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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: 811-05710
--------------------------------------------
ING VP Natural Resources Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
CT Corporation System, 101 Federal Street, Boston, MA 02110
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-992-0180
----------------------------
Date of fiscal year end: December 31
--------------------------
Date of reporting period: January 1, 2004 to June 30, 2004
----------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
The following is a copy of the report transmitted to stockholders pursuant to
Rule 30e-1 under the Act (17 CFR 270.30e-1):
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ING VP NATURAL RESOURCES TRUST
SEMI-ANNUAL REPORT
JUNE 30, 2004
[GRAPHIC]
[ING FUNDS LOGO]
<Page>
TABLE OF CONTENTS
<Table>
President's Letter 1
Market Perspective 2
Portfolio Managers' Report 4
Statement of Assets and Liabilities 6
Statement of Operations 7
Statements of Changes in Net Assets 8
Financial Highlights 9
Notes to Financial Statements 10
Portfolio of Investments 14
Trustee and Officer Information 15
</Table>
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(THIS PAGE INTENTIONALLY LEFT BLANK)
<Page>
PRESIDENT'S LETTER
[PHOTO OF JAMES M. HENNESSY]
JAMES M. HENNESSY
Dear Shareholder,
The past year has been unpredictable for investors. Strong growth in the overall
economy coupled with questions concerning mutual fund trading practices have
challenged investors.
In general, economic activity has continued to increase, with the growth being
widespread. Personal consumption of goods and services is leading the recovery
supported by corporate purchases of equipment and software and by Government
spending on defense. Worries of possible interest rate increases, worsening
global turmoil and increasing oil prices have reduced the gains the market
realized in the first few months of 2004.
However, investors remain steadfast as nearly each of the last six months has
seen an overall increase in assets invested in mutual funds despite continuing
investigations into late trading and market timing issues at some of the largest
and most respected financial services companies in the country.
You should have received a letter from Thomas J. McInerney, the Chief Executive
Officer of ING U.S. Financial Services, which provided information about the
internal review ING management conducted regarding trading practices in ING
mutual fund products. If you did not receive a copy of the letter, please
contact Investor Services at 1-800-992-0180 and we will provide you with a copy.
I wish to thank you on behalf of everyone here at ING Funds for your continued
confidence. We look forward to helping you meet your investment goals in the
future.
Sincerely,
/s/ James M. Hennessy
James M. Hennessy
President
ING Funds
July 19, 2004
1
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MARKET PERSPECTIVE: SIX MONTHS ENDED JUNE 30, 2004
OVERVIEW
Perhaps it was inevitable that the markets should be a little neurotic after the
heady gains of 2003. But whatever the reasons, investors in 2004 alternately
cheered and fretted over the developing economic outlook, sending markets up,
down and up again before ending the first six months of 2004 with modest and
distinctly fragile gains.
At first the worry was the so-called jobless recovery, then half way through the
six-month period a very strong U.S. employment report was released. The report
generated euphoria until people realized that as the job market tightens,
inflation picks up and rising interest rates were likely not far away. Investors
took comfort from Federal Open Market Committee ("FOMC") Chairman Greenspan's
soothing advice that the rebound in interest rates would be "measured". But as
the six months ended June 30, 2004 drew to a close, attention switched nervously
to the impending U.S. earnings season and the strong possibility that the
splendid results of the last few quarters would likely not be maintained.
GLOBAL EQUITIES managed a 3.52% return, net of withholding tax on dividends, for
the six months ended June 30, 2004 according to the Morgan Stanley Capital
International ("MSCI") World Index(1) in dollars, after peaking on average in
mid February and spending much of May in negative territory.
Among CURRENCIES, the euro reached a post launch record also in mid February
before retreating and ending about 3.0% lower for the six months ended June 30,
2004. The British pound ended the six months 2.0% higher against the dollar, as
the Bank of England became the first of the major central banks to raise
interest rates. The yen lost approximately 1.5%, ironically after the Bank of
Japan stopped buying dollars to keep the yen weak, spending a staggering $144
billion in the first quarter of 2004 to do so.
FIXED INCOME MARKET
U.S. FIXED INCOME classes started 2004 as they had ended 2003. Disappointing
jobs reports, together with stubbornly high new unemployment claims, suggested
continuing weakness, and gave bond investors a solid first quarter of gains.
That all changed on the first Friday in April 2004, with the very bullish U.S.
employment report. Investment grade bonds unsurprisingly bore the brunt of fears
that a new cycle of rising interest rates from multi-decade low levels was about
to start. For the six months ended June 30, 2004, the Lehman Brothers Aggregate
Bond Index(2) of investment grade bonds returned a tiny 0.16%. The Lehman
Brothers Corporate Index(3) component and the Lehman Brothers Treasury Bond
Index(4) fell by 0.26% and 0.20%, respectively. Ten-year Treasury yields rose by
36 basis points to 4.62%, passing through rates not seen in nearly two years.
Yields on 90-day Treasury Bills rose 39 basis points to 1.3%, emphatically
breaching the 1.0% level, a rate above which they had not closed since June 9,
2003. High yield bonds did better, the Lehman Brothers U.S. Corporate High Yield
Bond Index(5) hung on to return 1.35% for the six-month period.
DOMESTIC EQUITY MARKET
The U.S. EQUITIES market rose 3.44% in the six months ended June 30, 2004, based
on the Standard & Poor's ("S&P") 500 Index(6) including dividends. This implies
a price-to-earnings (P/E) level of just over 17 times 2004 earnings. Three
strong employment reports in the second quarter of 2004 were welcomed, but all
was not in harmony. For while successive, upbeat economic statistics sang of
good economic times, there was also a steady drumbeat of evidence that inflation
was picking up. The Federal Funds rate at just 1.0% meant that real interest
rates were becoming ever more negative at the same time, while the economy was
growing at over 4.0%. With labor markets tightening and oil prices breaking
above $40 per barrel, this appears to be an increasingly unstable situation.
Meanwhile, the FOMC took almost the entire second quarter of 2004 before
increasing the Federal Funds rate to 1.25% on June 30, 2004. However, in the
week before the increase, the wind seemed to shift again. First quarter of 2004
gross domestic product ("GDP") growth was revised down to 3.9%, durable goods
orders fell, and retailers and auto companies complained of slack sales. On the
day the FOMC raised rates, the Chicago Purchasing Managers' Index(7) had its
largest monthly drop in 30 years. Perhaps Greenspan's "measured" policy was
right, but perhaps something else was wrong. The first half of 2004 ended, with
investors again nervously awaiting the employment report two days later.
2
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MARKET PERSPECTIVE: SIX MONTHS ENDED JUNE 30, 2004
INTERNATIONAL MARKETS
Most INTERNATIONAL MARKETS eked out similarly modest gains for the six months
ended June 30, 2004, but JAPAN was the star, rising 10.73% in dollars according
to the MSCI Japan Index(8). Sentiment was encouraged by first quarter GDP
growth, reported at a surprisingly strong 6.1% annualized, suggesting that the
world's second largest economy was at last emerging from its slump of more than
a decade.
EUROPEAN EX UK MARKETS gained 2.88% in dollars in the six months ended June 30,
2004, according to the MSCI Europe ex UK Index(9). Buoyant exports were about
the only good news, as domestic demand still languished under unemployment of
9.0%. Still, these markets look relatively cheap.
Finally the UK market rose 3.32% in dollars during the first six months of 2004,
based on the MSCI UK Index(10). The economy appears to be strong, but the
troubling imbalances of an over-indebted consumer and a housing price bubble led
to three interest rate increases by the Bank of England, with more likely on the
way.
- ----------
(1) The MSCI WORLD INDEX reflects the stock markets of 22 countries, including
the United States, Europe, Canada, Australia, New Zealand and the Far East --
comprising approximately 1,500 securities -- with values expressed in U.S.
dollars.
(2) The LEHMAN BROTHERS AGGREGATE BOND INDEX is composed of securities from the
Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities
Index, and the Asset-Backed Securities Index. Total return comprises price
appreciation/depreciation and income as a percentage of the original investment.
(3) The LEHMAN BROTHERS CORPORATE INDEX includes all publicly issued,
fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade
corporate debt.
(4) The LEHMAN BROTHERS TREASURY BOND INDEX (U.S. Dollars) is composed of all
bonds covered by the Lehman Brothers Aggregate Bond Index with maturities of 10
years or greater. Total return comprises price appreciation/depreciation and
income as a percentage of the original investment.
(5) The LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD BOND INDEX is generally
representative of corporate bonds rated below investment-grade.
(6) The S&P 500 INDEX is a capitalization-weighted index of 500 stocks designed
to measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries.
(7) The CHICAGO PURCHASING MANAGERS' INDEX measures manufacturing activity in
the industrial Midwest.
(8) The MSCI JAPAN INDEX is a free float-adjusted market capitalization index
that is designed to measure developed market equity performance in Japan.
(9) The MSCI EUROPE EX UK INDEX is a free float-adjusted market capitalization
index that is designed to measure developed market equity performance in Europe,
excluding the UK.
(10) The MSCI UK INDEX is a free float-adjusted market capitalization index that
is designed to measure developed market equity performance in the UK.
ALL INDICES ARE UNMANAGED AND INVESTORS CANNOT INVEST DIRECTLY IN AN INDEX.
THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION
AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES
PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR
UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE
PORTFOLIOS' PERFORMANCE IS SUBJECT TO CHANGE SINCE THE PERIOD'S END AND MAY BE
LOWER OR HIGHER THAN THE PERFORMANCE DATA SHOWN. FOR VARIABLE ANNUITY CONTRACTS,
PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END.
MARKET PERSPECTIVE REFLECTS THE VIEWS OF THE CHIEF INVESTMENT RISK OFFICER ONLY
THROUGH THE END OF THE PERIOD, AND IS SUBJECT TO CHANGE BASED ON MARKET AND
OTHER CONDITIONS.
3
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ING VP NATURAL RESOURCES TRUST PORTFOLIO MANAGERS' REPORT
PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by James A.
Vail, ING Investment Management Co. (formerly, Aeltus Investment Management,
Inc.)-- the Sub-Adviser.
GOAL: The ING VP Natural Resources Trust (the "Trust") seeks long-term growth of
capital through investment primarily in common stocks of companies that own or
develop natural resources and other basic commodities, or supply goods and
services to such companies. Capital appreciation will be the primary determinant
of total return and income is a secondary consideration.
PERFORMANCE: For the six months ended June 30, 2004, the Trust returned -1.38%,
compared to the Standard & Poor's ("S&P") 500 Index(1) and the Goldman Sachs
Natural Resources Index(2), which returned 3.44% and 8.15%, respectively, for
the same period.
PORTFOLIO SPECIFICS: At the beginning of 2004, the Portfolio was underweight in
the energy sector, specifically the larger capitalization integrated oils and
oil service names, which hurt performance. Not owning large-capitalization
chemical companies, Dow Chemical Company and Du Pont de Nemours and Company, and
being underweight Alcoa, Inc. helped performance. The primary reason for the
Trust's underperformance in the second half of the reporting period was likely
being underweight energy, which was a strong performer, and overweight
materials. It appears the materials sector suffered as concerns over a slowdown
in the Chinese economy caused a dramatic reversal in commodity prices. Our prior
holdings in United States Steel Corporation, Freeport-McMoRan Copper and Gold,
Inc., and Barrick Gold Corporation were hurt by this severe downturn in metal
prices. Stock selection was the primary reason for trailing the benchmark in
energy.
MARKET OUTLOOK: Natural resources and materials have experienced significant
volatility recently. This volatility, in our opinion, has been driven by
familiar fears of a hard landing in China's economy, interest rate increases in
the United States, and Middle East uncertainties. Nevertheless, the
macroeconomic environment appears to be positive for natural resources. Crude
oil futures have fallen, which should bode well for continued global economic
expansion. Natural gas, primarily reflecting domestic demand, remains at
relatively high levels and given limited new production should stay so. Other
significant materials, such as copper, nickel, aluminum, and zinc, may have
retreated as speculators have exited the sector but should edge higher as global
demand enters a more sustainable phase.
Despite the recent volatility, investment in natural resources lagged other
sectors in the late 1990s and early into the 21st century. This lack of
investment, in the face of incremental demand from China, India, and Eastern
Europe, may argue for higher material prices in the years ahead. As China shifts
from a rural-based economy to a more urban and industrial center, this, in our
opinion, sets the stage for attractive materials prices and sector corporate
profits into the intermediate term. History points to similar experiences in the
United States from 1900-1945 and Japan from 1945-1970 as templates for how the
Chinese demand for materials and energy should unfold.
Going forward, we believe the Trust is well positioned to benefit from the
unfolding fundamentals as we perceive them. Approximately 58% of the Trust's
holdings are in the broad energy sector to include oil and gas producers, energy
services, drillers and producers of coal and uranium. 36% is represented by
materials and paper and forest products, with the remainder in cash. We continue
to search for companies in all sectors that possess attractive production growth
potential selling at reasonable valuations.
4
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PORTFOLIO MANAGERS' REPORT ING VP NATURAL RESOURCES TRUST
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS FOR THE
YEARS ENDED JUNE 30, 2004
---------------------------------------
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
ING VP Natural Resources Trust 21.23% 4.01% 6.10%
S&P 500 Index(1) 19.10% (2.21)% 11.83%
Goldman Sachs Natural Resources Index(2) 31.45% 2.77% N/A(3)
</Table>
The table above illustrates the total return of ING VP Natural Resources Trust
against the S&P 500 Index and the Goldman Sachs Natural Resources Index. The
Indices are unmanaged, have no cash in their portfolio, impose no sales charges
and incur no operating expenses. An investor cannot invest directly in an index.
The Trust's performance is shown without the imposition of any expenses or
charges which are, or may be, imposed under your annuity contract. Total returns
would have been lower if such expenses or charges were included.
The performance table does not reflect the deduction of taxes that a shareholder
will pay on Trust distributions or the redemption of Trust shares.
THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION
AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES
PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR
UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE
CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END.
THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING"
STATEMENTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
TRUST HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization companies whose
securities are traded on major U.S. stock markets.
(2) The Goldman Sachs Natural Resources Index is a
market-capitalization-weighted index of 112 stocks designed to measure the
performance of companies in the natural resources sector, which includes
energy, precious metals, timber, and other sub-sectors.
(3) The Index commenced in August 1996.
PRINCIPAL RISK FACTOR(s): Price volatility due to non-diversification and
concentration in natural resource companies. Securities of such companies may be
subject to broad price fluctuations, reflecting volatility of energy and basic
materials' prices and possible instability of supply of various natural
resources. The Trust's investments in foreign securities involve special risks
including currency fluctuations, lower liquidity, political and economic
uncertainties, and differences in accounting standards. The investment of a
large percentage of the Trust's assets in the securities of a small number of
issuers may cause the Trust's share price to fluctuate more than that of a
diversified investment company. The Trust should be considered as a vehicle for
diversification and not as a balanced investment program. The value of debt
securities may fall when interest rates rise.
5
<Page>
STATEMENT OF ASSETS AND LIABILITIES as of June 30, 2004 (Unaudited)
<Table>
ASSETS:
Investments in securities at value* $ 24,630,226
Cash 30,421
Foreign currencies at value** 370,090
Receivables:
Investment securities sold 530,124
Fund shares sold 62
Dividends and interest 7,222
Prepaid expenses 413
--------------
Total assets 25,568,558
--------------
LIABILITIES:
Payable for investment securities purchased 266,183
Payable to affiliates 21,811
Payable for trustee fees 49,567
Other accrued expenses and liabilities 55,841
--------------
Total liabilities 393,402
--------------
NET ASSETS (EQUIVALENT TO $15.45 PER SHARE ON 1,629,709 SHARES OUTSTANDING) $ 25,175,156
==============
NET ASSETS WERE COMPRISED OF:
Paid-in capital -- shares of beneficial interest at no par value
(unlimited shares authorized) $ 21,018,928
Accumulated net investment loss (104,328)
Accumulated net realized gain on investments and foreign currencies 804,420
Net unrealized appreciation on investments and foreign currencies 3,456,136
--------------
NET ASSETS $ 25,175,156
==============
*Cost of investments in securities $ 21,176,134
**Cost of foreign currencies $ 369,309
</Table>
See Accompanying Notes to Financial Statements
6
<Page>
STATEMENT OF OPERATIONS for the six months ended June 30, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends, net of foreign taxes withheld* $ 77,117
Interest 4,323
--------------
Total investment income 81,440
--------------
EXPENSES:
Investment management fees 123,912
Transfer agent fees 12,608
Administrative service fees 12,391
Shareholder reporting expense 12,659
Professional fees 18,200
Custody and accounting expense 4,189
Trustee fees 546
Miscellaneous expense 1,230
--------------
Total expenses 185,735
--------------
Net investment loss (104,295)
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments 854,200
Foreign currencies (7,899)
--------------
Net realized gain on investments and foreign currencies 846,301
--------------
Net change in unrealized appreciation or depreciation on:
Investments (1,139,395)
Foreign currencies 2,037
--------------
Net change in unrealized appreciation or depreciation on investments and
foreign currencies (1,137,358)
--------------
Net realized and unrealized loss on investments and foreign currencies (291,057)
--------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (395,352)
==============
*Foreign taxes $ 1,182
</Table>
See Accompanying Notes to Financial Statements
7
<Page>
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
<Table>
<Caption>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
2004 2003
-------------- ---------------
FROM OPERATIONS:
Net investment loss $ (104,295) $ (120,567)
Net realized gain on investments and foreign currencies 846,301 1,409,063
Net change in unrealized appreciation or depreciation on investments and
foreign currencies (1,137,358) 4,436,012
-------------- ---------------
Net increase (decrease) in net assets resulting from operations (395,352) 5,724,508
-------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (249,957) --
-------------- ---------------
Total distributions (249,957) --
-------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 4,789,284 4,418,070
Dividends reinvested 249,957 --
-------------- ---------------
5,039,241 4,418,070
Cost of shares redeemed (3,954,149) (6,643,754)
-------------- ---------------
Net increase (decrease) in net assets resulting from capital share transactions 1,085,092 (2,225,684)
-------------- ---------------
Net increase in net assets 439,783 3,498,824
-------------- ---------------
NET ASSETS:
Beginning of period 24,735,373 21,236,549
-------------- ---------------
End of period $ 25,175,156 $ 24,735,373
============== ===============
Undistributed net investment income (accumulated net investment loss) at
end of period $ (104,328) $ 249,924
============== ===============
</Table>
See Accompanying Notes to Financial Statements
8
<Page>
ING VP NATURAL RESOURCES TRUST (UNAUDITED) FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------
2004 2003 2002 2001 2000(1) 1999
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 15.82 12.12 12.40 14.75 12.51 11.03
Income (loss) from investment operations:
Net investment income (loss) $ (0.07) (0.08) (0.05) 0.03 (0.07) 0.06
Net realized and unrealized gain (loss)
on investments $ (0.14) 3.78 (0.21) (2.38) 2.36 1.50
Total income (loss) from investment operations $ (0.21) 3.70 (0.26) (2.35) 2.29 1.56
Less distributions from:
Net investment income $ 0.16 -- 0.02 -- 0.05 0.08
Total distributions $ 0.16 -- 0.02 -- 0.05 0.08
Net asset value, end of period $ 15.45 15.82 12.12 12.40 14.75 12.51
TOTAL RETURN(2) % (1.38) 30.53 (2.10) (15.93) 18.37 14.09
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000s) $ 25,175 24,735 21,237 23,741 32,291 31,737
Ratio to average net assets:
Expenses(3) % 1.50 1.61 1.64 1.35 1.66 1.33
Net investment income (loss)(3) % (0.84) (0.58) (0.41) 0.17 (0.53) 0.34
Portfolio turnover rate % 60 121 80 85 72 41
</Table>
(1) Effective July 26, 2000, ING Investments, LLC, became the Adviser to the
Fund.
(2) Total return is calculated assuming reinvestment of all dividend and
capital gain distributions at net asset value and does not reflect the
effect of insurance contract charges.
(3) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements
9
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited)
NOTE 1 -- ORGANIZATION
ORGANIZATION. ING VP Natural Resources Trust (the "Trust") is an open-end,
non-diversified management investment company registered under the Investment
Company Act of 1940, as amended. The Trust was organized as a Massachusetts
business trust on November 15, 1988 and commenced operation in 1991.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are consistently followed by the
Trust in the preparation of its financial statements:
A. SECURITY VALUATION. Investments in equity securities traded on a national
securities exchange are valued at the last reported sale price. Securities
reported by NASDAQ will be valued at the NASDAQ official closing prices.
Securities traded on an exchange or NASDAQ for which there has been no sale
and equity securities traded in the over-the-counter-market are valued at
the mean between the last reported bid and ask prices. All investments
quoted in foreign currencies will be valued daily in U.S. dollars on the
basis of the foreign currency exchange rates prevailing at that time. Debt
securities are valued at prices obtained from independent services or from
one or more dealers making markets in the securities and may be adjusted
based on the Trust's valuation procedures. U.S. Government obligations are
valued by using market quotations or independent pricing services which use
prices provided by market-makers or estimates of market values obtained
from yield data relating to instruments or securities with similar
characteristics.
Securities and assets for which market quotations are not readily available
(which may include certain restricted securities which are subject to
limitations as to their sale) are valued at their fair values as determined
in good faith by or under the supervision of the Trust's Board of Trustees
("Board"), in accordance with methods that are specifically authorized by
the Board. Securities traded on exchanges, including foreign exchanges,
which close earlier than the time that the Trust calculates its net asset
value may also be valued at their fair values as determined in good faith
by or under the supervision of the Trust's Board, in accordance with
methods that are specifically authorized by the Board. If a significant
event which is likely to impact the value of one or more foreign securities
held by the Trust occurs after the time at which the foreign market for
such security(ies) closes but before the time that the Trust's net asset
value is calculated on any business day, such event may be taken into
account in determining the fair value of such security(ies) at the time the
Trust calculates its net asset value. For these purposes, significant
events after the close of trading on a foreign market may include, among
others, securities trading in the U.S. and other markets, corporate
announcements, natural and other disasters, and political and other events.
Among other elements of analysis, the Board has authorized the use of one
or more research services to assist with the determination of the fair
value of foreign securities in light of significant events. Research
services use statistical analyses and quantitative models to help determine
fair value as of the time the Trust calculates its net asset value. Unlike
the closing price of a security on an exchange, fair value determinations
employ elements of judgment, and the fair value assigned to a security may
not represent the actual value that the Trust could obtain if it were to
sell the security at the time of the close of the NYSE. Investments in
securities maturing in less than 60 days 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 except when collection is not expected.
Dividend income is recorded on the ex-dividend date, or for certain foreign
securities, when the information becomes available to the Trust. Premium
amortization and discount accretion are determined by the effective yield
method.
C. FEDERAL INCOME TAXES. It is the policy of the Trust to comply with
subchapter M of the Internal Revenue Code and related excise tax provisons
applicable to regulated investment companies and to distribute
substantially all of its net investment income and any net realized capital
10
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
gains to its shareholders. Therefore, no federal income tax provision is
required. No capital gain distributions shall be made until any capital
loss carryforwards have been fully utilized or expired.
D. DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net investment income and net
realized gains, if any are declared and paid annually by the Trust.
Distributions are determined annually in accordance with federal tax
principles which may differ from accounting principles generally accepted
in the United States of America for investment companies. The Trust may
make distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. Distributions are recorded on
the ex-dividend date.
E. USE OF ESTIMATES. Management of the Trust 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.
F. FOREIGN CURRENCY TRANSLATION. The books and records of the Trust 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 Trust does 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 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 Trust'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 period end, resulting from changes in the exchange rate.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with investing in U.S.
companies and U.S. Government securities. These risks include, but are not
limited to, revaluation of currencies and future adverse political and
economic developments which could cause securities and their markets to be
less liquid and prices more volatile than those of comparable U.S.
companies and U.S. Government securities.
G. FORWARD FOREIGN CURRENCY CONTRACTS. The Trust may enter into forward
foreign currency contracts primarily to hedge against foreign currency
exchange rate risks on their non-U.S. dollar denominated investment
securities. When entering into a currency forward contract, the Trust
agrees to receive or deliver a fixed quantity of foreign currency for an
agreed-upon price on an agreed future date. These contracts are valued
daily and the Trust's net equity therein, representing unrealized gain or
loss on the contracts as measured by the difference between the forward
foreign exchange rates at the dates of entry into the contracts and the
forward rates at the reporting date, is included on the Statement of Assets
and Liabilities. Realized and unrealized gains and losses are included on
the Statement of Operations. These instruments involve market and/or credit
risk in excess of the amount recognized on the Statement of Assets and
Liabilities. Risks arise from the possible inability of counterparties to
meet the terms of their contracts and from movement in currency and
securities values and interest rates. At June 30, 2004, the Trust did not
have any open forward foreign currency contracts.
11
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued)
NOTE 3 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The Trust pays an investment management fee to ING Investments, LLC (the
"Investment Manager"), an indirect wholly-owned subsidiary of ING Groep N.V., at
an annual rate of 1.00% of the Trust's average daily net assets.
The Investment Manager has entered into an Expense Limitation Agreement with the
Trust, under which it will limit expenses of the Trust to the extent of 2.50% of
the value of the Trust's average daily net assets, excluding interest, taxes,
brokerage and extraordinary expenses. Fee waivers and/or reimbursements by the
Investment Manager may vary in order to achieve such contractually obligated
expense limit.
The Expense Limitation Agreement is contractual and shall renew automatically
for one-year terms unless ING Investments provides written notice of the
termination of the Expense Limitation Agreement within 90 days of the end of the
then current term.
The Investment Manager may at a later date recoup from the Trust for management
fees waived and other expenses assumed by the Investment Manager during the
previous 36 months, but only if, after such reimbursement, the Trust's expense
ratio does not exceed the percentage described above. No reimbursement was
required for the six months ended June 30, 2004.
The Investment Manager has entered into a Sub-Advisory Agreement with ING
Investment Management Co., (formerly, Aeltus Investment Management, Inc., "ING
IM"), an indirect wholly-owned subsidiary of ING Groep N.V.
ING Funds Services, LLC (the "Administrator"), an indirect wholly-owned
subsidiary of ING Groep N.V., serves as Administrator to the Trust. The Trust
pays the Administrator a fee calculated at an annual rate of 0.10% of the
Trust's average daily net assets.
NOTE 4 -- OTHER TRANSACTIONS WITH AFFILIATED AND RELATED PARTIES
At June 30, 2004, the Trust had the following amounts recorded in payable to
affiliates on the accompanying Statements of Assets and Liabilities:
<Table>
<Caption>
ACCRUED
INVESTMENT ACCRUED
MANAGEMENT ADMINISTRATIVE
FEES FEES TOTAL
---- ---- -----
$ 19,828 $ 1,983 $ 21,811
</Table>
The Trust has adopted a Retirement Policy covering all independent trustees of
the Trust who will have served as an independent trustee for at least five years
at the time of retirement. Benefits under this plan are based on an annual rate
as defined in the plan agreement.
NOTE 5 -- INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investments for the six months
ended June 30, 2004, excluding short-term securities, were $15,655,930 and
$14,816,207, respectively.
NOTE 6 -- OTHER ACCRUED EXPENSES AND LIABILITIES
At June 30, 2004, the Trust had a payable for professional fees of $28,845
included in Other Accrued Expenses and Liabilities that exceeded 5% of total
liabilities on the Statement of Assets and Liabilities.
NOTE 7 -- CONCENTRATION OF INVESTMENT RISKS
FOREIGN SECURITIES. The Trust may invest in foreign securities and has a policy
of investing in the securities of companies that own or develop natural
resources and other basic commodities, or supply goods and services to such
companies. There are certain risks involved in investing in foreign securities
or concentrating in specific industries such as natural resources that are in
addition to the usual risks inherent in domestic investments. These risks
include those resulting from future adverse political and economic developments,
as well as the possible imposition of foreign exchange or other foreign
governmental restrictions or laws, all of which could affect the market and/or
credit risk of the investments.
NON-DIVERSIFIED. The Portfolio is classified as a non-diversified investment
company under the Investment Company Act, which means that the Trust is not
limited in the proportion of its assets in a single issuer. The investment of a
large percentage of a Trust's assets in the securities of a small number of
issuers may cause the Trust's share price to fluctuate more than that of a
diversified investment company.
NOTE 8 -- LINE OF CREDIT
The Trust, in addition to certain other funds managed by the Investment Manager,
have entered into an unsecured committed revolving line of credit agreement (the
"Credit Agreement") with The Bank of New York for an aggregate amount of
$125,000,000.
12
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued)
NOTE 8 -- LINE OF CREDIT (CONTINUED)
The proceeds may be used to: (1) temporarily finance the purchase and sale of
securities; (2) finance the redemption of shares of an investor in the funds;
and (3) enable the funds to meet other emergency expenses as defined in the
Credit Agreement. The funds to which the line of credit is available pay a
commitment fee equal to 0.09% per annum on the daily unused portion of the
committed line amount payable quarterly in arrears. The Trust utilized the line
of credit for five days during the six months ended June 30, 2004, with an
approximate average daily balance of $620,000 and an approximate weighted
average interest rate of 1.51%.
NOTE 9 -- CAPITAL SHARE TRANSACTIONS
Transaction in capital shares and dollars were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
---------------------------- ----------------------------
SHARES DOLLARS SHARES DOLLARS
------------ ------------ ------------ ------------
Shares sold 303,978 $ 4,789,284 352,152 $ 4,418,070
Dividends reinvested 15,701 249,957 -- --
Shares redeemed (253,317) (3,954,149) (540,397) (6,643,754)
------------ ------------ ------------ ------------
Net increase (decrease) 66,362 $ 1,085,092 (188,245) $ (2,225,684)
============ ============ ============ ============
</Table>
NOTE 10 -- FEDERAL INCOME TAXES
The amount of distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from accounting principles generally accepted in the United States of
America for investment companies. These book/tax differences may be either
temporary or permanent. Permanent differences are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences are not reclassified. Key differences include the treatment of
short-term capital gains, foreign currency transactions, and wash sale
deferrals. Distributions in excess of net investment income and/or net realized
capital gains for tax purposes are reported as distributions of paid-in capital.
Dividends to shareholders from ordinary income were $249,957 for the six months
ended June 30, 2004. There were no distributions to shareholders during the year
ended December 31, 2003.
Dividends paid by the Trust 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-basis components of distributable earnings and the expiration dates of
the capital loss carryforwards which may be used to offset future realized
capital gains for federal income tax purposes as of December 31, 2003 were as
follows:
<Table>
<Caption>
UNDISTRIBUTED UNREALIZED CAPITAL
ORDINARY APPRECIATION/ LOSS EXPIRATION
INCOME (DEPRECIATION) CARRYFORWARDS DATE
- ------------- -------------- ------------- ----------
$ 249,931 $ 4,593,487 $ (41,881) 2010
</Table>
NOTE 11 -- OTHER INFORMATION
As with many financial services companies, ING Investments and affiliates of ING
Investments (collectively, "ING") have received requests for information from
various governmental and self-regulatory agencies in connection with
investigations related to trading in investment company shares. In each case,
full cooperation and responses are being provided. In addition to responding to
regulatory requests, ING management initiated an internal review of trading in
ING insurance, retirement, and mutual fund products. The goal of this review has
been to identify whether there have been any instances of inappropriate trading
in those products by third parties or by ING investment professionals and other
ING personnel. Additionally, ING reviewed its controls and procedures in a
continuing effort to deter improper frequent trading in ING products. ING's
internal reviews related to mutual fund trading are continuing.
The internal review has identified several arrangements allowing third parties
to engage in frequent trading of mutual funds within our variable insurance and
mutual fund products, and identified other circumstances where frequent trading
occurred despite measures taken by ING intended to combat market timing.
In addition, the review has identified five arrangements that allowed frequent
trading in certain ING Funds. ING entities did not receive special benefits in
return for any of these arrangements, which have all been terminated. The
internal review also identified two investment professionals who engaged in
improper frequent trading in ING Funds. ING will reimburse any ING Fund or its
shareholders affected by inappropriate trading for any improper profits that
accrued to any person who engaged in improper frequent trading for which ING is
responsible.
13
<Page>
PORTFOLIO OF INVESTMENTS
ING VP Natural Resources Trust as of June 30, 2004 (Unaudited)
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK: 97.8%
COAL: 2.2%
10,000 Peabody Energy Corp. $ 559,900
-------------
559,900
-------------
FOREST PRODUCTS AND PAPER: 4.1%
35,000 MeadWestvaco Corp. 1,028,650
-------------
1,028,650
-------------
IRON/STEEL: 3.0%
25,000 @ International Steel Group, Inc. 743,750
-------------
743,750
-------------
MINING: 31.3%
15,000 Alcan, Inc. 621,000
20,000 Alcoa, Inc. 660,600
20,000 Cameco Corp 1,164,274
100,000 @,@@ First Quantum Minerals Ltd. 1,055,379
12,100 @@ Impala Platinum Holdings Ltd. 917,397
15,000 @,@@ Inco Ltd. 518,400
30,000 @,@@ KGHM Polska Miedz SA 457,500
546,666 @,@@ Minara Resources Ltd. 894,900
93,000 @,@@ Mvelaphanda Resources Ltd. 254,497
5,000 Phelps Dodge Corp. 387,550
500,000 @,@@ Sons of Gwalia Ltd. 961,311
-------------
7,892,808
-------------
OIL AND GAS: 24.2%
26,000 Burlington Resources, Inc. 940,680
74,900 Chesapeake Energy Corp. 1,102,528
9,000 Murphy Oil Corp. 663,300
10,400 @,@@ Nabors Industries Ltd. 470,288
16,500 Noble Energy, Inc. 841,500
25,500 Pioneer Natural Resources Co. 894,540
26,200 @ Pride Intl., Inc. 448,282
25,000 @ Transocean, Inc. 723,500
-------------
6,084,618
-------------
OIL AND GAS SERVICES: 29.0%
24,000 Baker Hughes, Inc. 903,600
23,000 @ BJ Services Co. 1,054,320
24,000 @ Cooper Cameron Corp. 1,168,800
100,000 @ Global Industries Ltd. 572,000
100,000 @ Input/Output, Inc. 829,000
16,000 Schlumberger Ltd. 1,016,160
19,000 @ Smith Intl., Inc. 1,059,440
16,000 @ Weatherford Intl. Ltd. 719,680
-------------
7,323,000
-------------
PACKAGING AND CONTAINERS: 4.0%
50,000 @ Smurfit-Stone Container Corp. 997,500
-------------
997,500
-------------
Total Common Stock
(Cost $21,176,134) 24,630,226
-------------
TOTAL INVESTMENTS IN
SECURITIES (COST
$21,176,134)* 97.8% $ 24,630,226
OTHER ASSETS AND
LIABILITIES-NET 2.2 544,930
----- -------------
NET ASSETS 100.0% $ 25,175,156
===== =============
</Table>
@ Non-income producing security
@@ Foreign issuer
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized Appreciation consists of:
<Table>
Gross Unrealized Appreciation $ 3,941,815
Gross Unrealized Depreciation (487,723)
-------------
Net Unrealized Appreciation $ 3,454,092
=============
</Table>
<Table>
<Caption>
PERCENTAGE OF
REGION NET ASSETS
- --------------------------------------------------------------------------------
Australia 7.4%
Barbados 1.9
Canada 13.3
Poland 1.8
South Africa 4.7
United States 68.7
Other Assets and Liabilities, Net 2.2
-----
NET ASSETS 100.0%
=====
</Table>
See Accompanying Notes to Financial Statements
14
<Page>
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.
<Table>
<Caption>
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 TRUST SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ----- --------- --------------- ---------- -------
INDEPENDENT TRUSTEES
Paul S. Doherty(2) Trustee July 2000 - Mr. Doherty is President 118 University of
7337 E. Doubletree Ranch Rd. Present and Partner, Doherty, Massachusetts
Scottsdale, AZ 85258 Wallace, Pillsbury and Foundation Board
Born: 1934 Murphy, P.C., Attorneys (April 2004 - Present).
(1996 - Present).
J. Michael Earley(3) Trustee February 2002 - President and Chief 118 None
7337 E. Doubletree Ranch Rd. Present Executive Officer,
Scottsdale, AZ 85258 Bankers Trust Company,
Born: 1945 N.A. (1992 - Present).
R. Barbara Gitenstein(2) Trustee February 2002 - President, College of 118 New Jersey Resources
7337 E. Doubletree Ranch Rd. Present New Jersey (1999 - (September 2003 -
Scottsdale, AZ 85258 Present). Present).
Born: 1948
Walter H. May(2) Trustee July 2000 - Retired. Formerly, 118 Trustee, BestPrep
7337 E. Doubletree Ranch Rd. Present Managing Director and Charity
Scottsdale, AZ 85258 Director of Marketing, (1991 - Present) -
Born: 1936 Piper Jaffray, Inc. Charitable organization.
Jock Patton(2) Trustee July 2000 - Private Investor 118 Director, Hypercom, Inc.
7337 E. Doubletree Ranch Rd. Present (June 1997 - Present). (January 1999 -
Scottsdale, AZ 85258 Formerly Director and Present); JDA Software
Born: 1945 Chief Executive Officer, Group, Inc.
Rainbow Multimedia (January 1999 -
Group, Inc. (January Present); Swift
1999 - December 2001). Transportation Co.
(March 2004 - Present).
David W.C. Putnam(3) Trustee July 2000 - President and Director, 118 Anchor International
7337 E. Doubletree Ranch Rd. Present F.L. Putnam Securities Bond (December 2000 -
Scottsdale, AZ 85258 Company, Inc. and its Present); Progressive
Born: 1939 affiliates; President, Capital Accumulation
Secretary and Trustee, Trust (August 1998 -
The Principled Equity Present); Principled
Market Fund. Equity Market Fund
(November 1996 -
Present), Mercy Endowment
Foundation (1995 -
Present); Director, F.L.
Putnam Investment
Management Company
(December 2001 -
Present); Asian American
Bank and Trust Company
(June 1992 - Present);
and Notre Dame Health
Care Center (1991 -
Present) F.L. Putnam
Securities Company, Inc.
(June 1978 - Present);
and an Honorary Trustee,
Mercy Hospital (1973 -
Present).
</Table>
15
<Page>
TRUSTEE AND OFFICER INFORMATION (Unaudited) (continued)
<Table>
<Caption>
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 TRUST SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ----- --------- --------------- ---------- -------
Blaine E. Rieke(3) Trustee February 2001 - General Partner, 118 Trustee, Morgan Chase
7337 E. Doubletree Ranch Rd. Present Huntington Partners Trust Co. (January
Scottsdale, AZ 85258 (January 1997 - 1998 - Present);
Born: 1933 Present). Chairman of Director, Members Trust
the Board and Trustee Co. (November 2003 -
of each of the funds Present).
managed by ING
Investment
Management Co. LLC
(November 1998 -
February 2001).
Roger B. Vincent(3) Trustee February 2002 - President, Springwell 118 Director, AmeriGas
7337 E. Doubletree Ranch Rd. Present Corporation (1989 - Propane, Inc. (1998 -
Scottsdale, AZ 85258 Present). Formerly, Present).
Born: 1945 Director Tatham
Offshore, Inc. (1996 -
2000).
Richard A. Wedemeyer(2) Trustee February 2001 - Retired. Formerly Vice 118 Director, Touchstone
7337 E. Doubletree Ranch Rd. Present President - Finance and Consulting Group
Scottsdale, AZ 85258 Administration, (1997 - Present);
Born: 1936 Channel Corporation Trustee, Jim Henson
(June 1996 - April Legacy (1994 - Present).
2002); and Trustee of
each of the funds
managed by ING
Management Co. LLC
(1998 - 2001).
TRUSTEES WHO ARE "INTERESTED
PERSONS"
Thomas J. McInerney(4) Trustee February 2001 - Chief Executive Officer, 171 Director, Equitable Life
7337 E. Doubletree Ranch Rd. Present ING U.S. Financial Insurance Co., Golden
Scottsdale, AZ 85258 Services American Life Insurance
Born: 1956 (September 2001 - Co., Life Insurance
Present); Member ING Company of Georgia,
Americas Executive Midwestern United Life
Committee (2001 - Insurance Co., ReliaStar
Present); ING Aeltus Life Insurance Co.,
Holding Company, Inc. Security Life of Denver,
(2000 - Present), ING Security Connecticut
Retail Holding Life Insurance Co.,
Company (1998 - Southland Life
Present), and ING Insurance Co., USG
Retirement Holdings, Annuity and Life
Inc. (1997 - Present). Company, and United
Formerly, President, Life and Annuity
ING Life Insurance Insurance Co. Inc
Annuity Company (March 2001 - Present);
(September 1997 - Member of the Board,
November 2002); Bushnell Performing
President, Chief Arts Center; St. Francis
Executive Officer and Hospital; National
Director of Northern Conference of
Life Insurance Company Community Justice; and
(March 2001 - October Metro Atlanta Chamber
2002); General Manager of Commerce.
and Chief Executive
Officer, ING Worksite
Division (December 2000
- October 2001),
President ING-SCI, Inc.
(August 1997 - December
2000); President, Aetna
Financial Services
(August 1997 - December
2000).
</Table>
16
<Page>
TRUSTEE AND OFFICER INFORMATION (Unaudited) (continued)
<Table>
<Caption>
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 TRUST SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE
------- ----- --------- --------------- ---------- -------
John G. Turner(5) Trustee July 2000 - Chairman, Hillcrest 118 Director, Hormel Foods
7337 E. Doubletree Ranch Rd. Present Capital Partners Corporation
Scottsdale, AZ 85258 (May 2002 - Present); (March 2000 - Present);
Born: 1939 Formerly, Vice Shopko Stores, Inc.
Chairman of ING (August 1999 - Present);
Americas (2000 - 2002); and M.A. Mortenson
Chairman and Chief Company (March 2002 -
Executive Officer of Present); Conseco, Inc.
ReliaStar Financial (September 2003 -
Corp. and ReliaStar Life Present).
Insurance Company
(1993 - 2000); Chairman
of ReliaStar United
Services Life Insurance
Company (1995 - 1998);
Chairman of ReliaStar
Life Insurance Company
of New York (1995 -
1998); 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).
</Table>
- ----------
(1) Trustees serve until their successors are duly elected and qualified,
subject to the Board's retirement policy.
(2) Valuation and Proxy Voting Committee (formerly the Valuation Committee)
member.
(3) Audit Committee member.
(4) Mr. McInerney is an "interested person," as defined under the 1940 Act,
because of his affiliation with ING U.S. Financial Services and ING U.S.
Worksite Financial Services, both affiliates of ING Investments, LLC.
(5) Mr. Turner is an "interested person," as defined under the 1940 Act, because
of his affiliation with ING Americas, an affiliate of ING Investments, LLC.
17
<Page>
TRUSTEE AND OFFICER INFORMATION (Unaudited) (continued)
<Table>
<Caption>
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, ING Investments, LLC
Scottsdale, AZ 85258 (December 2001 - Present).
Born: 1949 Chief Operating July 2000 - Present Formerly, Senior Executive Vice
Officer President and Chief Operating
Officer, ING Investments, LLC
(April 1995 - December 2000); and
Executive Vice President, ING
Investments, LLC (May 1998 -
June 2000).
Stanley D. Vyner Executive Vice February 2002 - Executive Vice President, ING
7337 E. Doubletree Ranch Rd. President Present Investments, LLC and certain of its
Scottsdale, Arizona 85258 affiliates (July 2000 - Present) and
Born: 1950 Chief Investment Risk Officer (June
2003 - Present); Formerly, Chief
Investment Officer for the
International Portfolios, ING
Investments, LLC (July 1996 - June
2003); and President and Chief
Executive Officer, ING Investments,
LLC (August 1996 - August 2000).
Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief
7337 E. Doubletree Ranch Rd. President and Present Financial Officer and Treasurer,
Scottsdale, AZ 85258 Assistant Secretary ING Investments, LLC (December
Born: 1958 2001 - Present). Formerly, Senior
Principal Financial July 2000 - Present Vice President, ING Investments,
Officer LLC (June 1998 - December 2001).
Robert S. Naka Senior Vice President July 2000 - Present Senior Vice President and Assistant
7337 E. Doubletree Ranch Rd. and Assistant Secretary, ING Funds Services, LLC
Scottsdale, AZ 85258 Secretary (October 2001 - Present).
Born: 1963 Formerly, Senior Vice President
and Assistant Secretary, ING Funds
Services, LLC (February 1997 -
August 1999).
Kimberly A. Anderson Senior Vice President November 2003 - Senior Vice President, ING
7337 E. Doubletree Ranch Rd. Present Investments, LLC (October 2003 -
Scottsdale, AZ 85258 Present). Formerly, Vice President
Born: 1964 and Assistant Secretary, ING
Investments, LLC (October 2001 -
October 2003); Assistant Vice
President, ING Funds Services, LLC
(November 1999 - January 2001); and
has held various other positions
with ING Funds Services, LLC for
more than the last five years.
Robyn L. Ichilov Vice President and July 2000- Present Vice President, ING Funds Services,
7337 E. Doubletree Ranch Rd. Treasurer LLC (October 2001 - Present) and
Scottsdale, AZ 85258 ING Investments, LLC (August
Born: 1967 1997 - Present).
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 -
Born: 1954 Present); Vice President (February
1996 - Present) and Chief
Compliance Officer (October 2001 -
Present), ING Investments, LLC.
</Table>
18
<Page>
TRUSTEE AND OFFICER INFORMATION (Unaudited) (continued)
<Table>
<Caption>
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
------- ------------------- -------------- ---------------
Todd Modic Vice President August 2003 - Vice President of Financial
7337 E. Doubletree Ranch Rd. Present Reporting - Fund Accounting of
Scottsdale, AZ 85258 ING Funds Services, LLC
Born: 1967 (September 2002 - Present).
Formerly, Director of Financial
Reporting, ING Investments, LLC
(March 2001 - September 2002);
Director of Financial Reporting,
Axient Communications, Inc. (May
2000 - January 2001); and Director
of Finance, Rural/Metro Corporation
(March 1995 - May 2000).
Huey P. Falgout, Jr. Secretary August 2003 - Chief Counsel, ING U.S. Financial
7337 E. Doubletree Ranch Rd. Present Services (September 2003 -
Scottsdale, Arizona 85258 Present). Formerly, Counsel, ING
Born: 1963 U.S. Financial Services (November
2002 - September 2003); and
Associate General Counsel of AIG
American General (January 1999 -
November 2002).
Susan P. Kinens Assistant Vice February 2003 - Assistant Vice President and
7337 E. Doubletree Ranch Rd. President and Present Assistant Secretary, ING Funds
Scottsdale, AZ 85258 Assistant Secretary Services, LLC (December 2002 -
Born: 1976 Present); and has held various
other positions with ING Funds
Services, LLC for more than the
last five years.
Maria M. Anderson Assistant Vice August 2001 - Assistant Vice President of ING
7337 E. Doubletree Ranch Rd. President Present Funds Services, LLC (October 2001 -
Scottsdale, AZ 85258 Present). Formerly, Manager of
Born: 1958 Fund Accounting and Fund
Compliance, ING Investments, LLC
(September 1999 - November 2001);
and Section Manager of Fund
Accounting, Stein Roe Mutual Funds
(July 1998 - August 1999).
Theresa Kelety Assistant Secretary August 2003 - Counsel, ING U.S. Financial Services
7337 E. Doubletree Ranch Rd. Present (April 2003 - Present). Formerly,
Scottsdale, Arizona 85258 Senior Associate with Shearman &
Born: 1963 Sterling (February 2000 - April
2003); and Associate with
Sutherland Asbill & Brennan (1996 -
February 2000).
</Table>
- ----------
(1) The officers hold office until the next annual meeting of the Trustees and
until their successors have been elected and qualified.
19
<Page>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<Page>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<Page>
INVESTMENT MANAGER
ING Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
ADMINISTRATOR
ING Funds Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
DISTRIBUTOR
ING Funds Distributor, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
1-800-334-3444
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141
CUSTODIAN
The Bank of New York
100 Colonial Center Parkway, Suite 300
Lake Mary, FL 32746
LEGAL COUNSEL
Dechert LLP
1775 I Street, N.W.
Washington, D.C. 20006
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
99 High Street
Boston, MA 02110
BEFORE INVESTING, CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES
AND EXPENSES OF THE VARIABLE ANNUITY CONTRACT AND THE UNDERLYING VARIABLE
INVESTMENT OPTIONS. THIS AND OTHER INFORMATION IS CONTAINED IN THE PROSPECTUS
FOR THE VARIABLE ANNUITY CONTRACT AND THE UNDERLYING VARIABLE INVESTMENT
OPTIONS. OBTAIN THESE PROSPECTUSES FROM YOUR AGENT/REGISTERED REPRESENTATIVE AND
READ THEM CAREFULLY BEFORE INVESTING. THE TRUSTS' PROXY VOTING RECORD WILL BE
AVAILABLE WITHOUT CHARGE ON OR ABOUT AUGUST 31, 2004 ON THE TRUST'S WEBSITE AT
www.ingfunds.com AND ON THE SEC'S WEBSITE AT www.sec.gov.
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[ING FUNDS LOGO]
PRESORTED
STANDARD
U.S. POSTAGE
PAID
BOSTON MA
PERMIT NO. 57842
VPSAR-NRT (0604-081804)
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ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, Registrant had adopted a
code of ethics, as defined in Item 2 of Form N-CSR, that applies to the
Registrant's principal executive officer and principal financial officer. There
were no amendments to the Code during the period covered by the report. The
Registrant did not grant any waivers, including implicit waivers, from any
provisions of the Code during the period covered by this report. The code of
ethics is filed herewith pursuant to Item 11(a)(1), Exhibit 99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that David Putnam is an audit committee
financial expert, as defined in Item 3 of Form N-CSR. Mr. Putnam is
"independent" for purposes of Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule is included as part of the report to shareholders filed under Item 1 of
this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board has a Nominating Committee ("Committee") for the purpose of
considering and presenting to the Board candidates it proposes for nomination to
fill Trustee vacancies on the Board. The Committee currently consists of four
Trustees of the Board, none of whom are considered "interested persons" of the
Trust within the meaning of Section 2(a)(19) of the Investment Company Act of
1940. The Committee has adopted a written charter that sets forth the policies
and procedures of the Committee. The Committee will accept referrals for
potential candidates from Board members, Fund shareholders, legal counsel to the
disinterested Trustees or such other sources as the Committee deems appropriate.
Shareholders can submit recommendations in writing to the attention of the
Chairperson of the Committee at an address to be maintained by Fund management
for this purpose. In order for the Committee to consider a potential candidate,
the Committee initially must receive at least the following information
regarding such person: (1) name; (2) date of birth; (3) education; (4) business,
professional or other relevant experience and areas of expertise; (5) current
business, professional or other relevant experience and areas of expertise; (6)
current business and home addresses and contact information; (7) other board
positions or prior experience; and (8) any knowledge and experience relating to
investment companies and investment company governance.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based on our evaluation conducted within 90 days of the filing date,
hereof, the design and operation of the registrant's disclosure controls
and procedures are effective to ensure that material information relating
to the registrant is made known to the certifying officers by others
within the appropriate entities, particularly during the period in which
Forms N-CSR are being prepared, and the registrant's disclosure 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.
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(b) There were no significant changes in the registrant's internal controls
that occurred during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached
hereto as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT.
(b) The officer certifications required by Section 906 of the Sarbanes-Oxley
Act of 2002 are attached hereto as EX-99.906CERT.
(3) Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): ING VP NATURAL RESOURCES TRUST
By /s/ James M. Hennessy
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James M. Hennessy
President and Chief Executive Officer
Date: August 30, 2004
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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
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James M. Hennessy
President and Chief Executive Officer
Date: August 30, 2004
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By /s/ Michael J. Roland
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Michael J. Roland
Executive Vice President and Chief Financial Officer
Date: August 30, 2004
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