan Trust 577,068
------------
577,068
------------
Total Other Asset Backed Securities
(Cost $576,043) 637,668
------------
Shares Value
- --------------------------------------------------------------------------------
MUTUAL FUNDS: 1.5%
MUTUAL FUND: 1.5%
128,416 B ING High Yield Bond Fund 1,087,687
------------
Total Mutual Funds
(Cost $1,080,920) 1,087,687
------------
PREFERRED STOCK: 1.6%
DIVERSIFIED FINANCIAL SERVICES: 1.6%
33,800 Alliance Capital
Management Holding LP 1,183,000
------------
1,183,000
------------
TELECOMMUNICATIONS: 0.0%
10 @ XO Communications, Inc. --
------------
--
------------
Total Preferred Stock
(Cost $1,115,320) 1,183,000
------------
Number of
Warrants Value
- --------------------------------------------------------------------------------
WARRANTS: 0.0%
BUILDING MATERIALS: 0.0%
400 # @ X Dayton Superior Corp. 4
Food/Beverage: 0.0%
370 @ X North Atlantic Trading Co. --
Telecommunications: 0.0%
500 @ X Iridium World Communications, Inc. 5
------------
Total Warrants
(Cost $57,953) 9
------------
Total Long-Term Investments
(Cost $73,764,509) $ 70,345,035
------------
See Accompanying Notes to Financial Statements
114
ING
Equity and Bond
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued)
- --------------------------------------------------------------------------------
Pricipal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 5.3%
Repurchase Agreements: 5.3%
$ 3,847,000 State Street Repurchase Agreement dated 05/30/03,
1.130%, due 06/02/03, $3,847,362 to be received
upon repurchase (Collateralized by $ 3,225,000
U.S. Treasury Bond, 6.000%, Market Value
$3,930,672, due 02/15/26) $ 3,847,000
------------
Total Short-Term Investments
(Cost $3,847,000) 3,847,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $77,611,509)* 102.6% $ 74,192,035
OTHER ASSETS AND LIABILITIES-NET (2.6)% (1,909,679)
----- ------------
NET ASSETS 100.0% $ 72,282,356
===== ============
@ Non-income producing security
@@ Foreign Issuer
B Represents investments in an affiliated fund.
# Securities with purchase pursuant to Rule 144A, under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. These securities have been determined to be liquid
under the guidelines established by the Fund's Board of Trustees.
S Segregated securities for when-issued or delayed delivery securities held
at May 31, 2003.
X Market Value determined by ING Valuation Committee appointed by the Fund's
Board of Directors.
* Cost for federal income tax purposes is $77,635,027. Net unrealized
depreciation consists of:
Gross Unrealized Appreciation $ 4,818,824
Gross Unrealized Depreciation (8,261,817)
------------
Net Unrealized Depreciation $ (3,442,993)
============
See Accompanying Notes to Financial Statements
115
ING
Real Estate
Fund
PORTFOLIO OF INVESTMENTS as of May 31, 2003
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK: 5.1%
HOME BUILDERS: 1.0%
9,600 Lennar Corp. $ 643,680
22,000 @ Toll Brothers, Inc. 638,660
------------
1,282,340
------------
LODGING: 4.1%
232,800 Hilton Hotels Corp. 3,226,608
66,100 Starwood Hotels & Resorts Worldwide, Inc. 1,915,578
------------
5,142,186
------------
Total Common Stock
(Cost $5,962,013) 6,424,526
------------
REAL ESTATE INVESTMENT TRUSTS: 91.7%
APARTMENTS: 16.7%
23,500 Archstone-Smith Trust 558,360
168,300 Camden Property Trust 5,846,742
162,700 Equity Residential 4,308,296
107,500 Gables Residential Trust 3,170,175
104,300 Home Properties of NY, Inc. 3,744,370
210,100 United Dominion Realty Trust, Inc. 3,592,710
------------
21,220,653
------------
DIVERSIFIED FINANCIAL SERVICES: 13.7%
76,200 Colonial Properties Trust 2,667,000
155,100 iStar Financial, Inc. 5,118,300
151,161 Keystone Property Trust 3,204,072
193,900 Liberty Property Trust 6,451,053
------------
17,440,425
------------
HEALTH CARE: 4.5%
88,500 Health Care REIT, Inc. 2,633,760
213,600 Ventas, Inc. 3,022,440
------------
5,656,200
------------
HOTELS: 0.8%
107,400 @ Host Marriott Corp. 966,600
------------
966,600
------------
OFFICE PROPERTY: 27.4%
221,500 Arden Realty, Inc. 5,725,775
78,500 Boston Properties, Inc. 3,290,720
108,100 Brandywine Realty Trust 2,564,132
135,700 CarrAmerica Realty Corp. 3,769,746
119,700 Corporate Office Properties Trust 1,900,836
174,679 Equity Office Properties Trust 4,700,612
169,900 Mack-Cali Realty Corp. 5,839,463
174,200 Prentiss Properties Trust 5,027,412
182,200 Trizec Properties, Inc. 1,991,446
------------
34,810,142
------------
REGIONAL MALLS: 13.4%
83,700 CBL & Associates Properties, Inc. 3,629,232
43,000 General Growth Properties, Inc. 2,521,950
168,500 Macerich Co. 5,813,250
133,828 Simon Property Group, Inc. 5,034,609
------------
16,999,041
------------
SHOPPING CENTERS: 8.5%
159,000 Developers Diversified Realty Corp. 4,488,570
160,500 Heritage Property Investment Trust 4,429,800
55,500 Regency Centers Corp. 1,885,890
------------
10,804,260
------------
WAREHOUSE: 6.7%
150,400 Duke Realty Corp. 4,268,352
159,600 Prologis 4,291,644
------------
8,559,996
------------
Total Real Estate Investment Trusts
(Cost $98,600,164) 116,457,317
------------
Total Long-Term Investments
(Cost $104,562,177) 122,881,843
------------
rincipal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 2.9%
REPURCHASE AGREEMENT: 2.9%
$ 3,723,531 State Street Repurchase Agreement, 1.250%, due
06/02/03, $3,723,919 to be received upon
repurchase (Collateralized by $3,610,000 FNMA,
4.625%, Market Value $3,801,214, due 08/13/04) $ 3,723,531
------------
Total Short-Term Investments
(Cost $3,723,531) 3,723,531
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $108,285,708)* 99.7% $126,605,374
OTHER ASSETS AND LIABILITIES-NET 0.3 327,762
----- ------------
NET ASSETS 100.0% $126,933,136
===== ============
@ Non-income producing security
* Approximate cost for federal income tax purposes is $108,191,252. Net
unrealized appreciation consists of:
Gross Unrealized Appreciation $ 18,782,423
Gross Unrealized Depreciation (368,299)
------------
Net Unrealized Appreciation $ 18,414,124
============
See Accompanying Notes to Financial Statements
116
SHAREHOLDER MEETING INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
A special meeting of shareholders of the ING Retail Funds (formerly Pilgrim
Retail Funds) and Variable Products held May 29, 2003, at the offices of ING
Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258.
A brief description of each matter voted upon as well as the results are
outlined below:
1. To approve a Sub-Advisory Agreement for each of the ING LargeCap Growth
Fund and ING VP LargeCap Growth Portfolio, between ING Investments, LLC and
Wellington Management Company, LLP with no change in the Adviser or the
overall management fee paid by each Fund.
2. To transact such other business, not currently contemplated, that may
properly come before the Special Meeting or any adjournment(s) thereof in
the discretion of the proxies or their substitutes.
SHARES VOTED
SHARES AGAINST OR SHARES BROKER TOTAL
PROPOSAL VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED
-------- --------- -------- --------- -------- ------------
ING LargeCap Growth Fund 1 7,092,546 90,270 98,647 -- 7,281,463
ING LargeCap Growth Fund 2 6,494,145 644,779 142,539 -- 7,281,463
117
TAX INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
Dividends paid during the year ended May 31, 2003 were as follows:
FUND NAME TYPE PER SHARE AMOUNT
- --------- ---- ----------------
Large Company Value
Class A NII $ 0.0333
Class Q NII $ 0.0418
MagnaCap
Class A NII $ 0.0279
Class Q NII $ 0.0450
MidCap Value
Class A NII $ 0.0362
Class B NII $ 0.0081
Class C NII $ 0.0074
Class I NII $ 0.0742
Class Q NII $ 0.0629
All Classes STCG $ 0.1081
SmallCap Value
Class A NII $ 0.0386
Class B NII $ 0.0003
Class C NII $ 0.0082
Class I NII $ 0.0794
All Classes STCG $ 0.0853
Convertible
Class A NII $ 0.3123
Class B NII $ 0.2222
Class C NII $ 0.2327
Class Q NII $ 0.3412
Equity and Bond
Class A NII $ 0.2460
Class B NII $ 0.1767
Class C NII $ 0.1948
Class Q NII $ 0.2515
Class T NII $ 0.2078
Real Estate
Class A NII $ 0.1992
Class B NII $ 0.1650
Class C NII $ 0.0814
Class I NII $ 0.2028
- ----------
NII -- Net investment income
STCG -- Short-term capital gain
LTCG -- Long-term capital gain
Of the ordinary distributions made during the fiscal periods ended May 31, 2003,
the following percentages qualify for the dividends received deductions
available to corporate shareholders; 100.00%, 100.00%, 100.00%, 18.27%, 14.04%,
58.48% and 57.24% for the ING Large Company Value Fund, ING MagnaCap Value Fund,
ING MidCap Value Fund, ING SmallCap Value Fund, ING Convertible Fund, and ING
Equity and Bond Fund, respectively.
For the fiscal periods ended May 31, 2003, the following are percentages of
ordinary dividends paid by the Funds that are designated as qualifying dividend
income subject to reduced income tax rates for individuals; 13.30%, and 12.75%
for the ING Convertible Fund, and ING Equity and Bond Fund, respectively.
The above figure may differ from those cited elsewhere in this report due to
differences in the calculation of income and gains under Generally Accepted
Accounting Principles (book purposes) and Internal Revenue Service (tax
purposes).
Shareholder are strongly advised to consult their own tax advisers with respect
to the tax consequences of their Investments in the Funds. In January 2003,
shareholders, excluding corporate shareholders, received an IRS 1099 DIV
regarding the federal tax status of the dividends and distributions received by
them in calendar 2002.
118
TRUSTEE AND OFFICER INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
The business and affairs of the Trusts are managed under the direction of the
Trusts' Board of Trustees. A Trustee who is not an interested person of the
Trusts, as defined in the 1940 Act, is an independent trustee ("Independent
Trustee"). The Trustees and Officers of the Trust are listed below. The
Statement of Additional Information includes additional information about
trustees of the Registrant and is available, without charge, upon request at
1-800-992-0180.
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
INDEPENDENT TRUSTEES
Paul S. Doherty(2) Trustee October Mr. Doherty is 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1999 - President and Partner, (February 2002 -
Scottsdale, Arizona 85258 Present Doherty, Wallace, Present).
Born: 1934 Pillsbury and Murphy,
P.C., Attorneys (1996 -
Present); Director,
Tambrands, Inc. (1993 -
1998); and Trustee of
each of the funds
managed by Northstar
Investment
Management
Corporation (1993 -
1999).
J. Michael Earley(3) Trustee February President and Chief 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - Executive Officer, (1997 - Present).
Scottsdale, Arizona 85258 Present Bankers Trust Company,
Born: 1945 N.A. (1992 - Present).
R. Barbara Gitenstein(2) Trustee February President, College of 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - New Jersey (1999 - (1997 - Present).
Scottsdale, Arizona 85258 Present Present). Formerly,
Born: 1948 Executive Vice
President and Provost,
Drake University (1992
- 1998).
Walter H. May(2) Trustee October Retired. Formerly, 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1999 - Managing Director and (February 2002 -
Scottsdale, Arizona 85258 Present Director of Marketing, Present) and Best Prep
Born: 1936 Piper Jaffray, Inc.; Charity (1991 -
Trustee of each of the Present).
funds managed by
Northstar Investment
Management
Corporation (1996 -
1999).
Jock Patton(2) Trustee August Private Investor (June 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1995 - 1997 - Present). (February 2002 -
Scottsdale, Arizona 85258 Present Formerly, Director and Present); Director,
Born: 1945 Chief Executive Officer, Hypercom, Inc. (January
Rainbow Multimedia 1999 - Present); JDA
Group, Inc. (January Software Group, Inc.
1999 - December 2001); (January 1999 -
Director of Stuart Present); Buick of
Entertainment, Inc.; Scottsdale, Inc.;
Director of Artisoft, Inc. National Airlines, Inc.;
(1994 - 1998). BG Associates, Inc.; BK
Entertainment, Inc.;
and Arizona Rotorcraft,
Inc.
119
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER
POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY
AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ---- --------- --------------- ---------- -------
David W.C. Putnam(3) Trustee October President and Director, 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 1999 - F.L. Putnam Securities (February 2002 -
Scottsdale, Arizona 85258 Present Company, Inc. and its Present), Anchor
Born: 1939 affiliates; President, International Bond
Secretary and Trustee, (December 2000 -
The Principled Equity Present); Progressive
Marke Fund. Formerly, Capital Accumulation
Trustee, Trust Realty Trust (August 1998 -
Trust (December Corp.; Present); Principled
Anchor Investment Equity Market Fund
Trust; Bow 2000 - (November 1996 -
Present); Ridge Mining Present), Mercy
Company and each of Endowment
the F.L. Putnam funds Foundation (1995 -
managed by Northstar Present); Director, F.L.
Investment Foundation Putnam Investment
Management Management Company
Corporation (1994 - (December 2001 -
1999). Present); Asian
American Bank and
Trust Company (June
1992 - Present); and
Notre Dame Health
Care Center (1991 -
Present) F.L. Putnam
Securities Company,
Inc. (June 1978 -
Present); and an
Honorary Trustee,
Mercy Hospital (1973 -
Present).
Blaine E. Rieke(3) Trustee February General Partner, 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - Huntington Partners (February 2002 -
Scottsdale, Arizona 85258 Present (January 1997 - Present) and Morgan
Born: 1933 Present). Chairman of Chase Trust Co.
the Board and Trustee (January 1998 -
of each of the funds Present).
managed by ING
Investment
Management Co. LLC
(November 1998 -
February 2001).
Roger B. Vincent(3) Trustee February President, Springwell 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - (1994 - Present); and
Scottsdale, Arizona 85258 Present Present). Formerly, Director, AmeriGas
Born: 1945 Director, Tatham Propane, Inc. (1998 -
Offshore, Inc. (1996 - Present).
2000).
Richard A. Wedemeyer(2) Trustee February Retired. Mr. 106 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - Wedemeyer was (February 2002 -
Scottsdale, Arizona 85258 Present formerly Vice President Present) and
Born: 1936 - Finance and Touchstone Consulting
Administration, Group (1997 - Present).
Channel Corporation
(June 1996 - April
2002). Formerly, Vice
President, Operations
and Administration,
Jim Henson
Productions. (1979 -
1997); Trustee, First
Choice Funds (1997 -
2001); and of each of
the funds managed by
ING Investment
Management Co. LLC
(1998 - 2001).
120
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"
Thomas J. McInerney(4) Trustee February Chief Executive Officer, 160 Director, Hemisphere,
7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial Inc. (May 2003 -
Scottsdale, Arizona 85258 Present Services (September Present); Trustee, GCG
Born: 1956 2001 - Present); Trust (February 2002 -
General Manager and Present); Equitable Life
Chief Executive Officer, Insurance Co., Golden
ING U.S. Worksite American Life
Financial Services Insurance Co., Life
(December 2000 - Insurance Company of
Present); Member, ING Georgia, Midwestern
Americas Executive United Life Insurance
Committee (2001 - Co., ReliaStar Life
Present); President, Insurance Co., Security
Chief Executive Officer Life of Denver, Security
and Director of Connecticut Life
Northern Life Insurance Insurance Co.,
Company (March 2001 - Southland Life
October 2002), ING Insurance Co., USG
Aeltus Holding Annuity and Life
Company, Inc. (2000 - Company, and United
Present), ING Retail Life and Annuity
Holding Company Insurance Co. Inc
(1998 - Present), ING (March 2001 - Present);
Life Insurance and Director, Ameribest Life
Annuity Company Insurance Co., (March
(September 1997 - 2001 to January 2003);
November 2002) and Director, First
ING Retirement Columbine Life
Holdings, Inc. (1997 - Insurance Co. (March
Present). Formerly, 2001 to December
General Manager and 2002); Member of the
Chief Executive Officer, Board, National
ING Worksite Division Commission on
(December 2000 - Retirement Policy,
October 2001), Governor's Council on
President, ING-SCI, Inc. Economic
(August 1997 - Competitiveness and
December 2000); Technology of
President, Aetna Connecticut,
Financial Services Connecticut Business
(August 1997 - and Industry
December 2000). Association, Bushnell;
Connecticut Forum;
Metro Hartford
Chamber of Commerce;
and is Chairman,
Concerned Citizens for
Effective Government.
121
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(5) Trustee October Chairman, Hillcrest 106 Trustee, GCG; Director,
7337 E. Doubletree Ranch Rd. 1999 - Capital Partners (May Hormel Foods
Scottsdale, Arizona 85258 Present 2002-Present); Corporation (March
Born: 1939 President, Turner 2000 - Present); Shopko
Investment Company Stores, Inc. (August
(January 2002 - 1999 - Present); and
Present). Mr. Turner M.A. Mortenson
was formerly Vice Company (March 2002 -
Chairman of ING Present).
Americas (2000 - 2002);
Chairman and Chief
Executive Officer of
ReliaStar Financial
Corp. and ReliaStar Life
Insurance Company (1993
- 2000); Chairman of
ReliaStar United
Services Life Insurance
Company (1995 - 1998);
Chairman of ReliaStar
Life Insurance Company
of New York (1995 -
2001); Chairman of
Northern Life Insurance
Company (1992 - 2001);
Chairman and Trustee of
the Northstar affiliated
investment companies
(1993 - 2001) and
Director, Northstar
Investment Management
Corporation and its
affiliates (1993 -
1999).
- ----------
(1) Trustees serve until their successors are duly elected and qualified.
(2) Valuation Committee member.
(3) Audit Committee member.
(4) Mr. 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.
(5) 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.
122
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
OFFICERS:
James M. Hennessy President and Chief February 2001 - President and Chief Executive
7337 E. Doubletree Ranch Rd., Executive Officer Present Officer of ING Capital Corporation,
Scottsdale, Arizona 85258 LLC, ING Funds Services, LLC, ING
Born: 1949 Chief Operating June 2000 - Present Advisors, Inc., ING Investments,
Officer LLC, Lexington Funds Distributor,
Inc., Express America T.C. Inc. and
Senior Executive June 2000 - February EAMC Liquidation Corp. (since
Vice President 2001 December 2001); Executive Vice
President and Chief Operating
Secretary April 1995 - February Officer of ING Funds Distributor,
2001 LLC (since June 2000). Formerly,
Executive Vice President and Chief
Operating Officer of ING
Quantitative Management, Inc.
(October 2001 to September 2002);
Senior Executive Vice President
(June 2000 to December 2000) and
Secretary (April 1995 to December
2000) of ING Capital Corporation,
LLC, ING Funds Services, LLC, ING
Investments, LLC, ING Advisors,
Inc., Express America T.C. Inc.,
and EAMC Liquidation Corp.; and
Executive Vice President, ING
Capital Corporation, LLC and its
affiliates (May 1998 to June 2000)
and Senior Vice President, ING
Capital Corporation, LLC and its
affiliates (April 1995 to April
1998).
Stanley D. Vyner Executive Vice March 2003- Present Executive Vice President, ING
7337 E. Doubletree Ranch Rd., President (For the ING Funds) Advisors, Inc. and ING Investments,
Scottsdale, Arizona 85258 LLC (July 2000 - Present) and Chief
Born: 1950 July 1996 - March Investment Officer of the
2002 (For the International Portfolios, ING
international Investments, LLC (July 1996 -
portfolios of the Present.) Formerly, President and
Pilgrim Funds) Chief Executive Officer, ING
Investments, LLC (August 1996 -
August 2002).
Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief
7337 E. Doubletree Ranch Rd., President and Present Financial Officer and Treasurer of
Scottsdale, Arizona 85258 Assistant Secretary ING Funds Services, LLC, ING Funds
Born: 1958 Distributor, LLC, ING Advisors, Inc.,
Chief Financial Officer June 1998 - Present ING Investments, LLC (December
2001 to present), Lexington Funds
Senior Vice President June 1998 - February Distributor, Inc., Express America
2002 T.C. Inc. and EAMC Liquidation
Corp. (since December 2001).
Formerly, Executive Vice President,
Chief Financial Officer and
Treasurer of ING Quantitative
Management, Inc. (December 2001 to
October 2002); Senior Vice
President, ING Funds Services, LLC,
ING Investments, LLC, and ING Funds
Distributor, LLC (June 1998 to
December 2001) and Chief Financial
Officer of Endeavor Group (April
1997 to June 1998).
123
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
OFFICERS:
Robert S. Naka Senior Vice President November 1999 - Senior Vice President and Assistant
7337 E. Doubletree Ranch Rd., Present Secretary of ING Funds Services,
Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC,
Born: 1963 Assistant Secretary July 1996 - Present ING Advisors, Inc., ING
Investments, LLC (October 2001 to
present) and Lexington Funds
Distributor, Inc. (since December
2001). Formerly, Senior Vice
President and Assistant Secretary
for ING Quantitative
Management, Inc. (October 2001
to October 2002); Vice President,
ING Investments, LLC (April 1997
to October 1999) , ING Funds
Services, LLC (February 1997 to
August 1999) and Assistant Vice
President, ING Funds Services, LLC
(August 1995 to February 1997).
Robyn L. Ichilov Vice President November 1997 - Vice President of ING Funds
7337 E. Doubletree Ranch Rd., Present Services, LLC (since October 2001)
Scottsdale, Arizona 85258 and ING Investments, LLC (since
Born: 1967 August 1997); Accounting
Manager, ING Investments, LLC
(since November 1995).
Kimberly A. Anderson Vice President and February 2001 - Vice President and Assistant
7337 E. Doubletree Ranch Rd., Secretary Present Secretary of ING Funds Services,
Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC,
Born: 1964 Assistant November 1999 - ING Advisors, Inc., ING
Vice President and February 2001 Investments, LLC (since October
Assistant Secretary 2001) and Lexington Funds
Distributor, Inc. (since December
2001). Formerly, Vice President for
ING Quantitative Management,
Inc. (October 2001 to October
2002); Assistant Vice President of
ING Funds Services, LLC (November
1999 to January 2001) and has
held various other positions with
ING Funds Services, LLC for more
than the last five years
Lauren D. Bensinger Vice President February 2003 - Vice President and Chief
7337 E. Doubletree Ranch Rd., Present Compliance Officer, ING Funds
Scottsdale, Arizona 85258 Distributor, LLC (July 1995 to
Born: 1954 Present); Vice President (February
1996 to Present) and Chief
Compliance Officer (October 2001 to
Present), ING Investments, LLC;
Vice President and Chief Compliance
Officer, ING Advisors, Inc. (July
2000 to Present); Formerly, Vice
President and Chief Compliance
Officer ING Quantitative
Management, Inc. (July 2000 to
September 2002) and Vice President
ING Fund Services, LLC (July 1995
to Present).
Todd Modic Assistant August 2001 - Present Vice-President of Financial
7337 E. Doubletree Ranch Rd., Vice President Reporting-Fund Accounting of ING
Scottsdale, Arizona 85258 Funds Services, LLC (September
Born: 1967 2002 to present). Director of
Financial Reporting of ING
Investments, LLC (March 2001 to
September 2002). Formerly, Director
of Financial Reporting, Axient
Communications, Inc. (May 2000 to
January 2001) and Director of
Finance, Rural/Metro Corporation
(March 1995 to May 2000).
124
TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
OFFICERS:
Maria M. Anderson Assistant August 2001 - Present Assistant Vice President of ING
7337 E. Doubletree Ranch Rd., Vice President Funds Services, LLC (since October
Scottsdale, Arizona 85258 2001). Formerly, Manager of Fund
Born: 1958 Accounting and Fund Compliance,
ING Investments, LLC (September
1999 to November 2001); Section
Manager of Fund Accounting, Stein
Roe Mutual Funds (July 1998 to
August 1999); and Financial
Reporting Analyst, Stein Roe Mutual
Funds (August 1997 to July 1998).
Susan P. Kinens Assistant February 2003 - Assistant Vice President and
7337 E. Doubletree Ranch Rd. Vice President and Present (For the ING Assistant Secretary, ING Funds
Scottsdale, Arizona 85258 Assistant Secretary Funds) Services, LLC (December 2002 -
Born: 1976 Present); and has held various
other positions with ING Funds
Services, LLC for the last five
years.
- ----------
(1) The officers hold office until the next meeting of the Trustees and until
their successors shall have been elected and qualified.
125
ING Funds Distributor, LLC offers the funds listed below. Investors may obtain a
copy of a prospectus of any ING Fund by calling ING Funds Distributor, LLC at
(800) 992-0180. Please read the prospectus carefully before investing or sending
money.
INTERNATIONAL EQUITY DOMESTIC EQUITY VALUE FUNDS
ING Emerging Countries Fund ING Financial Services Fund
ING Foreign Fund ING Large Company Value Fund
ING International Fund ING MagnaCap Fund
ING International Growth Fund ING Tax Efficient Equity Fund
ING International SmallCap Growth Fund ING Value Opportunity Fund
ING International Value Fund ING SmallCap Value Fund
ING Precious Metals Fund ING MidCap Value Fund
ING Russia Fund
DOMESTIC EQUITY AND INCOME FUNDS
INTERNATIONAL GLOBAL EQUITY ING Equity and Bond Fund
ING Global Technology Fund ING Convertible Fund
ING Global Real Estate Fund ING Balanced Fund
ING Worldwide Growth Fund ING Growth and Income Fund
DOMESTIC EQUITY FUNDS FIXED INCOME FUNDS
ING Growth Fund ING Bond Fund
ING Growth + Value Fund ING Classic Money Market Fund*
ING Growth Opportunities Fund ING Government Fund
ING LargeCap Growth Fund ING GNMA Income Fund
ING MidCap Opportunities Fund ING High Yield Opportunity Fund
ING Small Company Fund ING High Yield Bond Fund
ING SmallCap Opportunities Fund ING Intermediate Bond Fund
ING Technology Fund ING Lexington Money Market Trust*
ING National Tax Exempt Bond Fund
DOMESTIC EQUITY INDEX FUNDS ING Money Market Fund*
ING Index Plus LargeCap Fund ING Aeltus Money Market Fund*
ING Index Plus MidCap Fund ING Strategic Bond Fund
ING Index Plus SmallCap Fund
ING Disciplined LargeCap STRATEGIC ALLOCATION FUNDS
ING Strategic Allocation Growth Fund
ING Strategic Allocation Balanced Fund
ING Strategic Allocation Income Fund
LOAN PARTICIPATION FUNDS
ING Prime Rate Trust
ING Senior Income Fund
* An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
INVESTMENT MANAGER
ING Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
ADMINISTRATOR
ING Funds Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
DISTRIBUTOR
ING Funds Distributor, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
1-800-992-0180
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141-6368
CUSTODIAN
Bank of New York
100 Colonial Center Parkway, Suite 300
Lake Mary, FL 32746
LEGAL COUNSEL
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
KPMG LLP
99 High Street
Boston, MA 02110-2371
Prospectus containing more complete information regarding the Funds, including
charges and expenses, may be obtained by calling ING Funds Distributor, LLC, at
1-800-992-0180. Please read the prospectus carefully before you invest or send
money.
[LION LOGO] DEI&QAR0503-0729
ING FUNDS
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) Based on our evaluation conducted within 90 days of the filing date,
hereof, the design and operation of the registrant's disclosure controls and
procedures are effective to ensure that material information relating to the
registrant is made known to the certifying officers by others within the
appropriate entities, particularly during the period in which Forms N-CSR are
being prepared, and the registrant's disclosure controls and procedures allow
timely preparation and review of the information for the registrant's Form N-CSR
and the officer certifications of such Form N-CSR.
(b) There were no significant changes in the registrant's internal controls 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 Mayflower Trust
By /s/ James M. Hennessy
--------------------------------------------
James M. Hennessy
President and Chief Executive Officer
Date August 4, 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 August 4, 2003
-------------------------------------------
By /s/ Michael J. Roland
--------------------------------------------
Michael J. Roland
Executive Vice President and
Chief Financial Officer
Date August 4, 2003
------------------------------------------