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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: 811-05451
--------------------------------------------
USLICO Series Fund
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258
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(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):
1
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SEMI-ANNUAL REPORT
SEMI-ANNUAL REPORT
JUNE 30, 2004
[GRAPHIC]
USLICO SERIES FUND
THE STOCK PORTFOLIO
THE MONEY MARKET PORTFOLIO
THE BOND PORTFOLIO
THE ASSET ALLOCATION PORTFOLIO
[ING FUNDS LOGO]
<Page>
TABLE OF CONTENTS
<Table>
President's Letter 1
Market Perspective 2
Portfolio Managers' Reports 4
Statements of Assets and Liabilities 10
Statements of Operations 11
Statements of Changes in Net Assets 12
Financial Highlights 14
Notes to Financial Statements 18
Portfolios of Investments 25
Trustee and Officer Information 38
</Table>
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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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THE USLICO STOCK PORTFOLIO PORTFOLIO MANAGERS' REPORT
PORTFOLIO MANAGEMENT TEAM: A team of investment professional led by James A.
Vail, CFA, ING Investment Management Co. (formerly, Aeltus Investment
Management, Inc.) -- the Sub-Adviser.
GOAL: The USLICO Series Fund -- Stock Portfolio (the "Portfolio") seeks
intermediate and long-term growth of capital. Its secondary investment objective
is to receive a reasonable level of income.
PERFORMANCE: For the six months ended June 30, 2004, the Portfolio provided a
return of 5.47%, compared to the Standard & Poor's ("S&P") 500 Index(1), which
returned 3.44% for the same period.
PORTFOLIO SPECIFICS: The Portfolio benefited from strong performance in the
information technology and health care sectors. The strong performing companies
were Biogen IDEC, Inc., as well as Advance PCS and National Semiconductor, which
were held during the period. Other strong individual performers were eBay, Inc.
and Yahoo!, Inc. as both continued to take share from their traditional
competitors. In the industrials sector, Tyco International Ltd. benefited from a
company-specific turnaround, as well as leverage to the overall strengthening
economy. Performance was hurt in the energy sector, as we did not hold any of
the large integrated oil companies, such as Exxon Mobil, ChevronTexaco and
Conoco Phillips.
MARKET OUTLOOK: In our opinion, the market is performing well in the face of
geopolitical uncertainties, high energy prices, and concerns over a weakening
China economy. As we ended the reporting period, despite recent indications of a
measured response by the Federal Reserve to an expanding domestic economy, the
market appeared to be transfixed on the letter of the statements and not the
spirit. All in all, the economic environment should be good for stocks, and we
remain encouraged by the outlook. Near-term concerns should abate as the year
continues to unfold and the market should move higher by year-end.
The Portfolio remains exposed to sectors experiencing improving economic
activity, specifically energy and industrials; however, our focus in the second
half of 2004 is to identify stocks that will benefit from later stage activity,
such as the lodging and gaming sectors. History also indicates that
large-capitalization pharmaceutical companies perform well in the face of rising
interest rates. While the first half of 2004 has been a difficult period, we
remain encouraged by the outlook for stocks and believe the Portfolio is well
positioned in the environment we foresee.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS FOR THE YEARS ENDED JUNE 30, 2004
--------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
Stock Portfolio 25.05% (10.46)% 3.28%
S&P 500 Index(1) 19.11% (2.17)% 11.87%
</Table>
The table above illustrates the total return of Stock Portfolio against the S&P
500 Index. The Index is unmanaged and has no cash in its portfolio, imposes no
sales charges and incurs no operating expenses. An investor cannot invest
directly in an index. The Portfolio's performance is shown without the
imposition of any expenses or charges which are, or may be, imposed under your
annuity contract. Total returns would have been lower if such expenses or
charges were included.
The performance table does not reflect the deduction of taxes that a shareholder
will pay on Portfolio distributions or the redemption of Portfolio shares.
TOTAL RETURNS REFLECT THE FACT THAT THE INVESTMENT MANAGER HAS WAIVED CERTAIN
FEES AND OPERATING EXPENSES OTHERWISE PAYABLE BY THE PORTFOLIO, SUBJECT TO
POSSIBLE LATER REIMBURSEMENT DURING A THREE-YEAR PERIOD. TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD THERE BEEN NO WAIVER TO THE PORTFOLIO.
THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION
AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES
PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR
UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE
CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END.
THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING"
STATEMENTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization companies whose
securities are traded on major U.S. stock markets.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. The value of securities of smaller issuers can be more
volatile than that of larger issuers. Derivatives are subject to the risk of
changes in the market price of a security, credit risk with respect to the
counterparty to the derivative instrument, and the risk of loss due to changes
in interest rates. Certain derivatives may also have a leveraging effect, which
may increase the volatility of the portfolio. The Portfolio is generally
expected to engage in frequent and active trading of portfolio securities, which
may result in an increase in brokerage commissions and other transaction costs.
An investment in the Portfolio is not guaranteed by the Federal Deposit
Insurance Corporation.
4
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PORTFOLIO MANAGERS' REPORT THE USLICO MONEY MARKET PORTFOLIO
PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Jennifer J.
Thompson, CFA, ING Investment Management Co. (formerly, Aeltus Investment
Management, Inc.) -- the Sub-Adviser.
GOAL: The USLICO Series Fund -- Money Market Portfolio (the "Portfolio") seeks
maximum current income consistent with preservation of capital and liquidity.
PORTFOLIO SPECIFICS: The first half of 2004 yielded varying and dramatic shifts
in interest rate expectations and ended with the Federal Reserve ("Fed") Board's
Federal Open Market Committee ("FOMC") raising the Federal Funds target rate 25
basis points to 1.25% on June 30, 2004. As market participants changed their
views of the economy's strength throughout the period, the LIBOR yield curve
flattened initially and then steepened dramatically.
Specifically, the LIBOR yield curve (the difference between 1-month to 12-month
LIBOR) steepened by 76 basis points to 109 basis points. The curve reached its
flattest point of 19 basis points in mid-March, but a significant shift in Fed
Funds expectations shortly thereafter caused yield levels to rise with the
back-end of the LIBOR curve incurring the greatest change. Over the period,
12-month LIBOR increased by 100 basis points to 2.46% from 1.46%.
Throughout the first quarter of 2004, the Portfolio utilized a barbell portfolio
strategy that called for purchasing longer-dated paper (nine months to thirteen
months) balanced by the purchase of short-term commercial paper and floating
rate notes. The strategy worked well and resulted in strong performance. The
Portfolio's weighted average maturity remained significantly longer than
competitors' funds early in the year.
However, in early April, as the market priced in an earlier start to the
tightening cycle beginning with the June 30 meeting, the Portfolio eased off its
barbell strategy and limited investments solely to short commercial paper and
floating rate notes. This better positioned the Portfolio to take advantage of
the higher interest rate environment. Accordingly, the Portfolio's weighted
average maturity significantly declined during the second half of the reporting
period and finished the period at 48 days compared with 45 days for the
benchmark, iMoneyNet First Tier Retail Index.
MARKET OUTLOOK: The June 30 FOMC statement appeared to signal the Fed's intent
to gradually raise the target interest rate. At the end of the period, the
market priced in a year-end Fed Funds rate of roughly 2.00% to 2.25%, or 25
basis points per FOMC meeting. But some market observers believe inflation will
accelerate, causing the Fed to move more aggressively than the market currently
thinks it will. Given such high level of uncertainty, particularly in light of
current market levels for longer term maturities, we believe that continuing our
strategy of limiting purchases to short-term commercial paper or floating rate
notes is most appropriate.
PRINCIPAL RISK FACTOR(S): An investment in the Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Portfolio seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Portfolio.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
Portfolio holdings are subject to change daily.
This report contains statements that may be "forward-looking" statements. Actual
results may differ materially from those projected in the "forward-looking"
statements.
5
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THE USLICO BOND PORTFOLIO PORTFOLIO MANAGERS' REPORT
PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by James B.
Kauffmann, ING Investment Management Co. (formerly, Aeltus Investment
Management, Inc.) -- the Sub-Adviser.
GOAL: The USLICO Series Fund -- Bond Portfolio (the "Portfolio") seeks high
level of income consistent with prudent risk and the preservation of capital. As
a secondary objective, the Portfolio seeks capital appreciation when consistent
with its principal objective.
PERFORMANCE: For the six months ended June 30, 2004, the Portfolio provided a
return of -0.81%, compared to the Lehman Brothers Aggregate Bond Index(1), which
returned 0.16% for the same period.
PORTFOLIO SPECIFICS: During the period, we reduced our exposure to longer-dated
and lower-rated corporates in the face of stretched valuations. As a rule,
longer-dated credit-sensitive paper underperformed. Our exposure in securitized
sectors generally proved beneficial. A slight overweight in financial
institutions early in the year contributed positively. In the second half we
were underweight the sector, which also contributed positively to relative
performance as the sector fared poorly as the market prepared for Federal
Reserve ("Fed") tightening. We were also underweight in dollar-denominated
issues of foreign countries, another sector that had a negative return.
Mortgages produced a small positive excess return, and our position varied from
neutral to underweight during the period. Exposure to emerging market debt
contributed to returns in the first half of the reporting period, but was a
significant drag on our performance in the second half as incremental yield was
not sufficient to offset price depreciation. However, our declining high yield
exposure broadly supported returns, although the exposure is now miniscule.
MARKET OUTLOOK: In our opinion, Treasury yields do not yet fully reflect the
quickening pace of the economy and the recent rise in a number of inflation
metrics, but the bond market has begun to incorporate a cycle of less
accommodative monetary policy. Now that Alan Greenspan has successfully
navigated the economy past the immediate concerns of deflation, we are anxious
to see if he can avoid the effects of inflation. While the recent rise in
inflation releases were amplified by increases in hotel rates, apparel, medical
care, and adjustments to owners' equivalent rent, the trajectory is worrisome.
One observer drew the analogy that Fed tightening cycles are like confronting a
tee shot with a putter. Should inflationary expectations become manifest in unit
labor costs, the Fed may be forced into a more aggressive stance. Many in the
bond market believe that the Fed's reactive approach will be tardy in responding
to increasing inflation, and we are cognizant of the lagged effect of monetary
policy. Historically, changes in the Fed Funds rate can take 12 to 18 months to
influence economic activity, but one may argue that today's domestic scene of
high consumer indebtedness and increased variable rate financing could indicate
speedier transmission of policy changes.
In the months ahead, employment and inflation releases and comments from Fed
officials will likely remain key data as bond market observers seek to divine
the timing, frequency, and magnitude of future tightenings. Tactically, the
Portfolio is still short in duration in the face of anticipated improving global
economic fundamentals, but we have reduced the magnitude of that posture
following the recent rise in rates. We are neutral home mortgages, overweight
asset-backed and commercial mortgage-backed securities, and underweight the
front-end of the yield curve, which appears most vulnerable in a tightening
cycle. We are underweight agencies. Stretched valuations in investment-grade
credit and plus sectors warrant some caution, and we have reduced the
contribution to duration of these spread sectors. Additionally, we have reduced
our exposure in emerging markets, and our high yield position has been
eliminated with the exception of a few crossover and special situation issues
that tend to track the investment grade market. However, we are watchful for
points of potential re-entry.
6
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PORTFOLIO MANAGERS' REPORT THE USLICO BOND PORTFOLIO
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS FOR THE YEARS ENDED JUNE 30, 2004
--------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
Bond Portfolio (0.21)% 4.06% 5.13%
Lehman Brothers Aggregate Bond Index(1) 0.32% 6.95% 7.39%
</Table>
The table above illustrates the total return of Bond Portfolio against the
Lehman Brothers Aggregate Bond Index. The Index is unmanaged and has no cash in
its portfolio, imposes no sales charges and incurs no operating expenses. An
investor cannot invest directly in an index. The Portfolio's performance is
shown without the imposition of any expenses or charges which are, or may be,
imposed under your annuity contract. Total returns would have been lower if such
expenses or charges were included.
The performance table does not reflect the deduction of taxes that a shareholder
will pay on Portfolio distributions or the redemption of Portfolio shares.
TOTAL RETURNS REFLECT THE FACT THAT THE INVESTMENT MANAGER HAS WAIVED CERTAIN
FEES AND OPERATING EXPENSES OTHERWISE PAYABLE BY THE PORTFOLIO, SUBJECT TO
POSSIBLE LATER REIMBURSEMENT DURING A THREE-YEAR PERIOD. TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD THERE BEEN NO WAIVER TO THE PORTFOLIO.
THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION
AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES
PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR
UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE
CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END.
THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING"
STATEMENTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) The Lehman Brothers Aggregate Bond Index is a widely recognized, unmanaged
index of publicly issued investment grade U.S. Government, mortgage-backed,
asset-backed and corporate debt securities.
PRINCIPAL RISK FACTOR(S): Credit, interest rate and other risks that accompany
debt instruments. Debt securities are subject to loss due to default in payment
of principal and/or interest by an issuer. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause greater
price volatility if interest rates change and less income is received due to
prepayment in a lower interest rate environment. The Portfolio is generally
expected to engage in frequent and active trading of portfolio securities, which
may result in an increase in brokerage commissions and other transaction costs.
An investment in the Portfolio is not guaranteed by the Federal Deposit
Insurance Corporation.
7
<Page>
THE USLICO ASSET ALLOCATION PORTFOLIO PORTFOLIO MANAGERS' REPORT
PORTFOLIO MANAGEMENT TEAM: A team of investment professional led by James A.
Vail, CFA, manages the equity portion, a team of investment professionals led by
James B. Kauffmann manages the bond portion and a team of investment
professionals led by Jennifer J. Thompson, CFA, manages the money market portion
of the Portfolio. They are all with ING Investment Management Co. (formerly,
Aeltus Investment Management, Inc.) -- the Sub-Adviser.
GOAL: The USLICO Series Fund -- Asset Allocation Portfolio (the "Portfolio")
seeks to obtain high total return with reduced risk over the long term by
allocating its assets among stocks, bonds and short-term instruments.
PERFORMANCE: For the six months ended June 30, 2004, the Portfolio provided a
return of 3.37%, compared to the Standard & Poor's ("S&P") 500 Index(1) and the
Lehman Brothers Aggregate Bond Index(2), which returned 3.44% and 0.16%,
respectively, for the same period.
PORTFOLIO SPECIFICS: The Portfolio benefited from strong performance in the
information technology and health care sectors. The strong performing companies
were Biogen IDEC, Inc., as well as Advance PCS and National Semiconductor, which
were held during the period. Other strong individual performers were eBay, Inc.
and Yahoo!, Inc. as both continued to take share from their traditional
competitors. In the industrials sector, Tyco International Ltd. benefited from a
company-specific turnaround, as well as leverage to the overall strengthening
economy. Performance was hurt in the energy sector, as we did not hold any of
the large integrated oil companies, such as Exxon Mobil, ChevronTexaco and
Conoco Phillips.
Our short duration stance was a major source of the good performance of the
fixed income portion relative to the benchmark. During the period, we reduced
our exposure to longer-dated and lower-rated corporates in the face of stretched
valuations. As a rule, longer-dated, credit-sensitive paper underperformed. Our
exposure in securitized sectors generally proved beneficial. A slight overweight
in financial institutions early in the year contributed positively. In the
second half of the reporting period, we were underweight the sector. This
contributed positively to relative performance, as the sector fared poorly as
the market prepared for Federal Reserve ("Fed") tightening. We were also
underweight in dollar-denominated issues of foreign countries, another sector
that had a negative return. Mortgages produced a small positive excess return,
and our position varied from neutral to underweight during the period. Exposure
to emerging market debt contributed to returns in the first half of the
reporting period, but was a significant drag on our performance in the second
half as incremental yield was not sufficient to offset price depreciation.
However, our declining high yield exposure broadly supported returns, although
the exposure is now miniscule.
MARKET OUTLOOK: In our opinion, the market is performing well in the face of
geopolitical uncertainties, high energy prices, and concerns over a weakening
China economy. As we ended the period, despite recent indications of a measured
response by the Fed to an expanding domestic economy, the market appeared to be
transfixed on the letter of the statements and not the spirit. Again, in our
opinion, the market is ignoring the fact that first-quarter earnings grew 27.5%
year-over-year, and second-quarter projections call for a gain of 30%. All in
all, the economic environment should be good for stocks, and we remain
encouraged by the outlook. Near-term concerns should abate, as the year
continues to unfold and the stock market should move higher by year-end.
In the months ahead, employment and inflation releases and comments from Fed
officials will likely remain key data as bond market observers seek to divine
the timing, frequency, and magnitude of future tightenings. Tactically, the
fixed income portion of the Portfolio is still short in duration in the face of
anticipated improving global economic fundamentals, but we have reduced the
magnitude of that posture following the recent rise in rates. We are neutral
home mortgages, overweight asset-backed and commercial mortgage backed
securities, and underweight the front-end of the yield curve, which appears most
vulnerable in a tightening cycle. We are underweight agencies. Stretched
valuations in investment-grade credit and plus sectors warrant some caution, and
we have reduced the contribution to duration of these spread sectors.
Additionally, we have reduced our exposure in emerging markets, and our high
yield position has been eliminated with the exception of a few crossover and
special situation issues that tend to track the investment grade market.
However, we are watchful for points of potential re-entry.
8
<Page>
PORTFOLIO MANAGERS' REPORT THE USLICO ASSET ALLOCATION PORTFOLIO
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004
----------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
Asset Allocation Portfolio 13.25% (2.25)% 5.38%
S&P 500 Index(1) 19.11% (2.17)% 11.87%
Lehman Brothers Aggregate Bond Index(2) 0.32% 6.95% 7.39%
</Table>
The table illustrates the total return of Asset Allocation Portfolio against
both the S&P 500 Index and the Lehman Brothers Aggregate Bond Index. The Indices
are unmanaged and have no cash in their portfolios, impose no sales charges and
incur no operating expenses. An investor cannot invest directly in an index. The
Portfolio's performance is shown without the imposition of any expenses or
charges which are, or may be, imposed under your annuity contract. Total returns
would have been lower if such expenses or charges were included.
The performance table does not reflect the deduction of taxes that a shareholder
will pay on Portfolio distributions or the redemption of Portfolio shares.
TOTAL RETURNS REFLECT THE FACT THAT THE INVESTMENT MANAGER HAS WAIVED CERTAIN
FEES AND OPERATING EXPENSES OTHERWISE PAYABLE BY THE PORTFOLIO, SUBJECT TO
POSSIBLE LATER REIMBURSEMENT DURING A THREE-YEAR PERIOD. TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD THERE BEEN NO WAIVER TO THE PORTFOLIO.
THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION
AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES
PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR
UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE
CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END.
THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING"
STATEMENTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
(1) The S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization companies whose
securities are traded on major U.S. stock markets.
(2) The Lehman Brothers Aggregate Bond Index is a widely recognized, unmanaged
index of publicly issued investment grade U.S. Government, mortgage-backed,
asset-backed and corporate debt securities.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. Credit, interest rate and other risks that accompany
debt instruments. The value of securities of smaller issuers can be more
volatile than that of larger issuers. Derivatives are subject to the risk of
changes in the market price of a security, credit risk with respect to the
counterparty to the derivative instrument, and the risk of loss due to changes
in interest rates. Certain derivatives may also have a leveraging effect, which
may increase the volatility of the portfolio. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause greater
price volatility if interest rates change and less income is received due to
prepayment in a lower interest rate environment. The Portfolio is generally
expected to engage in frequent and active trading of portfolio securities, which
may result in an increase in brokerage commissions and other transaction costs.
An investment in the Portfolio is not guaranteed by the Federal Deposit
Insurance Corporation.
9
<Page>
STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 2004 (Unaudited)
<Table>
<Caption>
THE THE THE THE
STOCK MONEY MARKET BOND ASSET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ------------------
ASSETS:
Investments in securities at value* $ 14,579,009 $ -- $ 2,804,928 $ 12,986,500
Short-term investments at amortized cost -- 5,004,194 -- --
Repurchase agreement 691,000 898,000 825,000 1,084,000
Cash 438 811 1,732 --
Receivables:
Investment securities sold 350,015 -- 38,115 209,439
Dividends and interest 7,641 12,967 21,522 51,516
Prepaid expenses 105 93 85 109
Reimbursement due from manager -- 708 1,354 1,495
-------------- -------------- -------------- ------------------
Total assets 15,628,208 5,916,773 3,692,736 14,333,059
-------------- -------------- -------------- ------------------
LIABILITIES:
Payable for investment securities purchased 73,757 -- 838,770 1,361,381
Income distribution payable -- 1,402 -- --
Payable to affiliates 4,861 1,770 851 3,854
Payable to custodian -- -- -- 416,791
Payable for trustee fees 4,018 3,061 2,125 3,020
Other accrued expenses and liabilities 80,992 22,121 23,565 59,397
-------------- -------------- -------------- ------------------
Total liabilities 163,628 28,354 865,311 1,844,443
-------------- -------------- -------------- ------------------
NET ASSETS $ 15,464,580 $ 5,888,419 $ 2,827,425 $ 12,488,616
============== ============== ============== ==================
NET ASSETS WERE COMPRISED OF:
Paid-in capital $ 28,943,275 $ 5,889,063 $ 2,945,286 $ 16,480,575
Undistributed net investment income 17,480 -- 26,149 61,765
Accumulated net realized loss on
investments and options (15,770,382) (644) (129,741) (5,282,921)
Net unrealized appreciation (depreciation)
on investments and options 2,274,207 -- (14,269) 1,229,197
-------------- -------------- -------------- ------------------
NET ASSETS $ 15,464,580 $ 5,888,419 $ 2,827,425 $ 12,488,616
============== ============== ============== ==================
- ----------
*Cost of investments in securities $ 12,304,802 $ -- $ 2,819,197 $ 11,757,303
Net assets $ 15,464,580 $ 5,888,419 $ 2,827,425 $ 12,488,616
Shares authorized unlimited unlimited unlimited unlimited
Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001
Shares outstanding 2,167,182 5,889,133 289,584 1,358,174
Net asset value and redemption price per share $ 7.14 $ 1.00 $ 9.76 $ 9.20
</Table>
See Accompanying Notes to Financial Statements
10
<Page>
STATEMENTS OF OPERATIONS for the six months ended June 30, 2004 (Unaudited)
<Table>
<Caption>
THE THE THE THE
STOCK MONEY MARKET BOND ASSET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ------------------
INVESTMENT INCOME:
Dividends, net of foreign taxes withheld* $ 53,142 $ -- $ 560 $ 36,526
Interest 30,185 35,859 59,235 127,050
-------------- -------------- -------------- ------------------
Total investment income 83,327 35,859 59,795 163,576
-------------- -------------- -------------- ------------------
EXPENSES:
Investment management fees 36,554 15,380 7,480 33,334
Transfer agent fees 3,290 2,393 2,202 3,146
Administrative service fees 7,311 3,076 1,496 6,667
Shareholder reporting expense 4,807 2,026 925 4,588
Professional fees 17,990 13,845 6,370 18,955
Custody and accounting expense 9,659 2,730 9,730 17,265
Trustee fees 4,914 1,092 1,456 3,822
Miscellaneous expense 683 255 197 430
-------------- -------------- -------------- ------------------
Total expenses 85,208 40,797 29,856 88,207
-------------- -------------- -------------- ------------------
Less:
Net waived and reimbursed fees 19,361 13,028 16,377 28,149
-------------- -------------- -------------- ------------------
Net expenses 65,847 27,769 13,479 60,058
-------------- -------------- -------------- ------------------
Net investment income 17,480 8,090 46,316 103,518
-------------- -------------- -------------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND OPTIONS:
Net realized gain (loss) on:
Investments 1,324,093 (644) 4,343 596,652
Options (5,036) -- -- (2,571)
-------------- -------------- -------------- ------------------
Net realized gain (loss) on investments and options 1,319,057 (644) 4,343 594,081
-------------- -------------- -------------- ------------------
Net change in unrealized appreciation
or depreciation on:
Investments (565,030) -- (50,469) (223,574)
Options (4,880) -- -- (2,440)
-------------- -------------- -------------- ------------------
Net change in unrealized appreciation
or depreciation on investments and options (569,910) -- (50,469) (226,014)
-------------- -------------- -------------- ------------------
Net realized and unrealized gain (loss) on
investments and options 749,147 (644) (46,126) 368,067
-------------- -------------- -------------- ------------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 766,627 $ 7,446 $ 190 $ 471,585
============== ============== ============== ==================
- ----------
*Foreign taxes $ 125 $ -- $ -- $ 132
</Table>
See Accompanying Notes to Financial Statements
11
<Page>
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
<Table>
<Caption>
THE STOCK PORTFOLIO THE MONEY MARKET PORTFOLIO
-------------------------------- ------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2004 2003 2004 2003
-------------- -------------- -------------- ------------------
FROM OPERATIONS:
Net investment income (loss) $ 17,480 $ (28,209) $ 8,090 $ 17,877
Net realized gain (loss) on investments and options 1,319,057 1,044,281 (644) (69)
Net change in unrealized appreciation or
depreciation on investments and options (569,910) 2,720,022 -- --
-------------- -------------- -------------- ------------------
Net increase in net assets resulting from
operations 766,627 3,736,094 7,446 17,808
-------------- -------------- -------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income -- -- (8,090) (17,877)
-------------- -------------- -------------- ------------------
Total distributions -- -- (8,090) (17,877)
-------------- -------------- -------------- ------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 415,432 412,117 -- --
Dividends reinvested -- -- 8,000 17,877
-------------- -------------- -------------- ------------------
415,432 412,117 8,000 17,877
Cost of shares redeemed -- (5,854) (303,889) (282,842)
-------------- -------------- -------------- ------------------
Net increase (decrease) in net asset resulting
from capital share transactions 415,432 406,263 (295,889) (264,965)
-------------- -------------- -------------- ------------------
Net increase (decrease) in net assets 1,182,059 4,142,357 (296,533) (265,034)
-------------- -------------- -------------- ------------------
NET ASSETS:
Beginning of period 14,282,521 10,140,164 6,184,952 6,449,986
-------------- -------------- -------------- ------------------
End of period $ 15,464,580 $ 14,282,521 $ 5,888,419 $ 6,184,952
============== ============== ============== ==================
Undistributed net investment income at end of
period $ 17,480 $ -- $ -- $ --
============== ============== ============== ==================
</Table>
See Accompanying Notes to Financial Statements
12
<Page>
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
<Table>
<Caption>
THE BOND PORTFOLIO THE ASSET ALLOCATION PORTFOLIO
-------------------------------- ------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2004 2003 2004 2003
-------------- -------------- -------------- ------------------
FROM OPERATIONS:
Net investment income $ 46,316 $ 112,733 $ 103,518 $ 222,669
Net realized gain on investments and options 4,343 41,841 594,081 642,224
Net change in unrealized appreciation or
depreciation on investments and options (50,469) (19,376) (226,014) 1,258,624
-------------- -------------- -------------- ------------------
Net increase in net assets resulting from
operations 190 135,198 471,585 2,123,517
-------------- -------------- -------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (24,203) (108,697) (47,573) (216,849)
-------------- -------------- -------------- ------------------
Total distributions (24,203) (108,697) (47,573) (216,849)
-------------- -------------- -------------- ------------------
FROM CAPITAL SHARE TRANSACTIONS:
Dividends reinvested 24,203 108,697 47,573 216,849
Cost of shares redeemed (163,910) (230,065) (1,133,605) (575,963)
-------------- -------------- -------------- ------------------
Net decrease in net asset resulting from capital
share transactions (139,707) (121,368) (1,086,032) (359,114)
-------------- -------------- -------------- ------------------
Net increase (decrease) in net assets (163,720) (94,867) (662,020) 1,547,554
-------------- -------------- -------------- ------------------
NET ASSETS:
Beginning of period 2,991,145 3,086,012 13,150,636 11,603,082
-------------- -------------- -------------- ------------------
End of period $ 2,827,425 $ 2,991,145 $ 12,488,616 $ 13,150,636
============== ============== ============== ==================
Undistributed net investment income at end of
period $ 26,149 $ 4,036 $ 61,765 $ 5,820
============== ============== ============== ==================
</Table>
See Accompanying Notes to Financial Statements
13
<Page>
THE USLICO STOCK PORTFOLIO (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(1) 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 6.77 4.96 7.32 12.42 16.06 13.64
Income (loss) from investment operations:
Net investment income (loss) $ 0.01 (0.01) (0.04) (0.05) (0.02) 0.12
Net realized and unrealized gain (loss)
on investments $ 0.36 1.82 (2.32) (5.05) (3.18) 3.93
Total from investment operations $ 0.37 1.81 (2.36) (5.10) (3.20) 4.05
Less distributions from:
Net investment income $ -- -- -- -- -- 0.13
Net realized gain on investments $ -- -- -- -- 0.44 1.50
Total distributions $ -- -- -- -- 0.44 1.63
Net asset value, end of period $ 7.14 6.77 4.96 7.32 12.42 16.06
TOTAL RETURN(2) % 5.47 36.49 (32.24) (41.06) (19.94) 30.08
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 15,465 14,283 10,140 14,972 26,513 34,493
Ratios to average net assets:
Net expenses after expense reimbursement(3)(4) % 0.90 0.90 0.90 0.90 0.62 0.90
Gross expenses prior to expense reimbursement(4) % 1.16 1.08 1.47 1.42 0.87 1.15
Net investment income (loss) after expense
reimbursement(3)(4) % 0.24 (0.24) (0.59) (0.61) (0.11) 0.84
Portfolio turnover rate % 63 189 418 510 365 306
</Table>
(1) Effective May 11, 2001, ING Investments, LLC began serving as Adviser to the
Portfolio.
(2) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total returns for periods
less than one year are not annualized.
(3) The Investment Adviser has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
(4) Annualized for periods less than one year.
See Accompanying Notes to Financial Statements.
14
<Page>
THE USLICO MONEY MARKET PORTFOLIO (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(1) 2000(2) 1999
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 1.00
Income from investment operations:
Net investment income $ 0.00* 0.00* 0.01 0.03 0.05 0.04
Total from investment operations $ 0.00* 0.00* 0.01 0.03 0.05 0.04
Less distributions from:
Net investment income $ 0.00* 0.00* 0.01 0.03 0.05 0.04
Total distributions $ 0.00* 0.00* 0.01 0.03 0.05 0.04
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 1.00
TOTAL RETURN(3) % 0.13 0.28 0.88 3.14 5.59 5.00
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 5,888 6,185 6,450 6,400 6,331 6,058
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 0.90 0.90 0.78 0.90 0.90 0.90
Gross expenses prior to expense reimbursement(5) % 1.33 1.11 1.03 1.63 1.34 1.15
Net investment income after expense
reimbursement(4)(5) % 0.26 0.28 0.97 3.13 5.45 4.27
</Table>
(1) Effective May 11, 2001, ING Investments, LLC ceased serving as the
Sub-Adviser to the Portfolio and began serving as Adviser to the Portfolio.
(2) Effective December 1, 2000, ING Investments, LLC became Sub-Adviser to the
Portfolio.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total returns for periods
less than one year are not annualized.
(4) The Investment Adviser has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
(5) Annualized for periods less than one year.
* Amount is less than $0.01 per share.
See Accompanying Notes to Financial Statements.
15
<Page>
THE USLICO BOND PORTFOLIO (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(1) 2000(2) 1999
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.84 9.75 9.41 9.21 9.01 9.74
Income (loss) from investment operations:
Net investment income $ 0.16 0.36 0.39 0.48 0.40 0.46
Net realized and unrealized gain (loss)
on investments $ (0.16) 0.08 0.35 0.11 0.20 (0.73)
Total from investment operations $ -- 0.44 0.74 0.59 0.60 (0.27)
Less distributions from:
Net investment income $ 0.08 0.35 0.40 0.39 0.40 0.46
Total distributions $ 0.08 0.35 0.40 0.39 0.40 0.46
Net asset value, end of period $ 9.76 9.84 9.75 9.41 9.21 9.01
TOTAL RETURN(3) % (0.81) 4.57 8.07 6.47 6.74 (2.87)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 2,827 2,991 3,086 2,846 2,881 2,765
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 0.90 0.91 0.89 0.90 0.90 0.90
Gross expenses prior to expense reimbursement(5) % 2.00 1.52 1.37 2.15 1.83 1.15
Net investment income after expense
reimbursement(4)(5) % 3.10 3.65 4.20 5.02(6) 4.30 4.88
Portfolio turnover rate % 253 368 159 215 49 46
</Table>
(1) Effective May 11, 2001, ING Investments, LLC ceased serving as the
Sub-Adviser to the Portfolio and began serving as Adviser to the Portfolio.
(2) Effective December 1, 2000, ING Investments, LLC became Sub-Adviser to the
Portfolio.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total returns for periods
less than one year are not annualized.
(4) The Investment Adviser has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
(5) Annualized for periods less than one year.
(6) Had the Bond Portfolio not amortized premiums and accreted discounts the
ratio of net investment income to average net assets would have been 4.56%.
See Accompanying Notes to Financial Statements.
16
<Page>
THE USLICO ASSET ALLOCATION PORTFOLIO (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(1) 2000(2) 1999
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 8.90 7.64 8.64 11.04 12.68 11.92
Income (loss) from investment operations:
Net investment income $ 0.37 0.15 0.19 0.22 0.18 0.31
Net realized and unrealized gain (loss)
on investments $ 0.25 1.25 (0.94) (2.43) (1.41) 1.48
Total from investment operations $ 0.62 1.40 (0.75) (2.21) (1.23) 1.79
Less distributions from:
Net investment income $ 0.32 0.14 0.25 0.19 0.18 0.31
Net realized gain on investments $ -- -- -- -- 0.23 0.72
Total distributions $ 0.32 0.14 0.25 0.19 0.41 1.03
Net asset value, end of period $ 9.20 8.90 7.64 8.64 11.04 12.68
TOTAL RETURN(3) % 3.37 18.54 (8.72) (20.09) (9.80) 15.10
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 12,489 13,151 11,603 12,752 15,591 18,180
Ratios to average net assets:
Net expenses after expense reimbursement(4)(5) % 0.90 0.91 0.90 0.90 0.90 0.90
Gross expenses prior to expense reimbursement(5) % 1.32 1.07 1.34 1.76 1.18 1.15
Net investment income after expense
reimbursement(4)(5) % 1.55 1.81 2.42 2.37(6) 1.44 2.58
Portfolio turnover rate % 142 210 258 354 243 227
</Table>
(1) Effective May 11, 2001, ING Investments, LLC ceased serving as the
Sub-Adviser to the Portfolio and began serving as Adviser to the Portfolio.
(2) Effective December 1, 2000, ING Investments, LLC became Sub-Adviser to the
Portfolio.
(3) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value. Total returns for periods
less than one year are not annualized.
(4) The Investment Adviser has agreed to limit expenses, (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
(5) Annualized for periods less than one year.
(6) Had the Asset Allocation Portfolio not amortized premiums and accreted
discounts the ratio of net investment income to average net assets would
have been 2.09%.
See Accompanying Notes to Financial Statements.
17
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited)
NOTE 1 -- ORGANIZATION
ORGANIZATION. USLICO Series Fund (the "Fund") is an open-end, diversified
management investment company registered under the Investment Company Act of
1940 and consisting of four separate portfolios. The four portfolios of the Fund
are as follows: The Stock Portfolio ("Stock Portfolio"), The Money Market
Portfolio ("Money Market Portfolio"), The Bond Portfolio ("Bond Portfolio") and
The Asset Allocation Portfolio ("Asset Allocation Portfolio"). Each Portfolio
has its own investment objectives and policies which are detailed in the
Prospectus for each Portfolio. The Fund was organized as a business trust under
the laws of Massachusetts on January 19, 1988. Shares of the Portfolio are sold
only to separate accounts of ReliaStar Life Insurance Company (ReliaStar Life)
and ReliaStar Life Insurance Company of New York (ReliaStar Life of New York, a
wholly owned subsidiary of ReliaStar Life) to serve as the investment medium for
variable life insurance policies issued by these companies. The separate
accounts invest in shares of one or more of the Portfolios, in accordance with
allocation instructions received from policyowners. Each Portfolio share
outstanding represents a beneficial interest in the respective Portfolio.
ING Investments, LLC ("ING Investments"), an Arizona limited liability company,
serves as the investment adviser to the Portfolios. ING Investments has engaged
ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.,
"ING IM"), a Connecticut corporation, to serve as the Sub-Adviser to the
Portfolios. ING Funds Distributor, LLC is the principal underwriter of the
Portfolios. ING Funds Services, LLC serves as the administrator to each
Portfolio. ING Investments, ING IM, ING Funds Distributor, LLC and ING Funds
Services, LLC are indirect wholly-owned subsidiaries of ING Groep N.V. ING Groep
N.V. is a global financial institution active in the field of insurance, banking
and asset management.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are consistently followed by the
Portfolios in the preparation of their financial statements. Such policies are
in conformity with accounting principles generally accepted in the United States
of America for investment companies.
A. SECURITY VALUATION. Investments in equity securities traded on a national
securities exchange are valued at the last reported sale price. Securities
reported by NASDAQ will be valued at the NASDAQ official closing prices.
Securities traded on an exchange or NASDAQ for which there has been no sale
and securities traded in the over-the-counter-market are valued at the mean
between the last reported bid and ask prices. All investments quoted in
foreign currencies will be valued daily in U.S. dollars on the basis of the
foreign currency exchange rates prevailing at that time. Debt securities are
valued at prices obtained from independent services or from one or more
dealers making markets in the securities and may be adjusted based on the
Portfolios' valuation procedures. U.S. Government obligations are valued by
using market quotations or independent pricing services that use prices
provided by market-makers or estimates of market values obtained from yield
data relating to instruments or securities with similar characteristics.
Securities and assets for which market quotations are not readily available
(which may include certain restricted securities which are subject to
limitations as to their sale) are valued at their fair values as determined
in good faith by or under the supervision of the Portfolio's Board of
Directors ("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 a Portfolio calculates its
net asset value may also be valued at their fair values as determined in
good faith by or under the supervision of a Portfolio's Board, in accordance
with methods that are specifically authorized by the Board. If a significant
event which is likely to impact the value of one or more foreign securities
held by Portfolio occurs after the time at which the foreign market for such
security(ies) closes but before the time that the Portfolio's net asset
value is calculated on any business day, such event may be taken into
account in determining the fair value of such security(ies) at the time the
Portfolio calculates its net asset value. For these purposes, significant
events after the close of trading on a foreign market may include, among
others, securities trading in the U.S. and other markets, corporate
announcements, natural and other disasters, and political and other events.
Among other elements of analysis, the Board has authorized the use of one or
more research services to assist with the determination of the fair value of
foreign securities in light of significant events. Research services use
statistical
18
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
analyses and quantitative models to help determine fair value as of the time
a Portfolio calculates its net asset value. Unlike the closing price of a
security on an exchange, fair value determinations employ elements of
judgment, and the fair value assigned to a security may not represent the
actual value that a Portfolio could obtain if it were to sell the security
at the time 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. Dividend income is recorded on the ex-dividend date, or
for certain foreign securities, when the information becomes available to
the Portfolios. Premium amortization and discount accretion are determined
by the effective yield method.
C. PURCHASES AND SALES. Purchases and sales of Portfolio shares are made on the
basis of the net asset value per share prevailing at the close of business
on the preceding business day.
D. DISTRIBUTIONS TO SHAREHOLDERS. The Portfolios record distributions to their
shareholders on ex-dividend date. Dividends from net investment income and
capital gains, if any, are declared and paid annually by the Portfolios. The
Portfolios may make distributions on a more frequent basis to comply with
the distribution requirements of the Internal Revenue Code. The
characteristics of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from accounting
principles generally accepted in the United States of America for investment
companies.
E. FEDERAL INCOME TAXES. It is the policy of the Portfolios to comply with
subchapter M of the Internal Revenue Code and related excise tax provisions
applicable to regulated investment companies and to distribute substantially
all of their net investment income and any net realized capital gains to
their shareholders. Therefore, no federal income tax provision is required.
No capital gain distributions shall be made until any capital loss
carryforwards have been fully utilized or expired.
F. USE OF ESTIMATES. Management of the Portfolios has made certain estimates
and assumptions relating to the reporting of assets, liabilities, income,
and expenses to prepare these financial statements in conformity with
accounting principles generally accepted in the United States of America for
investment companies. Actual results could differ from these estimates.
G. REPURCHASE AGREEMENTS. Each Portfolio may invest in repurchase agreements
only with government securities dealers recognized by the Board of Governors
of the Federal Reserve System. Under such agreements, the seller of the
security agrees to repurchase it at a mutually agreed upon time and price.
The resale price is in excess of the purchase price and reflects an agreed
upon interest rate for the period of time the agreement is outstanding. The
period of the repurchase agreements is usually short, from overnight to one
week, while the underlying securities generally have longer maturities. Each
Portfolio will receive as collateral securities acceptable to it whose
market value is equal to at least 100% of the carrying amount of the
repurchase agreements, plus accrued interest, being invested by the
Portfolio. The underlying collateral is valued daily on a mark to market
basis to assure that the value, including accrued interest is at least equal
to the repurchase price. If the seller defaults, a Portfolio might incur a
loss or delay in the realization of proceeds if the value of the security
collateralizing the repurchase agreement declines, and it might incur
disposition costs in liquidating the collateral.
H. ILLIQUID AND RESTRICTED SECURITIES. The Portfolios may not invest more than
10% of their net assets in illiquid securities. Illiquid securities are not
readily marketable. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for the Portfolios to sell them promptly at an acceptable price.
Each Portfolio may also invest in restricted securities, which include those
sold under Rule 144A of the Securities Act of 1933 (1933 Act) or securities
offered pursuant to Section 4(2) of the 1933 Act, and/or are subject to
legal or contractual restrictions on resale and may not be publicly sold
without registration under the 1933 Act. Certain restricted securities may
be considered liquid pursuant to procedures adopted by the Board or may be
deemed to be illiquid because they may not be readily marketable. Illiquid
and
19
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
restricted securities are valued using market quotations when readily
available. In the absence of market quotations, the securities are valued
based upon their fair value determined under procedures approved by the
Board.
I. DELAYED DELIVERY TRANSACTIONS. The Portfolios may purchase or sell
securities on a when-issued or forward commitment basis. The price of the
underlying securities and date when the securities will be delivered and
paid for are fixed at the time the transaction is negotiated. The market
value of such is identified in each Portfolio's Portfolio of Investments.
Losses may arise due to changes in the market value of the securities or
from the inability of counterparties to meet the terms of the contract. In
connection with such purchases, the Portfolios are required to segregate
liquid assets sufficient to cover the purchase price.
J. MORTGAGE DOLLAR ROLL TRANSACTIONS. In connection with a Portfolio's ability
to purchase or sell securities on a when-issued basis, the Portfolios may
engage in dollar roll transactions with respect to mortgage-backed
securities issued by Government National Mortgage Association, Federal
National Mortgage Association and Federal Home Loan Mortgage Corp. In a
dollar roll transaction, a Portfolio sells a mortgage-backed security to a
financial institution, such as a bank or broker/dealer, and simultaneously
agrees to repurchase a substantially similar (i.e., same type, coupon, and
maturity) security from the institution on a delayed delivery basis an
agreed upon price. The mortgage-backed securities that are repurchased will
bear the same interest rate as those sold, but generally will be
collateralized by different pools of mortgages with different prepayment
histories. The Portfolios account for dollar roll transactions as purchases
and sales.
K. OPTIONS CONTRACTS. Stock and Asset Allocation Portfolios may purchase put
and call options and may write (sell) call options on debt and other
securities in standardized contracts traded on national securities exchanges
or boards of trade. Option contracts are valued daily and unrealized gains
or losses are recorded based upon the last sales price on the principal
exchange on which the options are traded. The Portfolios will realize a gain
or loss upon the expiration or closing of the option contract. When an
option is exercised, the proceeds on sales of the underlying security for a
written call option, the purchase cost of the security for a written put
option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid. Realized and unrealized
gains or losses on option contracts are reflected in the accompanying
financial statements. The risk in writing a call option is that the
Portfolios give up the opportunity for profit if the market price of the
security increases and the option is exercised. The risk in writing a put
option is that the Portfolios may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option
is that the Portfolios pay a premium whether or not the option is exercised.
Risks may also arise from an illiquid secondary market or from the inability
of counterparties to meet the terms of the contract.
NOTE 3 -- INVESTMENT TRANSACTIONS
For the six months ended June 30, 2004, the cost of purchases and the proceeds
from the sales of securities, excluding short-term securities, were as follows:
<Table>
<Caption>
PURCHASES SALES
------------ ------------
Stock Portfolio $ 8,848,973 $ 8,909,690
Bond Portfolio 903,688 1,109,248
Asset Allocation Portfolio 6,075,933 6,583,785
</Table>
U.S. Government securities not included above were as follows:
<Table>
<Caption>
PURCHASES SALES
------------ ------------
Bond Portfolio $ 6,443,606 $ 6,185,366
Asset Allocation Portfolio 11,608,203 11,081,214
</Table>
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The Portfolios have entered into an Investment Management Agreement with ING
Investments (the "Investment Manager"). The Investment Management Agreement
compensates the Investment Manager with a fee, computed daily and payable
monthly, based on the average daily net assets of each Portfolio, at the annual
percentage rate of 0.50% on the first $100 million of average daily net assets
and 0.45% of average daily net assets in excess therof.
The Investment Manager entered into a Sub-Advisory Agreement with ING IM.
Subject to such policies as the Board or the Investment Manager may determine,
ING IM manages the Portfolios' assets in accordance with Portfolios' investment
objectives, policies, and limitations.
20
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued)
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES (CONTINUED)
The Investment Manager has contractually agreed to waive management fees charged
to each of the Portfolios to the extent they exceed 0.25% of the average daily
net assets of each Portfolio. The Investment Manager has also agreed to limit
the annual expenses of each Portfolio, other than management fees, to 0.65% of
the average net assets of each Portfolio.
The Investment Manager may at a later date recoup from a Portfolio for
management fees waived and other expenses assumed by the Investment Manager
during the previous 36 months, but only if, after such reimbursement, the
Portfolios' expense ratio does not exceed the percentage described above. Waived
and reimbursed fees net of any recoupment by the Investment Manager of such
waived and reimbursed fees are reflected on the accompanying Statements of
Operations.
As of June 30, 2004, the amounts of reimbursed fees that are subject to possible
recoupment by the Investment Manager and the related expiration dates are as
follows:
<Table>
<Caption>
JUNE 30,
------------------------------------
2005 2006 2007 TOTAL
---------- ---------- ---------- ----------
Stock Portfolio $ 61,463 $ 41,107 $ 7,357 $ 109,927
Money Market
Portfolio 45,414 -- 16,481 61,895
Bond Portfolio 53,736 8,271 25,261 87,268
Asset Allocation
Portfolio 104,976 16,730 21,125 142,831
</Table>
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.
Pursuant to an Administration Agreement, ING Funds Services, LLC ("IFS") serves
as administrator and provides certain administrative and shareholder services
necessary for Portfolio operations and is responsible for the supervision of
other service providers. IFS is entitled to receive from each Portfolio a fee at
an annual rate of 0.10% of each Portfolio's average daily net assets.
ING Funds Distributor, LLC serves as Distributor of the Portfolios. No fees are
charged to the Portfolios for distribution services.
NOTE 5 -- OTHER TRANSACTIONS WITH AFFILIATED AND RELATED PARTIES
At June 30, 2004, the Portfolios had the following amounts recorded in payable
to affiliates on the accompanying Statements of Assets and Liabilities (see Note
4):
<Table>
<Caption>
ACCRUED
INVESTMENT ACCRUED
MANAGEMENT ADMINISTRATIVE
FEES FEES TOTAL
---------- -------------- ---------
Stock Portfolio $ 3,647 $ 1,214 $ 4,861
Money Market
Portfolio 1,265 505 1,770
Bond Portfolio 608 243 851
Asset Allocation
Portfolio 2,754 1,100 3,854
</Table>
Each Portfolio has adopted a Retirement Policy covering all independent trustees
of the Portfolio 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 6 -- CALL OPTIONS WRITTEN
Written option activity for the Stock and Asset Allocation Portfolios for the
six months ended June 30, 2004 was as follows:
<Table>
<Caption>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
STOCK PORTFOLIO
Options outstanding at
December 31, 2003 40 $ 5,280
Options written -- --
Options expired (40) (5,280)
ASSET ALLOCATION PORTFOLIO
Options outstanding at
December 31, 2003 20 $ 2,640
Options written -- --
Options expired (20) (2,640)
</Table>
NOTE 7 -- LINE OF CREDIT
The Portfolios, in addition to certain other funds managed by the Investment
Manager, have entered into an unsecured committed revolving line of credit
agreement (the "Credit Agreement") with The Bank of New York for an aggregate
amount of $125,000,000. 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
21
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued)
NOTE 7 -- LINE OF CREDIT (CONTINUED)
payable quarterly in arrears. The Asset Allocation Portfolio utilized the line
of credit for one day during the six months ended June 30, 2004, with a daily
balance of $500,000 and an interest rate of 1.50%.
NOTE 8 -- CAPITAL SHARE TRANSACTIONS
Transaction in capital shares and dollars were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
------------------ ------------------
STOCK PORTFOLIO (NUMBER OF SHARES)
Shares sold 58,843 65,938
Shares redeemed -- (936)
------------------ ------------------
Net increase in shares outstanding 58,843 65,002
================== ==================
STOCK PORTFOLIO ($)
Shares sold $ 415,432 $ 412,117
Shares redeemed -- (5,854)
------------------ ------------------
Net increase $ 415,432 $ 406,263
================== ==================
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
------------------ ------------------
MONEY MARKET PORTFOLIO (NUMBER OF SHARES)
Shares reinvested 8,000 17,877
Shares redeemed (303,889) (282,842)
------------------ ------------------
Net decrease in shares outstanding (295,889) (264,965)
================== ==================
MONEY MARKET PORTFOLIO ($)
Shares reinvested $ 8,000 $ 17,877
Shares redeemed (303,889) (282,842)
------------------ ------------------
Net decrease $ (295,889) $ (264,965)
================== ==================
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
------------------ ------------------
BOND PORTFOLIO (NUMBER OF SHARES)
Shares reinvested 2,428 11,049
Shares redeemed (16,898) (23,500)
------------------ ------------------
Net decrease in shares outstanding (14,470) (12,451)
================== ==================
BOND PORTFOLIO ($)
Shares reinvested $ 24,203 $ 108,697
Shares redeemed (163,910) (230,065)
------------------ ------------------
Net decrease $ (139,707) $ (121,368)
================== ==================
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
------------------ ------------------
ASSET ALLOCATION PORTFOLIO (NUMBER OF SHARES)
Shares reinvested 5,193 26,221
Shares redeemed (124,435) (67,760)
------------------ ------------------
Net decrease in shares outstanding (119,242) (41,539)
================== ==================
ASSET ALLOCATION PORTFOLIO ($)
Shares reinvested $ 47,573 $ 216,849
Shares redeemed (1,133,605) (575,963)
------------------ ------------------
Net decrease $ (1,086,032) $ (359,114)
================== ==================
</Table>
22
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued)
NOTE 9 -- 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 paid by the Portfolios 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 was as
follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
ORDINARY INCOME ORDINARY INCOME
---------------- -----------------
Money Market Portfolio $ 8,090 $ 17,877
Bond Portfolio 24,203 108,697
Asset Allocation Portfolio 47,573 216,849
</Table>
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>
UNREALIZED CAPITAL
UNDISTRIBUTED APPRECIATION/ LOSS EXPIRATION
ORDINARY INCOME (DEPRECIATION) CARRYFORWARDS DATES
--------------- -------------- --------------- ----------
Stock Portfolio $ -- $ 2,822,516 $ (13,524,755) 2009
(3,543,083) 2010
---------------
$ (17,067,838)
===============
Bond Portfolio 4,058 36,200 $ (119,834) 2009
(14,250) 2010
---------------
$ (134,084)
===============
Asset Allocation Portfolio 5,864 1,442,395 $ (4,571,088) 2009
(1,293,099) 2010
---------------
$ (5,864,187)
===============
</Table>
NOTE 10 -- ILLIQUID SECURITIES
Pursuant to guidelines adopted by the Portfolios' Board, the following
securities have been deemed to be illiquid. The Portfolios currently limit
investment in illiquid securities to 10% of the Portfolios' net assets, at
market value, at time of purchase.
<Table>
<Caption>
INITIAL PERCENT
PRINCIPAL ACQUISITION OF NET
PORTFOLIO SECURITY AMOUNT PORTFOLIO COST VALUE ASSETS
- --------- -------- --------- ----------- -------- --------- --------
Bond Federal Home Loan Mortgage Corp.,
4.458%, due 12/01/26 $ 17,060 09/11/97 $ 17,335 $ 16,551 0.6%
Federal National Mortgage Association,
3.454%, due 07/01/27 1,455 10/02/97 1,476 1,475 0.1%
Federal National Mortgage Association,
3.555%, due 07/01/27 11,317 09/11/97 11,507 11,522 0.4%
United Cos. Financial Corp., 0.000%, due
11/02/99 100,000 11/07/01 -- -- 0.0%
-------- --------- --------
$ 30,318 $ 29,549 1.1%
======== ========= ========
Asset
Allocation Federal Home Loan Mortgage Corp.,
4.458%, due 12/01/26 44,618 09/11/97 45,184 43,288 0.3%
Federal National Mortgage Association,
3.454%, due 07/01/27 7,275 10/02/97 7,364 7,376 0.1%
Federal National Mortgage Association,
3.555%, due 07/01/27 30,104 09/11/97 30,523 30,650 0.2%
United Cos. Financial Corp., 0.000%, due
11/02/99 200,000 11/07/01 -- -- 0.0%
-------- --------- --------
$ 83,071 $ 81,313 0.6%
======== ========= ========
</Table>
23
<Page>
NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued)
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.
NOTE 12 -- SUBSEQUENT EVENT
DIVIDENDS. Subsequent to June 30, 2004, the following Portfolios declared
dividends from net investment income of:
<Table>
<Caption>
PER SHARE
AMOUNT PAYABLE DATE RECORD DATE
--------- ------------ -------------
Stock Portfolio $ 0.0081 July 1, 2004 June 30, 2004
Bond Portfolio $ 0.0904 July 1, 2004 June 30, 2004
Asset Allocation Portfolio $ 0.0455 July 1, 2004 June 30, 2004
</Table>
24
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO STOCK PORTFOLIO as of June 30, 2004 (Unaudited)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------------
COMMON STOCK: 94.2%
AEROSPACE/DEFENSE: 5.1%
5,515 @ Alliant Techsystems, Inc. $ 349,320
2,750 General Dyna 273,075
4,900 @ United Defense Industries, Inc. 171,500
--------------
793,895
--------------
AGRICULTURE: 1.1%
3,400 Altria Group, Inc. 170,170
--------------
170,170
--------------
APPAREL: 1.3%
5,750 Polo Ralph Lauren Corp. 198,088
--------------
198,088
--------------
AUTO MANUFACTURERS: 1.1%
2,850 Paccar, Inc. 165,272
--------------
165,272
--------------
BANKS: 1.2%
3,300 Wells Fargo & Co. 188,859
--------------
188,859
--------------
BEVERAGES: 2.0%
3,100 Coca-Cola Co. 156,488
2,900 PepsiCo, Inc. 156,252
--------------
312,740
--------------
BIOTECHNOLOGY: 4.5%
2,750 @ Amgen, Inc. 150,068
4,495 @ Biogen IDEC, Inc. 284,308
4,600 @ Celgene Corp. 263,396
--------------
697,772
--------------
CHEMICALS: 3.0%
2,200 Air Products & Chemicals, Inc. 115,390
2,950 Praxair, Inc. 117,735
5,500 Sherwin-Williams Co. 228,525
--------------
461,650
--------------
COMMERCIAL SERVICES: 1.4%
8,600 Cendant Corp. 210,528
--------------
210,528
--------------
COMPUTERS: 2.5%
7,750 Hewlett-Packard Co. 163,525
2,500 International Business
Machines Corp. 220,375
--------------
383,900
--------------
DIVERSIFIED FINANCIAL SERVICES: 9.4%
10,000 Citigroup, Inc. 464,999
3,220 Countrywide Financial Corp. 226,205
3,300 Goldman Sachs Group, Inc. 310,728
5,850 JP Morgan Chase & Co. 226,805
3,200 Lehman Brothers Holdings, Inc. 240,800
--------------
1,469,537
--------------
ELECTRONICS: 3.0%
4,600 @ Amphenol Corp. 153,272
5,200 Parker Hannifin Corp. 309,192
--------------
462,464
--------------
ENTERTAINMENT: 1.0%
4,000 International Game Technology 154,400
--------------
154,400
--------------
ENVIRONMENTAL CONTROL: 1.8%
5,300 @ Stericycle, Inc. $ 274,222
--------------
274,222
--------------
HEALTHCARE-PRODUCTS: 3.0%
5,500 @ Boston Scientific Corp. 235,400
3,700 @ Inamed Corp. 232,545
--------------
467,945
--------------
HEALTHCARE-SERVICES: 1.1%
1,500 @ WellPoint Health Networks 168,015
--------------
168,015
--------------
INSURANCE: 2.3%
5,000 American Intl. Group 356,400
--------------
356,400
--------------
INTERNET: 5.8%
4,250 @ eBay, Inc. 390,788
13,800 @ Yahoo!, Inc. 501,353
--------------
892,141
--------------
LEISURE TIME: 2.7%
4,150 Carnival Corp. 195,050
3,500 Harley-Davidson, Inc. 216,790
--------------
411,840
--------------
LODGING: 1.5%
3,000 Marriott Intl., Inc. 149,640
1,800 Starwood Hotels & Resorts
Worldwide, Inc. 80,730
--------------
230,370
--------------
MACHINERY-DIVERSIFIED: 1.8%
7,450 Rockwell Automation, Inc. 279,450
--------------
279,450
--------------
MEDIA: 2.5%
12,552 @ DIRECTV Group, Inc. 214,639
6,800 Walt Disney Co. 173,332
--------------
387,971
--------------
MISCELLANEOUS MANUFACTURING: 6.8%
1,550 3M Co. 139,516
2,950 Eaton Corp. 190,983
6,850 General Electric Co. 221,940
14,950 @@ Tyco Intl. Ltd. 495,442
--------------
1,047,881
--------------
OIL AND GAS: 2.6%
8,800 @,@@ Nabors Industries Ltd. 397,936
--------------
397,936
--------------
PHARMACEUTICALS: 7.7%
2,800 @ Barr Laboratories, Inc. 94,360
9,464 @ Caremark Rx, Inc. 311,744
2,450 @ Gilead Sciences, Inc. 164,150
5,850 @ Par Pharmaceutical Cos., Inc. 205,979
12,650 Pfizer, Inc. 433,641
--------------
1,209,874
--------------
RETAIL: 3.8%
700 @ Cabela's, Inc. 18,865
4,750 @ Chico's FAS, Inc. 214,510
</Table>
See Accompanying Notes to Financial Statements
25
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO STOCK PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------------
RETAIL (CONTINUED)
6,800 Wal-Mart Stores, Inc. $ 358,768
--------------
592,143
--------------
SAVINGS AND LOANS: 1.7%
6,700 Greenpoint Financial Corp. 265,990
--------------
265,990
--------------
SEMICONDUCTORS: 3.6%
7,950 @ Applied Materials, Inc. 155,979
8,700 Intel Corp. 240,120
7,650 @ Nvidia Corp. 156,825
--------------
552,924
--------------
SOFTWARE: 3.7%
3,700 @ Electronic Arts, Inc. 201,835
12,950 Microsoft Corp. 369,852
--------------
571,687
--------------
TELECOMMUNICATIONS: 5.2%
4,900 @ Avaya, Inc. 77,371
5,700 @ Cisco Systems, Inc. 135,090
6,050 @ Comcast Corp. 167,041
18,950 @ Corning, Inc. 247,487
6,600 @ Nextel Communications, Inc. 175,956
--------------
802,945
--------------
Total Common Stock (Cost
$12,304,802) 14,579,009
--------------
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 4.5%
REPURCHASE AGREEMENT: 4.5%
$ 691,000 Goldman Sachs Repurchase
Agreement dated 06/30/04,
1.500%, due 07/01/04, $691,029
to be received upon repurchase
(Collateralized by $705,000 Federal
Home Loan Mortgage Corporation,
1.100%, Market Value plus accrued
interest $706,775, due 10/07/05) $ 691,000
--------------
Total Short-Term Investments
(Cost $691,000) 691,000
--------------
TOTAL INVESTMENTS IN
SECURITIES (COST
$12,995,802)* 98.7% $ 15,270,009
OTHER ASSETS AND
LIABILITIES-NET 1.3 194,571
----- --------------
NET ASSETS 100.0% $ 15,464,580
===== ==============
</Table>
@ Non-income producing security
@@ Foreign issuer
* Cost for federal income tax purposes is $13,017,403. Net unrealized
appreciation consists of:
<Table>
Gross Unrealized Appreciation $ 2,498,323
Gross Unrealized Depreciation (245,717)
--------------
Net Unrealized Appreciation $ 2,252,606
==============
</Table>
See Accompanying Notes to Financial Statements
26
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO MONEY MARKET PORTFOLIO(1) as of June 30, 2004 (Unaudited)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
CORPORATE NOTES: 14.4%
$ 100,000 ABN Amro Bank NV/Chicago,
1.189%, due 03/18/05 $ 99,986
250,000 Fleet National Bank,
1.280%, due 11/22/04 250,130
100,000 HSBC Bank USA, 1.555%,
due 04/22/05 100,000
100,000 @@ Royal Bank of Canada/New York,
1.270%, due 03/30/05 99,988
200,000 Toyota Motor Credit Corp.,
4.100%, due 09/08/04 201,096
100,000 Wachovia Bank NA/Charlotte,
1.449%, due 07/30/04 100,028
--------------
Total Corporate Notes
(Cost $851,228) 851,228
--------------
COMMERCIAL PAPER: 58.6%
250,000 Barton Capital Corp.,
0.000%, due 07/01/04 250,000
300,000 Blue Ridge Asset Funding,
0.540%, due 07/02/04 299,991
300,000 Concord Minutemen Cap.,
1.160%, due 07/07/05 300,000
250,000 Crown Point Capital Co.,
1.190%, due 10/06/04 249,192
300,000 Dexia Delaware LLC,
1.190%, due 07/02/04 299,990
200,000 General Electric Capital Corp,
4.250%, due 01/28/05 203,255
200,000 HBOS Treasury Services,
1.460%, due 09/03/04 199,481
100,000 HSBC USA, Inc.,
1.050%, due 08/10/04 99,881
250,000 Jupiter Securities Corp.,
1.040%, due 07/09/04 249,935
100,000 LaSalle Bank Note,
1.210%, due 11/05/04 100,000
200,000 @@ Royal Bank of Scotland,
1.400%, due 10/21/04 199,994
250,000 St. Germain Holdings Ltd.,
1.030%, due 07/06/04 249,957
100,000 @@ Svenska Handelsbank PLC,
1.310%, due 08/05/04 99,869
300,000 Thunder Bay Funding, Inc.,
0.000%, due 07/01/04 299,999
250,000 Tulip Funding Corp.,
1.210%, due 07/12/04 249,908
100,000 Washington Mutual Bank,
1.120%, due 07/14/04 100,000
--------------
Total Commercial Paper
(Cost $3,451,452) 3,451,452
--------------
CERTIFICATE OF DEPOSIT: 1.7%
100,000 UBS AG Stanford,
1.195%, due 12/06/04 100,002
--------------
Total Certificate of Deposit
(Cost $100,002) 100,002
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 8.5%
FEDERAL HOME LOAN BANK: 8.5%
$ 150,000 1.240%, due 03/01/05 $ 150,000
100,000 1.510%, due 12/08/04 100,000
250,000 3.625%, due 10/15/04 251,512
--------------
Total U.S. Government Agency
Obligations (Cost $501,512) 501,512
--------------
INVESTMENT COMPANY: 1.7%
100,000 LaSalle Bank, 1.160%,
due 12/17/04 100,000
--------------
Total Investment Company
(Cost $100,000) 100,000
--------------
REPURCHASE AGREEMENT: 15.3%
898,000 Goldman Sachs Repurchase
Agreement dated, 1.500%,
due 07/01/04, $898,037 to be
received upon repurchase
(Collateralized by $925,000 Federal
Home Loan Mortgage Corporation,
1.100%, Market Value plus accrued
interest $927,329 due 10/07/05) 898,000
--------------
Total Repurchase Agreement
(Cost $898,000) 898,000
--------------
TOTAL INVESTMENTS IN
SECURITIES (COST
$5,902,194)* 100.2% $ 5,902,194
OTHER ASSETS AND
LIABILITIES-NET (0.2) (13,775)
----- --------------
NET ASSETS 100.0% $ 5,888,419
===== ==============
</Table>
(1) All securities with a maturity date greater than one year have either a
variable rate, a demand feature, are prerefunded or have an optional or
mandatory put resulting in an effective maturity of one year or less. Rate
shown reflects current rate.
@@ Foreign issuer
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -----------------------------------------------------------------------------------
Consumer Banks - Central U.S. 1.7%
Consumer Banks - Southern U.S. 3.4
Diversified Financial Services 14.5
Finance - Auto Loans 3.4
Finance - Other Services 4.2
Money Center Banks 18.7
S&L/Thrifts - Western U.S. 1.7
Sovereign Agency 8.5
Special Purpose Entity 22.9
Super-Regional Banks - U.S. 5.9
Repurchase Agreement 15.3
Other Assets and Liabilities, Net (0.2)
-------------
NET ASSETS 100.0%
=============
</Table>
See Accompanying Notes to Financial Statements
27
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO BOND PORTFOLIO as of June 30, 2004 (Unaudited)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
CORPORATE BONDS: 27.9%
AIRLINES: 0.3%
$ 11,000 American Airlines, Inc.,
7.324%, due 10/15/09 $ 9,057
--------------
9,057
--------------
AUTO MANUFACTURERS: 0.1%
3,000 Ford Motor Co.,
6.625%, due 10/01/28 2,634
--------------
2,634
--------------
BANKS: 6.9%
5,000 #,@@ Banco Bradesco SA,
8.750%, due 10/24/13 5,038
13,000 @@ Banco Santander Chile SA,
7.375%, due 07/18/12 14,329
1,000 # Bank of New York
Institutional Capital Trust A,
7.780%, due 12/01/26 1,071
2,000 # BankAmerica Institutional Capital B,
7.700%, due 12/31/26 2,143
5,000 Barnett Capital I,
8.060%, due 12/01/26 5,481
2,000 Barnett Capital II,
7.950%, due 12/01/26 2,199
5,000 #,@@ Danske Bank A/S,
5.914%, due 12/29/49 5,077
15,000 # Dresdner Funding Trust I,
8.151%, due 06/30/31 16,757
5,000 FBS Capital I, 8.090%, due 11/15/26 5,527
3,000 First Union Capital I,
7.935%, due 01/15/27 3,283
11,000 First Union Institutional Capital II,
7.850%, due 01/01/27 11,830
5,000 #,@@ HBOS Capital Funding LP,
6.071%, due 06/30/49 5,029
10,000 @@ HSBC Bank PLC, 1.975%, due 06/29/49 8,466
10,000 @@ HSBC Bank PLC, 2.125%, due 06/29/49 8,475
10,000 @@ Lloyds TSB Bank PLC,
1.270%, due 08/29/49 8,614
10,000 @@ Lloyds TSB Bank PLC,
2.188%, due 06/29/49 8,737
8,000 M&T Bank Corp.,
3.850%, due 04/01/13 7,854
10,000 Mellon Capital I,
7.720%, due 12/01/26 10,844
10,000 @@ National Westminster Bank PLC,
1.438%, due 11/29/49 8,458
4,000 #,@@ Northern Rock PLC,
5.600%, due 04/30/49 3,894
7,000 # Rabobank Capital Funding II,
5.260%, due 12/29/49 6,786
10,000 @@,C Societe Generale,
1.688%, due 11/29/49 8,362
20,000 @@,C Standard Chartered PLC,
1.800%, due 11/29/49 15,795
10,000 @@,C Standard Chartered PLC,
2.070%, due 12/29/49 7,875
100,000 #,X,I United Cos. Financial Corp.,
0.000%, due 11/02/99 0
12,000 # Westpac Capital Trust IV,
5.256%, due 12/29/49 11,078
--------------
193,002
--------------
BEVERAGES: 0.7%
$ 10,000 #,@@ Cia Brasileira de Bebidas,
8.750%, due 09/15/13 $ 10,600
1,000 @@ Cia Brasileira de Bebidas,
10.500%, due 12/15/11 1,150
9,000 # Miller Brewing Co.,
4.250%, due 08/15/08 8,964
--------------
20,714
--------------
CHEMICALS: 0.1%
2,000 Dow Chemical Co.,
5.750%, due 11/15/09 2,090
2,000 #,@@ Sociedad Quimica y Minera de
Chile SA, 7.700%, due 09/15/06 2,141
--------------
4,231
--------------
DIVERSIFIED FINANCIAL SERVICES: 4.1%
5,000 #,@@ Arcel Finance Ltd.,
6.361%, due 05/01/12 4,971
2,000 #,@@ Arcel Finance Ltd.,
7.048%, due 09/01/11 1,990
8,000 Boeing Capital Corp.,
7.375%, due 09/27/10 9,057
12,000 #,@@ Brazilian Merchant
Voucher Receivables Ltd.,
5.911%, due 06/15/11 11,670
1,000 Citigroup Capital II,
7.750%, due 12/01/36 1,078
2,000 # Farmers Exchange Capital,
7.050%, due 07/15/28 1,925
8,000 # Farmers Exchange Capital,
7.200%, due 07/15/48 7,756
5,000 @@ Financiere CSFB NV,
1.250%, due 03/29/49 4,006
3,000 Ford Motor Credit Co.,
7.000%, due 10/01/13 3,034
6,000 General Motors Acceptance Corp.,
6.875%, due 08/28/12 6,113
3,000 General Motors Acceptance Corp.,
8.000%, due 11/01/31 3,082
6,000 General Motors Acceptance Corp.,
7.750%, due 01/19/10 6,521
2,000 JPM Capital Trust I,
7.540%, due 01/15/27 2,124
13,000 # Mangrove Bay Pass-Through Trust,
6.102%, due 07/15/33 12,868
2,000 # Mizuho Preferred Capital Co. LLC,
8.790%, due 12/29/49 2,200
6,000 #,@@ PF Export Receivables Master Trust,
3.748%, due 06/01/13 5,723
8,982 #,@@ PF Export Receivables Master Trust,
6.436%, due 06/01/15 8,863
15,000 # Tokai Preferred Capital Co. LLC,
9.980%, due 12/29/49 16,898
5,000 # Wachovia Capital Trust V,
7.965%, due 06/01/27 5,492
--------------
115,371
--------------
ELECTRIC: 4.8%
6,000 #,@@ AES Gener SA, 7.500%, due 03/25/14 5,700
5,509 # Allegheny Energy Supply
Statutory Trust 2001,
10.250%, due 11/15/07 5,963
599 # Allegheny Energy Supply
Statutory Trust 2001,
13.000%, due 11/15/07 614
</Table>
See Accompanying Notes to Financial Statements
28
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
ELECTRIC (CONTINUED)
$ 2,000 Consumers Energy Co.,
4.250%, due 04/15/08 $ 1,984
6,000 Consumers Energy Co.,
4.800%, due 02/17/09 6,011
7,000 DTE Energy Co., 2.324%, due 06/01/07 6,997
14,000 @@ Empresa Nacional de
Electricidad SA/Chile,
7.750%, due 07/15/08 14,952
19,000 Enserch Capital I,
2.460%, due 07/01/28 17,780
8,000 Enterprise Capital Trust II,
2.806%, due 06/30/28 7,570
6,000 FirstEnergy Corp.,
6.450%, due 11/15/11 6,230
8,000 # Monongahela Power Co.,
6.700%, due 06/15/14 8,116
12,000 Ohio Power Co., 6.375%, due 07/15/33 11,781
22,000 # PG&E Corp., 6.875%, due 07/15/08 23,101
1,746 # Power Contract Financing LLC,
5.200%, due 02/01/06 1,758
12,000 # Power Contract Financing LLC,
6.256%, due 02/01/10 12,234
1,747 PPL Montana LLC,
8.903%, due 07/02/20 1,905
3,000 # Tenaska Virginia Partners LP,
6.119%, due 03/30/24 2,973
--------------
135,669
--------------
FOOD: 1.0%
4,000 Kroger Co., 7.250%, due 06/01/09 4,448
7,000 Safeway, Inc., 4.800%, due 07/16/07 7,160
5,000 Supervalu, Inc., 7.875%, due 08/01/09 5,653
10,000 Tyson Foods, Inc.,
7.250%, due 10/01/06 10,777
--------------
28,038
--------------
GAS: 0.3%
9,000 # Williams Gas Pipelines Central, Inc.,
7.375%, due 11/15/06 9,664
--------------
9,664
--------------
HOME BUILDERS: 0.0%
1,000 Technical Olympic USA, Inc.,
9.000%, due 07/01/10 1,030
--------------
1,030
--------------
INSURANCE: 0.7%
9,000 # Farmers Insurance Exchange,
8.625%, due 05/01/24 10,106
6,000 # Monumental Global Funding II,
3.850%, due 03/03/08 5,991
4,000 # Zurich Capital Trust I,
8.376%, due 06/01/37 4,431
--------------
20,528
--------------
LODGING: 0.2%
4,000 Caesars Entertainment, Inc.,
9.375%, due 02/15/07 4,355
--------------
4,355
--------------
MEDIA: 0.1%
3,000 Time Warner, Inc.,
6.875%, due 05/01/12 3,247
--------------
3,247
--------------
MINING: 0.5%
$ 3,000 #,@@ Corp Nacional del
Cobre de Chile - CODELCO,
6.375%, due 11/30/12 $ 3,181
2,000 @@ Vale Overseas Ltd.,
8.250%, due 01/17/34 1,750
9,000 @@ Vale Overseas Ltd.,
8.625%, due 03/08/07 9,675
--------------
14,606
--------------
MULTI-NATIONAL: 0.7%
10,000 @@ Corp. Andina de Fomento CAF,
5.200%, due 05/21/13 9,637
9,000 @@ Corp. Andina de Fomento CAF,
6.875%, due 03/15/12 9,692
--------------
19,329
--------------
OIL AND GAS: 2.4%
5,000 Amerada Hess Corp.,
6.650%, due 08/15/11 5,299
8,000 Amerada Hess Corp.,
7.875%, due 10/01/29 8,667
7,000 #,@@ Empresa Nacional de Petroleo ENAP,
4.875%, due 03/15/14 6,531
18,000 @@,+ Husky Oil Co., 8.900%, due 08/15/28 20,399
17,000 # Pemex Project Funding Master Trust,
2.820%, due 06/15/10 17,119
3,000 Pemex Project Funding Master Trust,
7.375%, due 12/15/14 3,075
5,000 Valero Energy Corp.,
8.750%, due 06/15/30 6,256
--------------
67,346
--------------
PACKAGING AND CONTAINERS: 0.5%
4,000 # Sealed Air Corp.,
5.375%, due 04/15/08 4,140
9,000 # Sealed Air Corp.,
6.950%, due 05/15/09 9,835
--------------
13,975
--------------
REAL ESTATE: 0.7%
8,000 EOP Operating LP,
7.750%, due 11/15/07 8,885
1,000 Liberty Property-LP,
6.375%, due 08/15/12 1,052
1,000 Liberty Property-LP,
6.950%, due 12/01/06 1,082
7,000 Liberty Property-LP,
7.750%, due 04/15/09 7,958
--------------
18,977
--------------
REAL ESTATE INVESTMENT TRUSTS: 1.2%
6,000 # iStar Financial, Inc.,
5.700%, due 03/01/14 5,662
11,000 # iStar Financial, Inc.,
5.125%, due 04/01/11 10,516
6,000 Simon Property Group LP,
4.875%, due 03/18/10 5,946
11,000 Simon Property Group LP,
6.375%, due 11/15/07 11,784
--------------
33,908
--------------
SAVINGS AND LOANS: 1.0%
7,000 Great Western Financial,
8.206%, due 02/01/27 7,623
9,000 Sovereign Bancorp, Inc.,
10.500%, due 11/15/06 10,316
</Table>
See Accompanying Notes to Financial Statements
29
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
SAVINGS AND LOANS (CONTINUED)
$ 9,000 Washington Mutual, Inc.,
4.375%, due 01/15/08 $ 9,065
--------------
27,004
--------------
TELECOMMUNICATIONS: 1.6%
7,000 @@ Cia de Telecomunicaciones de Chile SA,
7.625%, due 07/15/06 7,550
10,000 + Sprint Capital Corp.,
4.780%, due 08/17/06 10,199
3,000 Sprint Capital Corp.,
8.750%, due 03/15/32 3,506
7,000 Sprint Capital Corp.,
6.875%, due 11/15/28 6,748
18,000 Verizon Virginia, Inc.,
4.625%, due 03/15/13 16,836
--------------
44,839
--------------
Total Corporate Bonds (Cost
$791,248) 787,524
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 42.2%
FEDERAL HOME LOAN MORTGAGE
CORPORATION: 11.6%
65,000 2.700%, due 03/16/07 63,940
30,000 2.750%, due 02/09/07 29,599
16,831 I 4.458%, due 12/01/26 16,551
34,424 4.500%, due 04/01/14 33,782
20,744 6.000%, due 01/15/29 20,948
19,000 6.000%, due 01/15/28 19,775
13,000 6.000%, due 01/15/29 13,285
126,000 6.500%, due 07/15/34 131,316
--------------
329,196
--------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION: 30.6%
30,000 2.875%, due 05/19/08 28,907
1,424 I 3.454%, due 07/01/27 1,475
11,175 I 3.555%, due 07/01/27 11,522
46,000 4.500%, due 07/01/17 44,951
14,000 4.750%, due 12/25/42 14,038
131,000 5.000%, due 07/01/18 131,164
271,000 5.000%, due 07/15/34 261,768
15,000 5.250%, due 08/01/12 15,013
47,000 5.500%, due 08/15/19 47,896
74,000 5.500%, due 07/15/34 73,653
20,233 6.000%, due 07/25/29 20,530
9,442 6.000%, due 07/25/29 9,584
13,362 6.000%, due 04/25/31 13,542
52,000 6.000%, due 08/01/33 52,878
29,688 6.500%, due 11/01/29 31,845
46,000 6.500%, due 07/15/33 47,898
15,000 6.625%, due 11/15/10 16,676
23,000 7.000%, due 07/15/33 24,258
7,886 7.500%, due 06/25/32 8,455
9,691 7.500%, due 01/25/48 10,339
--------------
866,392
--------------
Total U.S. Government
Agency Obligations
(Cost $1,192,240) 1,195,588
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET-BACKED SECURITIES: 12.5%
AUTOMOBILE ASSET BACKED SECURITIES: 0.7%
20,000 USAA Auto Owner Trust,
2.040%, due 02/16/10 19,586
--------------
19,586
--------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES: 4.7%
$ 8,000 Bear Stearns Commercial Mortgage
Securities, 4.170%, due 01/12/41 $ 7,925
17,000 CS First Boston Mortgage
Securities Corp.,
3.861%, due 03/15/36 16,703
4,000 CS First Boston Mortgage
Securities Corp.,
7.810%, due 04/14/62 4,577
22,000 DLJ Commercial Mortgage Corp.,
6.240%, due 11/12/31 23,606
63,000 DLJ Commercial Mortgage Corp.,
7.300%, due 06/10/32 70,593
10,000 GE Capital Commercial
Mortgage Corp.,
5.994%, due 12/10/35 10,622
--------------
134,026
--------------
CREDIT CARD ASSET BACKED SECURITIES:1.4%
6,000 Bank One Issuance Trust,
4.540%, due 09/15/10 6,056
6,000 Capital One Master Trust,
4.900%, due 03/15/10 6,223
19,000 Citibank Credit Card Issuance Trust,
5.650%, due 06/16/08 19,924
8,000 MBNA Credit Card Master Note Trust,
4.950%, due 06/15/09 8,331
--------------
40,534
--------------
OTHER ASSET-BACKED SECURITIES: 0.6%
6,000 Chase Funding Mortgage Loan
Asset-Backed Certificates,
2.734%, due 09/25/24 5,891
4,000 Chase Funding Mortgage Loan
Asset-Backed Certificates,
4.045%, due 05/25/33 3,900
7,000 Residential Asset Mortgage
Products, Inc.,
2.140%, due 02/25/30 6,929
--------------
16,720
--------------
WHOLE LOAN COLLATERALIZED MORTGAGE: 3.5%
13,168 Bank of America Mortgage Securities,
5.000%, due 06/25/33 13,287
31,000 CS First Boston Mortgage
Securities Corp.,
4.187%, due 10/25/33 31,221
15,830 GMAC Mortgage Corp Loan Trust,
5.250%, due 04/25/34 16,047
22,000 GMAC Mortgage Corp. Loan Trust,
5.500%, due 01/25/34 22,170
9,162 GSR Mortgage Loan Trust,
6.500%, due 01/25/34 9,522
5,608 MASTR Asset Securitization Trust,
8.000%, due 06/25/33 5,928
--------------
98,175
--------------
WHOLE LOAN COLLATERALIZED PLANNED
AMORTIZATION CLASS: 1.5%
17,131 MASTR Alternative Loans Trust,
8.500%, due 05/25/33 17,581
18,000 Residential Funding Securities Corp.,
4.750%, due 02/25/33 18,218
5,662 Residential Funding Securities Corp.,
8.500%, due 05/25/33 6,026
--------------
41,825
--------------
</Table>
See Accompanying Notes to Financial Statements
30
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
WHOLE LOAN COLLATERALIZED
SUPPORT: 0.1%
$ 2,708 XX Bank of America Mortgage Securities,
5.500%, due 11/25/33 $ 2,678
--------------
2,678
--------------
Total Collateralized Mortgage
Obligations and Asset-backed
Securities (Cost $362,985) 353,544
--------------
U.S. TREASURY OBLIGATIONS: 14.2%
U.S. TREASURY BONDS: 10.9%
10,000 4.000%, due 02/15/14 9,534
43,000 4.750%, due 05/15/14 43,462
34,000 5.290%, due 05/15/16 18,441
79,000 5.375%, due 02/15/31 79,700
71,000 6.250%, due 08/15/23 78,644
30,000 10.375%, due 11/15/12 36,642
30,000 13.250%, due 05/15/14 42,495
--------------
308,918
--------------
U.S. TREASURY NOTES: 3.3%
25,000 2.250%, due 07/31/04 25,029
28,000 2.500%, due 05/31/06 27,915
23,000 3.125%, due 05/15/07 23,007
16,000 4.000%, due 06/15/09 16,142
--------------
92,093
--------------
Total U.S. Treasury Obligations
(Cost $402,547) 401,011
--------------
OTHER BONDS: 2.0%
SOVEREIGN: 2.0%
2,824 @@ Brazilian Government Intl. Bond,
2.188%, due 04/15/12 2,378
4,000 @@ Brazilian Government Intl. Bond,
10.000%, due 08/07/11 3,900
6,000 @@ Colombia Government Intl. Bond,
10.000%, due 01/23/12 6,239
6,000 @@ Dominican Republic Intl. Bond,
9.040%, due 01/23/13 3,720
4,000 @@ Ecuador Government Intl. Bond,
7.000%, due 08/15/30 2,835
1,000 @@ Panama Government International
Bond, 9.375%, due 07/23/12 1,098
2,000 @@ Panama Government Intl. Bond,
9.375%, due 01/16/23 2,050
6,000 @@ Peru Government Intl. Bond,
4.500%, due 03/07/17 4,873
1,000 @@ Philippine Government Intl. Bond,
9.875%, due 01/15/19 1,000
13,000 @@,+ Russia Government Intl. Bond,
5.000%, due 03/31/30 11,901
6,000 @@ Turkey Government Intl. Bond,
12.375%, due 06/15/09 6,892
1,000 #,@@ Ukraine Government Intl. Bond,
7.650%, due 06/11/13 958
3,390 @@,XX Uruguay Government Intl. Bond,
10.500%, due 10/20/06 3,729
5,000 @@ Venezuela Government Intl. Bond,
10.750%, due 09/19/13 4,938
--------------
Total Other Bonds
(Cost $59,299) 56,511
--------------
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------------
PREFERRED STOCK: 0.4%
BANKS: 0.4%
1 #,XX DG Funding Trust $ 10,750
Total Preferred Stock (Cost $10,878) 10,750
--------------
Total Long-Term Investments
(Cost $2,819,197) 2,804,928
--------------
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 29.2%
REPURCHASE AGREEMENT: 29.2%
$ 825,000 Goldman Sachs Repurchase
Agreement dated, 1.500%,
due 07/01/04, $825,034 to be
received upon repurchase
(Collateralized by $845,000
Federal Home Loan Mortgage
Association, 1.100%, Market Value
plus accrued interest $847,127
due 10/07/05) 825,000
--------------
Total Short-Term Investments
(Cost $825,000) 825,000
--------------
TOTAL INVESTMENTS IN
SECURITIES (COST
$3,644,197)* 128.4% $ 3,629,928
OTHER ASSETS AND
LIABILITIES-NET (28.4) (802,503)
----- --------------
NET ASSETS 100.0% $ 2,827,425
===== ==============
</Table>
# Securities with purchases pursuant to Rule 144A, under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. These securities have been determined to be liquid
under the guidelines established by the Funds' Board of Directors/Trustees.
@@ Foreign issuer
C Bond may be called prior to maturity date.
X Fair value determined by ING Funds Valuation Committee appointed by the
Funds' Board of Directors/Trustees.
I Illiquid security
+ Step-up basis bonds. Interest rates shown reflect current and future coupon
rates.
XX Value of securities obtained from one or more dealers making markets in the
securities in accordance with the Fund's valuation procedures.
* Cost for federal income tax purposes is the same as for financial statement
purposes. Net unrealized depreciation consists of:
<Table>
Gross Unrealized Appreciation $ 22,607
Gross Unrealized Depreciation (38,876)
--------------
Net Unrealized Depreciation $ (16,269)
==============
</Table>
See Accompanying Notes to Financial Statements
31
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO ASSET ALLOCATION PORTFOLIO as of June 30, 2004 (Unaudited)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
CORPORATE BONDS: 11.6%
AIRLINES: 0.1%
$ 22,000 American Airlines, Inc., 7.324%,
due 10/15/09 $ 18,114
--------------
18,114
--------------
AUTO MANUFACTURERS: 0.0%
5,000 Ford Motor Co., 6.625%,
due 10/01/28 4,391
--------------
4,391
--------------
BANKS: 3.1%
10,000 #,@@ Banco Bradesco SA/Cayman Islands,
8.750%, due 10/24/13 10,075
22,000 @@ Banco Santander Santiago Chile SA,
7.375%, due 07/18/12 24,248
4,000 # BankAmerica Institutional Capital B,
7.700%, due 12/31/26 4,287
10,000 Barnett Capital I, 8.060%,
due 12/01/26 10,961
4,000 Barnett Capital II, 7.950%,
due 12/01/26 4,398
40,000 @@ Citibank NA,
1.800%, due 11/29/49 31,588
10,000 #,@@ Danske Bank A/S, 5.914%,
due 12/29/49 10,155
29,000 # Dresdner Funding Trust I, 8.151%,
due 06/30/31 32,397
10,000 FBS Capital I, 8.090%,
due 11/15/26 11,053
5,000 First Union Capital I, 7.935%,
due 01/15/27 5,472
21,000 First Union Institutional Capital II,
7.850%, due 01/01/27 22,585
10,000 #,@@ HBOS Capital Funding LP, 6.071%,
due 06/30/49 10,059
5,000 @@ Hongkong & Shanghai
Banking Corp. Ltd., 1.313%,
due 07/29/49 4,247
20,000 @@ HSBC Bank PLC, 1.975%,
due 06/29/49 16,931
20,000 @@ HSBC Bank PLC,
2.125%, due 06/29/49 16,950
10,000 @@ Lloyds TSB Bank PLC, 1.270%,
due 08/29/49 8,614
10,000 @@ Lloyds TSB Bank PLC, 2.188%,
due 06/29/49 8,737
16,000 M&T Bank Corp., 3.850%,
due 04/01/13 15,708
20,000 Mellon Capital I, 7.720%,
due 12/01/26 21,689
10,000 @@ National Westminster Bank PLC,
1.375%, due 08/29/49 8,631
20,000 @@ National Westminster Bank PLC,
1.438%, due 11/29/49 16,915
8,000 #,@@ Northern Rock PLC, 5.600%,
due 04/30/49 7,787
13,000 # Rabobank Capital Funding II,
5.260%, due 12/29/49 12,603
10,000 @@,C Societe Generale, 1.688%,
due 11/29/49 8,362
20,000 @@,C Standard Chartered PLC, 2.070%,
due 12/29/49 15,750
$ 200,000 #,I,X United Cos. Financial Corp.,
.000%, due 11/02/99 $ --
10,000 @@ Westpac Banking Corp., 1.338%,
due 09/29/49 8,445
23,000 # Westpac Capital Trust IV, 5.256%,
due 12/29/49 21,234
--------------
369,881
--------------
BEVERAGES: 0.3%
19,000 #,@@ Cia Brasileira de Bebidas, 8.750%,
due 09/15/13 20,140
2,000 @@ Cia Brasileira de Bebidas,
10.500%, due 12/15/11 2,300
18,000 # Miller Brewing Co., 4.250%,
due 08/15/08 17,929
--------------
40,369
--------------
CHEMICALS: 0.1%
4,000 Dow Chemical Co., 5.750%,
due 11/15/09 4,179
4,000 #,@@ Sociedad Quimica y Minera
de Chile SA, 7.700%,
due 09/15/06 4,282
--------------
8,461
--------------
DIVERSIFIED FINANCIAL SERVICES: 1.7%
9,000 #,@@ Arcel Finance Ltd, 6.361%,
due 05/01/12 8,947
4,000 #,@@ Arcel Finance Ltd., 7.048%,
due 09/01/11 3,980
15,000 Boeing Capital Corp., 7.375%,
due 09/27/10 16,983
22,000 #,@@ Brazilian Merchant Voucher
Receivables Ltd., 5.911%,
due 06/15/11 21,395
2,000 Citigroup Capital II, 7.750%,
due 12/01/36 2,156
4,000 # Farmers Exchange Capital,
7.050%, due 07/15/28 3,850
15,000 # Farmers Exchange Capital,
7.200%, due 07/15/48 14,543
5,000 @@ Financiere CSFB NV, 1.250%,
due 03/29/49 4,006
8,000 Ford Motor Credit Co., 7.000%,
due 10/01/13 8,089
8,000 General Motors Acceptance Corp.,
6.875%, due 08/28/12 8,151
12,000 General Motors Acceptance Corp.,
7.750%, due 01/19/10 13,042
6,000 General Motors Acceptance Corp.,
8.000%, due 11/01/31 6,165
6,000 JPM Capital Trust I, 7.540%,
due 01/15/27 6,372
25,000 # Mangrove Bay Pass-Through Trust,
6.102%, due 07/15/33 24,745
3,000 # Mizuho Preferred Capital Co LLC,
8.790%, due 12/29/49 3,300
12,000 #,@@ PF Export Receivables Master Trust,
3.748%, due 06/01/13 11,446
17,065 #,@@ PF Export Receivables Master Trust,
6.436%, due 06/01/15 16,839
29,000 # Tokai Preferred Capital Co. LLC,
9.980%, due 12/29/49 32,670
</Table>
See Accompanying Notes to Financial Statements
32
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO ASSET ALLOCATION PORTFOLIO as of June 30, 2004 (Unaudited)
(continued)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
(CONTINUED)
$ 5,000 # Wachovia Capital Trust V, 7.965%,
due 06/01/27 $ 5,492
--------------
212,171
--------------
ELECTRIC: 2.1%
11,000 #,@@ AES Gener SA, 7.500%,
due 03/25/14 10,450
10,502 # Allegheny Energy Supply
Statutory Trust 2001, 10.250%,
due 11/15/07 11,368
1,194 # Allegheny Energy Supply
Statutory Trust 2001, 13.000%,
due 11/15/07 1,224
4,000 Consumers Energy Co., 4.250%,
due 04/15/08 3,968
13,000 Consumers Energy Co., 4.800%,
due 02/17/09 13,024
14,000 DTE Energy Co., 2.324%,
due 06/01/07 13,994
26,000 @@ Empresa Nacional de
Electricidad SA/Chile, 7.750%,
due 07/15/08 27,768
36,000 Enserch Capital I, 2.460%,
due 07/01/28 33,689
16,000 Enterprise Capital Trust II, 2.806%,
due 06/30/28 15,139
10,000 FirstEnergy Corp., 6.450%,
due 11/15/11 10,383
15,000 # Monongahela Power Co., 6.700%,
due 06/15/14 15,218
23,000 Ohio Power Co., 6.375%,
due 07/15/33 22,581
41,000 # PG&E Corp., 6.875%,
due 07/15/08 43,051
3,492 # Power Contract Financing LLC,
5.200%, due 02/01/06 3,515
23,000 # Power Contract Financing LLC,
6.256%, due 02/01/10 23,449
3,494 PPL Montana LLC, 8.903%,
due 07/02/20 3,810
5,000 # Tenaska Virginia Partners LP,
6.119%, due 03/30/24 4,955
--------------
257,586
--------------
FOOD: 0.4%
8,000 Kroger Co., 7.250%, due 06/01/09 8,897
14,000 Safeway, Inc., 4.800%,
due 07/16/07 14,321
10,000 Supervalu, Inc., 7.875%,
due 08/01/09 11,307
19,000 Tyson Foods, Inc., 7.250%,
due 10/01/06 20,474
--------------
54,999
--------------
GAS: 0.1%
17,000 # Williams Gas Pipelines Central,
Inc., 7.375%, due 11/15/06 18,254
--------------
18,254
--------------
HOME BUILDERS: 0.0%
1,000 Technical Olympic USA, Inc.,
9.000%, due 07/01/10 1,030
--------------
1,030
--------------
INSURANCE: 0.3%
$ 17,000 # Farmers Insurance Exchange,
8.625%, due 05/01/24 $ 19,089
12,000 # Monumental Global Funding II,
3.850%, due 03/03/08 11,983
8,000 # Zurich Capital Trust I, 8.376%,
due 06/01/37 8,862
--------------
39,934
--------------
LODGING: 0.1%
8,000 Caesars Entertainment, Inc.,
9.375%, due 02/15/07 8,710
--------------
8,710
--------------
MEDIA: 0.1%
6,000 Time Warner, Inc., 6.875%,
due 05/01/12 6,493
--------------
6,493
--------------
MINING: 0.2%
6,000 #,@@ Corp Nacional del Cobre de Chile,
6.375%, due 11/30/12 6,363
3,000 @@ Vale Overseas Ltd., 8.250%,
due 01/17/34 2,625
17,000 @@ Vale Overseas Ltd., 8.625%,
due 03/08/07 18,275
--------------
27,263
--------------
MULTI-NATIONAL: 0.3%
20,000 @@ Corp Andina de Fomento CAF,
5.200%, due 05/21/13 19,273
17,000 @@ Corp Andina de Fomento CAF,
6.875%, due 03/15/12 18,308
--------------
37,581
--------------
OIL AND GAS: 1.0%
10,000 Amerada Hess Corp., 6.650%,
due 08/15/11 10,597
15,000 Amerada Hess Corp., 7.875%,
due 10/01/29 16,251
14,000 Empresa Nacional de Petroleo
ENAP, 4.875%, due 03/15/14 13,062
33,000 @@,+ Husky Oil Co., 8.900%,
due 08/15/28 37,399
32,000 # Pemex Project Funding
Master Trust, 2.820%,
due 06/15/10 32,224
6,000 Pemex Project Funding
Master Trust, 7.375%,
due 12/15/14 6,150
9,000 Valero Energy Corp., 8.750%,
due 06/15/30 11,261
--------------
126,944
--------------
PACKAGING AND CONTAINERS: 0.2%
7,000 # Sealed Air Corp., 5.375%,
due 04/15/08 7,245
18,000 # Sealed Air Corp., 6.950%,
due 05/15/09 19,670
--------------
26,915
--------------
REAL ESTATE: 0.3%
15,000 EOP Operating LP, 7.750%,
due 11/15/07 16,659
</Table>
See Accompanying Notes to Financial Statements
33
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO ASSET ALLOCATION PORTFOLIO as of June 30, 2004 (Unaudited)
(continued)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
REAL ESTATE (CONTINUED)
$ 3,000 Liberty Property-LP, 6.375%,
due 08/15/12 $ 3,155
1,000 Liberty Property-LP, 6.950%,
due 12/01/06 1,082
13,000 Liberty Property-LP, 7.750%,
due 04/15/09 14,780
--------------
35,676
--------------
REAL ESTATE INVESTMENT TRUSTS: 0.5%
11,000 # iStar Financial, Inc., 5.700%,
due 03/01/14 10,380
21,000 # iStar Financial, Inc., 5.125%,
due 04/01/11 20,077
11,000 Simon Property Group LP, 4.875%,
due 03/18/10 10,901
22,000 Simon Property Group LP, 6.375%,
due 11/15/07 23,566
--------------
64,924
--------------
SAVINGS AND LOANS: 0.4%
13,000 Great Western Financial, 8.206%,
due 02/01/27 14,157
17,000 Sovereign Bancorp, Inc., 10.500%,
due 11/15/06 19,487
18,000 Washington Mutual, Inc., 4.375%,
due 01/15/08 18,129
--------------
51,773
--------------
TELECOMMUNICATIONS: 0.8%
10,000 #,@@ Brasil Telecom SA, 9.375%,
due 02/18/14 9,750
14,000 @@ Cia de Telecomunicaciones
de Chile SA, 7.625%,
due 07/15/06 15,100
20,000 + Sprint Capital Corp., 4.780%,
due 08/17/06 20,397
13,000 Sprint Capital Corp., 6.875%,
due 11/15/28 12,532
7,000 Sprint Capital Corp., 8.750%,
due 03/15/32 8,180
32,000 Verizon Virginia, Inc., 4.625%,
due 03/15/13 29,933
--------------
95,892
--------------
Total Corporate Bonds
(Cost $1,513,734) 1,507,361
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 17.4%
FEDERAL HOME LOAN MORTGAGE
CORPORATION: 5.6%
120,000 2.700%, due 03/16/07 118,043
60,000 2.750%, due 02/09/07 59,198
44,020 I 4.458%, due 12/01/26 43,288
53,549 4.500%, due 04/01/14 52,551
50,000 5.500%, due 07/15/34 49,781
37,000 6.000%, due 01/15/28 38,510
25,000 6.000%, due 01/15/29 25,548
40,104 6.000%, due 01/15/29 40,499
148,917 6.500%, due 12/01/31 155,496
109,000 6.500%, due 07/15/34 113,598
--------------
696,512
--------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION: 11.8%
$ 60,000 2.875%, due 05/19/08 $ 57,814
7,121 I 3.454%, due 07/01/27 7,376
29,726 I 3.555%, due 07/01/27 30,650
102,000 4.500%, due 07/01/17 99,673
25,000 4.750%, due 12/25/42 25,068
502,000 5.000%, due 07/15/34 484,902
30,000 5.250%, due 08/01/12 30,027
67,440 5.500%, due 07/15/19 68,978
57,000 5.500%, due 07/15/34 56,733
41,814 6.000%, due 07/25/29 42,428
17,535 6.000%, due 07/25/29 17,798
25,509 6.000%, due 04/25/31 25,852
303,000 6.000%, due 07/15/34 309,344
29,688 6.500%, due 11/01/29 31,845
82,000 6.500%, due 07/15/33 85,383
25,000 6.625%, due 11/15/10 27,794
41,000 7.000%, due 07/15/33 43,242
14,194 7.500%, due 06/25/32 15,219
18,872 7.500%, due 01/25/48 20,135
--------------
1,480,261
--------------
Total U.S. Government
Agency Obligations
(Cost $2,167,630) 2,176,773
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET-BACKED SECURITIES: 5.3%
AUTOMOBILE ASSET BACKED
SECURITIES: 0.3%
35,000 USAA Auto Owner Trust, 2.040%,
due 02/16/10 34,276
--------------
34,276
--------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES: 1.9%
15,000 Bear Stearns Commercial
Mortgage Securities, 4.170%,
due 01/12/41 14,860
32,000 CS First Boston Mortgage
Securities Corp., 3.861%,
due 03/15/36 31,440
8,000 CS First Boston Mortgage
Securities Corp., 7.810%,
due 04/14/62 9,155
41,000 DLJ Commercial Mortgage Corp.,
6.240%, due 11/12/31 43,993
115,000 DLJ Commercial Mortgage Corp.,
7.300%, due 06/10/32 128,860
19,000 GE Capital Commercial
Mortgage Corp., 5.994%,
due 12/10/35 20,181
--------------
248,489
--------------
CREDIT CARD ASSET BACKED
SECURITIES: 0.6%
12,000 Bank One Issuance Trust, 4.540%,
due 09/15/10 12,112
11,000 Capital One Master Trust, 4.900%,
due 03/15/10 11,409
36,000 Citibank Credit Card Issuance Trust,
5.650%, due 06/16/08 37,751
</Table>
See Accompanying Notes to Financial Statements
34
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO ASSET ALLOCATION PORTFOLIO as of June 30, 2004 (Unaudited)
(continued)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
CREDIT CARD ASSET BACKED
SECURITIES (CONTINUED)
$ 12,000 MBNA Credit Card Master
Note Trust, 4.950%,
due 06/15/09 $ 12,496
--------------
73,768
--------------
OTHER ASSET-BACKED
SECURITIES: 0.2%
10,000 Chase Funding Mortgage Loan
Asset-Backed Certificates,
2.734%, due 09/25/24 9,818
5,000 Chase Funding Mortgage Loan
Asset-Backed Certificates,
4.045%, due 05/25/33 4,876
15,000 Residential Asset Mortgage
Products, Inc., 2.140%,
due 02/25/30 14,847
--------------
29,541
--------------
WHOLE LOAN COLLATERALIZED
MORTGAGE: 1.6%
25,191 Bank of America Mortgage
Securities, 5.000%,
due 06/25/33 25,418
54,000 CS First Boston Mortgage
Securities Corp., 4.187%,
due 10/25/33 54,387
29,993 GMAC Mortgage Corp. Loan Trust,
5.250%, due 04/25/34 30,406
42,000 GMAC Mortgage Corp. Loan Trust,
5.500%, due 01/25/34 42,324
33,830 GSR Mortgage Loan Trust,
6.500%, due 01/25/34 35,156
10,197 MASTR Asset Securitization Trust,
8.000%, due 06/25/33 10,777
--------------
198,468
--------------
WHOLE LOAN COLLATERALIZED
SUPPORT: 0.1%
6,318 XX Bank of America
Mortgage Securities, 5.500%,
due 11/25/33 6,248
--------------
6,248
--------------
WHOLE LOAN COLLATERALIZED
PLANNED AMORTIZATION
CLASS: 0.6%
31,346 MASTR Alternative Loans Trust,
8.500%, due 05/25/33 32,170
10,381 Residential Funding
Securities Corp., 8.500%,
due 05/25/33 11,048
33,000 Residential Funding
Securities Corp., 4.750%,
due 02/25/33 33,400
--------------
76,618
--------------
Total Collateralized Mortgage
Obligations and Asset-backed
Securities (Cost $684,710) 667,408
--------------
U.S. TREASURY OBLIGATIONS: 6.3%
U.S. TREASURY BONDS: 5.0%
142,000 4.750%, due 05/15/14 143,526
$ 63,000 5.290%, due 05/15/16 $ 34,170
149,000 5.375%, due 02/15/31 150,322
127,000 6.250%, due 08/15/23 140,672
56,000 10.375%, due 11/15/12 68,399
59,000 13.250%, due 05/15/14 83,572
--------------
620,661
--------------
U.S. TREASURY NOTES: 1.3%
66,000 2.500%, due 05/31/06 65,798
56,000 3.125%, due 05/15/07 56,018
39,000 4.000%, due 06/15/09 39,346
--------------
161,162
--------------
Total U.S. Treasury Obligations
(Cost $785,671) 781,823
--------------
OTHER BONDS: 0.9%
5,647 @@ Brazilian Government
Intl. Bond, 2.188%,
due 04/15/12 4,755
8,000 @@ Brazilian Government
Intl. Bond, 10.000%,
due 08/07/11 7,800
11,000 @@ Colombia Government
Intl. Bond, 10.000%,
due 01/23/12 11,440
13,000 @@ Dominican Republic
Intl. Bond, 9.040%,
due 01/23/13 8,060
6,000 @@ Ecuador Government
Intl. Bond, 7.000%,
due 08/15/30 4,253
11,000 @@ Peru Government
Intl. Bond, 4.500%,
due 03/07/17 8,934
3,000 @@ Philippine Government
Intl. Bond, 9.875%,
due 01/15/19 3,000
1,000 @@ Panama Government
Intl. Bond, 9.375%,
due 07/23/12 1,098
3,000 Panama Government
Intl. Bond, 9.375%,
due 01/16/23 3,075
24,000 @@ Russia Government
Intl. Bond, 5.000%,
due 03/31/30 21,972
11,000 @@ Turkey Government
Intl. Bond, 12.375%,
due 06/15/09 12,635
3,000 #,@@ Ukraine Government
Intl. Bond, 7.650%,
due 06/11/13 2,873
10,169 XX Uruguay Government
Intl. Bond, 10.500%,
due 10/20/06 11,185
10,000 Venezuela Government
Intl. Bond, 10.750%,
due 09/19/13 9,875
--------------
Total Other Bonds
(Cost $116,266) 110,955
--------------
</Table>
See Accompanying Notes to Financial Statements
35
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO ASSET ALLOCATION PORTFOLIO as of June 30, 2004 (Unaudited)
(continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------------
COMMON STOCK: 61.7%
AEROSPACE/DEFENSE: 4.5%
2,725 @ Alliant Techsystems, Inc. $ 172,601
1,300 General Dynamics Corp. 129,090
1,750 Lockheed Martin Corp. 91,140
2,500 @ United Defense Industries, Inc. 87,500
900 United Technologies Corp. 82,332
--------------
562,663
--------------
AGRICULTURE: 0.7%
1,750 Altria Group, Inc. 87,588
--------------
87,588
--------------
APPAREL: 0.8%
3,000 Polo Ralph Lauren Corp. 103,350
--------------
103,350
--------------
AUTO MANUFACTURERS: 0.7%
1,550 Paccar, Inc. 89,885
--------------
89,885
--------------
BANKS: 1.7%
4,150 US Bancorp 114,374
1,800 Wells Fargo & Co. 103,014
--------------
217,388
--------------
BEVERAGES: 1.3%
1,550 Coca-Cola Co. 78,244
1,500 PepsiCo, Inc. 80,820
--------------
159,064
--------------
BIOTECHNOLOGY: 1.8%
1,770 @ Biogen IDEC, Inc. 111,953
1,900 @ Celgene Corp. 108,794
--------------
220,747
--------------
CHEMICALS: 2.9%
1,175 Air Products & Chemicals, Inc. 61,629
3,000 Dow Chemical Co. 122,100
1,575 Praxair, Inc. 62,858
2,700 Sherwin-Williams Co. 112,185
--------------
358,772
--------------
COMMERCIAL SERVICES: 0.8%
4,150 @ Cendant Corp. 101,592
--------------
101,592
--------------
COMPUTERS: 1.5%
3,700 Hewlett-Packard Co. 78,070
1,300 International Business
Machines Corp. 114,595
--------------
192,665
--------------
DIVERSIFIED FINANCIAL SERVICES: 5.7%
5,500 Citigroup, Inc. 255,749
1,640 Countrywide Financial Corp. 115,210
1,650 Goldman Sachs Group, Inc. 155,364
1,950 JP Morgan Chase & Co. 75,602
1,600 Lehman Brothers Holdings Inc 120,400
--------------
722,325
--------------
ELECTRIC: 0.7%
2,050 Consolidated Edison, Inc. 81,508
--------------
81,508
--------------
ELECTRONICS: 1.8%
2,425 @ Amphenol Corp. $ 80,801
2,500 Parker Hannifin Corp. 148,650
--------------
229,451
--------------
ENTERTAINMENT: 0.7%
2,125 International Game Technology 82,025
--------------
82,025
--------------
ENVIRONMENTAL CONTROL: 1.0%
2,500 @ Stericycle, Inc. 129,350
--------------
129,350
--------------
HEALTHCARE-PRODUCTS: 2.9%
2,900 @ Boston Scientific Corp. 124,120
1,750 @ Inamed Corp. 109,988
2,250 Johnson & Johnson 125,325
--------------
359,433
--------------
HEALTHCARE-SERVICES: 0.6%
700 @ WellPoint Health Networks 78,407
--------------
78,407
--------------
INSURANCE: 1.5%
2,700 American Intl. Group, Inc. 192,456
--------------
192,456
--------------
INTERNET: 3.1%
1,300 @ eBay, Inc. 119,535
7,250 @ Yahoo!, Inc. 263,392
--------------
382,927
--------------
LEISURE TIME: 1.6%
1,950 Carnival Corp. 91,650
1,800 Harley-Davidson, Inc. 111,492
--------------
203,142
--------------
LODGING: 1.0%
1,575 Marriott Intl., Inc. 78,561
950 Starwood Hotels & Resorts
Worldwide, Inc. 42,608
--------------
121,169
--------------
MACHINERY-DIVERSIFIED: 1.8%
1,200 Deere & Co. 84,168
3,600 Rockwell Automation, Inc. 135,036
--------------
219,204
--------------
MEDIA: 2.2%
2,900 @ Comcast Corp. 80,069
5,998 @ DIRECTV Group, Inc. 102,566
3,500 Walt Disney Co. 89,215
--------------
271,850
--------------
MINING: 1.0%
3,800 Alcoa, Inc. 125,514
--------------
125,514
--------------
MISCELLANEOUS MANUFACTURING: 4.5%
750 3M Co. 67,508
1,450 Eaton Corp. 93,873
4,350 General Electric Co. 140,940
7,650 @@ Tyco Intl. Ltd. 253,520
--------------
555,841
--------------
</Table>
See Accompanying Notes to Financial Statements
36
<Page>
PORTFOLIO OF INVESTMENTS
THE USLICO ASSET ALLOCATION PORTFOLIO as of June 30, 2004 (Unaudited)
(continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------------
OIL AND GAS: 1.5%
4,150 @@,@ Nabors Industries Ltd. $ 187,663
--------------
187,663
--------------
PHARMACEUTICALS: 4.1%
1,100 @ Barr Laboratories, Inc. 37,070
3,486 @ Caremark Rx, Inc. 114,829
1,250 @ Gilead Sciences, Inc. 83,750
1,490 Merck & Co., Inc. 70,775
6,000 Pfizer, Inc. 205,679
--------------
512,103
--------------
RETAIL: 2.3%
400 @ Cabela's, Inc. 10,780
2,400 @ Chico's FAS, Inc. 108,384
3,300 Wal-Mart Stores, Inc. 174,108
--------------
293,272
--------------
SAVINGS AND LOANS: 0.7%
2,150 Greenpoint Financial Corp. 85,355
--------------
85,355
--------------
SEMICONDUCTORS: 1.5%
4,250 Intel Corp. 117,300
3,600 @ Nvidia Corp. 73,800
--------------
191,100
--------------
SOFTWARE: 2.2%
1,700 @ Electronic Arts, Inc. 92,735
6,300 Microsoft Corp. 179,928
--------------
272,663
--------------
TELECOMMUNICATIONS: 2.6%
2,500 @ Avaya, Inc. 39,475
2,700 @ Cisco Systems, Inc. 63,990
9,700 @ Corning, Inc. 126,682
3,350 @ Nextel Communications, Inc. 89,311
--------------
319,458
--------------
Total Common Stock
(Cost $6,456,657) 7,709,930
--------------
PREFERRED STOCK: 0.3%
BANKS: 0.3%
3 #,XX,@ DG Funding Trust 32,250
--------------
Total Preferred Stock
(Cost $32,635) 32,250
--------------
Total Long-Term Investments
(Cost $11,757,303) 12,986,500
--------------
<Caption>
AMOUNT VALUE
- ------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 8.7%
REPURCHASE AGREEMENT: 8.7%
$ 1,084,000 Goldman Sachs Repurchase
Agreement, dated 06/30/04,
1.500%, due 07/01/04, $1,084,045
to be received upon repurchase
(Collateralized by $1,014,000
U.S. Treasury Bond, 6.000%,
Market Value plus accrued
interest $1,105,815, due 02/15/26) $ 1,084,000
--------------
Total Repurchase Agreement
(Cost $1,084,000) 1,084,000
--------------
TOTAL INVESTMENTS IN
SECURITIES (COST
$12,841,303)* 112.7% $ 14,070,500
OTHER ASSETS AND
LIABILITIES-NET (12.7) (1,581,884)
----- --------------
NET ASSETS 100.0% $ 12,488,616
===== ==============
</Table>
@ Non-income producing security
@@ Foreign issuer
# Securities with purchases pursuant to Rule 144A, under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. These securities have been determined to be liquid
under the guidelines established by the Funds' Board of Directors/Trustees.
C Bond may be called prior to maturity date.
I Illiquid security
X Fair value determined by ING Funds Valuation Committee appointed by the
Funds' Board of Directors/Trustees.
+ Step-up basis bonds. Interest rates shown reflect current and future coupon
rates.
XX Value of securities obtained from one or more dealers making markets in the
securities in accordance with the Fund's valuation procedures.
* Cost for federal income tax purposes is $12,854,119. Net unrealized
appreciation consists of:
<Table>
Gross Unrealized Appreciation $ 1,325,071
Gross Unrealized Depreciation (108,690)
--------------
Net Unrealized Appreciation $ 1,216,381
==============
</Table>
See Accompanying Notes to Financial Statements
37
<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 September Mr. Doherty is President 118 University of Massachusetts
7337 E. Doubletree Ranch Rd. 1999 - Present and Partner, Doherty, Foundation Board (April 2004
Scottsdale, AZ 85258 Wallace, Pillsbury and - Present).
Born: 1934 Murphy, P.C., Attorneys
(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 - Present).
Scottsdale, AZ 85258 Present).
Born: 1948
Walter H. May(2) Trustee September Retired. Formerly, 118 Trustee, BestPrep Charity
7337 E. Doubletree Ranch Rd. 1999 - Present Managing Director and (1991 - Present) - Charitable
Scottsdale, AZ 85258 Director of Marketing, organization.
Born: 1936 Piper Jaffray, Inc.
Jock Patton(2) Trustee February 2001 - Private Investor 118 Director, Hypercom, Inc.
7337 E. Doubletree Ranch Rd. Present (June 1997 - Present). (January 1999 - Present);
Scottsdale, AZ 85258 Formerly Director and JDA Software Group, Inc.
Born: 1945 Chief Executive Officer, (January 1999 - Present);
Rainbow Multimedia Swift Transportation Co.
Group, Inc. (January (March 2004 - Present).
1999 - December 2001).
David W.C. Putnam(3) Trustee September President and Director, 118 Anchor International Bond
7337 E. Doubletree Ranch Rd. 1999 - Present F.L. Putnam Securities (December 2000 - Present);
Scottsdale, AZ 85258 Company, Inc. and its Progressive Capital
Born: 1939 affiliates (1978- Accumulation Trust (August
Present); President, 1998 - Present); Principled
Secretary and Trustee, Equity Market Fund (November
The Principled Equity 1996 - Present), Mercy
Market Fund (1996- Endowment Foundation (1995 -
Present). 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>
38
<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 1998 -
Scottsdale, AZ 85258 (January 1997 - Present); Director, Members
Born: 1933 Present). Chairman of Trust Co. (November 2003 -
the Board and Trustee Present).
of each of the funds
managed by ING
Investment
Management Co. LLC
(November 1998 -
February 2001).
Roger B. Vincent(3) Trustee February 2002 - President, Springwell 118 Director, AmeriGas Propane,
7337 E. Doubletree Ranch Rd. Present Corporation (1989 - Inc. (1998 - Present).
Scottsdale, AZ 85258 Present). Formerly,
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 (1997 -
Scottsdale, AZ 85258 Administration, Present); Trustee, Jim Henson
Born: 1936 Channel Corporation Legacy (1994 - Present).
(June 1996 - April
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 American
Scottsdale, AZ 85258 Services (September 2001 Life Insurance Co., Life
Born: 1956 - Present); Member ING Insurance Company of Georgia,
Americas Executive Midwestern United Life
Committee (2001 - Insurance Co., ReliaStar Life
Present); ING Aeltus Insurance Co., Security Life
Holding Company, Inc. of Denver, Security
(2000 - Present), ING Connecticut Life Insurance
Retail Holding Company Co., Southland Life Insurance
(1998 - Present), and Co., USG Annuity and Life
ING Retirement Holdings, Company, and United Life and
Inc. (1997-Present). Annuity Insurance Co. Inc
Formerly, President, ING (March 2001 - Present); Member
Life Insurance Annuity of the Board, Bushnell
Company (September 1997 Performing Arts Center; St.
- November 2002); Francis Hospital; National
President, Chief Conference of Community
Executive Officer and Justice; and Metro Atlanta
Director of Northern Chamber of Commerce.
Life Insurance Company
(March 2001 - October
2002); General Manager
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>
39
<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 February 2001 - Chairman, Hillcrest 118 Director, Hormel Foods
7337 E. Doubletree Ranch Rd. Present Capital Partners (May Corporation (March 2000 -
Scottsdale, AZ 85258 2002 - Present); Present); Shopko Stores, Inc.
Born: 1939 Formerly, Vice Chairman (August 1999 - Present); and
of ING Americas (2000 - M.A. Mortenson Company (March
2002); Chairman and 2002 - Present); Conseco, Inc.
Chief Executive Officer (September 2003 - Present).
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 -
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.
40
<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, Chief February 2001 - President and Chief Executive Officer,
7337 E. Doubletree Ranch Rd. Executive Officer and Present ING Investments, LLC (December 2001 -
Scottsdale, AZ 85258 Chief Operating Present). Formerly, Senior Executive
Born: 1949 Officer Vice President and Chief Operating
Officer, ING Investments, LLC (April
1995 - December 2000); and Executive
Vice President, ING Investments, LLC
(May 1998 - June 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 January 2000 - Vice President, ING Investments,
Officer Present LLC (June 1998 - December 2001).
Stanley D. Vyner Executive Vice July 2000 - 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).
Robert S. Naka Senior Vice President January 2000 - Senior Vice President and Assistant
7337 E. Doubletree Ranch Rd. and Assistant Present Secretary, ING Funds Services, LLC
Scottsdale, AZ 85258 Secretary (October 2001 - Present). Formerly,
Born: 1963 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 Investments,
7337 E. Doubletree Ranch Rd. Present LLC (October 2003 - Present). Formerly,
Scottsdale, AZ 85258 Vice President and Assistant Secretary,
Born: 1964 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 - Vice President, ING Funds Services, LLC
7337 E. Doubletree Ranch Rd. Treasurer Present (October 2001 - Present) and ING
Scottsdale, AZ 85258 Investments, LLC (August 1997 -
Born: 1967 Present).
Lauren D. Bensinger Vice President February 2003 - Vice President and Chief Compliance
7337 E. Doubletree Ranch Rd. Present Officer, ING Funds Distributor, LLC
Scottsdale, Arizona 85258 (July 1995 - Present); Vice President
Born: 1954 (February 1996 - Present) and Chief
Compliance Officer (October 2001 -
Present), ING Investments, LLC.
</Table>
41
<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 Reporting -
7337 E. Doubletree Ranch Rd. Present Fund Accounting of ING Funds Services,
Scottsdale, AZ 85258 LLC (September 2002 - Present).
Born: 1967 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 - Present).
Scottsdale, Arizona 85258 Formerly, Counsel, ING U.S. Financial
Born: 1963 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 Assistant
7337 E. Doubletree Ranch Rd. President and Present Secretary, ING Funds Services, LLC
Scottsdale, AZ 85258 Assistant Secretary (December 2002 - Present); and has held
Born: 1976 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 Funds
7337 E. Doubletree Ranch Rd. President Present Services, LLC (October 2001 - Present).
Scottsdale, AZ 85258 Formerly, Manager of Fund Accounting and
Born: 1958 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, Senior
Scottsdale, Arizona 85258 Associate with Shearman & Sterling
Born: 1963 (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.
42
<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.
<Page>
[ING FUNDS LOGO]
PRESORTED
STANDARD
U.S. POSTAGE
PAID
BOSTON MA
PERMIT NO. 57842
VPSAR-USLICO (0604-081804)
<Page>
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.
2
<Page>
(b) There were no significant changes in the registrant's internal controls
that occurred during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached
hereto as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT.
(b) The officer certifications required by Section 906 of the Sarbanes-Oxley
Act of 2002 are attached hereto as EX-99.906CERT.
(3) Not applicable.
3
<Page>
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): USLICO SERIES FUND
By /s/ James M. Hennessy
---------------------
James M. Hennessy
President and Chief Executive Officer
Date: August 30, 2004
---------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James M. Hennessy
---------------------
James M. Hennessy
President and Chief Executive Officer
Date: AUGUST 30, 2004
By /s/ Michael J. Roland
---------------------
Michael J. Roland
Executive Vice President and Chief Financial Officer
Date: August 30, 2004
---------------
4