-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LjsGy/pu+lAEos5pfx29dJ7DKXoIAjkpGlQuP3B7EOs5I3vNzf+tpjCtdDx+Iue2 aLuycGt8+KmPsLHyH/7AYg== 0000950147-02-000914.txt : 20020730 0000950147-02-000914.hdr.sgml : 20020730 20020730172150 ACCESSION NUMBER: 0000950147-02-000914 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020531 FILED AS OF DATE: 20020730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING LARGE CO VALUE FUND INC CENTRAL INDEX KEY: 0000059146 IRS NUMBER: 221644924 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00865 FILM NUMBER: 02715096 BUSINESS ADDRESS: STREET 1: 7337 E DOUBLETREE RANCH ROAD STREET 2:   CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 1-800-992-0180 MAIL ADDRESS: STREET 1: 7337 E DOUBLETREE RANCH ROAD STREET 2:   CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON RESEARCH FUND INC DATE OF NAME CHANGE: 19910506 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON RESEARCH INVESTING CORP DATE OF NAME CHANGE: 19690813 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON GROWTH & INCOME FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM GROWTH & INCOME FUND INC DATE OF NAME CHANGE: 20000913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING VARIABLE PRODUCTS TRUST CENTRAL INDEX KEY: 0000916403 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08220 FILM NUMBER: 02715097 BUSINESS ADDRESS: STREET 1: ING PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 800-992-0180 MAIL ADDRESS: STREET 1: ING PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR NWNL TRUST DATE OF NAME CHANGE: 19931220 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR GALAXY TRUST DATE OF NAME CHANGE: 19981209 FORMER COMPANY: FORMER CONFORMED NAME: ING VARIABLE PRODUCTS TRUST DATE OF NAME CHANGE: 20020320 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM VARIABLE PRODUCTS TRUST DATE OF NAME CHANGE: 20000830 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM VARIABLE PRODUCTS TRUST DATE OF NAME CHANGE: 20020405 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING MAYFLOWER TRUST CENTRAL INDEX KEY: 0000911294 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07978 FILM NUMBER: 02715098 BUSINESS ADDRESS: STREET 1: ING PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 800-992-0180 MAIL ADDRESS: STREET 1: ING PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR TRUST DATE OF NAME CHANGE: 19981209 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR ADVANTAGE TRUST DATE OF NAME CHANGE: 19950620 FORMER COMPANY: FORMER CONFORMED NAME: NWNL NORTHSTAR SERIES TRUST DATE OF NAME CHANGE: 19931108 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM MAYFLOWER TRUST DATE OF NAME CHANGE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING MUTUAL FUNDS CENTRAL INDEX KEY: 0000895430 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07428 FILM NUMBER: 02715099 BUSINESS ADDRESS: STREET 1: 7337 E DOUBLETREE RANCH ROAD STREET 2:   CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 1-800-992-0180 MAIL ADDRESS: STREET 1: 7337 E DOUBLETREE RANCH ROAD STREET 2:   CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: NICHOLAS APPLEGATE MUTUAL FUNDS DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM MUTUAL FUNDS DATE OF NAME CHANGE: 19990526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING SMALLCAP OPPORTUNITIES FUND CENTRAL INDEX KEY: 0000779235 IRS NUMBER: 042886856 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04434 FILM NUMBER: 02715100 BUSINESS ADDRESS: STREET 1: ING PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 800-992-0180 MAIL ADDRESS: STREET 1: ING PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: ADVANTAGE SPECIAL FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR SPECIAL FUND DATE OF NAME CHANGE: 19981209 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR ADVANTAGE SPECIAL FUND DATE OF NAME CHANGE: 19950620 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM SMALLCAP OPPORTUNITIES FUND DATE OF NAME CHANGE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING GROWTH OPPORTUNITIES FUND CENTRAL INDEX KEY: 0000779233 IRS NUMBER: 042886865 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04431 FILM NUMBER: 02715101 BUSINESS ADDRESS: STREET 1: ING PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 800-992-0180 MAIL ADDRESS: STREET 1: ING PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: ADVANTAGE GROWTH FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR GROWTH FUND DATE OF NAME CHANGE: 19981209 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR ADVANTAGE GROWTH FUND DATE OF NAME CHANGE: 19950828 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM GROWTH OPPORTUNITIES FUND DATE OF NAME CHANGE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING EQUITY TRUST CENTRAL INDEX KEY: 0001063946 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08817 FILM NUMBER: 02715102 BUSINESS ADDRESS: STREET 1: ING FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 800-992-0180 MAIL ADDRESS: STREET 1: ING FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR EQUITY TRUST DATE OF NAME CHANGE: 19980612 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM EQUITY TRUST DATE OF NAME CHANGE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING INVESTMENT FUNDS INC CENTRAL INDEX KEY: 0000061448 IRS NUMBER: 136066974 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01939 FILM NUMBER: 02715103 BUSINESS ADDRESS: STREET 1: 7337 E DOUBLETREE RANCH ROAD STREET 2:   CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 1-800-992-0180 MAIL ADDRESS: STREET 1: 7337 E DOUBLETREE RANCH ROAD STREET 2:   CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: MAGNACAP FUND INC DATE OF NAME CHANGE: 19850701 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM MAGNACAP FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM INVESTMENT FUNDS INC DATE OF NAME CHANGE: 19950503 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM INVESTMENT FUNDS INC/MD DATE OF NAME CHANGE: 19981113 N-30D 1 e-8739.txt ANNUAL REPORT FOR THE YEAR ENDED 5/31/2002 ANNUAL REPORT May 31, 2002 DOMESTIC EQUITY GROWTH FUNDS CLASSES I AND Q ING Growth + Value Fund ING Growth Opportunities Fund ING LargeCap Growth Fund ING MidCap Opportunities Fund ING SmallCap Opportunities Fund ING Research Enhanced Index Fund DOMESTIC EQUITY VALUE FUNDS ING Large Company Value Fund ING MagnaCap Fund ING MidCap Value Fund ING SmallCap Value Fund DOMESTIC EQUITY AND INCOME FUNDS ING Convertible Fund ING Equity and Income Fund [PHOTO] [LION LOGO] ING FUNDS (formerly the Pilgrim Funds) TABLE OF CONTENTS - -------------------------------------------------------------------------------- President's Letter ........................... 1 Portfolio Managers' Reports: Domestic Equity Growth Funds ............... 2 Domestic Equity Value Funds ................ 14 Domestic Equity and Income Funds ........... 22 Index Descriptions ........................... 26 Independent Auditors' Report ................. 27 Statements of Assets and Liabilities ......... 28 Statements of Operations ..................... 34 Statements of Changes in Net Assets .......... 37 Financial Highlights ......................... 45 Notes to Financial Statements ................ 57 Portfolios of Investments .................... 77 Shareholder Meeting Information .............. 107 Tax Information .............................. 111 Director/Trustee and Officer Information ..... 112 PRESIDENT'S LETTER - -------------------------------------------------------------------------------- Dear Shareholder: We are pleased to present the Classes I and Q May 31, 2002 Annual Report for the ING Funds (formerly, the Pilgrim Funds). There are twelve Funds included in this Annual Report. There have been some very important changes that have occurred over the past several months regarding the ING Funds. I would like to take this opportunity to share them with you. As you may recall, in September 2000, ING Group acquired ReliaStar Financial Corp., the parent company of the adviser to the Pilgrim Funds. In December 2000, ING Group acquired the financial services of Aetna Inc., including Aeltus Investment Management, Inc., adviser to the Aetna Series Fund. ING Group has embarked upon a plan to integrate some of the operations of its various affiliated mutual fund groups. Effective March 1, 2002, ING Group merged the operations of the Aetna Series Fund into the Pilgrim Funds and renamed the entire fund complex, ING Funds. In addition to the changes noted above, individual product name changes have also occurred within the ING Funds family. These changes are part of ING Group's evolving corporate strategy to create one master brand. The ING Funds family now offers more than 100 open- and closed-end funds and variable products with a wide range of investment objectives and styles. At ING Funds, we are dedicated to providing core investments for the serious investors. Our goal is to understand and anticipate your needs and objectives, and manage our products accordingly. We greatly appreciate your continued investment in the ING Funds. Sincerely, /s/ James M. Hennessy James M. Hennessy President ING Funds Services, LLC June 15, 2002 1 ING GROWTH + VALUE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Louis Navellier, Chief Investment Officer and Alan Alpers, Senior Portfolio Manager, Navellier Fund Management, Inc. GOAL: The ING Growth + Value Fund (formerly Pilgrim Growth + Value Fund) (the "Fund") seeks long-term capital appreciation by investing primarily in stocks from a universe of small to mid capitalization U.S. companies. MARKET OVERVIEW: There is little doubt that the U.S. economy appears to be on a sluggish road to recovery. Many sectors of the U.S. economy such as housing, manufacturing, and retail sales appear relatively healthy. Moreover, productivity is soaring again which usually translates into robust profit margin expansion. However, evidence of increased corporate profitability is necessary for a sustained rise in the stock market. The profit picture is already improving across the capitalization spectrum. Both small and mid capitalization growth stocks recently posted strong annual earnings. We believe that many large multi-international stocks that dominate the S&P 500 Index should begin to benefit from the weakening U.S. dollar, boosting profits on their foreign subsidiaries. New evidence of increased corporate profitability and a rebounding U.S. economy may also help the stock market shake off lack of corporate confidence and global political uncertainties. We hope the market will return to a strong focus on corporate earnings because we believe such scrutiny will make it easier to pick companies that will release strong earnings each quarter. However, stock price gains do not necessarily require higher profits as we have recently witnessed in the fourth quarter of 2001 when many technology stocks rallied despite a poor profit outlook. As a result of the current valuation levels, we fully expect earnings to have a greater impact when the second quarter earnings announcements commence in mid-July. In fact, we expect Wall Street to reward companies that post strong corporate profits and punish those stocks that do not in the upcoming earnings season. We recently completed our quarterly fundamental model revisions for the Fund. The model tests, interestingly, detected a shift away from the value style, in favor for most of the past two years, toward the growth style which is more conducive with our investment philosophy. PERFORMANCE: For the year ended May 31, 2002, the Fund's Class Q shares returned - -28.96% compared to the Russell 2000 Index, which returned -0.50% and the Russell 3000 Index which returned -12.47% over the same time period. PORTFOLIO SPECIFICS: The Navellier proprietary quantitative measure, central to our growth strategy, encountered a difficult period the past year while value investing was in favor. Overweight positions in the healthcare and financial services sectors aided performance. Thus, sector allocation was largely successful during the past year. Unfortunately, earnings downgrades on several holdings, particularly stocks in the technology sector, offset the allocation benefits and resulted in the reported underperformance MARKET OUTLOOK: It appears that the U.S. economic recovery is occurring at a sluggish pace. Consumer spending has been strong, but may slow soon due to rising debt loads. Unfortunately, business spending remains very hard to predict and unless business spending perks up, the U.S. economy will likely slow temporarily. As a result, we remain extremely cautious and will stay in consumer-oriented stocks that are benefiting from predictable spending patterns. Overall, we also remain extremely optimistic on our favorite small and mid capitalization stocks in our portfolio, but remain mixed on the overall stock market, especially many large capitalization stocks that continue to experience significant selling pressure. In summary, as the summer months approach and trading volume becomes increasing erratic; it may become harder for the stock market to mount a significant rally. As a result, we strongly recommend that investors remain defensive in predominately consumer-related stocks with strong earnings growth and moderate price/earnings ratios such as those in the Fund. Currently, our portfolio is structured so that it should benefit from the flow of funds on Wall Street and meander higher in the upcoming months. 2 Portfolio Managers' Report ING GROWTH + VALUE FUND - -------------------------------------------------------------------------------- 6/5/00 5/31/01 5/31/02 ------- ------- ------- ING Growth + Value Fund Class Q $10,000 $ 5,775 $ 4,103 Russell 2000 Index $10,000 $10,569 $10,516 Russell 3000 Index $10,000 $ 9,028 $ 7,902 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 ------------------------------ SINCE INCEPTION 1 YEAR 6/5/00 ------ ------ Class Q -28.96% -36.09% Russell 2000 Index -0.50% 2.55%(1) Russell 3000 Index -12.47% -11.11%(1) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Growth + Value Fund against the Russell 2000 Index and the Russell 3000 Index. The Indices have an inherent performance advantage over the Fund since they have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 6/1/00. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller and mid-sized companies may entail greater price volatility than investing in stocks of larger companies. Investing in funds that are concentrated in a smaller number of holdings poses greater risk than those funds with a larger number of holdings because each investment has a greater effect on the fund's performance. See accompanying index descriptions on page 26. 3 ING GROWTH OPPORTUNITIES FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Mary Lisanti, Executive Vice-President and Portfolio Manager; Jeffrey Bernstein, Senior Vice President and Portfolio Manager, ING Investments, LLC. GOAL: The ING Growth Opportunities Fund (formerly Pilgrim Growth Opportunities Fund) (the "Fund") seeks long-term growth of capital by investing primarily in the common stock of U.S. companies that the Portfolio Managers' feel have above average prospects for growth. MARKET OVERVIEW: One of the longest bear markets on record continued into 2002, stretching the downturn in the equity markets beyond two years through the end of May. Last fall, economists confirmed what the stock market had been signaling for some time--the U.S. was in its first recession since 1990-91. Despite a solid bounce back with 5.6% GDP (Gross Domestic Product) economic growth in the first quarter of 2002, the economic situation remains tenuous. The recession was punctuated by the tragic events of September 11th, spectacular corporate collapses, accounting scandals, and the evaporation of corporate profits. The Federal Reserve's best efforts have failed to kick-start an economy and a stock market that are in search of leadership. The central bank has cut 475 basis points from the interest rate peak of May 2000 and 225 basis points in the past twelve months, but S&P 500 earnings have fallen 19.3% over the past four quarters. Only two of the S&P 500's eleven sectors have shown positive returns over the past twelve months (consumer staples and materials), but these sectors account for a little more than 10% of the market's capitalization. At the same time, the spread between the performance of value stocks and growth stocks widened in favor of value stocks. The deterioration of the market was most apparent in the growth indices, especially the NASDAQ Composite Index, which has dropped another 23.44% over the past twelve months. This technology-heavy benchmark is now down 68% from its peak in March 2000. The S&P 500 Index also, suffered, although in relative terms, its decline of 13.85% was not as severe. The Dow Jones Industrial Average slipped 9.04% during the past fiscal year, while the S&P Midcap 400 Index managed a gain of 2.40%. Small-cap stocks displayed the greatest dichotomy in performance as the Russell 2000 Index dropped 0.50%, but the Russell 2000 Value Index soared 15.41%, while the Russell 2000 Growth Index fell 15.82%. PERFORMANCE: For the year ended May 31, 2002, the Fund's Class I shares provided a total return of -28.38% compared to the S&P 500 Index, which returned -13.85% over the same period PORTFOLIO SPECIFICS: The Fund suffered from the market's ongoing bias of value over growth. Throughout the year, we continued to add to positions in consumer-related industries, which was clearly the most resilient part of the economy. However, our positioning in economically sensitive semiconductor issues proved to be early as the recovery never materialized. These positions were pared back to make room for more defensive health care services stocks. For the year-to-date period, the Fund's best performance came from the "America's Changing Leisure Time" and "Flourishing in the Managed Care Environment" investment themes. The strongest individual contributors were Williams-Sonoma, Boston Scientific, Anthem and Pactiv. MARKET OUTLOOK: Despite declining investor confidence in Wall Street, we are cautiously optimistic about the prospects for equities. The market has retreated to levels not seen since the period immediately following September 11th, and after a long and deep decline in the equity market, valuations are more reasonable than they have been in quite some time. Interest rates should remain low, as the economy grows at a slower pace than originally thought. However, there are hurdles that the market must overcome in the near term before a long-term recovery can take place. First, investor confidence will need to be restored by the demonstration of better corporate governance and improved financial transparency. Second, companies are going to have to demonstrate an ability to grow profits in an environment that has practically no inflation and more stringent accounting standards. Finally, there is a new element of risk that has to be factored into the market, namely terrorism in the wake of September 11th. Despite these issues, first-quarter productivity gains and the fact that inflation remains subdued are encouraging signs that an economic recovery may not be far off. We expect a weakening dollar can improve the competitiveness of U.S. companies, who for years have been fighting a headwind against foreign competition. We continue to focus on companies that can effectively control their costs, as pricing power remains elusive in many industries. Until financially unsound competitors are washed out of some sectors, the ability to raise prices (and profits) likely will remain constrained. 4 Portfolio Managers' Report ING GROWTH OPPORTUNITIES FUND - --------------------------------------------------------------------------------
3/31/97 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 ------- ------- ------- ------- ------- ------- ------- ING Growth Opportunities Fund Class I $10,000 $11,242 $14,692 $17,781 $19,643 $17,570 $15,137 S&P 500 Index $10,000 $11,017 $13,517 $17,825 $28,599 $17,809 $12,755
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 --------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 5 YEAR 03/31/97 6/1/00 ------ ------ -------- ------ Class I -28.38% 2.97% 4.82% -- Class Q -29.63% -- -- -34.74% S&P 500 Index -13.85% 6.13% 8.35%(1) -12.22% Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Growth Opportunities Fund against the S&P 500 Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 4/1/97. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller and mid-size companies may entail greater price volatility than investing in stocks of larger companies. See accompanying index descriptions on page 26. 5 ING LARGECAP GROWTH FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Mary Lisanti, Executive Vice-President and Senior Portfolio Manager; Jeffrey Bernstein, Senior Vice President and Senior Portfolio Manager, ING Investments, LLC. GOAL: The ING LargeCap Growth Fund (formerly Pilgrim LargeCap Growth Fund) (the "Fund") seeks long-term capital appreciation by investing primarily in stocks from a universe of U.S. companies with market capitalizations corresponding, at the time of purchase, to the upper 90% of the S&P 500 Index. MARKET OVERVIEW: One of the longest bear markets on record continued into 2002, stretching the downturn in the equity markets beyond two years through the end of May. Last fall, economists confirmed what the stock market had been signaling for some time--the U.S. was in its first recession since 1990-91. Despite a solid bounce back with 5.6% GDP (Gross Domestic Product) economic growth in the first quarter of 2002, the economic situation remains tenuous. The recession was punctuated by the tragic events of September 11th, spectacular corporate collapses, accounting scandals, and the evaporation of corporate profits. The Federal Reserve's best efforts have failed to kick-start an economy and a stock market that are in search of leadership. The central bank has cut 475 basis points from the interest rate peak of May 2000 and 225 basis points in the past twelve months, but S&P 500 earnings have fallen 19.3% over the past four quarters. Only two of the S&P's eleven sectors have shown positive returns over the past twelve months (consumer staples and materials), but these sectors account for a little more than 10% of the market's capitalization. At the same time, the spread between the performance of value stocks and growth stocks widened in favor of value stocks. The deterioration of the market was most apparent in the growth indices, especially the NASDAQ Composite Index, which has dropped another 23.44% over the past twelve months. This technology-heavy benchmark is now down 68% from its peak in March 2000. The S&P 500 Index also, suffered, although in relative terms, its decline of 13.85% was not as severe. The Dow Jones Industrial Average slipped 9.04% during the past fiscal year, while the S&P Midcap 400 Index managed a gain of 2.40%. Small-cap stocks displayed the greatest dichotomy in performance as the Russell 2000 Index dropped 0.50%, but the Russell 2000 Value Index soared 15.41%, while the Russell 2000 Growth Index fell 15.82%. PERFORMANCE: For the year ended May 31, 2002, the Fund's Class Q shares provided a total return of -31.77%, compared to the Russell 1000 Growth Index, which returned -20.87% over the same period. PORTFOLIO SPECIFICS: The Fund struggled in a market that was clearly biased against growth stocks. Throughout the year, we continued to add to positions in consumer-related industries, which was clearly the most resilient part of the economy. However, our positioning in economically sensitive semiconductor issues proved to be early as the recovery never materialized. These positions were pared back to make room for more defensive health care services stocks. For the year-to-date period, the Fund's best performance came from the "New Financial Structures" and "Flourishing in the Managed Care Environment." The best performing stocks were General Motors, Wellpoint Health Networks, Immunex and United Electronics. MARKET OUTLOOK: Despite declining investor confidence in Wall Street, we are cautiously optimistic about the prospects for equities. The market has retreated to levels not seen since the period immediately following September 11th, and after a long and deep decline in the equity market, valuations are more reasonable than they have been in quite some time. Interest rates should remain low, as the economy grows at a slower pace than originally thought. However, there are hurdles that the market must overcome in the near term before a long-term recovery can take place. First, investor confidence will need to be restored by the demonstration of better corporate governance and improved financial transparency. Second, companies are going to have to demonstrate an ability to grow profits in an environment that has practically no inflation and more stringent accounting standards. Finally, there is a new element of risk that has to be factored into the market, namely terrorism in the wake of September 11th. Despite these issues, first-quarter productivity gains and the fact that inflation remains subdued are encouraging signs that an economic recovery may not be far off. We expect a weakening dollar can improve the competitiveness of U.S. companies, who for years have been fighting a headwind against foreign competition. We continue to focus on companies that can effectively control their costs, as pricing power remains elusive in many industries. Until financially unsound competitors are washed out of some sectors, the ability to raise prices (and profits) likely will remain constrained. 6 Portfolio Managers' Report ING LARGECAP GROWTH FUND - --------------------------------------------------------------------------------
7/21/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 ------- ------- ------- ------- ------- ------- ING LargeCap Growth Fund Class Q $10,000 $12,688 $21,841 $32,876 $20,801 $14,193 Russell 1000 Growth Index $10,000 $11,375 $14,357 $17,946 $12,614 $ 9,982
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 ----------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 01/08/02 7/21/97 ------ -------- ------- Class I -- -19.53% -- Class Q -31.77% -- 7.47% Russell 1000 Growth Index -20.87% -12.70%(1) -0.04%(2) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING LargeCap Growth Fund against the Russell 1000 Growth Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 1/1/02. (2) Since inception performance for the index is shown from 8/1/97. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. Investing in funds that are concentrated in a smaller number of holdings poses greater risk than those funds with a larger number of holdings because each investment has a greater effect on the fund's performance. See accompanying index descriptions on page 26. 7 ING MIDCAP OPPORTUNITIES FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Mary Lisanti, Executive Vice-President and Senior Portfolio Manager; Jeffrey Bernstein, Senior Vice-President and Senior Portfolio Manager, ING Investments, LLC. GOAL: The ING MidCap Opportunities Fund (formerly Pilgrim MidCap Opportunities Fund) (the "Fund") seeks long-term capital appreciation by investing primarily in the common stock of mid-sized U.S. companies that the Portfolio Managers' feel have above average prospects for growth. MARKET OVERVIEW: One of the longest bear markets on record continued into 2002, stretching the downturn in the equity markets beyond two years through the end of May. Last fall, economists confirmed what the stock market had been signaling for some time -- the U.S. was in its first recession since 1990-91. Despite a solid bounce back with 5.6% GDP (Gross Domestic Product) economic growth in the first quarter of 2002, the economic situation remains tenuous. The recession was punctuated by the tragic events of September 11th, spectacular corporate collapses, accounting scandals, and the evaporation of corporate profits. The Federal Reserve's best efforts have failed to kick-start an economy and a stock market that are in search of leadership. The central bank has cut 475 basis points from the interest rate peak of May 2000 and 225 basis points in the past twelve months, but S&P 500 earnings have fallen 19.3% over the past four quarters. Only two of the S&P's eleven sectors have shown positive returns over the past twelve months (consumer staples and materials), but these sectors account for a little more than 10% of the market's capitalization. At the same time, the spread between the performance of value stocks and growth stocks widened in favor of value stocks. The deterioration of the market was most apparent in the growth indices, especially the NASDAQ Composite Index, which has dropped another 23.44% over the past twelve months. This technology-heavy benchmark is now down 68% from its peak in March 2000. The S&P 500 Index also, suffered, although in relative terms, its decline of 13.85% was not as severe. The Dow Jones Industrial Average slipped 9.04% during the past fiscal year, while the S&P Midcap 400 Index managed a gain of 2.39%. Small-cap stocks displayed the greatest dichotomy in performance as the Russell 2000 Index dropped 0.50%, but the Russell 2000 Value Index soared 15.42%, while the Russell 2000 Growth Index fell 15.82%. PERFORMANCE: For the year ended May 31, 2002, the Fund's Class I shares provided a total return of -23.35%, compared to the S&P MidCap 400 Index which returned 2.39% PORTFOLIO SPECIFICS: We are obviously unhappy with the performance of the Fund over the past year. We have made a number of changes, which we believe can improve performance. We restructured the department organizationally in the late summer of 2001; in late 2001/early 2002, a personnel change was made in one of the senior members of the team; and over the past few months, several junior and mid-level staff members have been added. Most importantly, we maintained a very strong focus on our investment process. Combined with great diligence in research, this has dramatically improved our stock picking capabilities. The Fund struggled in a market that was clearly biased against growth stocks. Throughout the year, we continued to add to positions in consumer-related industries, which was clearly the most resilient part of the economy. However, our positioning in economically sensitive semiconductor issues proved to be early as the recovery never materialized. These positions were pared back to make room for more defensive health care services stocks. Over the course of the past twelve months, the Fund saw the biggest benefit from themes such as "The New Consumer" and "America's Changing Leisure Time." Among the biggest individual contributors to performance were Williams-Sonoma, Ensco International, Boston Scientific, and Nucor Corp. MARKET OUTLOOK: Despite declining investor confidence in Wall Street, we are cautiously optimistic about the prospects for equities. The market has retreated to levels not seen since the period immediately following September 11th, and after a long and deep decline in the equity market, valuations are more reasonable than they have been in quite some time. Interest rates should remain low, as the economy grows at a slower pace than originally thought. However, there are hurdles that the market must overcome in the near term before a long-term recovery can take place. First, investor confidence will need to be restored by the demonstration of better corporate governance and improved financial transparency. Second, companies are going to have to demonstrate an ability to grow profits in an environment that has practically no inflation and more stringent accounting standards. Finally, there is a new element of risk that has to be factored into the market, namely terrorism in the wake of September 11th. Despite these issues, first-quarter productivity gains and the fact that inflation remains subdued are encouraging signs that an economic recovery may not be far off. We expect a weakening dollar can improve the competitiveness of U.S. companies, who for years have been fighting a headwind against foreign competition. We continue to focus on companies that can effectively control their costs, as pricing power remains elusive in many industries.Until financially unsound competitors are washed out of some sectors, the ability to raise prices (and profits) likely will remain constrained. 8 Portfolio Managers' Report ING MIDCAP OPPORTUNITIES FUND - --------------------------------------------------------------------------------
8/20/98 5/31/99 5/31/00 5/31/01 5/31/02 ------- ------- ------- ------- ------- ING MidCap Opportunities Fund Class I $10,000 $15,530 $26,259 $20,203 $15,485 S&P MidCap 400 Index $10,000 $14,218 $17,268 $19,154 $19,612
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 -------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 8/20/98 4/4/00 ------ ------- ------ Class I -23.35% 12.26% -- Class Q -23.72% -- -24.27% S&P MidCap 400 Index 2.39% 19.68%(1) 3.72%(2) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING MidCap Opportunities Fund against the S&P MidCap 400 Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 9/1/98. (2) Since inception performance for the index is shown from 4/1/00. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of mid-size companies may entail greater price volatility than investing in stocks of larger companies. Investing in funds that are concentrated in a smaller number of holdings poses greater risk than those funds with a larger number of holdings because each investment has a greater effect on the fund's performance. See accompanying index descriptions on page 26. 9 ING SMALLCAP OPPORTUNITIES FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: Mary Lisanti, Executive Vice-President and Senior Portfolio Manager, ING Investments, LLC. GOAL: The ING SmallCap Opportunities Fund (formerly Pilgrim SmallCap Opportunities Fund) (the "Fund") seeks capital appreciation by investing at least 80% of its total assets in the common stock of smaller U.S. companies that the Portfolio Manager feels have above average prospects for growth. MARKET OVERVIEW: One of the longest bear markets on record continued into 2002, stretching the downturn in the equity markets beyond two years through the end of May. Last fall, economists confirmed what the stock market had been signaling for some time -- the US was in its first recession since 1990-91. Despite a solid bounce back with 5.6% GDP (Gross Domestic Product) economic growth in the first quarter of 2002, the economic situation remains tenuous. The recession was punctuated by the tragic events of September 11th, spectacular corporate collapses, accounting scandals, and the evaporation of corporate profits. The Federal Reserve's best efforts have failed to kick-start an economy and a stock market that are in search of leadership. The central bank has cut 475 basis points from the interest rate peak of May 2000 and 225 basis points in the past twelve months, but S&P 500 earnings have fallen 19.3% over the past four quarters. Only two of the S&P's eleven sectors have shown positive returns over the past twelve months (consumer staples and materials), but these sectors account for a little more than 10% of the market's capitalization. At the same time, the spread between the performance of value stocks and growth stocks widened in favor of value stocks. The deterioration of the market was most apparent in the growth indices, especially the NASDAQ Composite Index, which has dropped another 23.44% over the past twelve months. This technology-heavy benchmark is now down 68% from its peak in March 2000. The S&P 500 Index also, suffered, although in relative terms, its decline of 13.85% was not as severe. The Dow Jones Industrial Average slipped 9.04% during the past fiscal year, while the S&P Midcap 400 Index managed a gain of 2.39%. Small-cap stocks displayed the greatest dichotomy in performance as the Russell 2000 Index dropped 0.50%, but the Russell 2000 Value Index soared 15.42%, while the Russell 2000 Growth Index fell 15.82%. PERFORMANCE: For the year ended May 31, 2002, the Fund's Class I shares provided a total return of -36.17%, compared to the Russell 2000 Index which returned - -0.50%. PORTFOLIO SPECIFICS: We are obviously unhappy with the performance of the Fund over the past year. We have made a number of changes, which we believe will improve performance. We restructured the department organizationally in the late summer of 2001; in late 2001/early 2002, a personnel change was made in one of the senior members of the team; and over the past few months, several junior and mid-level staff members have been added. Most importantly, we maintained a very strong focus on our investment process. Combined with great diligence in research, this has dramatically improved our stock picking capabilities. The Fund struggled in a market that was clearly biased against growth stocks. Throughout the year, we continued to add to positions in consumer-related industries, which was clearly the most resilient part of the economy. However, our positioning in economically sensitive semiconductor issues proved to be early as the recovery never materialized. These positions were pared back to make room for more defensive health care services stocks. For the twelve months just concluded, we had the biggest positive impact from the "The New Consumer" theme, which remains our largest weighting, along with "Flourishing in the Managed Care Environment." Our biggest individual contributors to performance for the year were Odyssey Healthcare, PF Chang's China Bistro, and Urban Outfitters. MARKET OUTLOOK: Despite declining investor confidence in Wall Street, we are cautiously optimistic about the prospects for equities. The market has retreated to levels not seen since the period immediately following September 11th, and after a long and deep decline in the equity market, valuations are more reasonable than they have been in quite some time. Interest rates should remain low, as the economy grows at a slower pace than originally thought. However, there are hurdles that the market must overcome in the near term before a long-term recovery can take place. First, investor confidence will need to be restored by the demonstration of better corporate governance and improved financial transparency. Second, companies are going to have to demonstrate an ability to grow profits in an environment that has practically no inflation and more stringent accounting standards. Finally, there is a new element of risk that has to be factored into the market, namely terrorism in the wake of September 11th. Despite these issues, first-quarter productivity gains and the fact that inflation remains subdued are encouraging signs that an economic recovery may not be far off. We expect a weakening dollar can improve the competitiveness of U.S. companies, who for years have been fighting a headwind against foreign competition. We continue to focus on companies that can effectively control their costs, as pricing power remains elusive in many industries. Until financially unsound competitors are washed out of some sectors, the ability to raise prices (and profits) likely will remain constrained. 10 Portfolio Manager's Report ING SMALLCAP OPPORTUNITIES FUND - --------------------------------------------------------------------------------
4/1/99 5/31/99 5/31/00 5/31/01 5/31/02 ------- ------- ------- ------- ------- ING SmallCap Opportunities Fund Class I $10,000 $ 9,805 $20,415 $17,515 $11,179 Russell 2000 Index $10,000 $11,055 $12,151 $12,842 $12,778
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 ------------------------------------------------ SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 4/01/99 4/4/00 ------ ------- ------ Class I -36.17% 3.58% -- Class Q -35.83% -- -28.54% Russell 2000 Index -0.50% 8.05% -3.26%(1) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING SmallCap Opportunities Fund against the Russell 2000 Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 4/1/00. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility than investing in stocks of larger companies. See accompanying index descriptions on page 26. 11 ING RESEARCH ENHANCED INDEX FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Aeltus Investment Management, Inc., led by Hugh Whelan, Co-Portfolio Manager and Doug Cote Co-Portfolio Manager. GOAL: The ING Research Enhanced Index Fund (formerly Pilgrim Research Enhanced Index Fund) (the "Fund") seeks capital appreciation by investing primarily in large companies contained in the S&P 500 Index. MARKET OVERVIEW: The S&P 500 Index ("S&P 500") posted a loss for the period. The market experienced sharp losses in the 3rd quarter of 2001 associated with the tragic events of September 11th. The S&P 500 then rebounded strongly in the 4th quarter of 2001 and early 2002, only to see those gains eroded by increasing concerns regarding the integrity of corporate accounting, the strength of the U.S. economic rebound, international hostilities and valuation levels within the large-cap growth sector of the market. The increasingly defensive tone of the U.S. equity market led to value-oriented sectors such as consumer staples and materials posting the strongest returns. The worst performing sectors were telecommunication services, utilities and information technology. In terms of market capitalization, the smallest stocks within the S&P 500 outperformed the largest stocks as many of the accounting and valuation concerns primarily affected large-cap stocks. PERFORMANCE: For the year ended May 31, 2002, the Fund's Class I shares declined 14.28% compared to a decline of 13.85% for the S&P 500 Index. PORTFOLIO SPECIFICS: The Fund's performance was significantly impacted by the sharp rally in stocks with relatively poor fundamentals in the 4th quarter of 2001. A strong surge in optimism regarding the prospects for a rebound in economic growth led investors to reward stocks with poor recent business momentum, negative analyst estimate trends, and poor valuations. In short, investors were hopeful that the stocks, which had fallen dramatically in the 3rd quarter of 2001, would rebound and provide the strongest gains. As our investment approach is based on overweighting stocks with strong fundamentals and underweighting those with poor fundamentals, the Fund's performance lagged that of its benchmark. Individual security selection contributed positively to fund performance during the year. Security selection was particularly successful in the telecommunication services sector where the Fund was underweight WorldCom and Qwest Communications. Individual security selection was less effective in the information technology sector due to an underweight in Intel and an overweight in Microsoft. Positive individual stock selection was offset, however, by the Fund's sector positioning. The Fund was hurt by its underweight in the information technology sector in the 4th quarter of 2001. MARKET OUTLOOK: Over the recent period we have increased our weighting in consumer discretionary and information technology stocks. At the same time we have decreased the Fund's weighting in the industrials and energy sectors. Our largest overweight is in the information technology sector, while our greatest underweight is in the energy sector. This positioning is somewhat contrary to the current defensive mood of investors, but it represents the disciplined application of fundamental evaluation of each individual stock in the S&P 500 on the basis of business momentum and earnings quality, valuation and market sentiment. We have enhanced the quantitative models we use to manage the Fund to incorporate the significant information provided by comparing stocks to their industry peers. The focus of our Fund continues to be adding return via good individual stock selection. By design, the quantitative factors our approach is based on are not highly correlated. This has historically led to competitive performance in a wide variety of market environments. We are encouraged by the performance of our approach thus far this year in what continues to be a turbulent market environment. 12 Portfolio Managers' Report ING RESEARCH ENHANCED INDEX FUND - --------------------------------------------------------------------------------
12/30/98 5/31/99 5/31/00 5/31/01 5/31/02 -------- ------- ------- ------- ------- ING Research Enhanced Index Fund Class I $10,000 $10,740 $11,434 $10,066 $ 8,628 S&P 500 Index $10,000 $10,647 $11,763 $10,521 $ 9,064
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 ------------------------------ SINCE INCEPTION 1 YEAR 12/30/98 ------ -------- Class I -14.28% -4.22% S&P 500 Index -13.85% -2.83%(1) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Research Enhanced Index Fund against the S&P 500 Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 01/01/99. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. See accompanying index descriptions on page 26. 13 ING LARGE COMPANY VALUE FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: Thomas Jackson, Senior Vice President and Senior Portfolio Manager, ING Investments, LLC. GOAL: The ING Large Company Value Fund (formerly Pilgrim Growth and Income Fund) (the "Fund") seeks long-term capital appreciation with income as a secondary objective. MARKET OVERVIEW: The U.S. stock market declined significantly in the Fund's fiscal year ending May 31, 2002 with the S&P 500 Index down 13.85% and with the more volatile NASDAQ Composite Index down even more at 23.44%. The year exhibited substantial volatility as the stock market declined dramatically into late September 2001 and then rallied into early December before resuming a grinding downward trend. The stock market volatility was to some degree a function of the economy, which entered a shallow recession in the second half of 2001 and then resumed growth in the first quarter of 2002. Despite the shallowness of the recession, corporate profits have declined a record amount over the last couple of years and stock prices have largely mirrored the decline in profits. Both the unsettled geopolitical situation and a rash of corporate/accounting scandals such as Enron, Tyco, Adelphia Communications, etc. have further damaged investor confidence. These concerns have been offset to some degree by a Federal Reserve policy that has been exceedingly easy and has lowered short-term interest rates to their lowest levels in a generation. Over the last year, small and mid-capitalization companies continued to outperform larger companies. Value stocks outperformed growth stocks among the small and mid-sized companies, but the S&P Barra Growth Index actually outperformed the S&P Barra Value Index for the year. PERFORMANCE: For the period from commencement (October 4, 2001) through May 31, 2002, the Fund's Class Q shares provided a total return of 2.80% compared to the S&P 500 Index which returned 3.49%. PORTFOLIO SPECIFICS: The Fund has been significantly restructured since the middle of last year when Tom Jackson assumed its management. Consistent with his value investment approach, the Fund now owns primarily issues that sell at significant absolute valuation discounts to the market. In many instances these companies are also expected to grow earnings at rates that exceed the market. (There is, of course, the risk that these expectations will not be fulfilled). For the last year, the Fund's performance relative to the S&P 500 Index was helped by its holdings in the consumer cyclical, financial, health care, and industrial sectors as well as by its under weighting in technology. The Fund's performance was hurt by its holdings in merchant energy companies, and Tyco. We believe that at current levels they offer significant value. The holding in WorldCom also negatively impacted performance and it was eliminated from the portfolio during the fiscal year. MARKET OUTLOOK: While the length and depth of the stock market decline over the last couple of years has been painful, the good news is that stocks appear now more reasonably priced than they have been in some time. Given the substantial decline in interest rates (which compete with stocks for investor attention and serve as the underpinning for stock valuation), stocks are at more attractive valuation levels than has been the case for years (with the exception of late September 2001). There are several critical questions that are likely to govern the intermediate term returns from stocks. First and foremost, questions regarding the integrity of corporate governance and the accounting system will have to be put to rest. A speculative bubble led to behavior by many players in the financial markets that ranged from naive at best to outright criminal at worst. However, recognition that a problem exists is the first step toward its solution, and we seem to be well into that stage. While it is quite possible that we may discover more examples of deceptive (or worse) behavior by corporate managements, the system is beginning to take the appropriate steps to restore confidence. While no accounting system can be immune from abuse, it is important that we come to some consensus as to the appropriate definition of earnings so that investors can once again put all companies on a roughly comparable basis. As but one example of this process, the majority of professional investors now agree that options should be expensed on the income statement. Once questions as to the quality and level of earnings are put to rest, we still have to deal with the likely future growth of profits. Recent economic statistics strongly indicate that corporate profits have bottomed and appear to be once again beginning to rebound. While this is an unmitigated positive, future secular growth is still in doubt. History indicates that a 7% growth in profits is the long-term trend. If the future is to differ from the past, it is likely that growth will be slower both because of lower inflation and more stringent accounting standards (on pensions and options to name but two). Furthermore, with the current low consumer savings rate and high levels of debt, the underlying strength of the economy may be below par for some period of time. The final question is the impact of terrorism as a permanent reality in our lives. While it is impossible to predict with any certainty what will happen on this front, it is likely that we will be living with this threat for a long time. This adds an element of risk that prior to September 11, 2001 was not contemplated by most investors. Yet, we believe that when all of these factors are considered, we will be investing in an environment of much lower investment returns in the future than we became accustomed to over the last couple of decades. Our current strategy is to continue to seek out companies that have depressed current valuations where we believe that their long-term prospects are not adequately reflected in their stock price. Furthermore, we believe that dividend yield will be a more important component of future investment returns than was the case in the 1990's. We currently have a large weighting in utility companies with an emphasis on the merchant energy sector. These stocks are currently quite depressed as a result of the Enron debacle and continuing questions about marked to market accounting. We are also building a position in the Drug industry as the stocks have come under pressure both due to concerns about the paucity of new drugs and political pressure on pricing. We have continued on the margin to cut back on our more cyclically sensitive holdings as these stocks have begun to reflect the likelihood that the economy has bottomed. 14 Portfolio Manager's Report ING LARGE COMPANY VALUE FUND - -------------------------------------------------------------------------------- 10/4/01 5/31/02 ------- ------- ING Large Company Value Fund Class Q $10,000 $10,280 S&P 500 Index $10,000 $10,349 TOTAL RETURNS FOR THE PERIOD ENDED MAY 31, 2002 ------------ SINCE INCEPTION OF CLASS Q 10/04/01 -------- Class Q 2.80% S&P 500 Index 3.49%(1) Based on a $10,000 initial investment, the graph and table above illustrate the total return of the ING Large Company Value Fund against the S&P 500 Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 10/01/01. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller and mid-sized companies may entail greater price volatility than investing in stocks of larger companies. The Fund may also invest in foreign securities. International investing does pose special risks, including currency fluctuations, economic and political risks not found in investments that are solely domestic. Investing in funds that are concentrated in a smaller number of holdings poses greater risk than those funds with a larger number of holdings because each investment has a greater effect on the fund's performance. See accompanying index descriptions on page 26. 15 ING MAGNACAP FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Thomas Jackson, Senior Vice President and Senior Portfolio Manager; Howard N. Kornblue, Senior Vice President and Senior Portfolio Manager serves as Auxiliary Portfolio Manager, ING Investments, LLC. GOAL: The ING MagnaCap Fund (formerly Pilgrim MagnaCap Fund) (the "Fund") seeks growth of capital, with dividend income as a secondary consideration. MARKET OVERVIEW: The U.S. stock market declined significantly in the Fund's fiscal year ending May 31, 2002 with the S&P 500 Index down 13.85% and with the more volatile NASDAQ Composite Index down even more at 23.44%. The year exhibited substantial volatility as the stock market declined dramatically into late September 2001 and then rallied into early December before resuming a grinding downward trend. The stock market volatility was to some degree a function of the economy, which entered a shallow recession in the second half of 2001 and then resumed growth in the first quarter of 2002. Despite the shallowness of the recession, corporate profits have declined a record amount over the last couple of years and stock prices have largely mirrored the decline in profits. Both the unsettled geopolitical situation and a rash of corporate/accounting scandals such as Enron, Tyco, Adelphia Communications, etc. have further damaged investor confidence. These concerns have been offset to some degree by a Federal Reserve policy that has been very easy and has lowered short-term interest rates to their lowest levels in a generation. Over the last year, small and mid-capitalization companies continued to outperform larger companies. Value stocks outperformed growth stocks among the small and mid-sized companies, but the S&P Barra Growth Index actually outperformed the S&P Barra Value Index for the year. PERFORMANCE: For the year ended May 31, 2002, the Fund's Class Q shares declined 10.75% compared to a 13.85% decline in the S&P 500 Index. PORTFOLIO SPECIFICS: The Fund has been significantly restructured since the middle of last year when Tom Jackson assumed its management. Consistent with his value investment approach, the Fund now primarily owns issues that sell at significant absolute valuation discounts to the market. In many instances these companies are also expected to grow earnings at rates that exceed the market. (There is, of course, the risk that these expectations will not be fulfilled). For the last year, the Fund's performance relative to the S&P 500 Index was helped by its holdings in the Consumer Cyclical, Financial, Health Care, and Industrial sectors. The Fund's performance was hurt by its holdings in Halliburton, Merchant Energy companies, and Tyco. We believe that at current levels they offer significant value. The holding in WorldCom also negatively impacted performance, but it was eliminated from the portfolio during the fiscal year. MARKET OUTLOOK: While the length and depth of the market decline over the last couple of years has been painful, the good news is that stocks are now more reasonably priced than they have been in some time. Given the substantial decline in interest rates (which compete with stocks for investor attention and serve as the underpinning for stock valuation), stocks are at more attractive valuation levels than has been the case for years (with the exception of late September 2001). There are several critical questions that are likely to govern the intermediate term returns from stocks. First and foremost, questions regarding the integrity of corporate governance and the accounting system will have to be put to rest. A speculative bubble led to behavior by many players in the financial markets that ranged from naive at best to outright criminal at worst. However, recognition that a problem exists is the first step toward its solution, and we are well into that stage. While it is quite possible that we will discover more examples of deceptive (or worse) behavior by corporate managements, the system is beginning to take the appropriate steps to restore confidence. While no accounting system will be immune from abuse, it is important that we come to some consensus as to the appropriate definition of earnings so that investors can once again put all companies on a roughly comparable basis. As but one example of this process, the majority of professional investors now agree that options should be expensed on the income statement. Once questions as to the quality and level of earnings are put to rest, we still have to deal with the likely future growth of profits. Recent economic statistics strongly indicate that corporate profits have bottomed and are once again beginning to rebound. While this is an unmitigated positive, future secular growth is still in doubt. History indicates that a 7% growth in profits is the long-term trend. If the future is to differ from the past, it is likely that growth will be slower both because of lower inflation and more stringent accounting standards (on pensions and options to name but two). Furthermore, with the current low consumer savings rate and high levels of debt, the underlying strength of the economy may be below par for some period of time. The final question is the impact of terrorism as a permanent reality in our lives. While it is impossible to predict with any certainty what will happen on this front, it is likely that we will be living with this threat for a long time. This adds an element of risk that prior to September 11, 2001 was not contemplated by most investors. Yet, we believe that when all of these factors are considered, we will be investing in an environment of much lower investment returns in the future than we became accustomed to over the last couple of decades. Our current strategy is to continue to seek out companies that have depressed current valuations where we believe that their long-term prospects are not adequately reflected in their stock price. Furthermore, we believe that dividend yield will be a more important component of future investment returns than was the case in the 1990's. We currently have a large weighting in Utility companies with an emphasis on the Merchant Energy sector. These stocks are currently quite depressed as a result of the Enron debacle and continuing questions about marked to market accounting. We are also building a position in the Drug industry as the stocks have come under pressure both due to concerns about the paucity of new drugs and political pressure on pricing. We have continued on the margin to cut back on our more cyclically sensitive holdings as these stocks have begun to reflect the likelihood that the economy has bottomed. 16 Portfolio Managers' Report ING MAGNACAP FUND - -------------------------------------------------------------------------------- 11/19/99 5/31/00 5/31/01 5/31/02 -------- ------- ------- ------- ING MagnaCap Fund Class Q $10,000 $ 9,975 $ 9,489 $ 8,469 S&P 500 Index $10,000 $10,290 $ 9,204 $ 7,930 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 ---------------------------------- SINCE INCEPTION OF CLASS Q 1 YEAR 11/19/99 ------ -------- Class Q -10.75% -6.36% S&P 500 Index -13.85% -8.86%(1) Based upon a $10,000 initial investment, the graph and table above illustrate the total return of ING MagnaCap Fund against the S&P 500 Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 12/1/99. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. International investing does pose special risks including currency fluctuation, economical and political risks not found in domestic investments. Investing in funds that are concentrated in a smaller number of holdings poses greater risk than those funds with a larger number of holdings because each investment has a greater effect on the fund's performance. See accompanying index descriptions on page 26. 17 ING MIDCAP VALUE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Managed by a multi-member Investment Committee, Brandes Investment Partners, L.P. GOAL: The ING MidCap Value Fund (the "Fund") seeks to maximize long-term capital appreciation by investing primarily in equity securities of U.S. issuers with equity market capitalizations greater than $1 billion but no greater than $5 billion at the time of purchase. The Fund may hold common and preferred stocks, warrants, and convertible securities. MARKET OVERVIEW: Larger-cap U.S. stocks tended to advance in March as evidence of economic recovery encouraged investors. In April and May, however, prices generally retreated amid mixed economic reports combined with gloomy earnings expectations and various Wall Street investigations. After gaining 3.8% in March, the S&P 500 Index shed 6.1% in April and 0.8% in May. For the entire three-month period, the S&P 500 Index declined 3.2%. Medium-cap equities proved more resilient than their larger-cap counterparts during the period. The Russell Midcap Index advanced 2.8% for the three months ended May 31. The Federal Reserve Board left interest rates unchanged during the period. At their meeting in May, Federal Reserve policy makers said the risks to the U.S. economy were evenly balanced between economic weakness and inflation and left the target for federal funds rate at 1.75% - its lowest level in 40 years. Reflecting economic lethargy, the U.S. Labor Department said jobless benefits claims rose to a 19-year high early in the month. At the same time, with companies cutting payroll, productivity jumped in the first quarter by the biggest amount in 19 years. Evidence of economic slowing was also evident among housing starts, which fell 5.4% in April on the heels of a 7.8% drop in March. At the same time, some reports in May suggested economic strength. The economy grew at an annual rate of 5.6% in the first quarter, the strongest performance in nearly two years. In addition, retail sales surged 1.2% in April, surpassing expectations and allaying fears that consumer spending might be softening during the second quarter. PERFORMANCE: For the period from inception (March 4, 2002) through May 31, 2002, the Fund's Class I shares, provided a total return of 0.98% compared to a return of 4.88% for the Russell Midcap Value Index. PORTFOLIO SPECIFICS: During the period, declines for holdings in the electric utilities industry weighed on performance. Positions in the industry posting declines included Sierra Pacific Resources (0.5% of the portfolio) and Aquila (1.5%). In addition, holdings in the airlines industry tended to decline during the period, which also detracted from returns. In contrast, substantial weightings for holdings in the consumer discretionary sector -- which includes the household durables and specialty retail industries - -- helped bolster returns. Stocks posting advances for the period included American Greetings (household durables -- 2.2%) and Sherwin-Williams (specialty retail -- 2.2%). Gains for positions in the communications equipment industry also buttressed performance. During the four-month period, we continued to establish new positions and add to select existing holdings at prices that we considered attractive. For example, we purchased shares of retailer Toys R Us (specialty retail -- 4.1%) and funeral home operator Service Corporation International (health care providers & services -- 3.3%) at significant discounts to our estimates of their fair values. We eliminated exposure to companies such as Dillards (multiline retail) and Tyson Foods (food products) as their market prices advanced toward our estimate of the value of their businesses. As of May 31, 2002, the Fund's most substantial exposure remains in the insurance industry. During the period, purchases dictated by our company-by-company analysis increased the Fund's exposure to the electric utilities industry. MARKET OUTLOOK: We continue our bottom-up, company-by-company search for undervalued medium-cap equities in the United States. By purchasing shares of fundamentally strong firms at discounts to our estimates of their fair values, we believe we can reward patient investors with favorable long-term results, regardless of short-term fluctuations in the overall market. 18 Portfolio Managers' Report ING MIDCAP VALUE FUND - -------------------------------------------------------------------------------- 3/4/02 5/31/02 ------- ------- ING MidCap Value Fund Class I $10,000 $10,098 Russell MidCap Value Index $10,000 $10,488 TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 ----------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 03/04/02 04/17/02 -------- -------- Class I 0.98% -- Class Q -- -2.28% Russell MidCap Value Index 4.88%(1) -0.15%(2) Based upon a $10,000 initial investment, the graph and table above illustrate the total return of ING MidCap Value Fund against the Russell MidCap Value Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 03/01/02. (2) Since inception performance for the index is shown from 05/01/02. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in equity securities. See accompanying index descriptions on page 26. 19 ING SMALLCAP VALUE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Managed by a multi-member Investment Committee, Brandes Investment Partners L.P. GOAL: The ING SmallCap Value Fund (the "Fund") seeks to maximize long-term capital appreciation by investing primarily in equity securities of U.S. issuers with equity market capitalizations of $1.5 billion or less at the time of purchase. The Fund may hold common and preferred stocks, warrants, and convertible securities. MARKET OVERVIEW: Larger-cap U.S. stocks tended to advance in March as evidence of economic recovery encouraged investors. In April and May, however, prices generally retreated amid mixed economic reports combined with gloomy earnings expectations and various Wall Street investigations. After gaining 3.8% in March, the S&P 500 Index shed 6.1% in April and 0.8% in May. For the entire three-month period, the S&P 500 Index declined 3.2%. Smaller-cap equities proved more resilient than their larger-cap counterparts during the period. The Russell 2000 Index advanced 4.2% for the three months ended May 31, 2002. The Federal Reserve Board left interest rates unchanged during the period. At their meeting in May, Federal Reserve policy makers said the risks to the U.S. economy were evenly balanced between economic weakness and inflation and left the target for federal funds rate at 1.75% - its lowest level in 40 years. Reflecting economic lethargy, the U.S. Labor Department said jobless benefits claims rose to a 19-year high early in the month. At the same time, with companies cutting payroll, productivity jumped in the first quarter by the biggest amount in 19 years. Evidence of economic slowing was also evident among housing starts, which fell 5.4% in April on the heels of a 7.8% drop in March. At the same time, some reports in May suggested economic strength. The economy grew at an annual rate of 5.6% in the first quarter, the strongest performance in nearly two years. In addition, retail sales surged 1.2% in April, surpassing expectations and allaying fears that consumer spending might be softening during the second quarter. PERFORMANCE: For the period from inception (March 7, 2002) through May 31, 2002, the Fund's Class I shares provided a total return of 3.00% versus 0.23% for the Russell 200 Value Index. PORTFOLIO SPECIFICS: During the period, declines for holdings in the electric utilities and machinery industries weighed on performance. Stocks posting declines included Sierra Pacific Resources (electric utilities -- 0.5% of the portfolio) and Trinity Industries (machinery -- 2.6%). Separately, Seitel (energy equipment & services -- 1.5%) declined substantially during the period, which also contributed negatively to results. In contrast, substantial weightings for holdings in the banking industry, which generally registered gains during the period, helped bolster returns. Banking stocks posting advances for the period included Provident Financial Holdings (3.1%) and PFF Bancorp (1.8%). Gains for positions in the consumer discretionary sector -- including holdings in the household durables and textiles, apparel & luxury goods industries -- also buttressed performance. During the four-month period, we continued to establish new positions and add to select existing holdings at prices that we considered attractive. For example, we purchased shares of staffing firm Kelly Services (commercial services & supplies -- 2.7%) and manufactured housing retailer Fleetwood Enterprises (household durables -- 2.6%) at significant discounts to our estimates of their fair values. We eliminated exposure to companies such as Dillards (multiline retail) and Myers Industries (containers & packaging) as their market prices advanced toward our estimate of the value of their businesses. During the period, purchases dictated by our company-by-company analysis combined with price appreciation to increase the Fund's exposure to the banking and textiles, apparel & luxury goods industries. As a result, banking and textiles, apparel & luxury goods joined chemicals as the Fund's most substantial industry exposures as of May 31, 2002. MARKET OUTLOOK: We continue our bottom-up, company-by-company search for undervalued smaller-cap equities in the United States. By purchasing shares of fundamentally strong firms at discounts to our estimates of their fair values, we believe we can reward patient investors with favorable long-term results, regardless of short-term fluctuations in the overall market. 20 Portfolio Manager's Report ING SMALLCAP VALUE FUND - -------------------------------------------------------------------------------- 3/7/02 5/31/02 ------- ------- ING SmallCap Value Fund Class I $10,000 $10,300 Russell 200 Value Index $10,000 $10,023 TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 ----------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 03/07/02 04/30/02 -------- -------- Class I 3.00% -- Class Q -- -3.45% Russell 200 Value Index 0.23%(1) 0.80%(2) Based upon a $10,000 initial investment, the graph and table above illustrate the total return of ING SmallCap Value Fund against the Russell 200 Value Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 03/01/02. (2) Since inception performance for the index is shown from 05/01/02. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany and investment in equity securities. See accompanying index descriptions on page 26. 21 ING CONVERTIBLE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Ed Schriver, Anu Sahai, Andy Mitchell, ING Investments, LLC. GOAL: The ING Convertible Fund (formerly Pilgrim Convertible Fund) (the "Fund") seeks to maximize long-term total return by investing primarily in convertible securities, while maintaining aggregate risk measures similar to that of the overall convertible universe. MARKET OVERVIEW: The twelve-month period ending May 31, 2002 witnessed significant volatility in the convertible indices, the S&P 500 Index and most of all in the NASDAQ Composite Index. To a large extent this was a function of the economy, which started off with a mild recession and turned mildly positive at the beginning of 2002. The market's inability to rally despite the Federal Reserve's rate cuts and positive economic indications indicate investors realized that the recently lowered expectations for corporate profit growth are still too high. On top of that, accounting issue concerns, the geopolitical situation and Wall Street's reduced credibility from investigations into their role in the telecom/internet bubble has made the market even more nervous. Within that broader picture, certain sectors of the market fared differently. The sectors that had run up the most in the past couple of years, namely the New Economy players such as Internet, telecommunications and to a lesser extent the traditional technology firms continued to decline even after the initial bubble burst of last year. Non-cyclicals, which included healthcare, food and financials performed well during the year. Cyclicals picked up some steam in the beginning of 2002, but have trended sideways since then. The convertible securities market was not immune to these changes. Since the convertible securities universe appears to be overweighted in technology, one might have even expected convertibles to fare worse in the continued sell-off of the last year. With the decrease in equity valuations however, we believe more of the convertible universe has become more bond like than it has been in the past and thus relatively insensitive to changes in the underlying equity. As an asset class convertibles outperformed stocks and trounced technology heavy indices such as the NASDAQ Composite Index. One of the intriguing aspects of the convertible market in the recent months has been its ability to accommodate equity sensitive issues in a down market. A large number of big sized deals came to market, primarily due to their reluctance to go to the equity market as stock valuations came down and due to their inability to raise capital in the straight debt market. As a result, issuance continues to remain high, especially in beaten down sectors like telecommunication equipment, utilities and cyclicals, to name a few. PERFORMANCE: For the year ended May 31, 2002, the Fund's Class Q shares returned - -11.12% compared to the Credit Suisse First Boston Convertible Index which returned -8.06% over the same time period. PORTFOLIO SPECIFICS: The Fund saw many changes in the last twelve months, including a management team change in April. Significant overweighting in the biotechnology sector hurt the Fund's performance as well as some sizeable losses in the semiconductor sector. This was somewhat offset by the health services, financials and the energy sector holdings in the Fund. Significant overweighting in sectors as well as some individual positions increased the volatility of the Fund in line with the market volatility. In light of this, the more opportunistic style adopted by the previous portfolio manager has now been replaced by a shift towards a more market weighted approach, the benefits of which we started witnessing close to the end of the year. The size of the portfolio's allocation to the New Economy type stocks has decreased and we have increased our exposure to cyclicals. Of course we still have exposure to the technology sector. Since the convertible universe remains heavily tilted towards technology, we will always have considerable technology exposure. However it is biased towards more bond like convertibles with lower equity sensitivity, as is the benchmark. We continue to like the healthcare and financial sectors, though we have reduced exposure somewhat to reduce the volatility associated with the sectors. MARKET OUTLOOK: Despite the likelihood that the Federal Reserve may be less restrictive than feared, we think the profitability outlook for firms may only slowly improve. Businesses simply do not have much pricing power and indeed this aspect may be one of the reasons why inflation might remain under control during the economic recovery and why the Federal Reserve should be under less pressure to raise rates than is commonly supposed. In this context, we believe, relative safe haven sectors like the healthcare services and financials should continue to hold up better. We continue to look for companies, primarily in cyclicals, but across the spectrum, that may benefit from a gradually recovering economy as we expect the market will reward companies that typically benefit in the recovery part of the cycle. We continue to believe that the recovery for firms in the telecom and software sectors may be distant and/or weak. Liquidity in the market remains quite good in contrast to some fixed income markets. The traditional ability to hedge incremental holdings of convertible securities by shorting the underlying common stock continues to allow both dealers and hedge funds to position convertibles more easily than they can accommodate straight corporate debt. This in turn keeps liquidity at reasonable levels. A bottom up approach, which relies on fundamental analysis and careful stock selection within our broader top down sector positioning strategy, continues to be the foundation for our investment decisions. 22 Portfolio Managers' Report ING CONVERTIBLE FUND - --------------------------------------------------------------------------------
8/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 ------- ------- ------- ------- ------- ------- ------- ------- ING Convertible Fund Class Q $10,000 $11,761 $13,476 $16,485 $20,321 $27,740 $24,648 $21,906 Credit Suisse First Boston Convertible Index $10,000 $11,194 $11,980 $13,841 $15,267 $19,433 $18,421 $16,937
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 --------------------------------------- SINCE INCEPTION OF CLASS Q 1 YEAR 5 YEAR 8/31/95 ------ ------ ------- Class Q -11.12% 16.86% 10.25% Credit Suisse First Boston Convertible Index -8.06% 7.17% 8.12%(1) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Convertible Fund against the Credit Suisse First Boston Convertible Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for index is shown from 9/1/95. PRINCIPAL RISK FACTOR(S): The credit standing of the issuer and other factors may affect the investment value of a convertible security. The market value of convertible debt securities tends to vary inversely with the level of interest rates. Lower rated securities may be less liquid than higher quality investments. The Fund also has exposure to financial, market and interest rate risks. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio and in some cases, the lower market prices for those instruments. The Fund may also invest in small and medium sized companies, which may be more susceptible to greater price volatility than larger companies. Investing in funds that are concentrated in a smaller number of holdings poses greater risk than those funds with a larger number of holdings because each investment has greater a effect on the fund's performance. See accompanying index descriptions on page 26. 23 ING EQUITY AND INCOME FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT TEAM: Thomas Jackson, Senior Vice President and Senior Portfolio Manager; Robert K. Kinsey, Vice President and Portfolio Manager; Edwin Schriver, Senior Vice President and Senior Portfolio Manager, ING Investments, LLC. GOAL: The ING Equity and Income Fund (formerly Pilgrim Balanced Fund) (the "Fund") seeks a balance of long-term capital appreciation and current income by investing in a blended portfolio of equity and debt securities with an emphasis on overall total return. MARKET OVERVIEW: The U.S. stock market declined significantly in the Fund's fiscal year ending May 31, 2002 with the S&P 500 Index down 13.85% and with the more volatile NASDAQ Composite Index down even more at 23.44%. The year exhibited substantial volatility as the stock market declined dramatically into late September 2001 and then rallied into early December before resuming a grinding downward trend. The stock market volatility was to some degree a function of the economy, which entered a shallow recession in the second half of 2001 and then resumed growth in the first quarter of 2002. Despite the shallowness of the recession, corporate profits have declined a record amount over the last couple of years and stock prices have largely mirrored the decline in profits. Both the unsettled geopolitical situation and a rash of corporate/accounting scandals such as Enron, Tyco, Adelphia Communications, etc. have further damaged investor confidence. These concerns have been offset to some degree by Federal Reserve policy that has been exceedingly easy and has lowered short-term interest rates to their lowest levels in a generation. Over the last year, small and mid-capitalization companies continued to outperform larger companies. Value stocks outperformed growth stocks among the small and mid-sized companies, but the S&P Barra Growth Index actually outperformed the S&P Barra Value Index for the year. Investment grade bonds have experienced a tumultuous twelve months beginning with the meltdown of Enron last August. Dramatic headlines about accounting irregularities, poor corporate and board governance, and outright fraud have traumatized the credit markets. The tragic events of September 11th resulted in multiple worldwide central bank easings and a flight to quality. Domestic capital markets soon righted themselves in the waning days of 2001. However, rapid credit deterioration in high profile names in the telco, media, and merchant energy sectors presented huge challenges to the market in the first half of 2002. The prospect of increased deficit spending and a weak dollar may present new hurdles for fixed income in the months to come. Nevertheless the widely followed Lehman Brothers Aggregate Bond Index posted an 8.10% return for the year ending May 31, 2002. High yield bonds roughly broke even during the twelve months ending May 31, 2002. While the Merrill Lynch High Yield Master II Index returned a positive 0.93% during the period, the average high yield mutual fund had a small negative return. The Merrill Index benefited from a higher average quality and a lower exposure to the telecommunications sector versus the average fund. The year saw a big quality divergence where the higher quality BB rated bonds returned +5.5%, single B's returned -0.9% and CCC bonds returned -5.5%. Not surprisingly, given the weak economy and the weak equity environment, the highest quality BB segment significantly outperformed its lower quality peers. PERFORMANCE: For the year ended May 31, 2002, the Fund's Class Q shares returned - -5.53% compared to -15.41% for the S&P Barra Value Index, 8.10% for the Lehman Brothers Aggregate Bond Index and -5.25% for the Composite Index (60% S&P 500 Index/ 40% Lehman Brothers Aggregate Bond Index). PORTFOLIO SPECIFICS: The equity portion of the Fund has been significantly restructured since the middle of last year when Tom Jackson assumed its management. Consistent with his value investment approach, the Fund now owns primarily issues that sell at significant absolute valuation discounts to the market. In many instances these companies are also expected to grow earnings at rates that exceed the market. (There is, of course, the risk that these expectations will not be fulfilled). For the last year, the Fund's equity performance relative to the S&P 500 Index was helped by its holdings in the industrial, financial, consumer cyclical, and health care, sectors. The Fund's performance was hurt by its holdings in merchant energy companies, telecommunications companies, and Tyco. While these latter issues have been mistakes to date, we believe that at current levels they offer significant value. The high-grade bond portion of the Fund benefited in the later half of 2001 from a focus on highly liquid issues, which represented a significant segment of the Lehman Credit Index. A defensive positioning prior to the Fall of 2001 afforded us the opportunity to add extremely cheap issues following the terrorist attacks. Our focus on names that loom large in the index hurt us in the first half of 2002 as Tyco, Worldcom, and others fell to non-investment grade. Fortunately we exited many of the high beta issuers prior to their most dramatic drops, and we estimate that for the Fund's fiscal year posted returns in excess of the benchmark. High yield represents approximately 10% of the Funds' assets. On a sleeved basis, we believe that the high yield portion out-performed the high yield mutual fund average. Performance relative to the competition was helped primarily by specific security selection within the food/tobacco and the aerospace segments. Although an overweight position in telecommunications during the calendar year 2001 hurt performance, a significant underweighting in the sector during the calendar year 2002 has benefited performance. More recently, performance has been negatively impacted by the fallout in the merchant power industry. We continue to believe that high yield bonds within that sector offer very attractive returns relative to the longer-term risks in the merchant power industry. MARKET OUTLOOK: While the length and depth of the stock market decline over the last couple of years has been painful, the good news is that stocks appear now more reasonably priced than they have been in some time. Given the substantial decline in interest rates (which compete with stocks for investor attention and serve as the underpinning for stock valuation), stocks are at more attractive valuation levels than has been the case for years (with the exception of late September 2001). There are several critical questions that are likely to govern the intermediate term returns from stocks. First and foremost, questions regarding the integrity of corporate governance and the accounting system will have to be put to rest. A speculative bubble led to behavior by many players in the financial markets that ranged from naive at best to outright criminal at worst. However, recognition that a problem exists is the first step toward its solution, and we seem to be well into that stage. While it is quite possible that we may discover more examples of deceptive (or worse) behavior by corporate managements, the system is beginning to take the appropriate steps to restore confidence. While no accounting system can be immune from abuse, it is important that we come to some consensus as to the appropriate definition of earnings so that investors can once again put all companies on a roughly comparable basis. As but one example of this process, the majority of professional investors now agree that options should be expensed on the income statement. Once questions as to the quality and level of earnings are put to rest, we still have to deal with the likely future growth of profits. Recent economic statistics strongly indicate that corporate profits have bottomed and appear to be once again beginning to rebound. While this is an unmitigated positive, future secular growth is still in doubt. History indicates that a 7% growth in profits is the long-term trend. If the future is to differ from the past, it is likely that growth will be slower both because of lower inflation and more stringent accounting standards (on pensions and options to name but two). The final question is the impact of terrorism as a permanent reality in our lives. While it is impossible to predict with any certainty what will happen on this front, it is likely that we will be living with this threat for a long time. This adds an element of risk that prior to September 11, 2001 was not contemplated by most investors. Yet, we believe that when all of these factors are considered, we will be investing in an environment of much lower investment returns in the future than we became accustomed to over the last couple of decades. Our current strategy is to continue to seek out companies that have depressed current valuations where we believe that their long-term prospects are not adequately reflected in their stock price. Furthermore, we believe that dividend yield will be a more important component of future investment returns than was the case in the 1990's. We currently have a large weighting in utility companies with an emphasis on the merchant energy sector. These stocks are currently quite depressed as a result of the Enron debacle and continuing questions about marked to market accounting. We are also building a position in the drug industry as the stocks have come under pressure both due to concerns about the paucity of new drugs and political pressure on pricing. We have continued on the margin to cut back on our more cyclically sensitive holdings as these stocks have begun to reflect the likelihood that the economy has bottomed. Looking forward we have several concerns for the investment grade market. A weak dollar and resurgent deficit spending do not augur well for interest rates. However the tepid economic recovery and geo-political risks have kept us from shortening our duration just yet. The terrible swift sword of the rating agencies and continuing disclosures vis a vis accounting irregularities have kept us in a defensive mode with regards to credit exposure. Yet, we do believe that some stability and value may be cause for increasing credit risk in the fall. The long-term fundamentals remain positive for high yield investors. Interest rates and inflation remain low and the steep yield curve should spur investment and economic growth. Default rates within the high yield market are also set to decline in the second half of the year, providing justification for tighter yield spreads (higher bond prices). All of these factors provide reasons for optimism regarding future returns. While the economy still faces several challenges, including issuer access to equity markets as a source of capital, we believe that the problems can be overcome and that yield spreads offer attractive returns relative to the risks involved. 24 Portfolio Managers' Report ING EQUITY AND INCOME FUND - --------------------------------------------------------------------------------
8/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 ------- ------- ------- ------- ------- ------- ------- ------- ING Equity and Income Fund Class Q $10,000 $11,233 $12,245 $15,530 $18,159 $18,183 $18,239 $17,231 S&P Barra Value Index $10,000 $12,020 $15,082 $19,443 $21,987 $22,557 $24,165 $20,441 Lehman Brothers Aggregate Bond Index $10,000 $10,262 $11,115 $12,328 $12,865 $13,136 $14,859 $16,063 60% S&P 500 / 40% Lehman Brothers Aggregate Bond Index $10,000 $11,346 $13,700 $16,806 $19,282 $20,701 $20,434 $19,361
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2002 ------------------------------------- SINCE INCEPTION OF CLASS Q 1 YEAR 5 YEAR 8/31/95 ------ ------ ------- Class Q -5.53% 7.07% 8.39% S&P Barra Value Index -15.41% 6.27% 11.17%(1) Lehman Brothers Aggregate Bond Index 8.10% 7.64% 7.27%(1) Composite Index (60% S&P 500 Index/40% Lehman Brothers Aggregate Bond Index) -5.25% 7.16% 10.28%(1) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Equity and Income Fund against the S&P Barra Value Index, Lehman Brothers Aggregate Bond Index and Composite Index (60% S&P 500 Index, 40% Lehman Brothers Aggregate Bond Index). The Indices have an inherent performance advantage over the Fund since they have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on fund distributions or the redemption of fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 9/1/95. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in equity securities. Credit, interest rate and other risks that accompany debt investments. The Fund may invest up to 20% of its total assets in foreign securities. International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio and in some cases, the lower market prices for those instruments. See accompanying index descriptions on page 26. 25 INDEX DESCRIPTIONS - -------------------------------------------------------------------------------- The S&P 500 INDEX is a capitalization-weighted index of 500 stocks chosen for market size, liquidity, and industry group representation. The DOW JONES INDUSTRIAL AVERAGE is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. The RUSSELL 1000 GROWTH INDEX is an index that measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The NASDAQ COMPOSITE INDEX is a broad-based capitalization-weighted index of all Nasdaq National Market & SmallCap stocks. The RUSSELL MIDCAP GROWTH INDEX consists of securities with capitalizations between $450 million and $3.8 billion with greater than average growth orientation. The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The RUSSELL 3000 INDEX measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The RUSSELL 2000 INDEX consists of the smallest 2,000 companies in the Russell 3000 Index. The S&P MIDCAP 400 INDEX is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. The RUSSELL 2000 VALUE INDEX is an index that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The LEHMAN BROTHERS AGGREGATE BOND INDEX is a widely recognized index of publicly issued fixed rate U.S. government, investment grade mortgage-backed and corporate debt securities. The S&P BARRA VALUE INDEX is a capitalization-weighted index of all the stocks in the S&P 500 Index that have low price-to-book ratios. The S&P BARRA GROWTH INDEX is a capitalization-weighted index of all the stocks in the S&P 500 Index that have high price-to-book ratios. The NASDAQ 100 INDEX is a modified capitalization-weighted index of the 100 largest and most active non-financial domestic and international issues listed on the Nasdaq. The RUSSELL MIDCAP VALUE INDEX is an index that measures the performance of Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The RUSSELL MIDCAP INDEX measures the performance of the 800 smallest companies in the Russell 1000 Index. The CREDIT SUISSE FIRST BOSTON CONVERTIBLE INDEX is an index representing the universe of convertible securities. The RUSSELL 200 VALUE INDEX measures the performance of those Russell 200 companies with lower price-to-book ratios and lower forecasted growth values. All indices are unmanaged. An investor cannot invest directly in an index. 26 INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- To the Shareholders and Boards of Directors and Trustees of ING Equity Trust, ING Large Company Value Fund, Inc., ING Growth Opportunities Fund, ING Investment Funds, Inc., ING Mayflower Trust, ING Mutual Funds, and ING SmallCap Opportunities Fund: We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the ING Growth + Value Fund (formerly Pilgrim Growth + Value Fund), ING Growth Opportunities Fund (formerly Pilgrim Growth Opportunities Fund), ING LargeCap Growth Fund (formerly Pilgrim LargeCap Growth Fund), ING MidCap Opportunities Fund (formerly Pilgrim MidCap Opportunities Fund), ING SmallCap Opportunities Fund (formerly Pilgrim SmallCap Opportunities Fund), ING Research Enhanced Index Fund (formerly Pilgrim Research Enhanced Index Fund), ING Large Company Value Fund (formerly Pilgrim Growth and Income Fund), ING MagnaCap Fund (formerly Pilgrim MagnaCap Fund), ING MidCap Value Fund, ING SmallCap Value Fund, ING Convertible Fund (formerly Pilgrim Convertible Fund), and ING Equity and Income Fund (formerly Pilgrim Balanced Fund) as of May 31, 2002, and the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein for the ING Large Company Value Fund, ING MagnaCap Fund, ING MidCap Value Fund, and ING SmallCap Value Fund, the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein ending on or after December 31, 2000 for the ING Growth Opportunities Fund, ING MidCap Opportunities Fund, and ING SmallCap Opportunities Fund, and the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein ending on or after May 31, 2001 for the ING Growth + Value Fund and ING Research Enhanced Index Fund and the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein ending on or after June 30, 1999 for the ING LargeCap Growth Fund, ING Convertible Fund, and ING Equity and Income Fund. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. For all periods ending prior to January 1, 2000 the financial highlights of the ING Growth Opportunities Fund, ING MidCap Opportunities Fund, and ING SmallCap Opportunities Fund were audited by other auditors whose report thereon dated February 17, 2000 expressed an unqualified opinion on those financial highlights. For all periods ending prior to November 1, 2000, the statements of changes in net assets, and financial highlights, of the ING Growth + Value Fund and ING Research Enhanced Index Fund were audited by other auditors whose report thereon dated December 5, 2000 expressed an unqualified opinion on those financial statements and financial highlights. For all periods ending prior to April 1, 1999, the financial highlights of the ING LargeCap Growth Fund, ING Convertible Fund and ING Equity and Income Fund were audited by other auditors whose report thereon dated May 7, 1999 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2002 by correspondence with the custodian and other appropriate audit procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above, excluding those financial statements and financial highlights which were indicated above as having been audited by others, present fairly, in all material respects, the financial position of each of the aforementioned funds, as of May 31, 2002, the results of their operations, the changes in their net assets, and their financial highlights for the periods indicated herein with reference to the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Boston, Massachusetts July 5, 2002 27 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2002 - --------------------------------------------------------------------------------
ING ING ING ING ING ING GROWTH + GROWTH LARGECAP MIDCAP SMALLCAP RESEARCH VALUE OPPORTUNITIES GROWTH OPPORTUNITIES OPPORTUNITIES ENHANCED INDEX FUND FUND FUND FUND FUND FUND ------------- ------------- ------------- ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 369,680,927 $ 292,655,513 $ 275,550,183 $ 282,319,966 $ 461,094,249 $ 120,408,099 Short-term investments at amortized cost 2,931,000 986,000 5,093,000 -- 14,579,000 -- Cash 902 281 812 69,117 153,526 -- Receivables: Investment securities sold 3,931,226 1,748,653 -- 5,278,996 9,127,876 8,726,212 Fund shares sold 2,217,877 192,895 367,313 96,049 2,543,626 37,546 Dividends and interest 202,243 63,625 245,756 51,818 8,930 200,524 Other -- -- 66,729 -- -- -- Prepaid expenses 42,237 43,191 47,510 50,745 56,664 28,872 Reimbursement due from investment manager -- -- -- 56,554 -- -- ------------- ------------- ------------- ------------- ------------- ------------- Total assets 379,006,412 295,690,158 281,371,303 287,923,245 487,563,871 129,401,253 ------------- ------------- ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased -- 393,139 -- 382,117 7,188,333 7,534,628 Payable for fund shares redeemed 3,384,839 932,655 1,278,435 1,284,057 1,802,177 234,361 Payable to affiliates 723,854 480,270 387,088 303,766 692,885 175,852 Payable to custodian -- -- -- -- -- 234,731 Other accrued expenses and liabilities 268,490 203,147 332,575 902,547 445,552 89,712 ------------- ------------- ------------- ------------- ------------- ------------- Total liabilities 4,377,183 2,009,211 1,998,098 2,872,487 10,128,947 8,269,284 ------------- ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 374,629,229 $ 293,680,947 $ 279,373,205 $ 285,050,758 $ 477,434,924 $ 121,131,969 ============= ============= ============= ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 814,148,284 $ 691,823,501 $ 633,426,862 $ 418,595,034 $ 717,026,915 $ 165,148,373 Undistributed net investment income -- -- -- -- -- -- Accumulated net realized loss on investments (443,996,280) (413,357,924) (359,486,791) (148,097,168) (256,856,432) (40,722,228) Net unrealized appreciation (depreciation) of investments 4,477,225 15,215,370 5,433,134 14,552,892 17,264,441 (3,294,176) ------------- ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 374,629,229 $ 293,680,947 $ 279,373,205 $ 285,050,758 $ 477,434,924 $ 121,131,969 ============= ============= ============= ============= ============= ============= * Cost of investments in securities $ 365,203,702 $ 277,440,143 $ 270,117,049 $ 267,767,074 $ 443,829,808 $ 123,702,275
See Accompanying Notes to Financial Statements 28 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2002 - --------------------------------------------------------------------------------
ING ING ING GROWTH + GROWTH LARGECAP VALUE OPPORTUNITIES GROWTH FUND FUND FUND --------------- --------------- --------------- CLASS A: Net assets $ 90,290,473 $ 89,618,950 $ 65,641,677 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 9,068,576 6,743,965 3,956,086 Net asset value and redemption price per share $ 9.96 $ 13.29 $ 16.59 Maximum offering price per share (5.75%)(1) $ 10.57 $ 14.10 $ 17.60 CLASS B: Net assets $ 185,949,545 $ 88,274,258 $ 116,738,126 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 19,532,564 7,088,493 7,161,366 Net asset value and redemption price per share(2) $ 9.52 $ 12.45 $ 16.30 Maximum offering price per share $ 9.52 $ 12.45 $ 16.30 CLASS C: Net assets $ 97,992,953 $ 45,900,843 $ 54,047,942 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 10,298,902 3,678,946 3,325,534 Net asset value and redemption price per share(2) $ 9.51 $ 12.48 $ 16.25 Maximum offering price per share $ 9.51 $ 12.48 $ 16.25 CLASS I: Net assets n/a $ 56,719,497 $ 26,105,561 Shares authorized n/a unlimited unlimited Par value n/a $ 0.01 $ 0.00 Shares outstanding n/a 4,146,014 1,541,876 Net asset value and redemption price per share n/a $ 13.68 $ 16.93 Maximum offering price per share n/a $ 13.68 $ 16.93 CLASS Q: Net assets $ 396,258 $ 9,954 $ 16,839,899 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 40,179 757 995,110 Net asset value and redemption price per share $ 9.86 $ 13.16 $ 16.92 Maximum offering price per share $ 9.86 $ 13.16 $ 16.92 CLASS T: Net assets n/a $ 13,157,445 n/a Shares authorized n/a unlimited n/a Par value n/a $ 0.01 n/a Shares outstanding n/a 1,046,981 n/a Net asset value and redemption price per share(2) n/a $ 12.57 n/a Maximum offering price per share n/a $ 12.57 n/a ING ING ING MIDCAP SMALLCAP RESEARCH OPPORTUNITIES OPPORTUNITIES ENHANCED INDEX FUND FUND FUND --------------- --------------- --------------- CLASS A: Net assets $ 68,105,747 $ 183,809,844 $ 9,883,257 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 Shares outstanding 6,130,103 7,645,036 1,172,039 Net asset value and redemption price per share $ 11.11 $ 24.04 $ 8.43 Maximum offering price per share (5.75%)(1) $ 11.79 $ 25.51 $ 8.94 CLASS B: Net assets $ 69,620,728 $ 154,899,144 $ 53,184,934 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 Shares outstanding 6,429,982 6,890,061 6,460,918 Net asset value and redemption price per share(2) $ 10.83 $ 22.48 $ 8.23 Maximum offering price per share $ 10.83 $ 22.48 $ 8.23 CLASS C: Net assets $ 100,887,707 $ 119,497,780 $ 36,485,780 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 Shares outstanding 9,364,313 5,326,378 4,431,234 Net asset value and redemption price per share(2) $ 10.77 $ 22.44 $ 8.23 Maximum offering price per share $ 10.77 $ 22.44 $ 8.23 CLASS I: Net assets $ 39,873,687 $ 10,700,127 $ 21,577,998 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 Shares outstanding 3,531,885 444,486 2,531,792 Net asset value and redemption price per share $ 11.29 $ 24.07 $ 8.52 Maximum offering price per share $ 11.29 $ 24.07 $ 8.52 CLASS Q: Net assets $ 6,562,889 $ 3,650,795 n/a Shares authorized unlimited unlimited n/a Par value $ 0.01 $ 0.01 n/a Shares outstanding 588,064 151,665 n/a Net asset value and redemption price per share $ 11.16 $ 24.07 n/a Maximum offering price per share $ 11.16 $ 24.07 n/a CLASS T: Net assets n/a $ 4,877,234 n/a Shares authorized n/a unlimited n/a Par value n/a $ 0.01 n/a Shares outstanding n/a 214,757 n/a Net asset value and redemption price per share(2) n/a $ 22.71 n/a Maximum offering price per share n/a $ 22.71 n/a
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements 29 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2002 - --------------------------------------------------------------------------------
ING ING ING LARGE COMPANY ING MIDCAP SMALLCAP VALUE MAGNACAP VALUE VALUE FUND FUND FUND FUND ------------- ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 159,848,519 $ 290,271,518 $ 43,705,670 $ 29,945,423 Short-term investments at amortized cost 20,430,073 31,521,000 2,286,000 1,889,000 Cash 317 959 836 607 Receivables: Investment securities sold -- -- 334,235 338,490 Fund shares sold 36,246 296,736 1,649,387 2,859,546 Dividends and interest 251,069 677,348 60,731 32,174 Other -- 56,143 -- -- Prepaid expenses 29,548 32,893 98,412 100,520 Reimbursement due from investment manager -- -- 106,622 101,648 ------------- ------------- ------------- ------------- Total assets 180,595,772 322,856,597 48,241,893 35,267,408 ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased -- -- 1,251,531 250,407 Payable for fund shares redeemed 115,540 686,356 60,699 81,238 Payable to affiliates 162,363 361,124 59,481 42,174 Other accrued expenses and liabilities 196,571 258,957 75,648 67,500 ------------- ------------- ------------- ------------- Total liabilities 474,474 1,306,437 1,447,359 441,319 ------------- ------------- ------------- ------------- NET ASSETS $ 180,121,298 $ 321,550,160 $ 46,794,534 $ 34,826,089 ============= ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 194,555,217 $ 352,036,034 $ 46,732,068 $ 34,634,884 Undistributed net investment income -- -- 45,818 22,825 Accumulated net realized gain (loss) on investments (8,816,571) (2,428,614) 477,240 286,427 Net unrealized depreciation of investments (5,617,348) (28,057,260) (460,592) (118,047) ------------- ------------- ------------- ------------- NET ASSETS $ 180,121,298 $ 321,550,160 $ 46,794,534 $ 34,826,089 ============= ============= ============= ============= * Cost of investments in securities $ 165,465,867 $ 318,328,778 $ 44,166,262 $ 30,063,470
See Accompanying Notes to Financial Statements 30 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2002 - --------------------------------------------------------------------------------
ING ING ING LARGE COMPANY ING MIDCAP SMALLCAP VALUE MAGNACAP VALUE VALUE FUND FUND FUND FUND ------------- ------------ ------------ ------------ CLASS A: Net assets $ 173,655,096 $ 11,602,461 $ 25,325,421 $ 18,435,229 Shares authorized 250,000,000 80,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 11,880,426 20,934,988 2,462,974 1,735,526 Net asset value and redemption price per share $ 14.62 $ 10.11 $ 10.28 $ 10.62 Maximum offering price per share (5.75%)(1) $ 15.51 $ 10.73 $ 10.91 $ 11.27 CLASS B: Net assets $ 4,552,033 $ 79,685,218 $ 11,655,745 $ 7,888,588 Shares authorized 100,000,000 80,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 314,940 8,171,287 1,135,349 743,980 Net asset value and redemption price per share(2) $ 14.45 $ 9.75 $ 10.27 $ 10.60 Maximum offering price per share $ 14.45 $ 9.75 $ 10.27 $ 10.60 CLASS C: Net assets $ 1,894,617 $ 9,693,291 $ 9,730,984 $ 8,467,950 Shares authorized 50,000,000 20,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 131,394 993,067 948,039 798,786 Net asset value and redemption price per share(2) $ 14.42 $ 9.76 $ 10.26 $ 10.60 Maximum offering price per share $ 14.42 $ 9.76 $ 10.26 $ 10.60 CLASS I: Net assets n/a n/a $ 70,925 $ 26,245 Shares authorized n/a n/a unlimited unlimited Par value n/a n/a $ 0.001 $ 0.001 Shares outstanding n/a n/a 6,888 2,469 Net asset value and redemption price per share n/a n/a $ 10.30 $ 10.63 Maximum offering price per share n/a n/a $ 10.30 $ 10.63 CLASS M: Net assets n/a $ 12,073,862 n/a n/a Shares authorized n/a 5,000,000 n/a n/a Par value n/a $ 0.00 n/a n/a Shares outstanding n/a 1,212,433 n/a n/a Net asset value and redemption price per share n/a $ 9.96 n/a n/a Maximum offering price per share (3.50%)(3) n/a $ 10.32 n/a n/a CLASS Q: Net assets $ 19,552 $ 8,495,328 $ 11,459 $ 8,077 Shares authorized 50,000,000 20,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 1,337 840,248 1,115 760 Net asset value and redemption price per share $ 14.62 $ 10.11 $ 10.28 $ 10.63 Maximum offering price per share $ 14.62 $ 10.11 $ 10.28 $ 10.63
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.50 of net asset value. On purchase of $50,000 or more, the offering price is reduced. See Accompanying Notes to Financial Statements 31 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2002 - --------------------------------------------------------------------------------
ING ING EQUITY AND CONVERTIBLE INCOME FUND FUND ------------- ------------- ASSETS: Investments in securities at value* $ 211,797,467 $ 104,881,461 Short-term investments at amortized cost 26,155,000 6,679,000 Cash 615,560 569 Receivables: Investment securities sold 5,433,790 20,161 Fund shares sold 145,829 659,145 Dividends and interest 682,544 674,464 Prepaid expenses 36,698 36,426 ------------- ------------- Total assets 244,866,888 112,951,226 ------------- ------------- LIABILITIES: Payable for investment securities purchased 3,954,255 826,532 Payable for fund shares redeemed 1,155,273 442,870 Payable to affiliates 343,776 187,974 Other accrued expenses and liabilities 199,328 13,293 ------------- ------------- Total liabilities 5,652,632 1,470,669 ------------- ------------- NET ASSETS $ 239,214,256 $ 111,480,557 ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 334,430,876 $ 123,280,934 Undistributed net investment income 1,072,672 222,224 Accumulated net realized loss on investments (97,842,992) (3,700,967) Net unrealized appreciation (depreciation) of investments 1,553,700 (8,321,634) ------------- ------------- NET ASSETS $ 239,214,256 $ 111,480,557 ============= ============= * Cost of investments in securities $ 210,243,767 $ 113,203,095
See Accompanying Notes to Financial Statements 32 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2002 - --------------------------------------------------------------------------------
ING ING EQUITY AND CONVERTIBLE INCOME FUND FUND ------------ ------------ CLASS A: Net assets $ 60,691,641 $ 57,042,341 Shares authorized unlimited unlimited Par value $ 0.00 $ 0.00 Shares outstanding 3,954,885 4,728,978 Net asset value and redemption price per share $ 15.35 $ 12.06 Maximum offering price per share (5.75%)(1) $ 16.29 $ 12.80 CLASS B: Net assets $ 88,650,004 $ 31,681,929 Shares authorized unlimited unlimited Par value $ 0.00 $ 0.00 Shares outstanding 5,267,916 2,442,439 Net asset value and redemption price per share(2) $ 16.83 $ 12.97 Maximum offering price per share $ 16.83 $ 12.97 CLASS C: Net assets $ 81,246,507 $ 18,006,689 Shares authorized unlimited unlimited Par value $ 0.00 $ 0.00 Shares outstanding 5,159,435 1,556,871 Net asset value and redemption price per share(2) $ 15.75 $ 11.57 Maximum offering price per share $ 15.75 $ 11.57 CLASS Q: Net assets $ 8,626,104 $ 190,984 Shares authorized unlimited unlimited Par value $ 0.00 $ 0.00 Shares outstanding 578,627 15,940 Net asset value and redemption price per share $ 14.91 $ 11.98 Maximum offering price per share $ 14.91 $ 11.98 CLASS T: Net assets n/a $ 4,558,614 Shares authorized n/a unlimited Par value n/a $ 0.00 Shares outstanding n/a 352,474 Net asset value and redemption price per share(2) n/a $ 12.93 Maximum offering price per share n/a $ 12.93
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements 33 STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------
ING ING ING GROWTH + GROWTH LARGECAP VALUE OPPORTUNITIES GROWTH FUND FUND FUND ------------- ------------- ------------- YEAR YEAR YEAR ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, 2002 2002 2002 ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes* $ 2,444,354 $ 581,917 $ 1,604,566 Interest 512,627 84,072 212,348 Other 22,590 5,850 -- ------------- ------------- ------------- Total investment income 2,979,571 671,839 1,816,914 ------------- ------------- ------------- EXPENSES: Investment management fees 4,983,047 3,583,090 2,935,487 Distribution fees: Class A 355,471 339,895 381,173 Class B 2,443,090 1,143,661 1,627,957 Class C 1,350,593 645,178 827,425 Class Q 1,115 9,886 66,676 Class T -- 176,740 -- Transfer agent fees: Class A 128,661 146,910 320,542 Class B 258,555 148,227 478,122 Class C 141,896 82,537 243,119 Class I -- 1,116 2,108 Class Q 388 105 5,919 Class T -- 22,575 -- Administrative and service fees 1,031,063 796,611 103,457 Shareholder reporting fees 255,784 305,250 177,390 Registration and filing fees 232,300 95,482 124,152 Professional fees 168,270 156,540 145,366 Custody and accounting fees 94,842 189,765 113,920 Directors' fees 16,715 14,244 11,675 Insurance fees 12,604 4,366 24,350 Miscellaneous fees 17,595 34,517 20,698 Merger fees -- -- -- ------------- ------------- ------------- Total expenses 11,491,989 7,896,695 7,609,536 ------------- ------------- ------------- Less: Waived and reimbursed fees -- -- -- ------------- ------------- ------------- Net expenses 11,491,989 7,896,695 7,609,536 ------------- ------------- ------------- Net investment loss (8,512,418) (7,224,856) (5,792,622) ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (135,053,076) (148,410,703) (178,879,014) Net realized gain on futures -- -- -- Net change in unrealized appreciation (depreciation) of investments (36,957,292) 8,273,970 22,043,801 ------------- ------------- ------------- Net realized and unrealized loss on investments (172,010,368) (140,136,733) (156,835,213) ------------- ------------- ------------- Decrease in net assets resulting from operations $(180,522,786) $(147,361,589) $(162,627,835) ============= ============= ============= *Foreign taxes $ 5,898 $ -- $ 2,164 ING ING ING MIDCAP SMALLCAP RESEARCH OPPORTUNITIES OPPORTUNITIES ENHANCED INDEX FUND FUND FUND ------------- ------------- ------------- YEAR YEAR YEAR ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, 2002 2002 2002 ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes* $ 202,755 $ 170,848 $ 2,109,250 Interest 126,954 282,709 22,604 Other -- -- 984 ------------- ------------- ------------- Total investment income 329,709 453,557 2,132,838 ------------- ------------- ------------- EXPENSES: Investment management fees 1,036,003 3,747,533 1,029,681 Distribution fees: Class A 56,616 423,911 33,177 Class B 236,216 1,551,220 632,442 Class C 169,242 622,052 495,728 Class Q 4,884 4,001 817 Class T -- 91,427 -- Transfer agent fees: Class A 40,959 171,315 4,217 Class B 52,450 185,648 18,344 Class C 35,665 74,379 12,447 Class I 854 385 206 Class Q 37 1,009 39 Class T -- 10,969 -- Administrative and service fees 153,373 726,375 208,822 Shareholder reporting fees 57,745 192,707 79,610 Registration and filing fees 122,587 224,919 38,411 Professional fees 64,434 151,312 47,324 Custody and accounting fees 63,768 140,902 52,499 Directors' fees 2,260 11,646 6,365 Insurance fees 1,490 15,172 3,442 Miscellaneous fees 12,400 11,001 1,936 Merger fees 17,219 38,877 -- ------------- ------------- ------------- Total expenses 2,128,202 8,396,760 2,665,507 ------------- ------------- ------------- Less: Waived and reimbursed fees 233,782 -- -- ------------- ------------- ------------- Net expenses 1,894,420 8,396,760 2,665,507 ------------- ------------- ------------- Net investment loss (1,564,711) (7,943,203) (532,669) ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (22,181,991) (116,051,246) (29,214,835) Net realized gain on futures -- -- 108,743 Net change in unrealized appreciation (depreciation) of investments (13,180,504) (59,155,762) 4,441,583 ------------- ------------- ------------- Net realized and unrealized loss on investments (35,362,495) (175,207,008) (24,664,509) ------------- ------------- ------------- Decrease in net assets resulting from operations $ (36,927,206) $(183,150,211) $ (25,197,178) ============= ============= ============= *Foreign taxes $ -- $ 2,182 $ 8,851
See Accompanying Notes to Financial Statements 34 STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------
ING ING ING LARGE ING MIDCAP SMALLCAP COMPANY VALUE MAGNACAP VALUE VALUE FUND FUND FUND FUND ------------ ------------ ------------ ------------ YEAR YEAR FEBRUARY 1, FEBRUARY 1, ENDED ENDED 2002(1) TO 2002(1) TO MAY 31, MAY 31, MAY 31, MAY 31, 2002 2002 2002 2002 ------------ ------------ ------------ ------------ INVESTMENT INCOME: Dividends, net of foreign taxes* $ 2,730,446 $ 6,184,560 $ 104,578 $ 52,018 Interest 337,789 764,690 13,358 9,420 Other 68,566 5,549 -- -- ------------ ------------ ------------ ------------ Total investment income 3,136,801 6,954,799 117,936 61,438 ------------ ------------ ------------ ------------ EXPENSES: Investment management fees 1,273,036 2,642,299 71,673 49,767 Distribution fees: Class A 470,011 701,353 9,747 7,015 Class B 44,649 931,253 18,256 12,276 Class C 21,247 101,349 14,291 9,394 Class M -- 106,181 -- -- Class Q 33 23,915 2 2 Transfer agent fees: Class A 214,424 404,344 9,747 7,014 Class B 4,768 154,118 4,564 3,070 Class C 2,547 16,195 3,573 2,348 Class I -- -- 5 1 Class M -- 23,369 -- -- Class Q -- 298 -- -- Administrative and service fees 194,607 23,960 7,168 4,977 Shareholder reporting fees 44,790 154,679 2,508 1,741 Registration and filing fees 101,820 90,105 761 694 Professional fees 55,342 91,737 2,150 1,492 Custody and accounting fees 62,571 94,741 14,340 13,075 Directors' fees 12,315 13,644 379 262 Insurance fees 3,495 9,037 -- -- Organization fees -- -- 40,000 40,000 Offering fees -- -- 43,042 43,041 Miscellaneous fees 7,138 9,919 1,075 746 ------------ ------------ ------------ ------------ Total expenses 2,512,793 5,592,496 243,281 196,915 ------------ ------------ ------------ ------------ Less: Waived and reimbursed fees -- -- 106,622 101,648 ------------ ------------ ------------ ------------ Net expenses 2,512,793 5,592,496 136,659 95,267 ------------ ------------ ------------ ------------ Net investment income (loss) 624,008 1,362,303 (18,723) (33,829) ------------ ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 3,709,737 9,984,802 477,240 286,427 Net change in unrealized depreciation of investments (32,312,425) (58,176,380) (460,592) (118,047) ------------ ------------ ------------ ------------ Net realized and unrealized gain (loss) on investments (28,602,688) (48,191,578) 16,648 168,380 ------------ ------------ ------------ ------------ Increase (decrease) in net assets resulting from operations $(27,978,680) $(46,829,275) $ (2,075) $ 134,551 ============ ============ ============ ============ *Foreign taxes $ -- $ 2,247 $ -- $ --
- ---------- (1) Commencement of operations See Accompanying Notes to Financial Statements 35 STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------
ING ING EQUITY AND CONVERTIBLE INCOME FUND FUND ------------ ------------ YEAR YEAR ENDED ENDED MAY 31, MAY 31, 2002 2002 ------------ ------------ INVESTMENT INCOME: Dividends, net of foreign taxes* $ 3,048,983 $ 989,057 Interest 6,694,924 4,500,126 ------------ ------------ Total investment income 9,743,907 5,489,183 ------------ ------------ EXPENSES: Investment management fees 2,156,604 892,830 Distribution fees: Class A 263,229 205,440 Class B 1,027,888 336,156 Class C 944,474 205,024 Class Q 37,583 760 Class T -- 44,431 Transfer agent fees: Class A 143,897 113,847 Class B 192,002 65,927 Class C 179,481 39,932 Class Q 2,542 635 Class T -- 11,006 Administrative and service fees 63,637 35,827 Shareholder reporting fees 136,634 29,189 Registration and filing fees 99,251 45,680 Professional fees 80,598 13,649 Custody and accounting fees 64,102 44,730 Directors' fees 11,437 5,886 Insurance fees 7,411 5,177 Miscellaneous fees 16,888 766 ------------ ------------ Total expenses 5,427,658 2,096,892 ------------ ------------ Less: Recoupment -- (40,880) ------------ ------------ Net expenses 5,427,658 2,137,772 ------------ ------------ Net investment income 4,316,249 3,351,411 ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (94,733,125) (1,232,233) Net change in unrealized appreciation (depreciation) of investments 47,508,825 (9,585,022) ------------ ------------ Net realized and unrealized loss on investments (47,224,300) (10,817,255) ------------ ------------ Decrease in net assets resulting from operations $(42,908,051) $ (7,465,844) ============ ============ * Foreign taxes $ -- $ 3,899
See Accompanying Notes to Financial Statements 36 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING GROWTH + VALUE FUND ----------------------------------------------------- YEAR SEVEN MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, OCTOBER 31, 2002 2001 2000 --------------- --------------- --------------- FROM OPERATIONS: Net investment loss $ (8,512,418) $ (8,973,823) $ (13,479,347) Net realized gain (loss) on investments (135,053,076) (301,751,046) 96,147,664 Net change in unrealized appreciation (depreciation) of investments (36,957,292) (104,576,146) 50,016,590 --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations (180,522,786) (415,301,015) 132,684,907 --------------- --------------- --------------- FROM DIVIDENDS TO SHAREHOLDERS: Net realized gains -- (93,173,524) (52,769,105) Tax return on capital -- (2,724,028) -- --------------- --------------- --------------- Total distributions -- (95,897,552) (52,769,105) --------------- --------------- --------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 118,982,140 271,208,423 795,463,400 Shares resulting from dividend reinvestments -- 62,411,607 32,130,552 --------------- --------------- --------------- 118,982,140 333,620,030 827,593,952 Cost of shares redeemed (233,711,496) (199,253,732) (253,638,470) --------------- --------------- --------------- Net increase (decrease) in net assets resulting from capital share transactions (114,729,356) 134,366,298 573,955,482 --------------- --------------- --------------- Net increase (decrease) in net assets (295,252,142) (376,832,269) 653,871,284 NET ASSETS: Beginning of period 669,881,371 1,046,713,640 392,842,356 --------------- --------------- --------------- End of period $ 374,629,229 $ 669,881,371 $ 1,046,713,640 =============== =============== =============== Undistributed net investment income at end of period $ -- $ -- $ -- =============== =============== ===============
See Accompanying Notes to Financial Statements 37 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING GROWTH OPPORTUNITIES FUND ----------------------------------------------- YEAR FIVE MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, DECEMBER 31, 2002 2001 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (7,224,856) $ (4,047,103) $ (8,378,898) Net realized gain (loss) on investments (148,410,703) (186,849,526) (44,978,445) Net change in unrealized appreciation (depreciation) of investments 8,273,970 (9,865,713) (137,522,500) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (147,361,589) (200,762,342) (190,879,843) ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- -- -- Class Q -- -- -- Net realized gains -- -- (41,120,168) ------------- ------------- ------------- Total distributions -- -- (41,120,168) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 57,584,228 85,048,337 726,623,810 Net proceeds from shares issued in merger -- -- -- Shares resulting from dividend reinvestments -- -- 30,960,648 ------------- ------------- ------------- 57,584,228 85,048,337 757,584,458 Cost of shares redeemed (147,726,009) (80,753,091) (225,228,540) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (90,141,781) 4,295,246 532,355,918 ------------- ------------- ------------- Net increase (decrease) in net assets (237,503,370) (196,467,096) 300,355,907 NET ASSETS: Beginning of period 531,184,317 727,651,413 427,295,506 ------------- ------------- ------------- End of period $ 293,680,947 $ 531,184,317 $ 727,651,413 ============= ============= ============= Undistributed net investment income at end of period $ -- $ -- $ -- ============= ============= ============= ING LARGECAP GROWTH FUND ----------------------------------------------- YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, 2002 2001 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (5,792,622) $ (7,121,127) $ (5,317,970) Net realized gain (loss) on investments (178,879,014) (174,109,898) 13,498,698 Net change in unrealized appreciation (depreciation) of investments 22,043,801 (173,014,281) 147,558,169 ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (162,627,835) (354,245,306) 155,738,897 ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (23,490) -- -- Class Q (16,054) -- -- Net realized gains -- (8,506,681) (3,085,512) ------------- ------------- ------------- Total distributions (39,544) (8,506,681) (3,085,512) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 162,524,986 305,120,966 532,535,020 Net proceeds from shares issued in merger -- 110,393,160 -- Shares resulting from dividend reinvestments 30,939 5,079,126 2,521,879 ------------- ------------- ------------- 162,555,925 420,593,252 535,056,899 Cost of shares redeemed (236,666,205) (238,728,153) (93,636,480) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (74,110,280) 181,865,099 441,420,419 ------------- ------------- ------------- Net increase (decrease) in net assets (236,777,659) (180,886,888) 594,073,804 NET ASSETS: Beginning of period 516,150,864 697,037,752 102,963,948 ------------- ------------- ------------- End of period $ 279,373,205 $ 516,150,864 $ 697,037,752 ============= ============= ============= Undistributed net investment income at end of period $ -- $ -- $ -- ============= ============= =============
See Accompanying Notes to Financial Statements 38 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING MIDCAP OPPORTUNITIES FUND ----------------------------------------------- YEAR FIVE MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, DECEMBER 31, 2002 2001 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (1,564,711) $ (879,029) $ (1,458,611) Net realized gain (loss) on investments (22,181,991) (25,966,455) 7,746,077 Net change in unrealized depreciation of investments (13,180,504) (14,150,486) (15,822,878) ------------- ------------- ------------- Net decrease in net assets resulting from operations (36,927,206) (40,995,970) (9,535,412) ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net realized gains -- -- (15,667,624) ------------- ------------- ------------- Total distributions -- -- (15,667,624) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 23,229,928 9,802,023 106,404,210 Net proceeds from shares issued in merger 217,968,703 30,843,894 -- Shares resulting from dividend reinvestments -- -- 12,544,986 ------------- ------------- ------------- 241,198,631 40,645,917 118,949,196 Cost of shares redeemed (45,911,969) (31,459,743) (22,301,858) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 195,286,662 9,186,174 96,647,338 ------------- ------------- ------------- Net increase (decrease) in net assets 158,359,456 (31,809,796) 71,444,302 NET ASSETS: Beginning of period 126,691,302 158,501,098 87,056,796 ------------- ------------- ------------- End of period $ 285,050,758 $ 126,691,302 $ 158,501,098 ============= ============= ============= Undistributed net investment income at end of period $ -- $ -- $ -- ============= ============= ============= ING SMALLCAP OPPORTUNITIES FUND ----------------------------------------------- YEAR FIVE MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, DECEMBER 31, 2002 2001 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (7,943,203) $ (3,643,091) $ (10,536,111) Net realized gain (loss) on investments (116,051,246) (21,202,558) (16,488,885) Net change in unrealized depreciation of investments (59,155,762) (81,917,523) (45,920,205) ------------- ------------- ------------- Net decrease in net assets resulting from operations (183,150,211) (106,763,172) (72,945,201) ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net realized gains (12,207,533) -- (99,067,878) ------------- ------------- ------------- Total distributions (12,207,533) -- (99,067,878) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 169,513,918 39,685,223 488,213,149 Net proceeds from shares issued in merger 191,995,534 29,533,351 -- Shares resulting from dividend reinvestments 8,872,522 -- 69,587,907 ------------- ------------- ------------- 370,381,974 69,218,574 557,801,056 Cost of shares redeemed (162,003,224) (71,756,890) (306,341,551) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 208,378,750 (2,538,316) 251,459,505 ------------- ------------- ------------- Net increase (decrease) in net assets 13,021,006 (109,301,488) 79,446,426 NET ASSETS: Beginning of period 464,413,918 573,715,406 494,268,980 ------------- ------------- ------------- End of period $ 477,434,924 $ 464,413,918 $ 573,715,406 ============= ============= ============= Undistributed net investment income at end of period $ -- $ -- $ -- ============= ============= =============
See Accompanying Notes to Financial Statements 39 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING RESEARCH ENHANCED INDEX FUND ----------------------------------------------- YEAR SEVEN MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, OCTOBER 31, 2002 2001 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (532,669) $ (745,522) $ (1,241,287) Net realized loss on investments and futures (29,106,092) (9,758,933) (1,264,718) Net change in unrealized appreciation (depreciation) of investments 4,441,583 (17,931,672) 4,751,252 ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (25,197,178) (28,436,127) 2,245,247 ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net realized gains -- -- (3,268,200) ------------- ------------- ------------- Total distributions -- -- (3,268,200) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 13,127,048 22,144,706 70,474,849 Shares resulting from dividend reinvestments -- -- 1,900,825 ------------- ------------- ------------- 13,127,048 22,144,706 72,375,674 Cost of shares redeemed (48,152,451) (47,147,064) (66,766,343) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (35,025,403) (25,002,358) 5,609,331 ------------- ------------- ------------- Net increase (decrease) in net assets (60,222,581) (53,438,485) 4,586,378 NET ASSETS: Beginning of period 181,354,550 234,793,035 230,206,657 ------------- ------------- ------------- End of period $ 121,131,969 $ 181,354,550 $ 234,793,035 ============= ============= ============= Undistributed net investment income at end of period $ -- $ -- $ -- ============= ============= =============
See Accompanying Notes to Financial Statements 40 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING LARGE COMPANY VALUE FUND ----------------------------------------------- YEAR FIVE MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, DECEMBER 31, 2002 2001 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment income (loss) $ 624,008 $ (350,783) $ (158,364) Net realized gain (loss) on investments 3,709,737 (8,374,851) 36,335,197 Net change in unrealized depreciation of investments (32,312,425) (5,227,499) (43,042,039) ------------- ------------- ------------- Net decrease in net assets resulting from operations (27,978,680) (13,953,133) (6,865,206) ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (48,577) -- (22,244) Class B -- -- -- Class C -- -- -- Class M -- -- -- Class Q -- -- -- Net realized gains (3,531,616) -- (41,013,548) Tax return of capital (561,446) -- -- ------------- ------------- ------------- Total distributions (4,141,639) -- (41,035,792) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 23,772,105 9,762,846 44,113,735 Net proceeds from shares issued in merger -- 32,272,403 -- Shares resulting from dividend reinvestments 3,625,709 -- 35,741,121 ------------- ------------- ------------- 27,397,814 42,035,249 79,854,856 Cost of shares redeemed (36,480,872) (34,544,687) (58,698,351) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (9,083,058) 7,490,562 21,156,505 ------------- ------------- ------------- Net increase (decrease) in net assets (41,203,377) (6,462,571) (26,744,493) NET ASSETS: Beginning of period 221,324,675 227,787,246 254,531,739 ------------- ------------- ------------- End of period $ 180,121,298 $ 221,324,675 $ 227,787,246 ============= ============= ============= Undistributed net investment income at end of period $ -- $ -- $ -- ============= ============= ============= ING MAGNACAP FUND ----------------------------------------------- YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, 2002 2001 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment income (loss) $ 1,362,303 $ 631,110 $ 1,079,687 Net realized gain (loss) on investments 9,984,802 63,559,889 29,968,024 Net change in unrealized depreciation of investments (58,176,380) (72,272,816) (35,597,984) ------------- ------------- ------------- Net decrease in net assets resulting from operations (46,829,275) (8,081,817) (4,550,273) ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (1,450,626) (1,630,626) (1,038,566) Class B -- (22,115) -- Class C -- (945) -- Class M (25,317) (4,626) (12,763) Class Q (90,550) (66,993) -- Net realized gains (57,616,918) (47,090,684) (48,878,271) Tax return of capital -- -- -- ------------- ------------- ------------- Total distributions (59,183,411) (48,815,989) (49,929,600) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 42,905,807 36,855,285 169,844,202 Net proceeds from shares issued in merger -- 69,632,639 -- Shares resulting from dividend reinvestments 47,870,369 40,302,303 45,853,052 ------------- ------------- ------------- 90,776,176 146,790,227 215,697,254 Cost of shares redeemed (92,733,007) (78,040,728) (245,236,862) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (1,956,831) 68,749,499 (29,539,608) ------------- ------------- ------------- Net increase (decrease) in net assets (107,969,517) 11,851,693 (84,019,481) NET ASSETS: Beginning of period 429,519,677 417,667,984 501,687,465 ------------- ------------- ------------- End of period $ 321,550,160 $ 429,519,677 $ 417,667,984 ============= ============= ============= Undistributed net investment income at end of period $ -- $ -- $ 872,876 ============= ============= =============
See Accompanying Notes to Financial Statements 41 STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- ING ING MIDCAP SMALLCAP VALUE VALUE FUND FUND ------------ ------------ PERIOD PERIOD ENDED ENDED MAY 31, MAY 31, 2002(1) 2002(1) ------------ ------------ FROM OPERATIONS: Net investment loss $ (18,723) $ (33,829) Net realized gain on investments 477,240 286,427 Net change in unrealized depreciation of investments (460,592) (118,047) ------------ ------------ Net increase (decrease) in net assets resulting from operations (2,075) 134,551 ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 48,636,078 36,135,334 ------------ ------------ 48,636,078 36,135,334 Cost of shares redeemed (1,839,469) (1,443,796) ------------ ------------ Net increase in net assets resulting from capital share transactions 46,796,609 34,691,538 ------------ ------------ Net increase in net assets 46,794,534 34,826,089 NET ASSETS: Beginning of period -- -- ------------ ------------ End of period $ 46,794,534 $ 34,826,089 ============ ============ Undistributed net investment income at end of period $ 45,818 $ 22,825 ============ ============ - ---------- (1) Fund commenced operations on February 1, 2002. See Accompanying Notes to Financial Statements 42 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING CONVERTIBLE FUND ----------------------------------------------- YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, 2002 2001 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment income $ 4,316,249 $ 7,393,607 $ 4,826,371 Net realized gain (loss) on investments (94,733,125) 25,240,635 70,655,086 Net change in unrealized appreciation (depreciation) of investments 47,508,825 (125,518,453) 29,680,606 ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (42,908,051) (92,884,211) 105,162,063 ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (1,989,161) (2,742,655) (1,119,420) Class B (1,691,488) (1,907,503) (674,174) Class C (1,695,959) (2,150,950) (908,198) Class Q (462,156) (1,131,972) (450,509) Net realized gains (1,658,653) (91,080,548) (42,129,281) ------------- ------------- ------------- Total distributions (7,497,417) (99,013,628) (45,281,582) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 49,293,522 161,509,462 220,047,461 Shares resulting from dividend reinvestments 4,837,275 62,313,647 38,566,753 ------------- ------------- ------------- 54,130,797 223,823,109 258,614,214 Cost of shares redeemed (136,764,084) (143,352,464) (93,851,800) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (82,633,287) 80,470,645 164,762,414 ------------- ------------- ------------- Net increase (decrease) in net assets (133,038,755) (111,427,194) 224,642,895 NET ASSETS: Beginning of period 372,253,011 483,680,205 259,037,310 ------------- ------------- ------------- End of period $ 239,214,256 $ 372,253,011 $ 483,680,205 ============= ============= ============= Undistributed net investment income at end of period $ 1,072,672 $ 2,222,925 $ 2,762,398 ============= ============= =============
See Accompanying Notes to Financial Statements 43 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING EQUITY AND INCOME FUND ----------------------------------------------- YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, 2002 2001 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment income $ 3,351,411 $ 3,904,269 $ 1,744,544 Net realized gain (loss) on investments (1,232,233) (1,616,640) 10,481,616 Net change in unrealized depreciation of investments (9,585,022) (3,330,551) (17,791,175) ------------- ------------- ------------- Net decrease in net assets resulting from operations (7,465,844) (1,042,922) (5,565,015) ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (2,123,367) (2,160,525) (229,987) Class B (917,202) (985,710) (140,731) Class C (647,607) (682,525) (417,990) Class Q (13,963) (10,659) (4,652) Class T (182,065) (298,008) -- Net realized gains (484,742) (10,205,280) (7,355,531) ------------- ------------- ------------- Total distributions (4,368,946) (14,342,707) (8,148,891) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 36,437,605 32,659,504 14,115,466 Net proceeds from shares issued in merger -- -- 120,445,073 Shares resulting from dividend reinvestments 3,439,849 11,072,991 6,982,714 ------------- ------------- ------------- 39,877,454 43,732,495 141,543,253 Cost of shares redeemed (44,643,957) (41,904,310) (24,486,297) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (4,766,503) 1,828,185 117,056,956 ------------- ------------- ------------- Net increase (decrease) in net assets (16,601,293) (13,557,444) 103,343,050 NET ASSETS: Beginning of period 128,081,850 141,639,294 38,296,244 ------------- ------------- ------------- End of period $ 111,480,557 $ 128,081,850 $ 141,639,294 ============= ============= ============= Undistributed net investment income at end of period $ 222,224 $ 776,758 $ 1,009,916 ============= ============= =============
See Accompanying Notes to Financial Statements 44 FINANCIAL HIGHLIGHTS ING GROWTH + VALUE FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS Q ------------------------------- YEAR SEVEN MONTHS PERIOD ENDED ENDED ENDED MAY 31, MAY 31, OCT. 31, 2002 2001(4) 2001(1) ---- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.88 24.90 26.73 Income (loss) from investment operations: Net investment loss $ (0.11) (0.18) (0.05) Net realized and unrealized loss on investments $ (3.91) (8.62) (1.78) Total from investment operations $ (4.02) (8.80) (1.83) Less distributions from: Net realized gains on investments $ -- 2.16 -- Tax return of capital $ -- 0.06 -- Total distributions $ -- 2.22 -- Net asset value, end of period $ 9.86 13.88 24.90 TOTAL RETURN(2) % (28.96) (38.00) (6.85) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 396 454 1,346 Ratios to average net assets: Expenses(3) % 1.71 1.69 1.53 Net investment loss(3) % (0.93) (1.43) (1.19) Portfolio turnover rate % 255 95 163
- ---------- (1) Class Q commenced offering of shares on June 5, 2000. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Fund changed its fiscal year end to May 31. See Accompanying Notes to Financial Statements 45 ING GROWTH OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ----------------------------------------------------------- YEAR FIVE MONTHS ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, -------------------------------- 2002 2001(6) 2000 1999 1998 ---- ------- ---- ---- ---- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 19.10 26.05 33.76 26.28 21.36 Income (loss) from investment operations: Net investment income (loss) $ (0.19) (0.08) (0.15) (0.17) (0.05) Net realized and unrealized gain (loss) on investments $ (5.23) (6.87) (6.07) 20.49 5.18 Total from investment operations $ (5.42) (6.95) (6.22) 20.32 5.13 Less distributions from: Net realized gains on investments $ -- -- 1.49 12.84 0.21 Total distributions $ -- -- 1.49 12.84 0.21 Net asset value, end of period $ 13.68 19.10 26.05 33.76 26.28 TOTAL RETURN(3) % (28.38) (26.68) (18.74) 93.86 24.06 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 56,719 79,174 108,005 132,953 83,233 Ratios to average net assets: Net expenses after expense reimbursement(4) % 1.37 1.31 1.16 1.00 1.00 Gross expenses prior to expense reimbursement(4) % 1.37 1.31 1.16 1.00 1.00 Net investment income (loss) after expense reimbursement(4) % (1.21) (0.92) (0.56) (0.61) (0.13) Portfolio turnover rate % 473 217 326 286 98 CLASS I CLASS Q -------- ------------------------------------- PERIOD YEAR FIVE MONTHS PERIOD ENDED ENDED ENDED ENDED DEC. 31, MAY 31, MAY 31, DEC. 31, 1997(1) 2002 2001(6) 2000(2) ------- ---- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 17.90 18.70 25.48 32.58 Income (loss) from investment operations: Net investment income (loss) $ 0.01 (0.34)* (0.10) (0.15) Net realized and unrealized gain (loss) on investments $ 4.30 (5.20) (6.68) (5.46) Total from investment operations $ 4.31 (5.54) (6.78) (5.61) Less distributions from: Net realized gains on investments $ 0.85 -- -- 1.49 Total distributions $ 0.85 -- -- 1.49 Net asset value, end of period $ 21.36 13.16 18.70 25.48 TOTAL RETURN(3) % 24.29 (29.63) (26.61) (17.55) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 113,529 10 7,947 10,274 Ratios to average net assets: Net expenses after expense reimbursement(4) % 1.02(5) 1.62 1.56 1.41 Gross expenses prior to expense reimbursement(4) % 1.02 1.62 1.56 1.41 Net investment income (loss) after expense reimbursement(4) % 0.08(5) (1.49) (1.17) (0.81) Portfolio turnover rate % 32 473 217 326
- ---------- (1) Class I commenced offering of shares on March 31, 1997. (2) Class Q commenced offering of shares on June 1, 2000. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) Expenses calculated net of taxes and advisor reimbursement. (6) The Fund changed its fiscal year end to May 31. * Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 46 FINANCIAL HIGHLIGHTS ING LARGECAP GROWTH FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I CLASS Q ------- -------------------------------------------------------------------- PERIOD YEAR ELEVEN MONTHS YEAR THREE MONTHS YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, MARCH 31, 2002(7) 2002 2001(6) 2000 1999(2) 1999 1998(1) ------- ---- ------- ---- ------- ---- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 21.04 24.81 43.71 28.43 25.24 15.66 12.50 Income (loss) from investment operations: Net investment loss $ (0.02) (0.44) (0.17) (0.20) (0.03) (0.02) (0.01) Net realized and unrealized gain (loss) on investments $ (4.09) (7.44) (18.26) 15.86 3.22 9.87 3.26 Total from investment operations $ (4.11) (7.88) (18.43) 15.66 3.19 9.85 3.25 Less distributions from: Net investment income $ -- 0.01 -- -- -- -- 0.01 Net realized gains on investments $ -- -- 0.47 0.38 -- 0.27 0.08 Total distributions $ -- 0.01 0.47 0.38 -- 0.27 0.09 Net asset value, end of period $ 16.93 16.92 24.81 43.71 28.43 25.24 15.66 TOTAL RETURN(3): % (19.53) (31.77) (42.50) 55.57 12.64 63.76 62.47 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 26,106 16,840 12,534 24,838 6,044 4,908 799 Ratios to average net assets: Net expenses after expense reimbursement/ (recoupment)(4)(5) % 0.96 1.21 1.19 1.26 1.23 1.26 1.25 Gross expenses prior to expense reimbursement/(recoupment)(4) % 0.96 1.21 1.19 1.26 1.25 1.91 10.45 Net investment loss after expense reimbursement/(recoupment)(4)(5) % (0.43) (0.76) (0.50) (0.77) (0.36) (0.28) (0.62) Portfolio turnover rate % 536 536 331 139 27 253 306
- ---------- (1) The Fund commenced operations on July 21, 1997. (2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Investments, LLC within three years. (6) The Fund changed its fiscal year end to May 31. (7) Class I commenced offering of shares on January 8, 2002. See Accompanying Notes to Financial Statements 47 ING MIDCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I CLASS Q ------------------------------------------------ --------------------------------- YEAR FIVE MONTHS YEAR ENDED YEAR FIVE MONTHS PERIOD ENDED ENDED DECEMBER 31, ENDED ENDED ENDED MAY 31, MAY 31, -------------------------- MAY 31, MAY 31, DECEMBER 31, 2002 2001(6) 2000 1999 1998(1) 2002 2001(6) 2000(2) ---- ------- ---- ---- ------- ---- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.73 19.26 21.34 12.99 10.00 14.63 19.16 22.57 Income (loss) from investment operations: Net investment loss $ (0.11)* (0.06) (0.13) (0.15) (0.02) (0.17)* (0.08) (0.06) Net realized and unrealized gain (loss) on investments $ (3.33) (4.47) 0.23 12.09 3.01 (3.30) (4.45) (1.17) Total from investment operations $ (3.44) (4.53) 0.10 11.94 2.99 (3.47) (4.53) (1.23) Less distributions from: Net realized gains on investments $ -- -- 2.18 3.59 -- -- -- 2.18 Total distributions $ -- -- 2.18 3.59 -- -- -- 2.18 Net asset value, end of period $ 11.29 14.73 19.26 21.34 12.99 11.16 14.63 19.16 TOTAL RETURN(3): % (23.35) (23.52) 0.08 103.19 29.90 (23.72) (23.64) (5.86) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 39,874 52,007 68,006 67,954 33,441 6,563 3,071 3,264 Ratios to average net assets: Net expenses after expense reimbursement(4) % 1.26 1.52 1.36 1.41 1.50(5) 1.63 1.82 1.61 Gross expenses prior to expense reimbursement(4) % 1.50 1.52 1.36 1.41 2.01 1.69 1.82 1.61 Net investment loss after expense reimbursement(4) % (0.95) (0.97) (0.66) (1.04) (0.70)(5) (1.35) (1.28) (0.91) Portfolio turnover rate % 399 182 188 201 61 399 182 188
- ---------- (1) Fund commenced operations on August 20, 1998. (2) Class Q commenced offering of shares on April 4, 2000 (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) Expenses calculated net of taxes and advisor reimbursement. (6) The Fund changed its fiscal year end to May 31. * Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 48 FINANCIAL HIGHLIGHTS ING SMALLCAP OPPORTUNITIES FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I CLASS Q ------------------------------------------ ----------------------------------- YEAR FIVE MONTHS YEAR ENDED YEAR FIVE MONTHS PERIOD ENDED ENDED DECEMBER 31, ENDED ENDED ENDED MAY 31, MAY 31, ----------------- MAY 31, MAY 31, DECEMBER 31, 2002 2001(6) 2000 1999(1) 2002 2001(6) 2000(2) ---- ------- ---- ------- ---- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 39.02 47.47 59.54 31.78 38.81 47.20 60.86 Income (loss) from investment operations: Net investment loss $ (0.36)** (0.14) (1.00) (0.08) (0.51)** (0.20) (0.27) Net realized and unrealized gain (loss) on investments $ (13.60) (8.31) (2.17) 35.40 (13.24) (8.19) (4.49) Total from investment operations $ (13.96) (8.45) (3.17) 35.32 (13.75) (8.39) (4.76) Less distributions from: Net realized gains on investments $ 0.99 -- 8.90 7.56 0.99 -- 8.90 Total distributions $ 0.99 -- 8.90 7.56 0.99 -- 8.90 Net asset value, end of period $ 24.07 39.02 47.47 59.54 24.07 38.81 47.20 TOTAL RETURN(3) % (36.17) (17.80) (5.21) 126.05 (35.83) (17.78) (8.29) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 10,700 --* --* --* 3,651 2,832 2,545 Ratios to average net assets: Net expenses after expense reimbursement(4) % 1.41 1.31 1.15 0.47(5) 1.66 1.56 1.40 Gross expenses prior to expense reimbursement(4) % 1.41 1.31 1.15 0.47 1.66 1.56 1.40 Net investment loss after expense reimbursement(4) % (1.34) (1.03) (0.75) (0.35)(5) (1.62) (1.28) (1.10) Portfolio turnover rate % 423 104 134 223 423 104 134
- ---------- (1) Class I commenced offering of shares on April 1, 1999. (2) Class Q commenced offering of shares on April 4, 2000. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) Expenses calculated net of taxes and advisor reimbursement. (6) The Fund changed its fiscal year end to May 31. * Amount represents less than $1,000. ** Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 49 ING RESEARCH ENHANCED INDEX FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------- YEAR SEVEN MONTHS PERIOD ENDED ENDED YEAR ENDED ENDED MAY 31, MAY 31, OCT. 31, OCT. 31, 2002 2001(5) 2000 1999(1) ---- ------- ---- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.94 11.25 11.17 10.00 Income (loss) from investment operations: Net investment income $ 0.04 0.02 0.04 0.06 Net realized and unrealized gain (loss) on investments $ (1.46) (1.33) 0.19 1.11 Total from investment operations $ (1.42) (1.31) 0.23 1.17 Less distributions from: Net realized gains on investments $ -- -- 0.15 -- Total distributions $ -- -- 0.15 -- Net asset value, end of period $ 8.52 9.94 11.25 11.17 TOTAL RETURN(2) % (14.28) (11.64) 2.00 11.70 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 21,578 25,172 28,473 27,927 Ratios to average net assets: Net expenses after expense reimbursement(3) % 1.00 1.04 1.07 0.98(4) Gross expenses prior to expense reimbursement(3) % 1.00 1.04 1.07 1.23 Net investment income after expense reimbursement(3) % 0.46 0.27 0.34 0.62(4) Portfolio turnover rate % 149 26 57 26
- ---------- (1) The Fund commenced operations on December 30, 1998. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) Expenses calculated net of taxes and advisor reimbursement. (5) The Fund changed its fiscal year end to May 31. See Accompanying Notes to Financial Statements 50 FINANCIAL HIGHLIGHTS ING LARGE COMPANY VALUE FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period. CLASS Q ------------ PERIOD ENDED MAY 31, 2002(1) ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.53 Income from investment operations: Net investment income $ 0.07 Net realized and unrealized gain on investments $ 0.35 Total from investment operations $ 0.42 Less distributions from: Net realized gain on investments $ 0.29 Tax return of capital $ 0.04 Total distributions $ 0.33 Net asset value, end of period $ 14.62 TOTAL RETURN(2): % 2.80 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 20 Ratios to average net assets: Expenses(3) % 1.16 Net investment income(3) % 0.67 Portfolio turnover rate % 88 - ---------- (1) Class Q commenced offering of shares on October 4, 2001. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. See Accompanying Notes to Financial Statements 51 ING MAGNACAP FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS Q ---------------------------------------- YEAR ELEVEN MONTHS PERIOD ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, 2002 2001(4) 2000(1) ---- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.55 15.84 16.26 Income (loss) from investment operations: Net investment income $ 0.09 0.07 0.05 Net realized and unrealized loss on investments $ (1.52) (0.38) (0.47) Total from investment operations $ (1.43) (0.31) (0.42) Less distributions from: Net investment income $ 0.11 0.10 -- Net realized gains on investments $ 1.90 1.88 -- Total distributions $ 2.01 1.98 -- Net asset value, end of period $ 10.11 13.55 15.84 TOTAL RETURN(2): % (10.75) (2.60) (2.58) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 8,495 11,184 9,928 Ratios to average net assets: Expenses(3) % 1.12 1.11 1.24 Net investment income(3) % 0.81 0.53 0.46 Portfolio turnover rate % 75 92 26
- ---------- (1) Class Q commenced offering of shares on November 19, 1999. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Fund changed its fiscal year end to May 31. See Accompanying Notes to Financial Statements 52 FINANCIAL HIGHLIGHTS ING MIDCAP VALUE FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I CLASS Q ------- ------- PERIOD PERIOD ENDED ENDED MAY 31, MAY 31, 2002(1) 2002(2) ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.20 10.52 Income (loss) from investment operations: Net investment income $ 0.01 0.00* Net realized and unrealized gain (loss) on investments $ 0.09 (0.24) Total from investment operations $ 0.10 (0.24) Net asset value, end of period $ 10.30 10.28 TOTAL RETURN(3): % 0.98 (2.28) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 71 11 Ratios to average net assets: Net expenses after reimbursement (4)(5) % 1.24 1.52 Gross expenses prior to expense reimbursement(4) % 2.60 2.28 Net investment income after expense reimbursement(4)(5) % 0.38 0.43 Portfolio turnover rate % 13 13
- ---------- (1) Class I commenced offering of shares on March 4, 2002. (2) Class Q commenced offering of shares on April 17, 2002. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not anualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses subject to possible reimbursement to ING Investments, LLC within three years. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 53 ING SMALLCAP VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period
CLASS I CLASS Q ------- ------- PERIOD PERIOD ENDED ENDED MAY 31, MAY 31, 2002(1) 2002(2) ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.32 11.01 Income (loss) from investment operations: Net investment income $ 0.00* 0.00* Net realized and unrealized gain (loss) on investments $ 0.31 (0.38) Total from investment operations $ 0.31 (0.38) Net asset value, end of period $ 10.63 10.63 TOTAL RETURN(3): % 3.00 (3.45) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 26 8 Ratios to average net assets: Net expenses after reimbursement (4)(5) % 1.23 1.42 Gross expenses prior to expense reimbursement(4) % 2.78 2.42 Net investment income after expense reimbursement(4)(5) % 0.17 0.00 Portfolio turnover rate % 12 12
- ---------- (1) Class I commenced offering of shares on March 7, 2002. (2) Class Q commenced offering of shares on April 30, 2002. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not anualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses subject to possible reimbursement to ING Investments, LLC within three years. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 54 FINANCIAL HIGHLIGHTS ING CONVERTIBLE FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS Q -------------------------------------------------------------------- ELEVEN THREE YEAR MONTHS YEAR MONTHS ENDED ENDED ENDED ENDED YEAR ENDED MARCH 31, MAY 31, MAY 31, JUNE 30, JUNE 30, -------------------- 2002 2001(5) 2000 1999(1) 1999 1998 ---- ------- ---- ------- ---- ---- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 17.37 26.85 22.51 21.22 18.47 15.19 Income (loss) from investment operations: Net investment income $ 0.36 0.59 0.44 0.09 0.43 0.48 Net realized and unrealized gain (loss) on investments $ (2.28) (4.84) 7.82 1.31 3.09 4.19 Total from investment operations $ (1.92) (4.25) 8.26 1.40 3.52 4.67 Less distributions from: Net investment income $ 0.45 0.53 0.35 0.11 0.46 0.48 Net realized gains on investments $ 0.09 4.70 3.57 -- 0.31 0.91 Total distributions $ 0.54 5.23 3.92 0.11 0.77 1.39 Net asset value, end of period $ 14.91 17.37 26.85 22.51 21.22 18.47 TOTAL RETURN(2): % (11.12) (17.50) 40.36 6.62 19.66 31.54 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 8,626 29,629 56,165 17,537 8,741 7,080 Ratios to average net assets: Net expenses after expense reimbursement/ (recoupment)(3)(4) % 1.19 1.15 1.25 1.23 1.23 1.22 Gross expenses prior to expense reimbursement/ (recoupment)(3) % 1.19 1.14 1.25 1.23 1.35 2.35 Net investment income after expense reimbursement/(recoupment)(3)(4) % 2.23 2.47 1.88 2.04 2.37 5.99 Portfolio turnover rate % 100 145 129 28 138 160
- ---------- (1) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Investments, LLC within three years. (5) The Fund changed its fiscal year end to May 31. See Accompanying Notes to Financial Statements 55 ING EQUITY AND INCOME FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
CLASS Q ----------------------------------------------------- ELEVEN THREE YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED MARCH 31, MAY 31, MAY 31, JUNE 30, JUNE 30, ------------- 2002 2001(5) 2000 1999(1) 1999 1998 ---- ------- ---- ------- ---- ---- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.23 14.94 19.04 18.85 18.48 13.42 Income (loss) from investment operations: Net investment income $ 0.42 0.44 0.54 0.11 0.44 0.30 Net realized and unrealized gain (loss) on investments $ (1.15) (0.54) (0.57) 0.16 2.50 5.07 Total from investment operations $ (0.73) (0.10) (0.03) 0.27 2.94 5.37 Less distributions from: Net investment income $ 0.47 0.47 0.40 0.08 0.50 0.31 Net realized gains on investments $ 0.05 1.14 3.67 -- 2.07 -- Total distributions $ 0.52 1.61 4.07 0.08 2.57 0.31 Net asset value, end of period $ 11.98 13.23 14.94 19.04 18.85 18.48 TOTAL RETURN(2): % (5.53) (0.70) (0.60) 1.44 17.49 40.21 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 191 373 230 190 176 166 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.40 1.25 1.30 1.25 1.25 1.26 Gross expenses prior to expense reimbursement(3) % 1.40 1.46 1.51 1.51 1.63 11.28 Net investment income after expense reimbursement(3)(4) % 3.31 3.61 3.36 2.30 2.41 4.09 Portfolio turnover rate % 145 76 173 63 165 260
- ---------- (1) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund; concurrently, Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Investments, LLC within three years. (5) The Fund changed its fiscal year end to May 31. See Accompanying Notes to Financial Statements 56 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- NOTE 1 -- ORGANIZATION ORGANIZATION. The ING Funds are comprised of ING Mutual Funds ("IMF", formerly Pilgrim Mutual Funds), ING Investment Funds, Inc. ("IIF", formerly Pilgrim Investment Funds, Inc.), ING Large Company Value Fund, Inc. (formerly Pilgrim Growth and Income Fund, Inc.), ING Mayflower Trust ("IMT" formerly Pilgrim Mayflower Trust), ING Growth Opportunities Fund (formerly Pilgrim Growth Opportunities Fund), ING SmallCap Opportunities Fund (formerly Pilgrim SmallCap Opportunities) and ING Equity Trust ("IET" formerly Pilgrim Equity Trust), all of which are open-end investment management companies registered under the Investment Company Act of 1940, as amended. IMF is a Delaware business trust organized in 1992 with nine separate series (Portfolios). Three of the Portfolios in this report are: ING LargeCap Growth Fund ("LargeCap Growth" formerly Pilgrim LargeCap Growth Fund), ING Equity and Income Fund ("Equity and Income" formerly Pilgrim Balanced Fund) and ING Convertible Fund ("Convertible" formerly Pilgrim Convertible Fund). IIF is a Maryland Corporation organized in 1969 with one Portfolio, ING MagnaCap Fund ("MagnaCap" formerly Pilgrim MagnaCap Fund). ING Large Company Value Fund, Inc. ("Large Company Value"), is a Maryland corporation organized in 1969. IMT is a Massachusetts business trust organized in 1992 with three separate series (Portfolios). Two of the Portfolios in this report are: ING Growth + Value Fund ("Growth + Value" formerly Pilgrim Growth + Value Fund) and ING Research Enhanced Index Fund ("Research Enhanced Index" formerly Pilgrim Research Enhanced Index Fund). ING Growth Opportunities Fund ("Growth Opportunities") is a Massachusetts business trust organized in 1986. ING SmallCap Opportunities Fund ("SmallCap Opportunities") is a Massachusetts business trust organized in 1986. IET is a Massachusetts business trust organized in 1998 with seven separate series (Portfolios). Three of the Portfolios in this report are: ING MidCap Opportunities Fund ("MidCap Opportunities" formerly Pilgrim MidCap Opportunities Fund), ING MidCap Value Fund ("MidCap Value") and ING SmallCap Value Fund ("SmallCap Value"). The investment objective of each Fund is described in each Funds' prospectus. Each Fund offers at least four of the following classes of shares: Class A, Class B, Class C, Class I, Class M, Class Q and Class T. The separate classes of shares differ principally in the applicable sales charges (if any), distribution fees, shareholder servicing fees and transfer agency fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Fund and earn income from the portfolio pro rata based on the average daily net assets of each class, without distinction between share classes. Dividends are determined separately for each class based on income and expenses allocable to each class. Realized gains are allocated to each class pro rata based on the net assets of each class on the date of distribution. No class preferential dividend rights exist. Differences in per share dividend rates generally results from the relative weighting of pro rata income and realized gain allocations and from differences in separate class expenses, including distribution, and shareholder servicing fees. Class B shares, along with their pro rata reinvested dividend shares, automatically convert to Class A shares approximately eight years after purchase. Effective March 1, 2002, ING Pilgrim Investments, LLC, ING Pilgrim Securities, Inc. and ING Pilgrim Group, LLC changed their names to ING Investments, LLC, ING Funds Distributor, Inc. and ING Funds Services, LLC, respectively. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Funds in the preparation of their financial statements, and 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 or included on the NASDAQ National Market System are valued at the last reported sale price. Securities traded on an exchange or NASDAQ for which there has been no sale and securities traded in the over-the-counter-market are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by each Fund's 57 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- custodian. Debt securities are valued at bid prices obtained from independent services or from one or more dealers making markets in the securities. U.S. Government obligations are valued by using market quotations or independent pricing services which uses prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Securities for which market quotations are not readily available are valued at their respective fair values as determined in good faith and in accordance with policies set by the Board of Directors. Investments in securities maturing in less than 60 days are valued at amortized cost, which, when combined with accrued interest, approximates market value. Investments in mutual funds are valued at the closing Net Asset Value (NAV) per share. 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 delivered. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date, or for certain foreign securities, when the information becomes available to the funds. Premium amortization and discount accretion are determined by the effective yield method. C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Market value of investment securities, other assets and liabilities -- at the exchange rates prevailing at the end of the day. (2) Purchases and sales of investment securities, income and expenses -- at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Funds do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities which are subject to foreign withholding tax upon disposition, liabilities are recorded on the statement of assets and liabilities for the estimated tax withholding based on the securities current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and the U.S. Government. These risks include but are not limited to re-evaluation of currencies and future adverse political and economic developments which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and the U.S. Government. D. FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS. Certain funds may enter into foreign currency exchange transactions to convert to and from different foreign currencies and to and from the U.S. dollar in connection with the planned purchases or sales of securities. The Funds either enter into these transactions on a spot basis at the spot rate prevailing in the foreign currency exchange market or use forward foreign currency contracts to purchase or sell foreign currencies. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation. Risks may arise upon entering into forward contracts from the potential inability of counterparties to meet the terms of their forward contracts and 58 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. Each Fund may enter into futures contracts involving foreign currency, interest rates, securities and security indices, for hedging purposes only. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of foreign currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Fund is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Fund agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margins and are recorded as unrealized gains or losses by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. There were no open futures contracts at May 31, 2002. E. DISTRIBUTIONS TO SHAREHOLDERS. The Funds record distributions to their shareholders on ex-date. Each Fund pays dividends, if any, as follows: ANNUALLY SEMI-ANNUALLY QUARTERLY -------- ------------- --------- Growth + Value MagnaCap Convertible Growth Large Company Equity and Opportunities Value Income LargeCap Growth Midcap Opportunities SmallCap Opportunities Research Enhanced Index MidCap Value SmallCap Value Each Fund distributes capital gains, to the extent available, annually. F. FEDERAL INCOME TAXES. It is the policy of the Funds, to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of their net investment income and any net realized capital gains to their shareholders. Therefore, a federal income tax or excise tax provision is not required. In addition, by distributing during each calendar year substantially all of its net investment income and net realized capital gains, each Fund intends not to be subject to any federal excise tax. The Board of Directors intends to offset any net capital gains with any available capital loss carryforward until each carryforward has been fully utilized or expires. In addition, no capital gain distribution shall be made until the capital loss carryforward has been fully utilized or expires. G. USE OF ESTIMATES. Management of the Funds has made certain estimates and assumptions relating to the reporting of assets, liabilities, income, and expenses to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. H. REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System or with member banks of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase 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 Fund will always receive as collateral securities acceptable to it whose market value is equal to at least 100% of the carrying amount of the repurchase agreements, plus accrued interest, being invested by the Fund. The underlying collateral is valued daily on a mark to market basis to assure that the value, including accrued interest is at least equal to the repurchase price. If the seller defaults, a Fund might incur a loss or delay in the realization of proceeds if the value of the collateral securing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. 59 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- I. SECURITIES LENDING. Each Fund had the option to temporarily loan 331|M/3% of its total assets to brokers, dealers or other financial institutions in exchange for a negotiated lender's fee. The borrower is required to fully collateralize the loans with cash, letters of credit or U.S. Government securities. NOTE 3 -- INVESTMENT TRANSACTIONS For the year ended May 31, 2002, the cost of purchases and proceeds from the sales of securities, excluding short-term securities, were as follows: PURCHASES SALES -------------- -------------- Growth+ Value $1,219,430,103 $1,317,063,006 Growth Opportunities 1,784,790,954 1,881,000,154 LargeCap Growth 2,041,283,397 2,098,162,438 MidCap Opportunities 435,017,860 454,346,810 SmallCap Opportunities 1,766,020,861 1,610,083,851 Research Enhanced Index 217,386,534 254,786,529 Large Company Value 157,743,767 183,851,551 MagnaCap 247,493,022 319,587,203 MidCap Value 46,797,056 3,108,034 SmallCap Value 31,774,545 1,997,502 Convertible 268,112,960 367,668,260 Equity and Income 164,146,056 160,369,003 NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES Each of the Funds has entered into an Investment Management Agreement with ING Investments, LLC. (the "Manager") (formerly ING Pilgrim Investments, LLC), a wholly-owned subsidiary of ING Groep N.V. The investment management agreements compensate the Manager with a fee, computed daily and payable monthly, based on the average daily net assets of each Fund, at the following annual rates: AS A PERCENT OF AVERAGE NET ASSETS ---------------------------------- Growth+ Value 1.00% Growth Opportunities 0.95% LargeCap Growth 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in excess of $1 billion MidCap Opportunities 1.00% SmallCap Opportunities 1.00% Research Enhanced Index 0.70% Large Company Value 0.75% on first $100 million; 0.60% on next $50 million; 0.50% on next $100 million; and 0.40% in excess of $250 million MagnaCap 1.00% on first $30 million; 0.75% on next $220 million; 0.625% on next $250 million; and 0.50% in excess of $500 million MidCap Value 1.00% SmallCap Value 1.00% Convertible 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in excess of $1 billion Equity and Income 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in excess of $1 billion Navellier Fund Management, Inc. ("Navellier"), a registered investment advisor, serves as subadvisor to the Growth + Value Fund pursuant to a Subadvisory Agreement, dated July 31, 1996 and amended and restated on July 1, 1998, between the Manager and Navellier. Aeltus Investment Management, Inc. ("Aeltus"), a registered investment advisor, serves as subadvisor to the Research Enhanced Index Fund pursuant to a Subadvisory Agreement, dated August 7, 2001, between the Manager and Aeltus. Prior to August 1, 2001, J.P. Morgan Investment Management, Inc. served as subadvisor to the Fund. Brandes Investment Partners, LP ("Brandes"), a registered investment advisor, serves as subadvisor to the MidCap Value and SmallCap Value Funds pursuant to a Subadvisory Agreement, dated January 30, 2002, between the Manager and Brandes. ING Funds Services, LLC (the "Administrator" or "IFS") (formerly ING Pilgrim Group, LLC), serves as administrator to each Fund except MagnaCap. The Funds pay the Administrator a fee calculated at an annual rate of 0.10% of each Funds' average daily net assets. MagnaCap has entered into a Service Agreement with IFS whereby IFS will act as Shareholder Service Agent for the Fund. The agreement provides that IFS will be compensated for incoming and outgoing shareholder telephone calls and letters, and all reasonable out-of-pocket expenses incurred in connection with the performance of such services. Prior to March 1, 2002, IFS acted as Shareholder Service Agent for LargeCap Growth, Convertible and Equity and Income. Growth + Value, Growth Opportunities, MidCap Opportunities, SmallCap Opportunities and Research Enhanced Index also pay IFS an annual shareholder account servicing fee of $5.00, payable semi-annually, for each account of beneficial owners of shares. NOTE 5 -- DISTRIBUTION AND SERVICE FEES Each share class of the Funds (except as noted below) has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING Funds Distributor, Inc. (the "Distributor") (formerly ING Pilgrim Securities, Inc.) is reimbursed or compensated (depending on the class of shares) by the Funds for expenses incurred in the distribution of each Fund's shares ("Distribution Fees"). Pursuant 60 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- to the 12b-1 Plans, the Distributor is entitled to a payment each month to reimburse or compensate expenses incurred in the distribution and promotion of each Fund's shares, including expenses incurred in printing prospectuses and reports used for sales purposes, expenses incurred in preparing and printing sales literature and other such distribution related expenses, including any distribution or shareholder servicing fees ("Service Fees") paid to securities dealers who have executed a distribution agreement with the Distributor. Under the 12b-1 Plans, each class of shares of the Fund pays the Distributor a combined Distribution and Service Fee based on average daily net assets at the following rates:
CLASS A CLASS B CLASS C CLASS I CLASS M CLASS Q CLASS T ------- ------- ------- ------- ------- ------- ------- Growth + Value 0.30 1.00 1.00% N/A N/A 0.25% N/A Growth Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95 LargeCap Growth 0.35 1.00 1.00 N/A N/A 0.25 N/A MidCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 N/A SmallCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95 Research Enhanced Index 0.30 1.00 1.00 N/A N/A 0.25 N/A Large Company Value 0.25 1.00 1.00 N/A N/A 0.25 N/A MagnaCap 0.30 1.00 1.00 N/A 0.75 0.25 N/A MidCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A SmallCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A Convertible 0.35 1.00 1.00 N/A N/A 0.25 N/A Equity and Income 0.35 1.00 1.00 N/A N/A 0.25 0.75
For the year ended May 31, 2002, the Distributor has retained $159,382 as sales charges from the proceeds of Class A Shares sold, $183,263 from the proceeds of Class C Shares redeemed, and $1,141 from the proceeds of Class M Shares sold. NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES At May 31, 2002, the Funds had the following amounts recorded in payable to affiliates on the accompanying Statements of Assets and Liabilities (see Notes 4, 5 and 7):
ACCRUED ACCRUED SHAREHOLDER INVESTMENT ACCRUED SERVICES AND RECOUPMENT MANAGEMENT ADMINISTRATIVE DISTRIBUTION OF WAIVED FEES FEES FEES FEES TOTAL ---- ---- ---- ---- ----- Growth + Value $336,598 $107,539 $279,717 $ -- $723,854 Growth Opportunities 244,686 82,536 153,048 -- 480,270 LargeCap Growth 184,561 27,714 174,813 387,088 MidCap Opportunities 164,542 33,643 105,581 -- 303,766 SmallCap Opportunities 355,307 90,993 246,585 -- 692,885 Research Enhanced Index 74,083 20,524 81,245 -- 175,852 Large Company Value 103,518 15,601 43,244 -- 162,363 MagnaCap 206,669 12,345 142,110 -- 361,124 MidCap Value 35,167 3,517 20,797 -- 59,481 SmallCap Value 24,636 2,464 15,074 -- 42,174 Convertible 155,108 21,912 166,756 -- 343,776 Equity and Income 71,943 9,592 63,012 43,427 187,974
NOTE 7 -- EXPENSE LIMITATIONS For the following Funds, the Manager has voluntarily agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the levels listed below:
CLASS A CLASS B CLASS C CLASS I CLASS Q CLASS T ------- ------- ------- ------- ------- ------- LargeCap Growth(1) 1.60% 2.25% 2.25% N/A 1.50% N/A MidCap Opportunities(2) 1.50 2.20 2.20 1.20% 1.35 N/A Large Company Value 2.75 3.50 3.50 N/A 2.75 N/A MidCap Value 1.75 2.50 2.50 1.50 1.75 N/A SmallCap Value 1.75 2.50 2.50 1.50 1.75 N/A Convertible(1) 1.60 2.25 2.25 N/A 1.50 N/A Equity and Income(1)(3) 1.60 2.25 2.25 N/A 1.50 2.00%
(1) Prior to November 1, 2001, the expense limitation rate for Class Q was 1.25%. (2) Prior to January 1, 2002, there was no expense limitation for the Fund. (3) Prior to November 1, 2001, the expense limitation rate for Class T was 1.75%. 61 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Each Fund will at a later date reimburse the Manager for expenses waived during the previous 36 months, but only if, after such reimbursement, the Fund's expense ratio does not exceed the percentage described above. Waived and reimbursed fees and any recoupment by the Manager of such waived and reimbursed fees are reflected on the accompanying Statements of Operations for each Fund. As of May 31, 2002, the cumulative amounts of reimbursed fees that are subject to possible recoupment by the Manager are as follows: MidCap Opportunities $233,782 MidCap Value 106,622 SmallCap Value 101,648 Equity and Income 406,647 NOTE 8 -- LINE OF CREDIT All of the Funds included in this report, in addition to certain other funds managed by the Adviser, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement") with State Street Bank and Trust Company for an aggregate amount of $125,000,000. The proceeds may be used only to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the Funds; and (3) enable the Funds to meet other emergency expenses as defined in the Credit Agreement. The Funds to which the line of credit is available pay a commitment fee equal to 0.08% per annum on the daily unused portion of the committed line amount payable quarterly in arrears. During the year ended May 31, 2002, the Funds did not have any loans outstanding under the line of credit. 62 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- NOTE 9 -- CAPITAL SHARES Transactions in capital shares and dollars were as follows:
CLASS A SHARES CLASS B SHARES ----------------------------------------------- ----------------------------------------------- YEAR SEVEN MONTHS YEAR YEAR SEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, OCT. 31, MAY 31, MAY 31, OCT. 31, 2002 2001 2000 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- ING GROWTH + VALUE (NUMBER OF SHARES) Shares sold 7,573,521 6,573,538 11,866,737 1,829,213 5,608,121 11,175,519 Shares issued as reinvestment of dividends -- 891,094 380,695 -- 1,515,476 806,730 Shares redeemed (10,051,567) (6,441,138) (6,015,701) (6,707,089) (3,701,720) (2,742,651) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (2,478,046) 1,023,494 6,231,731 (4,877,876) 3,421,877 9,239,598 ============= ============= ============= ============= ============= ============= ING GROWTH + VALUE ($) Shares sold $ 83,819,458 $ 111,564,124 $ 303,851,859 $ 20,197,659 $ 93,178,069 $ 278,695,932 Shares issued as reinvestment of dividends -- 17,584,472 8,366,591 -- 28,929,059 17,285,755 Shares redeemed (111,034,969) (103,349,835) (151,084,341) (71,726,807) (53,957,953) (67,678,591) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (27,215,511) $ 25,798,761 $ 161,134,109 $ (51,529,148) $ 68,149,175 $ 228,303,096 ============= ============= ============= ============= ============= ============= CLASS C SHARES CLASS Q SHARES ----------------------------------------------- ----------------------------------------------- YEAR SEVEN MONTHS YEAR YEAR SEVEN MONTHS PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, OCT. 31, MAY 31, MAY 31, OCT. 31, 2002 2001 2000 2002 2001 2000 (1) ------------- ------------- ------------- ------------- ------------- ------------- ING GROWTH + VALUE (NUMBER OF SHARES) Shares sold 1,324,639 3,982,395 8,365,370 27,404 8,425 54,841 Shares issued as reinvestment of dividends -- 827,517 302,389 -- 5,569 -- Shares redeemed (4,731,745) (2,713,026) (1,424,913) (19,970) (35,320) (770) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (3,407,106) 2,096,886 7,242,846 7,434 (21,326) 54,071 ============= ============= ============= ============= ============= ============= ING GROWTH + VALUE ($) Shares sold $ 14,652,114 $ 66,299,168 $ 211,475,739 $ 312,909 $ 167,062 $ 1,439,870 Shares issued as reinvestment of dividends -- 15,788,143 6,478,206 -- 109,933 -- Shares redeemed (50,714,645) (41,360,170) (34,857,895) (235,075) (585,774) (17,643) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (36,062,531) $ 40,727,141 $ 183,096,050 $ 77,834 $ (308,779) $ 1,422,227 ============= ============= ============= ============= ============= =============
- ---------- (1) Commenced offering of shares on June 5, 2000 63 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES ----------------------------------------------- ----------------------------------------------- YEAR FIVE MONTHS YEAR YEAR FIVE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, MAY 31, DEC. 31, 2002 2001 2000 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- ING GROWTH OPPORTUNITIES (NUMBER OF SHARES) Shares sold 2,688,274 2,281,701 9,073,117 599,172 953,281 7,518,752 Shares issued as reinvestment of dividends -- -- 340,940 -- -- 313,178 Shares redeemed (4,465,341) (1,877,278) (4,350,033) (2,729,664) (1,044,539) (1,307,372) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (1,777,067) 404,423 5,064,024 (2,130,492) (91,258) 6,524,558 ============= ============= ============= ============= ============= ============= ING GROWTH OPPORTUNITIES ($) Shares sold $ 40,004,026 $ 48,811,178 $ 302,644,101 $ 8,476,731 $ 19,318,917 $ 239,059,218 Shares issued as reinvestment of dividends -- -- 9,343,843 -- 8,129,351 Shares redeemed (64,658,384) (37,623,802) (138,551,847) (37,036,999) (19,637,536) (38,068,877) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (24,654,358) $ 11,187,376 $ 173,436,097 $ (28,560,268) $ (318,619) $ 209,119,692 ============= ============= ============= ============= ============= ============= CLASS C SHARES CLASS T SHARES ----------------------------------------------- ----------------------------------------------- YEAR FIVE MONTHS YEAR YEAR FIVE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, MAY 31, DEC. 31, 2002 2001 2000 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- ING GROWTH OPPORTUNITIES (NUMBER OF SHARES) Shares sold 580,309 775,265 5,330,125 1,728 3,661 37,238 Shares issued as reinvestment of dividends -- -- 167,384 -- -- 103,870 Shares redeemed (2,210,476) (869,143) (756,091) (627,535) (310,534) (785,108) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (1,630,167) (93,878) 4,741,418 (625,807) (306,873) (644,000) ============= ============= ============= ============= ============= ============= ING GROWTH OPPORTUNITIES ($) Shares sold $ 8,201,102 $ 15,469,116 $ 169,365,141 $ 21,321 $ 96,693 $ 1,235,846 Shares issued as reinvestment of dividends -- -- 4,361,451 -- -- 2,718,440 Shares redeemed (29,810,181) (16,496,360) (21,462,799) (8,967,880) (6,071,229) (24,995,887) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (21,609,079) $ (1,027,244) $ 152,263,793 $ (8,946,559) $ (5,974,536) $ (21,041,601) ============= ============= ============= ============= ============= ============= CLASS I SHARES CLASS Q SHARES ----------------------------------------------- ----------------------------------------------- YEAR FIVE MONTHS YEAR YEAR FIVE MONTHS PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, MAY 31, DEC. 31, 2002 2001 2000 2002 2001 2000(1) ------------- ------------- ------------- ------------- ------------- ------------- ING GROWTH OPPORTUNITIES (NUMBER OF SHARES) Shares sold 792 -- 258 55,711 66,494 452,836 Shares issued as reinvestment of dividends -- -- 208,890 -- -- 20,223 Shares redeemed (1,013) (442) (154) (479,835) (44,793) (69,879) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (221) (442) 208,994 (424,124) 21,701 403,180 ============= ============= ============= ============= ============= ============= ING GROWTH OPPORTUNITIES ($) Shares sold $ 13,222 $ -- $ 12,307 $ 867,826 $ 1,352,433 $ 14,307,198 Shares issued as reinvestment of dividends -- -- 5,853,263 -- -- 554,300 Shares redeemed (14,464) (8,973) (5,261) (7,238,101) (915,191) (2,143,870) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (1,242) $ (8,973) $ 5,860,309 $ (6,370,275) $ 437,242 $ 12,717,628 ============= ============= ============= ============= ============= =============
- ---------- (1) Commenced offering of shares on June 1, 2000 64 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES ----------------------------------------------- ----------------------------------------------- YEAR ELEVEN MONTHS YEAR YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, MAY 31, MAY 31, JUNE 30, 2002 2001 2000 2002 2001 2000(1) ------------- ------------- ------------- ------------- ------------- ------------- ING LARGECAP GROWTH (NUMBER OF SHARES) Shares sold 2,658,138 3,579,855 4,427,459 855,661 2,915,079 6,775,370 Shares issued in merger -- 2,888,990 -- -- 652,330 -- Shares issued as reinvestment of dividends 939 47,176 21,754 124 61,221 38,999 Shares redeemed (5,335,128) (4,203,463) (1,201,487) (2,997,437) (2,085,769) (796,940) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (2,676,051) 2,312,558 3,247,726 (2,141,652) 1,542,861 6,017,429 ============= ============= ============= ============= ============= ============= ING LARGECAP GROWTH ($) Shares sold $ 52,212,562 $ 121,958,781 $ 159,716,404 $ 16,971,200 $ 102,214,098 $ 236,388,229 Shares issued in merger -- 77,301,925 -- -- 17,296,035 -- Shares issued as reinvestment of dividends 18,730 1,672,391 708,311 3,107 2,155,612 1,276,968 Shares redeemed (103,167,640) (122,216,465) (45,373,374) (56,761,530) (64,408,711) (30,088,529) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (50,936,348) $ 78,716,632 $ 115,051,341 $ (39,787,223) $ 57,257,034 $ 207,576,668 ============= ============= ============= ============= ============= ============= CLASS C SHARES ------------------------------------------------ YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, 2002 2001 2000 ------------- ------------- ------------- ING LARGECAP GROWTH (NUMBER OF SHARES) Shares sold 639,475 1,965,952 3,308,222 Shares issued in merger -- 594,903 -- Shares issued as reinvestment of dividends 51 28,660 13,490 Shares redeemed (2,184,382) (1,284,529) (388,728) ------------- ------------- ------------- Net increase (decrease) in shares outstanding (1,544,856) 1,304,986 2,932,984 ============= ============= ============= ING LARGECAP GROWTH ($) Shares sold $ 12,898,628 $ 69,760,356 $ 120,907,907 Shares issued in merger -- 15,730,119 -- Shares issued as reinvestment of dividends 901 1,004,118 443,449 Shares redeemed (41,155,563) (39,024,155) (15,356,494) ------------- ------------- ------------- Net increase (decrease) $ (28,256,034) $ 47,470,438 $ 105,994,862 ============= ============= ============= CLASS I SHARES CLASS Q SHARES ------------ -------------------------------------------- PERIOD YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, 2002(1) 2002 2001 2000 ------------ ------------ ------------ ------------ ING LARGECAP GROWTH (NUMBER OF SHARES) Shares sold 1,838,570 2,029,559 381,911 424,166 Shares issued in merger -- -- 2,399 -- Shares issued as reinvestment of dividends -- 404 6,871 2,730 Shares redeemed (296,694) (1,540,016) (454,258) (71,210) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 1,541,876 489,947 (63,077) 355,686 ============ ============ ============ ============ ING LARGECAP GROWTH ($) Shares sold $ 36,212,393 $ 44,230,203 $ 11,187,731 $ 15,522,480 Shares issued in merger -- -- 65,081 -- Shares issued as reinvestment of dividends -- 8,201 247,005 93,151 Shares redeemed (5,342,391) (30,239,081) (13,078,822) (2,818,083) ------------ ------------ ------------ ------------ Net increase (decrease) $ 30,870,002 $ 13,999,323 $ (1,579,005) $ 12,797,548 ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on January 8, 2002. 65 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES -------------------------------------------- -------------------------------------------- YEAR FIVE MONTHS YEAR YEAR FIVE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, MAY 31, DEC. 31, 2002 2001 2000 2002 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ ING MIDCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold 1,348,381 271,311 1,539,052 360,114 188,773 1,564,330 Shares issued in merger 5,001,056 1,712,771 -- 4,822,131 190,728 -- Shares issued as reinvestment of dividends -- 91,879 -- 104,104 Shares redeemed (1,883,562) (1,666,345) (579,993) (741,630) (281,653) (167,531) ------------ ------------ ------------ ------------ ------------ ------------ Net increase in shares outstanding 4,465,875 317,737 1,050,938 4,440,615 97,848 1,500,903 ============ ============ ============ ============ ============ ============ ING MIDCAP OPPORTUNITIES ($) Shares sold $ 15,945,265 $ 4,156,261 $ 35,460,776 $ 4,209,707 $ 2,917,853 $ 35,935,995 Shares issued in merger 57,460,972 26,643,510 -- 54,010,417 2,913,949 -- Shares issued as reinvestment of dividends -- -- 1,828,926 -- -- 2,039,665 Shares redeemed (21,781,921) (23,089,620) (12,947,201) (8,323,034) (4,168,040) (3,675,916) ------------ ------------ ------------ ------------ ------------ ------------ Net increase $ 51,624,316 $ 7,710,151 $ 24,342,501 $ 49,897,090 $ 1,663,762 $ 34,299,744 ============ ============ ============ ============ ============ ============ CLASS C SHARES CLASS I SHARES -------------------------------------------- -------------------------------------------- YEAR FIVE MONTHS YEAR YEAR FIVE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, MAY 31, DEC. 31, 2002 2001 2000 2002 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ ING MIDCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold 171,335 96,579 1,317,500 431 -- -- Shares issued in merger 8,539,378 84,547 -- -- -- -- Shares issued as reinvestment of dividends -- -- 73,211 -- -- 346,770 Shares redeemed (673,551) (239,763) (221,802) -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 8,037,162 (58,637) 1,168,909 431 -- 346,770 ============ ============ ============ ============ ============ ============ ING MIDCAP OPPORTUNITIES ($) Shares sold $ 1,957,505 $ 1,510,855 $ 30,373,920 $ 5,008 $ 663 $ -- Shares issued in merger 95,170,477 1,286,435 -- -- -- -- Shares issued as reinvestment of dividends -- 1,427,606 -- -- 6,945,794 Shares redeemed (7,569,185) (3,570,512) (4,645,276) -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ 89,558,797 $ (773,222) $ 27,156,250 $ 5,008 $ 663 $ 6,945,794 ============ ============ ============ ============ ============ ============ CLASS Q SHARES -------------------------------------------- YEAR FIVE MONTHS PERIOD ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, 2002 2001 2000(1) ------------ ------------ ------------ ING MIDCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold 91,512 80,120 204,027 Shares issued in merger 981,467 -- -- Shares issued as reinvestment of dividends -- -- 15,211 Shares redeemed (694,816) (40,530) (48,927) ------------ ------------ ------------ Net increase in shares outstanding 378,163 39,590 170,311 ============ ============ ============ ING MIDCAP OPPORTUNITIES ($) Shares sold $ 1,112,443 $ 1,217,717 $ 4,633,519 Shares issued in merger 11,326,837 -- -- Shares issued as reinvestment of dividends -- -- 302,995 Shares redeemed (8,237,829) (631,571) (1,033,465) ------------ ------------ ------------ Net increase $ 4,201,451 $ 586,146 $ 3,903,049 ============ ============ ============
- ---------- (1) Commenced offering of shares on March 1, 2000 66 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES ----------------------------------------------- ----------------------------------------------- YEAR FIVE MONTHS YEAR YEAR FIVE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, MAY 31, DEC. 31, 2002 2001 2000 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- ING SMALLCAP OPPORTUNITES (NUMBER OF SHARES) Shares sold 4,108,446 805,278 4,441,888 636,080 127,540 1,707,949 Shares issued in merger 2,414,351 634,284 -- 1,849,518 93,498 -- Shares issued as reinvestment of dividends 125,361 -- 466,417 137,050 -- 683,360 Shares redeemed (3,119,480) (1,081,378) (3,228,805) (1,386,958) (533,148) (1,063,776) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 3,528,678 358,184 1,679,500 1,235,690 (312,110) 1,327,533 ============= ============= ============= ============= ============= ============= ING SMALLCAP OPPORTUNITES($) Shares sold $ 120,715,302 $ 31,370,059 $ 289,038,217 $ 17,982,622 $ 4,753,320 $ 106,992,786 Shares issued in merger 61,806,247 24,496,877 -- 44,285,046 3,413,381 -- Shares issued as reinvestment of dividends 3,576,353 -- 22,787,725 3,669,830 -- 31,619,407 Shares redeemed (90,422,365) (38,841,872) (204,676,330) (37,810,172) (19,107,874) (61,751,282) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ 95,675,537 $ 17,025,064 $ 107,149,612 $ 28,127,326 $ (10,941,173) $ 76,860,911 ============= ============= ============= ============= ============= ============= CLASS C SHARES CLASS T SHARES ----------------------------------------------- ----------------------------------------------- YEAR FIVE MONTHS YEAR YEAR FIVE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, MAY 31, DEC. 31, 2002 2001 2000 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- ING SMALLCAP OPPORTUNITES (NUMBER OF SHARES) Shares sold 508,063 65,064 1,356,512 334 235 9,929 Shares issued in merger 3,423,776 44,557 -- -- -- -- Shares issued as reinvestment of dividends 46,233 -- 237,876 11,694 -- 81,043 Shares redeemed (805,214) (292,981) (531,379) (238,967) (78,959) (156,635) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 3,172,858 (183,360) 1,063,009 (226,939) (78,724) (65,663) ============= ============= ============= ============= ============= ============= ING SMALLCAP OPPORTUNITES($) Shares sold $ 14,450,521 $ 2,418,338 $ 87,619,842 $ 8,901 $ 8,792 $ 642,005 Shares issued in merger 81,805,796 1,623,093 -- -- -- -- Shares issued as reinvestment of dividends 1,235,346 -- 10,986,485 316,205 -- 3,780,127 Shares redeemed (21,787,806) (10,518,379) (29,398,162) (6,826,551) (2,874,330) (9,395,885) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ 75,703,857 $ (6,476,948) $ 69,208,165 $ (6,501,445) $ (2,865,538) $ (4,973,753) ============= ============= ============= ============= ============= ============= CLASS I SHARES CLASS Q SHARES ----------------------------------------------- ----------------------------------------------- YEAR FIVE MONTHS YEAR YEAR FIVE MONTHS PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, MAY 31, DEC. 31, 2002 2001 2000 2002 2001 2000(1) ------------- ------------- ------------- ------------- ------------- ------------- ING SMALLCAP OPPORTUNITES (NUMBER OF SHARES) Shares sold 518,042 -- -- 21,261 29,782 66,690 Shares issued in merger -- -- -- 159,919 -- -- Shares issued as reinvestment of dividends -- -- 1 2,615 -- 8,491 Shares redeemed (73,562) -- -- (105,090) (10,751) (21,253) ------------- ------------- ------------- ------------- ------------- ------------- Net increase in shares outstanding 444,480 -- 1 78,705 19,031 53,928 ============= ============= ============= ============= ============= ============= ING SMALLCAP OPPORTUNITES($) Shares sold $ 15,648,216 $ -- $ -- $ 708,356 $ 1,134,714 $ 3,920,299 Shares issued in merger -- -- -- 4,098,445 -- -- Shares issued as reinvestment of dividends 5 -- 39 74,783 -- 414,124 Shares redeemed (1,925,564) -- -- (3,230,766) (414,435) (1,119,892) ------------- ------------- ------------- ------------- ------------- ------------- Net increase $ 13,722,657 $ -- $ 39 $ 1,650,818 $ 720,279 $ 3,214,531 ============= ============= ============= ============= ============= =============
- ---------- (1) Commenced offering of shares on April 4, 2000 67 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES -------------------------------------------- -------------------------------------------- YEAR SEVEN MONTHS YEAR YEAR SEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, OCT. 31, MAY 31, MAY 31, OCT. 31, 2002 2001 2000 2002 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ ING RESEARCH ENHANCED INDEX (NUMBER OF SHARES) Shares sold 332,209 370,903 905,210 653,975 687,827 2,050,650 Shares issued as reinvestment of dividends -- -- 14,197 -- -- 52,910 Shares redeemed (451,951) (1,189,056) (1,242,238) (2,101,755) (1,293,360) (2,542,262) ------------ ------------ ------------ ------------ ------------ ------------ Net decrease in shares outstanding (119,742) (818,153) (322,831) (1,447,780) (605,533) (438,702) ============ ============ ============ ============ ============ ============ ING RESEARCH ENHANCED INDEX ($) Shares sold $ 2,956,464 $ 3,773,518 $ 10,303,882 $ 5,692,149 $ 7,017,926 $ 23,253,462 Shares issued as reinvestment of dividends -- -- 165,396 -- -- 612,733 Shares redeemed (4,015,022) (12,089,290) (14,134,442) (18,419,336) (12,699,740) (28,592,017) ------------ ------------ ------------ ------------ ------------ ------------ Net decrease $ (1,058,558) $ (8,315,772) $ (3,665,164) $(12,727,187) $ (5,681,814) $ (4,725,822) ============ ============ ============ ============ ============ ============ CLASS C SHARES CLASS I SHARES -------------------------------------------- -------------------------------------------- YEAR SEVEN MONTHS YEAR YEAR SEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, OCT. 31, MAY 31, MAY 31, OCT. 31, 2002 2001 2000 2002 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ ING RESEARCH ENHANCED INDEX (NUMBER OF SHARES) Shares sold 478,885 1,081,677 3,232,804 3 -- -- Shares issued as reinvestment of dividends -- -- 64,089 -- -- 31,779 Shares redeemed (2,874,370) (2,260,540) (2,138,973) -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (2,395,485) (1,178,863) 1,157,920 3 -- 31,779 ============ ============ ============ ============ ============ ============ ING RESEARCH ENHANCED INDEX ($) Shares sold $ 4,203,945 $ 11,050,075 $ 36,538,030 $ 25 $ -- $ -- Shares issued as reinvestment of dividends -- -- 751,195 -- -- 371,501 Shares redeemed (25,015,303) (22,266,858) (23,939,384) -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(20,811,358) $(11,216,783) $ 13,349,841 $ 25 $ -- $ 371,501 ============ ============ ============ ============ ============ ============ CLASS Q SHARES -------------------------------------------- YEAR SEVEN MONTHS YEAR ENDED ENDED ENDED MAY 31, MAY 31, OCT. 31, 2002 2001 2000 ------------ ------------ ------------ ING RESEARCH ENHANCED INDEX (NUMBER OF SHARES) Shares sold 30,192 30,835 33,521 Shares issued as reinvestment of dividends -- -- -- Shares redeemed (76,493) (8,978) (9,077) ------------ ------------ ------------ Net increase (decrease) in shares outstanding (46,301) 21,857 24,444 ============ ============ ============ ING RESEARCH ENHANCED INDEX ($) Shares sold $ 274,465 $ 303,187 $ 379,475 Shares issued as reinvestment of dividends -- -- -- Shares redeemed (702,790) (91,176) (100,500) ------------ ------------ ------------ Net increase (decrease) $ (428,325) $ 212,011 $ 278,975 ============ ============ ============
68 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES -------------------------------------------- -------------------------------------------- YEAR FIVE MONTHS YEAR YEAR FIVE MONTHS PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, MAY 31, OCT. 31, 2002 2001 2000 2002 2001 2000(1) ------------ ------------ ------------ ------------ ------------ ------------ ING LARGE COMPANY VALUE (NUMBER OF SHARES) Shares sold 1,373,253 412,848 1,928,901 121,663 33,068 38,995 Shares issued in merger -- 1,556,404 -- -- 232,380 -- Shares issued as reinvestment of dividends 233,778 -- 1,846,883 5,594 -- 956 Shares redeemed (2,149,663) (2,085,326) (2,607,578) (99,057) (18,616) (43) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (542,632) (116,074) 1,168,206 28,200 246,832 39,908 ============ ============ ============ ============ ============ ============ ING LARGE COMPANY VALUE ($) Shares sold $ 20,940,770 $ 6,956,290 $ 43,182,596 $ 1,825,895 $ 563,268 $ 747,146 Shares issued in merger 26,816,325 -- -- 3,999,448 -- Shares issued as reinvestment of dividends 3,503,302 -- 35,712,783 83,179 -- 18,030 Shares redeemed (32,730,767) (33,932,210) (58,679,502) (1,527,433) (308,462) (825) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ (8,286,695) $ (159,595) $ 20,215,877 $ 381,641 $ 4,254,254 $ 764,351 ============ ============ ============ ============ ============ ============ CLASS C SHARES CLASS Q SHARES -------------------------------------------- ------------ YEAR FIVE MONTHS PERIOD PERIOD ENDED ENDED ENDED ENDED MAY 31, MAY 31, DEC. 31, MAY 31, 2002 2001 2000(2) 2002(3) ------------ ------------ ------------ ------------ ING LARGE COMPANY VALUE (NUMBER OF SHARES) Shares sold 64,684 127,519 9,353 1,337 Shares issued in merger -- 84,879 -- -- Shares issued as reinvestment of dividends 2,645 -- 546 -- Shares redeemed (139,077) (18,121) (1,034) -- ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (71,748) 194,277 8,865 1,337 ============ ============ ============ ============ ING LARGE COMPANY VALUE ($) Shares sold $ 986,051 $ 2,243,288 $ 183,993 $ 19,389 Shares issued in merger -- 1,456,630 -- -- Shares issued as reinvestment of dividends 39,228 -- 10,308 -- Shares redeemed (2,222,672) (304,015) (18,024) -- ------------ ------------ ------------ ------------ Net increase (decrease) $ (1,197,393) $ 3,395,903 $ 176,277 $ 19,389 ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on August 22, 2000 (2) Commenced offering of shares on September 26, 2000 (3) Commenced offering of shares on October 4, 2001 69 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES ----------------------------------------------- ----------------------------------------------- YEAR ELEVEN MONTHS YEAR YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, MAY 31, MAY 31, JUNE 30, 2002 2001 2000 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- ING MAGNACAP (NUMBER OF SHARES) Shares sold 2,200,329 911,087 8,302,663 1,165,942 1,079,075 1,126,639 Shares issued in merger -- 1,823,060 -- -- 2,675,379 -- Shares issued as reinvestment of dividends 3,100,059 2,065,847 2,042,086 1,123,166 547,903 670,172 Shares redeemed (4,883,156) (3,467,219) (11,985,501) (2,663,961) (1,401,394) (2,847,837) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 417,232 1,332,775 (1,640,752) (374,853) 2,900,963 (1,051,026) ============= ============= ============= ============= ============= ============= ING MAGNACAP ($) Shares sold $ 24,358,517 $ 13,700,644 $ 134,588,976 $ 12,626,363 $ 14,758,082 $ 18,234,831 Shares issued in merger -- 24,128,851 -- -- 33,904,811 -- Shares issued as reinvestment of dividends 31,776,032 29,583,918 33,390,241 11,153,042 7,628,566 10,716,050 Shares redeemed (54,127,863) (51,340,796) (193,866,999) (28,380,740) (20,174,618) (44,525,122) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ 2,006,686 $ 16,072,617 $ (25,887,782) $ (4,601,335) $ 36,116,841 $ (15,574,241) ============= ============= ============= ============= ============= ============= CLASS C SHARES CLASS M SHARES ----------------------------------------------- ----------------------------------------------- YEAR ELEVEN MONTHS YEAR YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, MAY 31, MAY 31, JUNE 30, 2002 2001 2000 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- ING MAGNACAP (NUMBER OF SHARES) Shares sold 491,490 452,160 355,043 38,778 30,058 71,735 Shares issued in merger -- 320,750 -- -- 531,039 -- Shares issued as reinvestment of dividends 119,279 29,252 13,431 207,863 96,050 94,820 Shares redeemed (446,035) (210,840) (166,071) (339,171) (186,663) (265,773) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 164,734 591,322 202,403 (92,530) 470,484 (99,218) ============= ============= ============= ============= ============= ============= ING MAGNACAP ($) Shares sold $ 5,208,521 $ 6,214,939 $ 5,649,398 $ 418,837 $ 429,381 $ 1,164,803 Shares issued in merger -- 4,079,042 -- -- 6,853,720 -- Shares issued as reinvestment of dividends 1,185,640 407,569 214,760 2,103,577 1,358,565 1,532,001 Shares redeemed (4,684,503) (2,826,362) (2,597,664) (3,695,461) (2,763,847) (4,228,665) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ 1,709,658 $ 7,875,188 $ 3,266,494 $ (1,173,047) $ 5,877,819 $ (1,531,861) ============= ============= ============= ============= ============= ============= CLASS Q SHARES ----------------------------------------------- YEAR ELEVEN MONTHS PERIOD ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, 2002 2001 2000(1) ------------- ------------- ------------- ING MAGNACAP (NUMBER OF SHARES) Shares sold 25,363 113,698 627,893 Shares issued in merger -- 52,762 -- Shares issued as reinvestment of dividends 161,336 92,505 -- Shares redeemed (172,009) (60,151) (1,149) ------------- ------------- ------------- Net increase in shares outstanding 14,690 198,814 626,744 ============= ============= ============= ING MAGNACAP ($) Shares sold $ 293,569 $ 1,752,239 $ 10,206,194 Shares issued in merger -- 666,215 -- Shares issued as reinvestment of dividends 1,652,078 1,323,685 -- Shares redeemed (1,844,440) (935,105) (18,412) ------------- ------------- ------------- Net increase $ 101,207 $ 2,807,034 $ 10,187,782 ============= ============= =============
- ---------- (1) Commenced offering of shares on November 22, 1999 70 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS I SHARES CLASS Q SHARES -------------- -------------- -------------- -------------- -------------- PERIOD PERIOD PERIOD PERIOD PERIOD ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2002(1) 2002(2) 2002(2) 2002(3) 2002(4) ------------ ------------ ------------ ------------ ------------ ING MIDCAP VALUE (NUMBER OF SHARES) Shares sold 2,605,647 1,153,304 965,747 6,888 1,115 Shares redeemed (142,673) (17,955) (17,708) -- -- ------------ ------------ ------------ ------------ ------------ Net increase in shares outstanding 2,462,974 1,135,349 948,039 6,888 1,115 ============ ============ ============ ============ ============ ING MIDCAP VALUE ($) Shares sold $ 26,775,675 $ 11,840,128 $ 9,937,739 $ 70,941 $ 11,595 Shares redeemed (1,470,743) (184,720) (184,006) -- -- ------------ ------------ ------------ ------------ ------------ Net increase $ 25,304,932 $ 11,655,408 $ 9,753,733 $ 70,941 $ 11,595 ============ ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on February 1, 2002. (2) Commenced offering of shares on February 4, 2002. (3) Commenced offering of shares on March 4, 2002. (4) Commenced offering of shares on April 17, 2002.
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS I SHARES CLASS Q SHARES -------------- -------------- -------------- -------------- -------------- PERIOD PERIOD PERIOD PERIOD PERIOD ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2002(1) 2002(2) 2002(3) 2002(4) 2002(5) ------------ ------------ ------------ ------------ ------------ ING SMALLCAP VALUE (NUMBER OF SHARES) Shares sold 1,818,913 783,600 812,089 2,469 760 Shares redeemed (83,387) (39,620) (13,303) -- -- ------------ ------------ ------------ ------------ ------------ Net increase in shares outstanding 1,735,526 743,980 798,786 2,469 760 ============ ============ ============ ============ ============ ING SMALLCAP VALUE ($) Shares sold $ 19,106,892 $ 8,286,464 $ 8,706,900 $ 26,848 $ 8,230 Shares redeemed (875,665) (426,160) (141,971) -- -- ------------ ------------ ------------ ------------ ------------ Net increase $ 18,231,227 $ 7,860,304 $ 8,564,929 $ 26,848 $ 8,230 ============ ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on February 1, 2002. (2) Commenced offering of shares on February 4, 2002. (3) Commenced offering of shares on February 7, 2002. (4) Commenced offering of shares on March 7, 2002. (5) Commenced offering of shares on April 30, 2002. 71 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES -------------------------------------------- -------------------------------------------- YEAR ELEVEN MONTHS YEAR YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, MAY 31, MAY 31, JUNE 30, 2002 2001 2000 2002 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ ING CONVERTIBLE (NUMBER OF SHARES) Shares sold 1,958,879 2,382,181 2,765,285 614,464 2,141,257 2,212,800 Shares issued as reinvestment of dividends 110,965 989,422 432,032 88,673 923,386 446,940 Shares redeemed (3,641,803) (2,581,631) (1,602,580) (1,844,627) (1,281,373) (721,161) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,571,959) 789,972 1,594,737 (1,141,490) 1,783,270 1,938,579 ============ ============ ============ ============ ============ ============ ING CONVERTIBLE ($) Shares sold $ 30,523,457 $ 52,464,635 $ 74,411,486 $ 10,852,858 $ 52,883,513 $ 62,613,451 Shares issued as reinvestment of dividends 1,758,845 19,822,295 10,028,609 1,536,619 20,109,225 11,247,841 Shares redeemed (57,093,216) (51,967,967) (41,141,454) (31,743,142) (28,949,115) (20,328,894) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(24,810,914) $ 20,318,963 $ 43,298,641 $(19,353,665) $ 44,043,623 $ 53,532,398 ============ ============ ============ ============ ============ ============ CLASS C SHARES CLASS Q SHARES -------------------------------------------- -------------------------------------------- YEAR ELEVEN MONTHS YEAR YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, MAY 31, MAY 31, JUNE 30, 2002 2001 2000 2002 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ ING CONVERTIBLE (NUMBER OF SHARES) Shares sold 450,714 1,819,012 1,543,879 30,682 719,641 1,566,620 Shares issued as reinvestment of dividends 64,090 663,511 594,205 32,307 452,416 144,983 Shares redeemed (1,812,332) (1,553,690) (827,109) (1,190,010) (1,558,160) (398,796) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,297,528) 928,833 1,310,975 (1,127,021) (386,103) 1,312,807 ============ ============ ============ ============ ============ ============ ING CONVERTIBLE ($) Shares sold $ 7,434,361 $ 40,238,507 $ 41,908,144 $ 482,846 $ 15,922,807 $ 41,144,380 Shares issued as reinvestment of dividends 1,039,698 13,561,955 14,012,886 502,113 8,820,172 3,277,417 Shares redeemed (29,432,206) (31,759,310) (22,139,549) (18,495,520) (30,676,072) (10,241,903) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(20,958,147) $ 22,041,152 $ 33,781,481 $(17,510,561) $ (5,933,093) $ 34,179,894 ============ ============ ============ ============ ============ ============
72 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES -------------------------------------------- -------------------------------------------- YEAR ELEVEN MONTHS YEAR YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, MAY 31, MAY 31, JUNE 30, 2002 2001 2000 2002 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ ING EQUITY AND INCOME (NUMBER OF SHARES) Shares sold 2,044,167 1,463,798 462,023 568,337 453,764 236,780 Shares issued in merger -- -- 3,669,160 -- -- 2,263,054 Shares issued as reinvestment of dividends 169,074 430,851 120,353 53,496 179,566 87,982 Shares redeemed (2,107,628) (1,499,291) (523,820) (688,620) (673,174) (386,298) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 105,613 395,358 3,727,716 (66,787) (39,844) 2,201,518 ============ ============ ============ ============ ============ ============ ING EQUITY AND INCOME ($) Shares sold $ 25,609,560 $ 20,216,598 $ 7,288,215 $ 7,552,484 $ 6,755,688 $ 4,171,242 Shares issued in merger -- -- 57,648,201 -- -- 38,096,820 Shares issued as reinvestment of dividends 2,077,020 5,925,370 1,895,528 706,119 2,642,601 1,483,448 Shares redeemed (26,287,880) (21,129,277) (8,162,726) (9,177,528) (10,233,160) (6,483,178) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ 1,398,700 $ 5,012,691 $ 58,669,218 $ (918,925) $ (834,871) $ 37,268,332 ============ ============ ============ ============ ============ ============ CLASS C SHARES CLASS Q SHARES -------------------------------------------- -------------------------------------------- YEAR ELEVEN MONTHS YEAR YEAR ELEVEN MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, MAY 31, MAY 31, JUNE 30, 2002 2001 2000 2002 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ ING EQUITY AND INCOME (NUMBER OF SHARES) Shares sold 262,677 397,383 168,630 9,956 27,145 4,284 Shares issued in merger -- -- 813,022 -- -- -- Shares issued as reinvestment of dividends 38,349 113,417 235,394 1,271 2,793 2,693 Shares redeemed (518,494) (525,040) (579,424) (23,460) (17,144) (1,565) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (217,468) (14,240) 637,622 (12,233) 12,794 5,412 ============ ============ ============ ============ ============ ============ ING EQUITY AND INCOME ($) Shares sold $ 3,148,057 $ 5,227,356 $ 2,578,680 $ 123,222 $ 389,776 $ 66,184 Shares issued in merger -- -- 12,280,463 -- -- -- Shares issued as reinvestment of dividends 452,175 1,496,911 3,561,673 15,488 37,994 42,058 Shares redeemed (6,149,939) (7,140,840) (8,869,902) (288,266) (234,653) (24,419) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ (2,549,707) $ (416,573) $ 9,550,914 $ (149,556) $ 193,117 $ 83,823 ============ ============ ============ ============ ============ ============ CLASS T SHARES -------------------------------------------- YEAR ELEVEN MONTHS PERIOD ENDED ENDED ENDED MAY 31, MAY 31, JUNE 30, 2002 2001 2000(1) ------------ ------------ ------------ ING EQUITY AND INCOME (NUMBER OF SHARES) Shares sold 325 4,667 1,889 Shares issued in merger -- -- 737,757 Shares issued as reinvestment of dividends 14,320 65,876 -- Shares redeemed (204,914) (208,190) (59,256) ------------ ------------ ------------ Net increase (decrease) in shares outstanding (190,269) (137,647) 680,390 ============ ============ ============ ING EQUITY AND INCOME ($) Shares sold $ 4,282 $ 70,086 $ 11,152 Shares issued in merger -- -- 12,419,589 Shares issued as reinvestment of dividends 189,047 970,115 -- Shares redeemed (2,740,344) (3,166,380) (946,072) ------------ ------------ ------------ Net increase (decrease) $ (2,547,015) $ (2,126,179) $ 11,484,669 ============ ============ ============
- ---------- (1) Commenced offering of shares on March 31, 2000 73 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- NOTE 10 -- WHEN ISSUED SECURITIES The Equity and Income Fund, at times, may purchase FNMA/GNMA certificates on a delayed delivery, forward or when-issued basis with payment and delivery often taking place a month or more after the initiation of the transaction. It is the Fund's policy to record when-issued FNMA/GNMA certificates (and the corresponding obligation to pay for the securities) at the time the purchase commitment becomes fixed -- generally on the trade date. It is also the Fund's policy to segregate assets to cover its commitments for when-issued securities on trade date. NOTE 11 -- REORGANIZATIONS On May 17, 2002, certain Funds, as listed below (each an: "Acquiring Fund"), acquired the assets and certain liabilities of other Funds, also listed below (each an "Acquired Fund"), in a tax-free reorganization in exchange for shares of the Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired Fund's shareholders. The number and value of shares issued by the Acquiring Fund are presented in Note 9 -- Capital Shares. Net assets and unrealized appreciation/(depreciation) as of the reorganization date were as follows:
ACQUIRED FUND ACQUIRING ACQUIRED TOTAL NET ASSETS OF TOTAL NET ASSETS OF UNREALIZED FUND FUND ACQUIRED FUND ACQUIRING FUND APPRECIATION ---- ---- ------------- -------------- ------------ MidCap Pilgrim MidCap $217,968,703 $84,663,797 $20,262,576 Opportunities Growth Fund Fund SmallCap Pilgrim SmallCap 191,995,534 319,795,499 16,636,048 Opportunities Growth Fund Fund
The net assets of MidCap Opportunities Fund and SmallCap Opportunities after the acquisition were approximately $302,632,500 and $511,791,033 respectively. NOTE 12 -- FEDERAL INCOME TAXES Dividends paid by the Funds from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. The tax composition of dividends and distributions to shareholders were as follows: ORDINARY LONG-TERM TAX RETURN INCOME CAPITAL GAINS OF CAPITAL ------ ------------- ---------- LargeCap Growth $ 39,544 $ -- $ -- SmallCap Opportunities -- 12,207,533 -- Large Company Value 667,555 2,912,637 561,446 MagnaCap 1,362,303 57,821,108 -- Convertible 5,995,821 1,501,596 -- Equity and Income 4,225,295 143,651 -- The amount of distributions from net investment income and net realized capital gain are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. Key differences are the treatment of short-term capital gains, foreign currency transactions, organization costs and other temporary differences. To the extent that these differences are permanent in nature, such amounts are reclassified within the capital accounts, presented on the Statements of Assets and Liabilities, based on their federal tax-basis treatment; temporary differences do not require reclassifications. To the extent distributions exceed net investment income and/or net realized capital gains for tax purposes, they are reported as distributions of paid-in capital. 74 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Accordingly, the following amounts have been increased (decreased) through reclassification as of May 31, 2002:
ACCUMULATED NET PAID-IN UNDISTRIBUTED NET REALIZED GAINS (LOSSES) CAPITAL INVESTMENT INCOME ON INVESTMENTS ------- ----------------- -------------- Growth + Value $ (8,514,877) $ 8,512,418 $ 2,459 Growth Opportunities (7,183,842) 7,224,856 (41,014) LargeCap Growth (5,832,166) 5,832,166 -- MidCap Opportunities 93,302,912 1,564,711 (94,867,623) SmallCap Opportunities 79,222,933 7,943,203 (87,166,136) Research Enhanced Index (535,040) 532,669 2,371 Large Company Value (567,079) (575,431) 1,142,510 MagnaCap -- 204,190 (204,190) MidCap Value (64,541) 64,541 -- SmallCap Value (56,654) 56,654 -- Convertible -- 372,262 (372,262) Equity and Income -- (21,741) 21,741
As of May 31, 2002, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED ACCUMULATED UNREALIZED ORDINARY REALIZED APPRECIATION/ INCOME GAIN/LOSS DEPRECIATION ------ --------- ------------ Growth + Value $ -- $(443,996,279) $ 4,477,225 Growth Opportunities -- (407,063,615) 8,921,061 LargeCap Growth -- (346,606,915) (7,446,741) MidCap Opportunities -- (146,381,726) (7,425,126) SmallCap Opportunities -- (251,007,652) 11,415,661 Research Enhanced Index -- (25,424,144) (18,592,261) Large Company Value -- (7,488,459) (6,945,460) MagnaCap -- (2,428,614) (28,057,260) MidCap Value 560,392 -- (460,592) SmallCap Value 346,586 -- (118,048) Convertible 1,072,672 (97,587,259) 1,297,967 Equity and Income 222,224 (3,553,889) (8,468,712) The aggregate value of the capital accounts as stated above on a tax basis for MidCap Value and SmallCap Value have a difference from their aggregate capital account totals on a book basis respectively of $37,333 and $37,333. These differences are due to temporary differences in their undistributed net investment income accounts. Capital loss carryforwards, which may be used to offset future realized capital gains for federal income tax purposes were as follows at May 31, 2002: AMOUNT EXPIRATION DATES ------ ---------------- Growth + Value $443,996,279 2009 - 2011 Growth Opportunities 407,063,615 2009 - 2011 LargeCap Growth 346,606,915 2008 - 2011 MidCap Opportunities 146,381,726 2007 - 2010 SmallCap Opportunities 251,007,652 2008 - 2011 Research Enhanced Index 25,424,144 2008 - 2011 Large Company Value 7,488,459 2011 MagnaCap 2,428,614 2011 Convertible 97,587,259 2010 - 2011 Equity and Income 3,553,889 2010 - 2011 A portion of the amount of these losses may be limited in the future for LargeCap Growth, MidCap Opportunities, SmallCap Opportunities, Large Company Value, MagnaCap and Equity and Income due to previous fund mergers. As of May 31, 2002, the following amounts represent distribution requirements of the Funds: ORDINARY INCOME ---------------- MidCap Value $ 560,392 SmallCap Value 346,586 Convertible 1,072,671 Equity and Income 222,224 75 NOTES TO FINANCIAL STATEMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Under the current tax law, capital and currency losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the seven months ended May 31, 2002, the Funds elected to defer losses occurring between November 1, 2001 and May 31, 2002 as follows: POST OCTOBER CAPITAL/CURRENCY LOSSES DEFERRED ----------------- Growth + Value $22,437,379 Growth Opportunities 20,404,013 LargeCap Growth 45,080,774 SmallCap Opportunities 45,408,586 Research Enhanced Index 6,324,846 Large Company Value 7,488,459 MagnaCap 2,428,614 Convertible 13,769,665 Equity and Income 1,495,208 NOTE 13 -- SUBSEQUENT EVENTS Subsequent to May 31, 2002 the following funds declared dividends from net investment income of: PER SHARE AMOUNT PAYABLE DATE RECORD DATE ------ ------------ ----------- EQUITY AND INCOME Class A $ 0.0564 July 3, 2002 June 28, 2002 Class B $ 0.0492 July 3, 2002 June 28, 2002 Class C $ 0.0504 July 3, 2002 June 28, 2002 Class Q $ 0.0518 July 3, 2002 June 28, 2002 Class T $ 0.0571 July 3, 2002 June 28, 2002 CONVERTIBLE Class A $ 0.0956 July 3, 2002 June 28, 2002 Class B $ 0.0858 July 3, 2002 June 28, 2002 Class C $ 0.0870 July 3, 2002 June 28, 2002 Class Q $ 0.0991 July 3, 2002 June 28, 2002 76 ING Growth + Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 98.68% ADVERTISING: 1.14% 196,350 Harte-Hanks, Inc. $ 4,298,102 ------------ 4,298,102 ------------ AEROSPACE/DEFENSE: 1.80% 107,400 @ L-3 Communications Holdings, Inc. 6,776,940 ------------ 6,776,940 ------------ AGRICULTURE: 2.26% 65,100 RJ Reynolds Tobacco Holdings, Inc. 4,602,570 95,200 Universal Corp. 3,865,120 ------------ 8,467,690 ------------ APPAREL: 1.24% 88,600 @ Coach, Inc. 4,630,236 ------------ 4,630,236 ------------ AUTO MANUFACTURERS: 1.44% 90,200 Oshkosh Truck Corp. 5,384,940 ------------ 5,384,940 ------------ CHEMICALS: 3.19% 420,100 RPM, Inc. 6,612,374 269,000 Schulman, Inc. 5,334,270 ------------ 11,946,644 ------------ COMMERCIAL SERVICES: 5.63% 203,400 Deluxe Corp. 9,201,816 163,500 @ FTI Consulting, Inc. 5,001,465 230,300 @ PRG-Schultz Intl., Inc. 3,219,594 64,900 @ Rent-A-Center, Inc. 3,683,075 ------------ 21,105,950 ------------ COMPUTERS: 2.55% 239,700 @ Fidelity National Information Solutions, Inc. 6,948,903 901,300 @ Silicon Graphics, Inc. 2,622,783 ------------ 9,571,686 ------------ COSMETICS/PERSONAL CARE: 1.06% 74,800 Alberto-Culver Co. 3,962,156 ------------ 3,962,156 ------------ DISTRIBUTION/WHOLESALE: 3.49% 206,800 Fastenal Co. 8,170,668 93,500 WW Grainger, Inc. 4,916,230 ------------ 13,086,898 ------------ ELECTRICAL EQUIPMENT: 1.27% 177,100 @ Energizer Holdings, Inc. 4,772,845 ------------ 4,772,845 ------------ ELECTRONICS: 3.91% 213,700 Cubic Corp. 5,772,037 205,700 @ Cymer, Inc. 8,892,411 ------------ 14,664,448 ------------ ENTERTAINMENT: 2.65% 175,400 @ GTECH Holdings Corp. 4,937,510 249,900 @ Isle of Capri Casinos, Inc. 4,990,503 ------------ 9,928,013 ------------ FOOD: 7.30% 121,800 Dole Food Co. 4,052,286 119,800 Dreyer's Grand Ice Cream, Inc. 5,262,814 373,400 @ Great Atlantic & Pacific Tea Co. 8,614,338 137,900 @ Ralcorp Holdings, Inc. 3,880,506 183,400 Supervalu, Inc. 5,535,012 ------------ 27,344,956 ------------ HEALTHCARE-PRODUCTS: 3.21% 260,700 @ Hanger Orthopedic Group, Inc. 3,884,430 173,300 @ Varian Medical Systems, Inc. 8,127,770 ------------ 12,012,200 ------------ HEALTHCARE-SERVICES: 5.16% 148,900 @ Anthem, Inc. 10,557,010 181,700 @ Oxford Health Plans 8,757,940 ------------ 19,314,950 ------------ HOME BUILDERS: 4.14% 405,000 DR Horton, Inc. 9,930,600 16,850 @ NVR, Inc. 5,577,350 ------------ 15,507,950 ------------ HOME FURNISHINGS: 2.11% 142,700 Harman Intl. Industries, Inc. 7,891,310 ------------ 7,891,310 ------------ HOUSEWARES: 2.60% 284,900 Newell Rubbermaid, Inc. 9,729,335 ------------ 9,729,335 ------------ INSURANCE: 4.02% 277,400 Brown & Brown, Inc. 9,889,310 125,900 Hilb Rogal & Hamilton Co. 5,188,339 ------------ 15,077,649 ------------ INTERNET: 2.06% 582,000 @ Net.B@nk, Inc. 7,728,960 ------------ 7,728,960 ------------ LODGING: 1.22% 155,700 @ Ameristar Casinos, Inc. 4,562,010 ------------ 4,562,010 ------------ MACHINERY-DIVERSIFIED: 1.46% 264,100 AGCO Corp. 5,480,075 ------------ 5,480,075 ------------ MEDIA: 3.49% 218,000 Belo Corp. 5,223,280 120,800 Media General, Inc. 7,865,288 ------------ 13,088,568 ------------ MINING: 0.53% 142,000 @@ Gold Fields Ltd. ADR 1,978,060 ------------ 1,978,060 ------------ MISCELLANEOUS MANUFACTURER: 1.76% 98,300 ITT Industries, Inc. 6,586,100 ------------ 6,586,100 ------------ OIL & GAS: 1.07% 296,400 @@,@ Hurricane Hydrocarbons 3,992,212 ------------ 3,992,212 ------------ RETAIL: 19.35% 94,000 Cato Corp. 2,538,940 169,000 Fred's, Inc. 5,779,800 65,600 Home Depot, Inc. 2,734,864 241,600 @ Michaels Stores, Inc. 10,497,520 116,500 @ Panera Bread Co. 7,256,785 372,200 @ Petsmart, Inc. 6,118,968 168,600 @ PF Chang's China Bistro, Inc. 5,533,452 180,900 Pier 1 Imports, Inc. 3,657,798 272,100 Regis Corp. 7,836,480 194,700 @ Sonic Automotive, Inc. 6,444,570 246,900 @ Sports Authority, Inc. 3,177,603 170,700 @ Yum! Brands, Inc. 10,907,730 ------------ 72,484,510 ------------ SAVINGS & LOANS: 1.09% 219,500 Waypoint Financial Corp. 4,073,920 ------------ 4,073,920 ------------ SEMICONDUCTORS: 0.87% 393,300 @ Silicon Image, Inc. 3,244,724 ------------ 3,244,724 ------------ SOFTWARE: 4.70% 92,400 @ ChoicePoint, Inc. 5,507,964 242,300 @ Dun & Bradstreet Corp. 9,018,406 356,200 @ VitalWorks, Inc. 3,063,320 ------------ 17,589,690 ------------ See Accompanying Notes to Financial Statements 77 ING Growth + Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 0.91% 447,000 @@ Rostelecom ADR 3,397,200 ------------ 3,397,200 ------------ Total Common Stock (Cost $365,203,702) 369,680,927 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT: 0.78% REPURCHASE AGREEMENT: 0.78% $ 2,931,000 State Street Bank Repurchase Agreement 1.680%, due 06/03/02, $2,931,410 to be received upon repurchase (Collateralized by U.S. Treasury Bond, 13.250%, Market Value $2,995,000, due 05/15/14) $ 2,931,000 ------------ Total Short-Term Investment (Cost $2,931,000) 2,931,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $368,134,702)* 99.46% $372,611,927 OTHER ASSETS AND LIABILITIES-NET 0.54% 2,017,302 ------ ------------ NET ASSETS 100.00% $374,629,229 ====== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 19,161,214 Gross Unrealized Depreciation (14,683,989) ------------ Net Unrealized Appreciation $ 4,477,225 ============ See Accompanying Notes to Financial Statements 78 ING Growth Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 99.65% AEROSPACE/DEFENSE: 1.70% 30,000 General Dynamics Corp. $ 3,018,000 31,400 @ L-3 Communications Holdings, Inc. 1,981,340 ------------ 4,999,340 ------------ APPAREL: 2.10% 61,600 @ Coach, Inc. 3,219,216 74,200 @ Jones Apparel Group, Inc. 2,957,612 ------------ 6,176,828 ------------ AUTO MANUFACTURERS: 1.50% 86,800 Ford Motor Co. 1,532,020 46,000 General Motors Corp. 2,858,900 ------------ 4,390,920 ------------ AUTO PARTS & EQUIPMENT: 0.78% 145,300 Delphi Corp. 2,288,475 ------------ 2,288,475 ------------ BANKS: 4.25% 40,300 Bank of America Corp. 3,055,143 46,500 Charter One Financial, Inc. 1,683,300 119,200 North Fork Bancorporation, Inc. 4,685,752 58,500 Wells Fargo & Co. 3,065,400 ------------ 12,489,595 ------------ BIOTECHNOLOGY: 0.65% 39,900 @ Amgen, Inc. 1,900,437 ------------ 1,900,437 ------------ BUILDING MATERIALS: 1.04% 40,400 @ American Standard Cos., Inc. 3,050,200 ------------ 3,050,200 ------------ COMMERCIAL SERVICES: 2.51% 183,600 @ Caremark Rx, Inc. 3,550,824 92,100 Manpower, Inc. 3,818,466 ------------ 7,369,290 ------------ COMPUTERS: 2.89% 61,900 @ Apple Computer, Inc. 1,442,270 111,100 @ Dell Computer Corp. 2,983,035 65,000 @ Lexmark Intl., Inc. 4,059,250 ------------ 8,484,555 ------------ DISTRIBUTION/WHOLESALE: 0.37% 20,700 WW Grainger, Inc. 1,088,406 ------------ 1,088,406 ------------ DIVERSIFIED FINANCIAL: 3.20% 78,600 American Express Co. 3,341,286 52,400 Capital One Financial Corp. 3,271,856 68,200 Merrill Lynch & Co., Inc. 2,776,422 ------------ 9,389,564 ------------ ELECTRICAL EQUIPMENT: 1.08% 104,500 @ Advanced Energy Industries, Inc. 3,166,350 ------------ 3,166,350 ------------ ELECTRONICS: 3.31% 95,100 @ Cymer, Inc. 4,111,173 87,500 @ Gentex Corp. 2,706,375 71,700 @ Photon Dynamics, Inc. 2,895,246 ------------ 9,712,794 ------------ FOOD: 0.54% 30,900 @ Whole Foods Market, Inc. 1,581,153 ------------ 1,581,153 ------------ FOREST PRODUCTS & PAPER: 1.04% 46,600 Weyerhaeuser Co. 3,052,300 ------------ 3,052,300 ------------ HEALTHCARE-PRODUCTS: 4.25% 85,800 @@,@ Alcon, Inc. 3,318,744 145,200 @ Boston Scientific Corp. 4,043,820 104,300 @ Cytyc Corp. 1,699,047 40,500 @ St Jude Medical, Inc. 3,418,200 ------------ 12,479,811 ------------ HEALTHCARE-SERVICES: 10.44% 74,400 A Aetna, Inc. 3,560,040 74,300 @ Anthem, Inc. 5,267,870 221,400 @ Humana, Inc. 3,369,708 120,100 @ Mid Atlantic Medical Services 4,312,791 78,000 @ Odyssey HealthCare, Inc. 2,749,500 76,200 @ Oxford Health Plans 3,672,840 50,000 @ Pediatrix Medical Group, Inc. 1,902,500 27,600 @ Quest Diagnostics 2,412,792 75,300 @ Triad Hospitals, Inc. 3,402,807 ------------ 30,650,848 ------------ HOME FURNISHINGS: 0.64% 42,100 Maytag Corp. 1,885,659 ------------ 1,885,659 ------------ INSURANCE: 3.99% 30,600 Brown & Brown, Inc. 1,090,890 28,600 PMI Group, Inc. 2,448,160 80,400 @@ Renaissance Holdings Ltd. 2,974,800 160,400 @@,@ Willis Group Holdings Ltd. 5,217,812 ------------ 11,731,662 ------------ INTERNET: 0.44% 23,500 @ eBay, Inc. 1,297,435 ------------ 1,297,435 ------------ IRON/STEEL: 1.31% 57,600 Nucor Corp. 3,840,192 ------------ 3,840,192 ------------ LEISURE TIME: 0.75% 72,100 Carnival Corp. 2,191,840 ------------ 2,191,840 ------------ MEDIA: 2.88% 46,800 @ Lin TV Corp. 1,277,640 169,100 Walt Disney Co. 3,874,081 86,700 @ Westwood One, Inc. 3,307,605 ------------ 8,459,326 ------------ OIL & GAS: 6.40% 96,100 ENSCO Intl., Inc. 3,147,275 165,700 GlobalSantaFe Corp. 5,592,375 96,800 @@,@ Precision Drilling Corp. 3,644,520 89,300 @ Pride Intl., Inc. 1,732,420 80,500 Transocean, Inc. 3,072,685 79,600 XTO Energy, Inc. 1,612,696 ------------ 18,801,971 ------------ OIL & GAS SERVICES: 3.65% 89,900 Baker Hughes, Inc. 3,294,835 54,100 @ Cooper Cameron Corp. 3,044,207 125,000 Halliburton Co. 2,318,750 41,000 @ Weatherford Intl., Inc. 2,064,350 ------------ 10,722,142 ------------ PACKAGING & CONTAINERS: 1.26% 159,800 @ Pactiv Corp. 3,702,566 ------------ 3,702,566 ------------ See Accompanying Notes to Financial Statements 79 ING Growth Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- PHARMACEUTICALS: 4.20% 42,000 AmerisourceBergen Corp. $ 3,237,780 37,900 D&K Healthcare Resources, Inc. 1,268,892 54,600 @ Gilead Sciences, Inc. 1,947,036 89,000 @ Medimmune, Inc. 2,894,280 44,500 @@ Teva Pharmaceutical Industries ADR 2,982,835 ------------ 12,330,823 ------------ RETAIL: 20.63% 56,700 @ Advance Auto Parts 3,277,260 41,800 @ Autozone, Inc. 3,421,330 101,600 Blockbuster, Inc. 2,794,000 63,400 Circuit City Stores, Inc. 1,452,494 103,900 @ Dollar Tree Stores, Inc. 4,184,053 53,300 @ Federated Department Stores 2,207,153 274,900 Gap, Inc. 4,005,293 155,300 @ Hollywood Entertainment Corp. 3,006,608 39,400 @ Kohl's Corp. 2,955,000 86,500 @ Linens 'N Things, Inc. 2,655,550 65,300 Lowe's Cos, Inc. 3,079,548 90,600 @ Michaels Stores, Inc. 3,936,570 113,400 @ Petco Animal Supplies, Inc. 2,898,504 103,400 Pier 1 Imports, Inc. 2,090,748 188,200 @ Staples, Inc. 3,967,256 55,100 @ Urban Outfitters, Inc. 1,629,858 139,400 Wendy's Intl., Inc. 5,293,017 195,000 @ Williams-Sonoma, Inc. 6,241,950 23,200 @ Yum! Brands, Inc. 1,482,480 ------------ 60,578,672 ------------ SEMICONDUCTORS: 10.54% 51,900 @ Kla-Tencor Corp. 2,705,547 178,400 @ Lam Research Corp. 4,056,816 126,000 @@, @ Marvell Technology Group Ltd. 3,966,480 105,900 @ Microchip Technology, Inc. 3,166,410 102,800 @ National Semiconductor Corp. 3,155,960 110,800 @ Novellus Systems, Inc. 4,706,784 51,400 @ QLogic Corp. 2,350,008 135,400 @@, @ Taiwan Semiconductor Manufacturing Co. Ltd. ADR 2,244,933 544,800 @@, @ United Microelectronics Corp. ADR 4,630,800 ------------ 30,983,738 ------------ TELECOMMUNICATIONS: 0.99% 181,900 Motorola, Inc. 2,908,581 ------------ 2,908,581 ------------ TEXTILES: 0.32% 14,500 @ Mohawk Industries, Inc. 950,040 ------------ 950,040 ------------ Total Common Stock (Cost $277,440,143) 292,655,513 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT: 0.34% REPURCHASE AGREEMENT: 0.34% $ 986,000 State Street Bank Repurchase Agreement dated 5/31/02, 1.680%, due 06/03/02, $986,138 to be received upon repurchase (Collateralized by U.S. Treasury Note, 5.750%, Market Value $1,007,525, due 08/15/03) $ 986,000 ------------ Total Short-Term Investment (Cost $986,000) 986,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $278,426,143)* 99.99% $293,641,513 OTHER ASSETS AND LIABILITIES-NET 0.01% 39,434 ------ ------------ NET ASSETS 100.00% $293,680,947 ====== ============ @ Non-income producing security @@ Foreign Issuer A Related Party ADR American Depository Receipt * Cost for federal income tax purposes is $284,720,452. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 15,427,265 Gross Unrealized Depreciation (6,506,204) ------------ Net Unrealized Appreciation $ 8,921,061 ============ See Accompanying Notes to Financial Statements 80 ING LargeCap Growth Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 98.63% AEROSPACE/DEFENSE: 5.67% 63,100 General Dynamics Corp. $ 6,347,860 106,400 Lockheed Martin Corp. 6,602,120 65,700 Raytheon Co. 2,903,940 ------------ 15,853,920 ------------ AUTO MANUFACTURERS: 4.39% 166,100 Ford Motor Co. 2,931,665 150,000 General Motors Corp. 9,322,500 ------------ 12,254,165 ------------ BANKS: 6.62% 84,100 Bank of America Corp. 6,375,621 249,200 US Bancorp 5,893,580 118,600 Wells Fargo & Co. 6,214,640 ------------ 18,483,841 ------------ BIOTECHNOLOGY: 0.87% 50,800 @ Amgen, Inc. 2,419,604 ------------ 2,419,604 ------------ COMMERCIAL SERVICES: 2.33% 208,000 @ Concord EFS, Inc. 6,504,160 ------------ 6,504,160 ------------ COMPUTERS: 5.76% 215,400 @ Dell Computer Corp. 5,783,490 70,300 International Business Machines Corp. 5,655,635 74,700 @ Lexmark Intl., Inc. 4,665,015 ------------ 16,104,140 ------------ COSMETICS/PERSONAL CARE: 0.97% 51,300 Avon Products, Inc. 2,716,335 ------------ 2,716,335 ------------ DIVERSIFIED FINANCIAL SERVICES: 7.49% 214,600 American Express Co. 9,122,646 102,100 Capital One Financial Corp. 6,375,124 133,500 Merrill Lynch & Co., Inc. 5,434,785 ------------ 20,932,555 ------------ FOREST PRODUCTS & PAPER: 1.28% 54,500 Weyerhaeuser Co. 3,569,750 ------------ 3,569,750 ------------ HEALTHCARE-PRODUCTS: 4.49% 164,100 @,@@ Alcon, Inc. 6,347,388 222,300 @ Boston Scientific Corp. 6,191,055 ------------ 12,538,443 ------------ HEALTHCARE-SERVICES: 4.39% 63,200 @ Tenet Healthcare Corp. 4,708,400 102,000 @ Wellpoint Health Networks 7,564,320 ------------ 12,272,720 ------------ INTERNET: 0.45% 22,600 @ eBay, Inc. 1,247,746 ------------ 1,247,746 ------------ MEDIA: 5.90% 87,800 @ Clear Channel Communications, Inc. 4,673,594 146,400 @ Univision Communications, Inc. 5,856,000 121,800 @ Viacom, Inc. 5,963,328 ------------ 16,492,922 ------------ MINING: 1.05% 76,800 @@ Alcan, Inc. 2,926,080 ------------ 2,926,080 ------------ MISCELLANEOUS MANUFACTURING: 2.31% 51,500 3M Co. 6,459,645 ------------ 6,459,645 ------------ OIL & GAS SERVICES: 5.02% 224,400 Baker Hughes, Inc. 8,224,260 115,300 @ Weatherford Intl., Inc. 5,805,355 ------------ 14,029,615 ------------ PHARMACEUTICALS: 1.04% 43,200 @@ Teva Pharmaceutical Industries ADR 2,895,696 ------------ 2,895,696 ------------ RETAIL: 15.11% 40,600 @ Autozone, Inc. 3,323,110 123,700 @ Bed Bath & Beyond, Inc. 4,242,910 532,800 Gap, Inc. (The) 7,762,896 305,000 JC Penney Co, Inc. 7,460,300 82,000 @ Kohl's Corp. 6,150,000 119,100 Sears Roebuck and Co. 7,032,855 97,800 @ Yum! Brands, Inc. 6,249,420 ------------ 42,221,491 ------------ SEMICONDUCTORS: 16.60% 221,100 @ Applied Materials, Inc. 4,903,998 49,900 @ Emulex Corp. 1,502,489 98,700 Intel Corp. 2,726,094 85,700 @ Kla-Tencor Corp. 4,467,541 116,700 @ Micron Technology, Inc. 2,751,786 132,100 @ Novellus Systems, Inc. 5,611,608 346,100 @,@@ Taiwan Semiconductor Manufacturing Co. Ltd. ADR 5,738,338 187,100 @ Teradyne, Inc. 5,066,668 200,700 Texas Instruments, Inc. 5,754,069 924,400 @,@@ United Microelectronics Corp. ADR 7,857,400 ------------ 46,379,991 ------------ SOFTWARE: 2.12% 86,700 Adobe Systems, Inc. 3,129,870 55,000 @ Microsoft Corp. 2,800,050 ------------ 5,929,920 ------------ TELECOMMUNICATIONS: 4.77% 543,600 @ Cisco Systems, Inc. 8,578,008 296,400 Motorola, Inc. 4,739,436 ------------ 13,317,444 ------------ Total Common Stock (Cost $270,117,049) 275,550,183 ------------ See Accompanying Notes to Financial Statements 81 ING LargeCap Growth Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT: 1.82% REPURCHASE AGREEMENT: 1.82% $ 5,093,000 State Street Repurchase Agreement dated 05/31/02, 1.680%, due 06/03/02, $5,093,713 to be received upon repurchase (Collateralized by U.S. Treasury Bonds, 6.125%, Market Value 5,196,918, due 11/15/27) $ 5,093,000 ------------ Total Short-Term Investment (Cost $5,093,000) 5,093,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $275,210,049)* 100.45% $280,643,183 OTHER ASSETS AND LIABILITIES-NET -0.45% (1,269,978) ------ ------------ NET ASSETS 100.00% $279,373,205 ====== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is $288,089,924. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 705,352 Gross Unrealized Depreciation (8,152,093) ------------ Net Unrealized Depreciation $ (7,446,741) ============ See Accompanying Notes to Financial Statements 82 ING MidCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 99.04% AEROSPACE/DEFENSE: 1.83% 26,200 @ L-3 Communications Holdings, Inc. $ 1,653,220 29,300 Northrop Grumman Corp. 3,554,383 ------------ 5,207,603 ------------ APPAREL: 2.58% 51,100 @ Coach, Inc. 2,670,486 68,400 @ Jones Apparel Group, Inc. 2,726,424 64,000 Liz Claiborne, Inc. 1,960,320 ------------ 7,357,230 ------------ AUTO PARTS & EQUIPMENT: 0.83% 51,400 @ Lear Corp. 2,375,708 ------------ 2,375,708 ------------ BANKS: 5.29% 130,400 AmSouth BanCorp. 2,894,880 108,500 Charter One Financial, Inc. 3,927,700 116,000 North Fork Bancorporation, Inc. 4,559,960 72,200 TCF Financial Corp. 3,700,972 ------------ 15,083,512 ------------ BEVERAGES: 1.45% 190,000 Coca-Cola Enterprises, Inc. 4,132,500 ------------ 4,132,500 ------------ BIOTECHNOLOGY: 0.83% 47,600 @ Biogen, Inc. 2,374,288 ------------ 2,374,288 ------------ BUILDING MATERIALS: 0.59% 22,100 @ American Standard Cos., Inc. 1,668,550 ------------ 1,668,550 ------------ COMMERCIAL SERVICES: 4.97% 70,100 @ Career Education Corp. 3,056,360 179,400 @ Caremark Rx, Inc. 3,469,596 144,500 @ KPMG Consulting, Inc. 2,245,530 61,000 Manpower, Inc. 2,529,060 68,800 @ Weight Watchers Intl., Inc. 2,854,512 ------------ 14,155,058 ------------ COMPUTERS: 1.34% 163,800 @ Apple Computer, Inc. 3,816,540 ------------ 3,816,540 ------------ DIVERSIFIED FINANCIAL SERVICES: 0.75% 60,800 @ AmeriCredit Corp. 2,134,080 ------------ 2,134,080 ------------ ELECTRONICS: 3.41% 53,700 @,@@ Flextronics Intl. Ltd. 710,451 93,000 @ Gentex Corp. 2,876,490 251,200 @ Vishay Intertechnology, Inc. 6,169,472 ------------ 9,756,413 ------------ FOOD: 0.23% 12,600 @ Whole Foods Market, Inc. 644,742 ------------ 644,742 ------------ FOREST PRODUCTS & PAPER: 1.02% 52,500 Boise Cascade Corp. 1,867,950 18,500 Temple-Inland, Inc. 1,030,080 ------------ 2,898,030 ------------ HEALTHCARE-PRODUCTS: 0.58% 101,500 @ Cytyc Corp. 1,653,435 ------------ 1,653,435 ------------ HEALTHCARE-SERVICES: 8.23% 78,100 A Aetna, Inc. 3,737,085 47,400 @ Anthem, Inc. 3,360,660 122,500 @ Community Health Systems, Inc. 3,606,400 92,000 @ Laboratory Corp. of America Holdings 4,512,600 75,700 @ Oxford Health Plans 3,648,740 8,500 @ Quest Diagnostics 743,070 85,100 @ Triad Hospitals, Inc. 3,845,669 ------------ 23,454,224 ------------ HOME BUILDERS: 0.50% 57,950 DR Horton, Inc. 1,420,934 ------------ 1,420,934 ------------ HOME FURNISHINGS: 0.65% 41,600 Maytag Corp. 1,863,264 ------------ 1,863,264 ------------ INSURANCE: 5.51% 37,100 PMI Group, Inc. 3,175,760 110,900 @ Principal Financial Group 3,371,360 149,400 @@ RenaissanceRe Holdings Ltd. 5,527,800 111,300 @,@@ Willis Group Holdings Ltd. 3,620,589 ------------ 15,695,509 ------------ INTERNET: 0.35% 52,100 @ Network Associates, Inc. 1,008,135 ------------ 1,008,135 ------------ IRON/STEEL: 1.18% 50,600 Nucor Corp. 3,373,502 ------------ 3,373,502 ------------ LODGING: 1.50% 61,500 @ Harrah's Entertainment, Inc. 2,930,475 42,400 @ Mandalay Resort Group 1,382,240 ------------ 4,312,715 ------------ MEDIA: 3.09% 38,200 Scripps Co. 2,929,558 90,600 @ Univision Communications, Inc. 3,624,000 59,200 @ Westwood One, Inc. 2,258,480 ------------ 8,812,038 ------------ OIL & GAS: 6.34% 44,500 Diamond Offshore Drilling 1,500,985 84,300 ENSCO Intl., Inc. 2,760,825 78,700 GlobalSantaFe Corp. 2,656,125 192,400 @ Pioneer Natural Resources Co. 4,642,612 230,800 @ Pride Intl., Inc. 4,477,520 100,200 XTO Energy, Inc. 2,030,052 ------------ 18,068,119 ------------ OIL & GAS SERVICES: 5.45% 123,200 @ Cooper Cameron Corp. 6,932,464 121,400 Halliburton Co. 2,251,970 75,900 @ National-Oilwell, Inc. 1,938,486 87,600 @ Weatherford Intl., Inc. 4,410,660 ------------ 15,533,580 ------------ PACKAGING & CONTAINERS: 1.11% 136,300 @ Pactiv Corp. 3,158,071 ------------ 3,158,071 ------------ PHARMACEUTICALS: 4.57% 53,200 AmerisourceBergen Corp. 4,101,188 37,100 D&K Healthcare Resources, Inc. 1,242,108 52,900 @ Gilead Sciences, Inc. 1,886,414 87,700 @ Medimmune, Inc. 2,852,004 43,800 @@ Teva Pharmaceutical Industries ADR 2,935,914 ------------ 13,017,628 ------------ See Accompanying Notes to Financial Statements 83 ING MidCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- RETAIL: 12.75% 73,600 @ Advance Auto Parts $ 4,254,080 64,800 Circuit City Stores, Inc. 1,484,568 155,500 @ Dollar Tree Stores, Inc. 6,261,985 87,900 @ Michaels Stores, Inc. 3,819,255 83,200 Pier 1 Imports, Inc. 1,682,304 43,300 Ross Stores, Inc. 1,825,528 40,800 Tiffany & Co. 1,530,000 137,600 Wendy's Intl., Inc. 5,224,672 207,000 @ Williams-Sonoma, Inc. 6,626,070 57,000 @ Yum! Brands, Inc. 3,642,300 ------------ 36,350,762 ------------ SAVINGS & LOANS: 0.49% 49,200 New York Community BanCorp., Inc. 1,397,772 ------------ 1,397,772 ------------ SEMICONDUCTORS: 14.34% 286,100 @ Atmel Corp. 2,351,742 211,600 @ Fairchild Semiconductor Intl., Inc. 5,321,740 82,800 @ Integrated Device Technology, Inc. 2,106,432 78,400 @ Intersil Corp. 1,883,168 184,000 @ Lam Research Corp. 4,184,160 45,600 @ LSI Logic Corp. 519,840 82,500 @,@@ Marvell Technology Group Ltd. 2,597,100 215,100 @ Microchip Technology, Inc. 6,431,490 194,100 @ National Semiconductor Corp. 5,958,870 109,500 @ Novellus Systems, Inc. 4,651,560 83,400 @ QLogic Corp. 3,813,048 38,800 @ Teradyne, Inc. 1,050,704 ------------ 40,869,854 ------------ SOFTWARE: 3.12% 153,600 @,@@ Cognos, Inc. 3,740,160 80,700 @ Electronic Arts, Inc. 5,164,800 ------------ 8,904,960 ------------ TELECOMMUNICATIONS: 2.48% 1,019,700 @ Nextel Communications, Inc. 4,955,742 94,400 @ Utstarcom, Inc. 2,100,400 ------------ 7,056,142 ------------ TEXTILES: 0.45% 19,400 @ Mohawk Industries, Inc. 1,271,088 ------------ 1,271,088 ------------ TOYS/GAMES/HOBBIES: 1.23% 164,500 Mattel, Inc. 3,493,980 ------------ 3,493,980 ------------ Total Common Stock (Cost $267,767,074) 282,319,966 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $267,767,074)* 99.04% $282,319,966 OTHER ASSETS AND LIABILITIES-NET 0.96% 2,730,792 ------ ------------ NET ASSETS 100.00% $285,050,758 ====== ============ @ Non-income producing security @@ Foreign Issuer A Related Party ADR American Depository Receipt * Cost for federal income tax purposes is $269,482,517. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 20,171,436 Gross Unrealized Depreciation (7,333,987) ------------ Net Unrealized Appreciation $ 12,837,449 ============ See Accompanying Notes to Financial Statements 84 ING SmallCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 96.58% ADVERTISING: 0.81% 115,400 @ Getty Images, Inc. $ 3,878,594 ------------ 3,878,594 ------------ APPAREL: 0.76% 222,500 @ Gymboree Corp. 3,649,000 ------------ 3,649,000 ------------ AUTO PARTS & EQUIPMENT: 1.97% 74,400 @ Aftermarket Technology Corp. 1,764,694 103,000 @ American Axle & Manufacturing Holdings, Inc. 3,110,600 82,500 ArvinMeritor, Inc. 2,202,750 50,300 @ Lear Corp. 2,324,866 ------------ 9,402,910 ------------ BANKS: 0.55% 77,900 East-West BanCorp., Inc. 2,630,683 ------------ 2,630,683 ------------ BIOTECHNOLOGY: 1.40% 79,700 @ Charles River Laboratories Intl., Inc. 2,928,975 3,200 @ Exact Sciences Corp. 42,240 43,000 @ InterMune, Inc. 1,150,250 70,100 @ Martek Biosciences Corp. 1,706,935 38,900 @ Myriad Genetics, Inc. 867,081 ------------ 6,695,481 ------------ COMMERCIAL SERVICES: 4.97% 120,600 @ Career Education Corp. 5,258,160 70,400 @ Cross Country, Inc. 2,569,600 77,100 @ FTI Consulting, Inc. 2,358,489 172,200 @ Medical Staffing Network Holdings, Inc. 4,434,150 264,900 @ PRG-Schultz Intl., Inc. 3,703,302 95,000 @ Rent-A-Center, Inc. 5,391,250 ------------ 23,714,951 ------------ COMPUTERS: 3.40% 66,000 @ Cognizant Technology Solutions Corp. 3,218,820 48,900 @ Fidelity National Information Solutions, Inc. 1,417,611 79,200 @ Manhattan Associates, Inc. 2,193,840 40,600 @ Pec Solutions, Inc. 1,081,584 319,600 @ Silicon Storage Technology, Inc. 3,451,680 43,400 @ SRA Intl., Inc. 1,002,540 237,900 @ Synaptics, Inc. 3,853,980 ------------ 16,220,055 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 1.12% 176,400 @ Advanced Energy Industries, Inc. 5,344,920 ------------ 5,344,920 ------------ ELECTRONICS: 3.36% 224,600 @ Cymer, Inc. 9,709,458 156,600 @ Photon Dynamics, Inc. 6,323,508 ------------ 16,032,966 ------------ ENVIRONMENTAL CONTROL: 0.70% 48,400 @ Stericycle, Inc. 3,327,984 ------------ 3,327,984 ------------ FOOD: 0.56% 73,200 @ J&J Snack Foods Corp. 2,649,840 ------------ 2,649,840 ------------ HAND/MACHINE TOOLS: 0.60% 113,100 Regal-Beloit Corp. 2,850,120 ------------ 2,850,120 ------------ HEALTHCARE-PRODUCTS: 3.75% 64,400 @ Advanced Neuromodulation Systems, Inc. 2,056,936 88,800 @ American Medical Systems Holdings, Inc. 2,042,400 72,100 Mentor Corp. 2,757,104 205,700 @ Ocular Sciences, Inc. 5,788,398 256,000 @ Wright Medical Group, Inc. 5,273,600 ------------ 17,918,438 ------------ HEALTHCARE-SERVICES: 9.19% 128,500 @ Coventry Health Care, Inc. 3,989,925 57,600 @ Dianon Systems, Inc. 3,715,200 139,400 @ Health Net, Inc. 4,035,630 65,900 @ LabOne, Inc. 1,535,470 157,400 @ Mid Atlantic Medical Services 5,652,234 188,600 @ Odyssey HealthCare, Inc. 6,648,150 88,600 @ Pacificare Health Systems 2,457,764 116,400 @ Pediatrix Medical Group, Inc. 4,429,020 164,550 @ Province Healthcare Co. 4,189,443 221,900 @ Sierra Health Services 4,160,625 98,100 @ United Surgical Partners Intl., Inc. 3,047,967 ------------ 43,861,428 ------------ HOME BUILDERS: 2.05% 29,900 @ Beazer Homes USA, Inc. 2,338,778 80,200 Standard-Pacific Corp. 2,646,600 165,700 @ WCI Communities, Inc. 4,805,300 ------------ 9,790,678 ------------ HOME FURNISHINGS: 0.74% 63,800 Harman Intl. Industries, Inc. 3,528,140 ------------ 3,528,140 ------------ INSURANCE: 1.59% 160,900 @ Arch Capital Group Ltd. 4,778,730 78,800 Brown & Brown, Inc. 2,809,220 ------------ 7,587,950 ------------ INTERNET: 1.01% 19,500 @ Macromedia, Inc. 432,900 330,700 @ Net.B@nk, Inc. 4,391,696 ------------ 4,824,596 ------------ IRON/STEEL: 0.76% 204,200 @ Steel Dynamics, Inc. 3,638,844 ------------ 3,638,844 ------------ LEISURE TIME: 0.71% 92,700 @ Nautilus Group, Inc. 3,388,185 ------------ 3,388,185 ------------ LODGING: 0.50% 142,800 @ Station Casinos, Inc. 2,377,620 ------------ 2,377,620 ------------ See Accompanying Notes to Financial Statements 85 ING SmallCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- MEDIA: 4.18% 306,000 @ Cumulus Media, Inc. $ 6,588,180 228,700 @ Lin TV Corp. 6,243,510 205,500 @ Radio One, Inc. 4,547,715 331,800 @ Regent Communications, Inc. 2,571,450 ------------ 19,950,855 ------------ METAL FABRICATE/HARDWARE: 0.89% 126,500 @ Shaw Group, Inc. 4,231,425 ------------ 4,231,425 ------------ MINING: 0.19% 52,000 @ Liquidmetal Technologies 923,000 ------------ 923,000 ------------ MISCELLANEOUS MANUFACTURING: 1.47% 60,700 @ Actuant Corp. 2,421,930 50,300 AO Smith Corp. 1,498,940 92,100 @ CoorsTek, Inc. 3,089,955 ------------ 7,010,825 ------------ OIL & GAS: 3.10% 62,500 @ Evergreen Resources, Inc. 2,793,750 232,200 @,@@ Precision Drilling Corp. 8,742,330 85,000 @ Spinnaker Exploration Co. 3,253,800 ------------ 14,789,880 ------------ OIL & GAS SERVICES: 5.84% 70,300 @ Cooper Cameron Corp. 3,955,781 483,600 @ Grant Prideco, Inc. 7,254,000 445,400 @ Horizon Offshore, Inc. 4,396,098 131,700 @ Lone Star Technologies 3,160,800 155,100 @ Newpark Resources 1,219,086 42,500 @ Smith Intl., Inc. 3,118,650 237,300 @ Varco Intl., Inc. 4,800,579 ------------ 27,904,994 ------------ PHARMACEUTICALS: 4.19% 72,100 @ Accredo Health, Inc. 3,889,074 43,700 @ Antigenics, Inc. 440,059 207,700 @ Eon Labs, Inc. 3,323,200 127,200 @ First Horizon Pharmaceutical Corp. 2,813,664 9,700 @ Neurocrine Biosciences, Inc. 314,571 110,200 @ Sangstat Medical Corp. 2,424,400 62,200 @ Scios, Inc. 1,570,550 107,600 @ Trimeris, Inc. 5,246,576 ------------ 20,022,094 ------------ RETAIL: 19.26% 86,500 @ AC Moore Arts & Crafts, Inc. 3,690,955 42,400 @ Advance Auto Parts 2,450,720 80,500 @ Aeropostale, Inc. 2,133,250 186,500 @ AnnTaylor Stores Corp. 5,311,520 200,500 @ Asbury Automotive Group, Inc. 3,909,750 347,000 @ Big Lots, Inc. 6,211,300 134,900 @ Chico's FAS, Inc. 5,162,623 62,900 @ Christopher & Banks Corp. 2,502,162 80,300 @ Circuit City Stores, Inc. 2,125,541 260,200 @ CSK Auto Corp. 4,160,598 135,600 @ Gart Sports Co. 4,240,212 169,800 @ Goody's Family Clothing, Inc. 1,726,866 261,500 @ Hollywood Entertainment Corp. 5,062,640 149,900 @ J Jill Group, Inc. 4,883,742 120,700 Landry's Restaurants, Inc. 3,065,780 139,900 @ Linens 'N Things, Inc. 4,294,930 67,000 @ Men's Wearhouse, Inc. 1,894,760 87,600 @ Movie Gallery, Inc. 1,568,040 224,800 @ Petco Animal Supplies, Inc. 5,745,888 315,200 @ Petsmart, Inc. 5,181,888 99,000 @ PF Chang's China Bistro, Inc. 3,249,180 167,200 Pier 1 Imports, Inc. 3,380,784 263,000 @ Restoration Hardware, Inc. 2,117,150 75,800 @ Too, Inc. 2,319,480 159,600 @ Urban Outfitters, Inc. 4,720,968 36,900 @ Wet Seal, Inc. 858,663 ------------ 91,969,390 ------------ SEMICONDUCTORS: 12.39% 161,800 @ Actel Corp. 3,980,280 226,100 @ Asyst Technologies, Inc. 3,843,700 103,400 @ ATMI, Inc. 2,755,610 277,400 @ August Technology Corp. 3,387,054 817,700 @ ChipPAC, Inc. 7,097,636 162,600 Cohu, Inc. 3,983,700 99,800 @ Exar Corp. 2,152,686 161,400 Helix Technology Corp. 3,817,110 197,100 @ Integrated Circuit Systems, Inc. 4,107,564 130,900 @ Kulicke & Soffa Industries, Inc. 1,911,140 237,400 @ Microsemi Corp. 3,449,422 148,100 @ MKS Instruments, Inc. 4,546,670 70,900 @ Mykrolis Corp. 957,150 110,600 @ Omnivision Technologies, Inc. 1,406,832 132,300 @ Power Integrations, Inc. 2,983,365 224,300 @ Silicon Laboratories, Inc. 5,356,284 48,900 @ Varian Semiconductor Equipment Associates, Inc. 1,945,731 60,900 @ Zoran Corp. 1,476,825 ------------ 59,158,759 ------------ SOFTWARE: 3.94% 247,500 @ Activision, Inc. 8,073,450 236,300 @ IDX Systems Corp. 4,194,325 82,500 @ Manugistics Group, Inc. 652,575 258,300 @ Per-Se Technologies, Inc. 2,789,640 103,400 @ Pinnacle Systems, Inc. 1,133,264 227,900 @ VitalWorks, Inc. 1,959,940 ------------ 18,803,194 ------------ TOYS/GAMES/HOBBIES: 0.63% 152,500 @ Racing Champions Ertl Corp. 3,016,450 ------------ 3,016,450 ------------ Total Common Stock (Cost $443,829,808) 461,094,249 ------------ See Accompanying Notes to Financial Statements 86 ING SmallCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT: 3.05% REPURCHASE AGREEMENT: 3.05% $14,579,000 State Street Bank Repurchase Agreement, dated 05/31/02, 1.680%, due 06/03/02, $14,581,041 to be received upon repurchase (Collateralized by $9,935,000 USTB, 13.250% Market Value $14,877,663, due 05/15/14) $ 14,579,000 ------------ Total Short-Term Investment (Cost $14,579,000) 14,579,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $458,408,808)* 99.63% $475,673,249 OTHER ASSETS AND LIABILITIES-NET 0.37% 1,761,675 ------ ------------ NET ASSETS 100.00% $477,434,924 ====== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $464,257,588. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 29,608,963 Gross Unrealized Depreciation (18,193,302) ------------ Net Unrealized Appreciation $ 11,415,661 ============ See Accompanying Notes to Financial Statements 87 ING Research Enhanced Index Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 99.40% ADVERTISING: 0.17% 2,450 Omnicom Group $ 211,606 ------------ 211,606 ------------ AEROSPACE/DEFENSE: 1.15% 2,600 General Dynamics Corp. 261,560 500 Goodrich Corp. 16,705 5,900 Lockheed Martin Corp. 366,095 1,550 Northrop Grumman Corp. 188,030 2,000 Raytheon Co. 88,400 2,150 Rockwell Collins, Inc. 55,900 6,000 United Technologies Corp. 413,220 ------------ 1,389,910 ------------ AGRICULTURE: 0.08% 2,450 UST, Inc. 93,909 ------------ 93,909 ------------ AIRLINES: 0.06% 3,950 Southwest Airlines Co. 67,269 ------------ 67,269 ------------ APPAREL: 0.31% 600 @ Jones Apparel Group, Inc. 23,916 1,600 Liz Claiborne, Inc. 49,008 3,450 Nike, Inc. 185,438 300 @ Reebok Intl. Ltd. 7,854 2,450 VF Corp. 104,125 ------------ 370,341 ------------ AUTO MANUFACTURERS: 0.81% 22,950 Ford Motor Co. 405,068 7,400 General Motors Corp. 459,910 800 Navistar Intl. Corp. 28,408 1,950 Paccar, Inc. 86,268 ------------ 979,654 ------------ AUTO PARTS & EQUIPMENT: 0.31% 1,000 Cooper Tire & Rubber Co. 22,840 1,850 Dana Corp. 39,442 7,250 Delphi Corp. 114,187 2,400 Goodyear Tire & Rubber Co. 52,608 2,400 TRW, Inc. 131,760 1,100 Visteon Corp. 17,325 ------------ 378,162 ------------ BANKS: 6.79% 5,750 AmSouth Bancorp 127,650 26,900 Bank of America Corp. 2,039,289 15,150 Bank One Corp. 615,545 5,600 BB&T Corp. 210,448 3,345 Charter One Financial, Inc. 121,089 2,350 Comerica, Inc. 150,635 2,950 Fifth Third Bancorp 192,251 1,600 First Tennessee National Corp. 62,320 13,100 FleetBoston Financial Corp. 461,644 3,700 Huntington Bancshares, Inc. 73,889 7,300 Keycorp 199,290 1,400 Marshall & Ilsley Corp. 86,926 5,550 Mellon Financial Corp. 205,905 8,550 National City Corp. 284,544 3,550 PNC Financial Services Group, Inc. 199,687 2,900 Regions Financial Corp. 104,545 5,000 SouthTrust Corp. 129,850 4,000 State Street Corp. 185,840 4,000 SunTrust Banks, Inc. 273,200 2,050 Union Planters Corp. 102,848 24,800 US Bancorp 586,520 17,250 Wachovia Corp. 661,883 21,450 Wells Fargo & Co. 1,123,980 500 Zions Bancorporation 27,535 ------------ 8,227,313 ------------ BEVERAGES: 3.16% 11,200 Anheuser-Busch Cos., Inc. 578,032 400 Brown-Forman Corp. 31,484 32,100 Coca-Cola Co. 1,783,476 5,750 Coca-Cola Enterprises, Inc. 125,062 600 Coors (Adolph) 40,044 3,400 Pepsi Bottling Group, Inc. 112,268 22,200 PepsiCo, Inc. 1,153,956 ------------ 3,824,322 ------------ BIOTECHNOLOGY: 0.79% 13,150 @ Amgen, Inc. 626,334 750 @ Biogen, Inc. 37,410 900 @ Chiron Corp. 32,580 2,850 @ Genzyme Corp. 91,286 6,850 @ Immunex Corp. 172,894 ------------ 960,504 ------------ BUILDING MATERIALS: 0.27% 1,000 @ American Standard Cos., Inc. 75,500 6,100 Masco Corp. 162,626 1,800 Vulcan Materials Co. 86,094 ------------ 324,220 ------------ CHEMICALS: 1.31% 3,050 Air Products & Chemicals, Inc. 152,958 1,400 Ashland, Inc. 53,186 4,500 Dow Chemical Co. (The) 150,030 13,050 Du Pont (E.I.) de Nemours & Co. 600,300 1,800 Ecolab, Inc. 85,824 1,850 Engelhard Corp. 57,572 1,600 International Flavors & Fragrances, Inc. 54,496 2,200 PPG Industries, Inc. 125,796 2,300 Praxair, Inc. 128,800 2,950 Rohm & Haas Co. 111,156 2,300 Sherwin-Williams Co. 72,680 ------------ 1,592,798 ------------ COMMERCIAL SERVICES: 0.85% 2,100 @ Apollo Group, Inc. 72,408 6,500 @ Concord EFS, Inc. 203,255 2,450 @ Convergys Corp. 64,288 1,300 Deluxe Corp. 58,812 1,700 Equifax, Inc. 46,971 2,450 H&R Block, Inc. 110,005 4,150 McKesson Corp. 155,625 2,200 Moody's Corp. 105,952 1,850 Paychex, Inc. 64,103 2,950 @ Quintiles Transnational Corp. 41,920 2,150 @ Robert Half Intl., Inc. 53,062 1,700 RR Donnelley & Sons Co. 49,011 ------------ 1,025,412 ------------ See Accompanying Notes to Financial Statements 88 ING Research Enhanced Index Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMPUTERS: 4.34% 4,300 @ Apple Computer, Inc. $ 100,190 2,300 @ Computer Sciences Corp. 108,951 57,050 @ Dell Computer Corp. 1,531,792 6,000 Electronic Data Systems Corp. 316,920 27,400 @ EMC Corp.-Mass. 198,650 37,387 Hewlett-Packard Co. 713,718 22,050 International Business Machines Corp. 1,773,922 1,700 @ Lexmark Intl., Inc. 106,165 4,300 @ Network Appliance, Inc. 55,943 18,700 @,@@ Seagate Technology, Inc. 1,496 41,300 @ Sun Microsystems, Inc. 284,557 1,700 @ Unisys Corp. 19,448 2,050 @ Veritas Software Corp. 46,473 ------------ 5,258,225 ------------ COSMETICS/PERSONAL CARE: 3.43% 400 Alberto-Culver Co. 21,188 3,350 Avon Products, Inc. 177,383 7,500 Colgate-Palmolive Co. 406,500 18,100 Gillette Co. 643,817 6,550 Kimberly-Clark Corp. 425,226 27,700 Procter & Gamble Co. 2,480,535 ------------ 4,154,649 ------------ DISTRIBUTION/WHOLESALE: 0.14% 2,300 Genuine Parts Co. 84,065 1,600 WW Grainger, Inc. 84,128 ------------ 168,193 ------------ DIVERSIFIED FINANCIAL SERVICES: 7.66% 16,850 American Express Co. 716,294 2,100 Bear Stearns Cos., Inc. 126,105 2,950 Capital One Financial Corp. 184,198 64,900 Citigroup, Inc. 2,802,382 2,200 Countrywide Credit Ind., Inc. 108,482 21,300 Fannie Mae 1,704,213 11,800 Freddie Mac 773,490 7,900 Household Intl., Inc. 404,085 25,600 JP Morgan Chase & Co. 920,320 3,200 Lehman Brothers Holdings, Inc. 195,200 10,650 MBNA Corp. 385,637 10,900 Merrill Lynch & Co., Inc. 443,739 5,600 Morgan Stanley Dean Witter & Co. 254,576 2,250 SLM Corp. 217,080 1,100 Stilwell Financial, Inc. 23,760 600 T Rowe Price Group, Inc. 21,666 ------------ 9,281,227 ------------ ELECTRIC: 2.60% 3,100 @ AES Corp. 20,305 1,600 Allegheny Energy, Inc. 57,488 4,500 American Electric Power Co., Inc. 192,285 2,400 Cinergy Corp. 87,480 2,800 Consolidated Edison, Inc. 122,556 2,200 Constellation Energy Group, Inc. 66,594 3,700 Dominion Resources, Inc. 239,686 2,050 DTE Energy Co. 95,940 10,350 Duke Energy Corp. 331,303 4,800 @ Edison Intl. 89,568 2,700 Entergy Corp. 118,746 1,700 Exelon Corp. 90,933 4,100 FirstEnergy Corp. 141,491 2,500 FPL Group, Inc. 157,475 7,050 @ Mirant Corp. 66,975 2,850 NiSource, Inc. 69,055 6,900 @ PG&E Corp. 148,350 1,500 Pinnacle West Capital Corp. 60,165 800 PPL Corp. 28,312 2,850 Progress Energy, Inc. 147,773 2,850 Public Service Enterprise Group, Inc. 129,048 7,000 Reliant Energy, Inc. 119,070 8,750 Southern Co. 236,250 2,150 TECO Energy, Inc. 53,535 3,350 TXU Corp. 171,955 4,900 XCEL Energy, Inc. 105,301 ------------ 3,147,639 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 0.34% 1,050 @ American Power Conversion 14,658 5,200 Emerson Electric Co. 300,820 2,600 Molex, Inc. 98,150 ------------ 413,628 ------------ See Accompanying Notes to Financial Statements 89 ING Research Enhanced Index Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- ELECTRONICS: 0.65% 6,200 @ Agilent Technologies, Inc. $ 163,494 3,050 Applera Corp. -- Applied Biosystems Group 55,510 3,550 @ Jabil Circuit, Inc. 81,508 1,250 Johnson Controls, Inc. 110,075 1,500 Parker Hannifin Corp. 73,500 6,150 @ Sanmina Corp. 70,725 13,850 @ Solectron Corp. 111,908 1,500 @ Tektronix, Inc. 30,420 2,100 @ Thermo Electron Corp. 38,556 1,900 @ Waters Corp. 50,654 ------------ 786,350 ------------ ENGINEERING & CONSTRUCTION: 0.03% 1,000 Fluor Corp. 37,600 ------------ 37,600 ------------ ENTERTAINMENT: 0.04% 750 @ International Game Technology 46,875 ------------ 46,875 ------------ ENVIRONMENTAL CONTROL: 0.22% 3,200 @ Allied Waste Industries, Inc. 35,840 8,600 Waste Management, Inc. 236,070 ------------ 271,910 ------------ FOOD: 2.12% 5,350 Albertson's, Inc. 188,159 9,560 Archer-Daniels-Midland Co. 139,098 2,000 Campbell Soup Co. 56,500 6,900 Conagra Foods, Inc. 169,809 5,000 General Mills, Inc. 227,500 1,750 Hershey Foods Corp. 116,778 4,300 HJ Heinz Co. 174,709 5,050 Kellogg Co. 185,335 10,250 @ Kroger Co. 229,088 2,800 @ Safeway, Inc. 113,820 10,900 Sara Lee Corp. 229,772 2,200 Supervalu, Inc. 66,396 6,650 Sysco Corp. 185,203 7,400 @@ Unilever NV ADR 484,848 ------------ 2,567,015 ------------ FOREST PRODUCTS & PAPER: 0.46% 500 Boise Cascade Corp. 17,790 2,800 Georgia-Pacific Corp. 74,732 6,700 International Paper Co. 288,770 2,400 Plum Creek Timber Co., Inc. 72,888 450 Temple-Inland, Inc. 25,056 1,200 Weyerhaeuser Co. 78,600 ------------ 557,836 ------------ GAS: 0.16% 1,700 KeySpan Corp. 64,362 550 Nicor, Inc. 26,433 550 Peoples Energy Corp. 21,659 3,250 Sempra Energy 81,282 ------------ 193,736 ------------ HAND/MACHINE TOOLS: 0.09% 1,000 Black & Decker Corp. 47,790 500 Snap-On, Inc. 15,800 1,150 Stanley Works 48,967 ------------ 112,557 ------------ HEALTHCARE-PRODUCTS: 4.03% 1,000 Bausch & Lomb, Inc. 37,770 5,650 Becton Dickinson & Co. 212,440 1,350 Biomet, Inc. 38,111 5,700 @ Boston Scientific Corp. 158,745 900 CR Bard, Inc. 49,590 4,300 @ Guidant Corp. 172,000 52,100 Johnson & Johnson 3,196,335 15,350 Medtronic, Inc. 708,402 1,900 @ St. Jude Medical, Inc. 160,360 1,050 Stryker Corp. 57,288 2,600 @ Zimmer Holdings, Inc. 90,948 ------------ 4,881,989 ------------ HEALTHCARE-SERVICES: 1.45% 2,000 Aetna, Inc. 95,700 6,400 HCA, Inc. 314,432 1,700 @ Health Management Associates, Inc. 35,003 6,100 @ Healthsouth Corp. 86,315 2,400 @ Humana, Inc. 36,528 1,200 @ Manor Care, Inc. 31,080 4,400 @ Tenet Healthcare Corp. 327,800 6,650 UnitedHealth Group, Inc. 603,820 3,050 @ Wellpoint Health Networks 226,188 ------------ 1,756,866 ------------ HOME BUILDERS: 0.04% 1,000 KB Home 51,530 ------------ 51,530 ------------ HOME FURNISHINGS: 0.16% 3,100 Leggett & Platt, Inc. 81,592 800 Maytag Corp. 35,832 1,150 Whirlpool Corp. 82,110 ------------ 199,534 ------------ HOUSEHOLD PRODUCTS/ WARES: 0.34% 1,500 Avery Dennison Corp. 98,055 3,800 Clorox Co. 174,040 2,500 Fortune Brands, Inc. 134,125 ------------ 406,220 ------------ HOUSEWARES: 0.09% 3,300 Newell Rubbermaid, Inc. 112,695 ------------ 112,695 ------------ INSURANCE: 4.65% 3,350 @@ ACE Ltd. 115,943 2,600 Aflac, Inc. 83,616 9,250 Allstate Corp. 355,940 1,450 AMBAC Financial Group, Inc. 97,672 32,924 American Intl. Group 2,204,920 3,550 AON Corp. 118,676 2,350 Chubb Corp. 176,626 1,850 Cigna Corp. 196,193 1,950 Cincinnati Financial Corp. 88,491 3,200 Hartford Financial Services Group, Inc. 211,200 2,200 Jefferson-Pilot Corp. 104,742 3,850 John Hancock Financial Services, Inc. 141,257 2,300 Lincoln National Corp. 103,086 3,750 Marsh & McLennan Cos., Inc. 378,375 2,150 MBIA, Inc. 120,636 9,600 Metlife, Inc. 319,008 1,350 MGIC Investment Corp. 98,253 3,800 Progressive Corp. 224,998 2,000 Safeco Corp. 63,980 2,600 St. Paul Cos. 110,786 1,800 Torchmark Corp. 72,648 3,600 UnumProvident Corp. 91,080 1,750 @@ XL Capital Ltd. 154,910 ------------ 5,633,036 ------------ See Accompanying Notes to Financial Statements 90 ING Research Enhanced Index Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- INTERNET: 0.13% 1,300 @ TMP Worldwide, Inc. $ 35,113 7,700 @ Yahoo, Inc. 123,354 ------------ 158,467 ------------ IRON/STEEL: 0.06% 1,100 Nucor Corp. 73,337 ------------ 73,337 ------------ LEISURE TIME: 0.26% 1,400 Brunswick Corp. 37,240 3,950 Harley-Davidson, Inc. 207,691 1,750 @ Sabre Holdings Corp. 68,950 ------------ 313,881 ------------ LODGING: 0.34% 2,600 @ Harrah's Entertainment, Inc. 123,890 4,100 Hilton Hotels Corp. 58,220 3,100 Marriott Intl., Inc. 125,364 3,100 Starwood Hotels & Resorts Worldwide, Inc. 109,709 ------------ 417,183 ------------ MACHINERY-DIVERSIFIED: 0.26% 3,250 Deere & Co. 152,750 2,750 Dover Corp. 97,873 2,800 Rockwell Automation, Inc. 61,432 ------------ 312,055 ------------ MEDIA: 2.70% 22,300 @ AOL Time Warner, Inc. 417,010 7,400 @ Clear Channel Communications, Inc. 393,902 11,850 @ Comcast Corp. 333,696 500 Dow Jones & Co., Inc. 27,525 3,500 Gannett Co., Inc. 265,300 1,150 Knight-Ridder, Inc. 75,705 2,700 McGraw-Hill Cos., Inc. 170,451 2,200 New York Times Co. 110,594 3,700 Tribune Co. 157,287 22,200 @ Viacom, Inc. 1,086,912 10,300 Walt Disney Co. 235,973 ------------ 3,274,355 ------------ MINING: 0.69% 4,250 @@ Alcan, Inc. 161,925 10,800 Alcoa, Inc. 377,784 800 @,@@ Inco Ltd. 18,128 5,150 Newmont Mining Corp. 160,731 1,400 Phelps Dodge Corp. 54,614 4,300 @@ Placer Dome, Inc. 58,480 ------------ 831,662 ------------ MISCELLANEOUS MANUFACTURING: 5.50% 8,450 3M Co. 1,059,884 1,350 Cooper Industries Ltd. 58,550 1,000 Crane Co. 27,730 2,000 Danaher Corp. 139,240 4,350 Eastman Kodak Co. 144,725 1,450 Eaton Corp. 117,189 124,900 General Electric Co. 3,889,386 4,100 Honeywell Intl., Inc. 160,720 4,200 Illinois Tool Works, Inc. 298,326 850 @@ Ingersoll-Rand Co. 42,798 1,100 ITT Industries, Inc. 73,700 1,750 Textron, Inc. 82,110 25,900 @@ Tyco Intl. Ltd. 568,505 ------------ 6,662,863 ------------ OFFICE/BUSINESS EQUIPMENT: 0.17% 3,200 Pitney Bowes, Inc. 131,040 8,650 Xerox Corp. 77,591 ------------ 208,631 ------------ OIL & GAS: 5.71% 1,150 Amerada Hess Corp. 94,587 2,300 Apache Corp. 128,064 1,050 Burlington Resources, Inc. 42,630 17,391 ChevronTexaco Corp. 1,517,365 8,750 Conoco, Inc. 235,200 2,100 Devon Energy Corp. 109,725 850 EOG Resources, Inc. 34,850 44,350 Exxon Mobil Corp. 1,770,895 5,900 Marathon Oil Corp. 161,778 1,800 @ Noble Corp. 77,076 6,350 Occidental Petroleum Corp. 189,611 4,990 Phillips Petroleum Co. 287,175 34,550 @@ Royal Dutch Petroleum Co. ADR 1,900,250 1,700 Sunoco, Inc. 60,452 4,700 Transocean, Inc. 179,399 3,600 Unocal Corp. 132,552 ------------ 6,921,609 ------------ OIL & GAS SERVICES: 0.10% 2,000 @ BJ Services Co. 75,040 2,300 Halliburton Co. 42,665 ------------ 117,705 ------------ PACKAGING & CONTAINERS: 0.15% 800 Ball Corp. 33,264 950 Bemis Co. 47,405 3,350 @ Pactiv Corp. 77,619 500 @ Sealed Air Corp. 22,375 ------------ 180,663 ------------ See Accompanying Notes to Financial Statements 91 ING Research Enhanced Index Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- PHARMACEUTICALS: 7.52% 19,750 Abbott Laboratories $ 938,125 1,850 Allergan, Inc. 116,735 100 AmerisourceBergen Corp. 7,709 24,600 Bristol-Myers Squibb Co. 765,552 14,200 Eli Lilly & Co. 918,740 2,300 @ Forest Laboratories, Inc. 169,809 3,500 @ King Pharmaceuticals, Inc. 94,675 3,700 @ Medimmune, Inc. 120,324 28,750 Merck & Co., Inc. 1,641,625 79,100 Pfizer, Inc. 2,736,860 16,400 Pharmacia Corp. 708,316 18,250 Schering-Plough Corp. 482,712 1,500 @ Watson Pharmaceuticals, Inc. 39,000 6,600 Wyeth 366,300 ------------ 9,106,482 ------------ PIPELINES: 0.31% 5,000 Dynegy, Inc. 44,450 6,850 EL Paso Corp. 175,703 1,550 Kinder Morgan, Inc. 67,037 6,400 Williams Cos., Inc. 90,880 ------------ 378,070 ------------ REITS: 0.23% 5,700 Equity Office Properties Trust 171,798 3,550 Equity Residential 102,737 ------------ 274,535 ------------ RETAIL: 8.01% 1,350 @ Autozone, Inc. 110,498 3,550 @ Bed Bath & Beyond, Inc. 121,765 5,500 @ Best Buy Co., Inc. 254,100 5,400 Circuit City Stores, Inc. 123,714 6,100 @ Costco Wholesale Corp. 239,547 2,050 Darden Restaurants, Inc. 51,516 4,700 Dollar General Corp. 80,793 2,400 Family Dollar Stores 86,400 2,500 @ Federated Department Stores 103,525 11,550 Gap, Inc. (The) 168,283 39,800 Home Depot, Inc. 1,659,262 5,550 JC Penney Co, Inc. 135,753 4,300 @ Kohl's Corp. 322,500 13,150 Lowe's Cos., Inc. 620,154 11,400 Ltd. Brands 239,286 4,100 May Department Stores Co. 144,238 16,550 McDonald's Corp. 495,507 7,550 @ Office Depot, Inc. 138,014 3,800 RadioShack Corp. 130,112 4,400 Sears Roebuck and Co. 259,820 6,600 @ Staples, Inc. 139,128 5,250 @ Starbucks Corp. 127,470 11,400 Target Corp. 472,530 1,900 Tiffany & Co. 71,250 7,200 TJX Cos., Inc. 151,848 56,950 Wal-Mart Stores, Inc. 3,080,995 1,000 Wendy's Intl., Inc. 37,970 2,050 @ Yum! Brands, Inc. 130,995 ------------ 9,696,973 ------------ SAVINGS & LOANS: 0.68% 2,600 Golden West Financial Corp. 181,896 16,500 Washington Mutual, Inc. 641,355 ------------ 823,251 ------------ SEMICONDUCTORS: 4.19% 2,000 @ Altera Corp. 36,060 4,950 @ Analog Devices, Inc. 181,269 21,100 @ Applied Materials, Inc. 467,998 4,000 @ Applied Micro Circuits Corp. 24,600 3,600 @ Broadcom Corp. 81,180 3,500 @ Conexant Systems, Inc. 25,025 83,800 Intel Corp. 2,314,556 2,600 @ Kla-Tencor Corp. 135,538 6,950 Linear Technology Corp. 258,888 3,350 @ LSI Logic Corp. 38,190 4,150 @ Maxim Integrated Products 190,900 2,000 @ National Semiconductor Corp. 61,400 2,000 @ Novellus Systems, Inc. 84,960 1,900 @ Nvidia Corp. 63,574 2,500 @ PMC - Sierra, Inc. 35,550 1,350 @ QLogic Corp. 61,722 950 @ Teradyne, Inc. 25,726 29,300 Texas Instruments, Inc. 840,031 4,350 @ Xilinx, Inc. 153,381 ------------ 5,080,548 ------------ SOFTWARE: 4.96% 3,000 Adobe Systems, Inc. 108,300 2,000 Autodesk, Inc. 27,000 8,300 Automatic Data Processing 430,936 3,050 @ BMC Software, Inc. 51,576 2,600 @ Citrix Systems, Inc. 27,742 7,600 Computer Associates Intl., Inc. 131,936 4,650 @ Compuware Corp. 34,271 5,050 First Data Corp. 399,960 2,800 @ Fiserv, Inc. 119,112 1,500 IMS Health, Inc. 31,575 3,050 @ Intuit, Inc. 133,376 1,000 @ Mercury Interactive Corp. 33,860 67,550 @ Microsoft Corp. 3,438,970 95,600 @ Oracle Corp. 755,240 6,950 @ Peoplesoft, Inc. 142,683 2,450 @ Rational Software Corp. 27,881 6,100 @ Siebel Systems, Inc. 111,325 ------------ 6,005,743 ------------ See Accompanying Notes to Financial Statements 92 ING Research Enhanced Index Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 6.92% 3,800 Alltel Corp. $ 195,662 1,350 @ Andrew Corp. 23,260 47,050 AT&T Corp. 563,188 35,886 @ AT&T Wireless Services, Inc. 291,035 24,900 BellSouth Corp. 828,672 2,100 CenturyTel, Inc. 65,100 155,300 @ Cisco Systems, Inc. 2,450,634 2,200 @ Citizens Communications Co. 20,680 2,850 @ Comverse Technology, Inc. 33,773 17,550 @ JDS Uniphase Corp. 61,601 27,550 Motorola, Inc. 440,524 3,850 @ Qualcomm, Inc. 121,814 42,200 SBC Communications, Inc. 1,447,038 2,600 Scientific-Atlanta, Inc. 50,570 12,750 Sprint Corp.-FON Group 209,737 5,500 @ Sprint Corp.-PCS Group 57,420 5,300 @ Tellabs, Inc. 51,198 34,250 Verizon Communications, Inc. 1,472,750 ------------ 8,384,656 ------------ TEXTILES: 0.11% 2,500 Cintas Corp. 130,525 ------------ 130,525 ------------ TOBACCO: 0.52% 10,950 Philip Morris Cos., Inc. 626,888 ------------ 626,888 ------------ TOYS/GAMES/HOBBIES: 0.20% 2,000 Hasbro, Inc. 30,600 9,800 Mattel, Inc. 208,152 ------------ 238,752 ------------ TRANSPORTATION: 0.58% 5,000 Burlington Northern Santa Fe Corp. 141,500 3,050 CSX Corp. 104,920 4,000 FedEx Corp. 215,800 1,900 Norfolk Southern Corp. 40,223 3,300 Union Pacific Corp. 202,092 ------------ 704,535 ------------ Total Common Stock (Cost $123,702,275) 120,408,099 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $ 123,702,275)* 99.40% $120,408,099 OTHER ASSETS AND LIABILITIES-NET 0.60% 723,870 ------- ------------ NET ASSETS 100.00% $121,131,969 ======= ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is $139,000,359. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 5,901,347 Gross Unrealized Depreciation (24,493,607) ------------ Net Unrealized Depreciation $(18,592,260) ============ See Accompanying Notes to Financial Statements 93 ING Large Company Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 88.75% BANKS: 1.35% 102,600 US Banorp $ 2,426,490 ------------ 2,426,490 ------------ BEVERAGES: 1.37% 44,400 Coca-Cola Co. 2,466,864 ------------ 2,466,864 ------------ COMMERCIAL SERVICES: 1.00% 98,400 @ Cendant Corp. 1,798,752 ------------ 1,798,752 ------------ COMPUTERS: 2.02% 190,174 Hewlett-Packard Co. 3,630,422 ------------ 3,630,422 ------------ COSMETICS/PERSONAL CARE: 1.37% 38,100 Kimberly-Clark Corp. 2,473,452 ------------ 2,473,452 ------------ ELECTRIC: 7.69% 50,700 Duke Energy Corp. 1,622,907 33,900 FPL Group, Inc. 2,135,361 275,200 @ Reliant Resources, Inc. 2,600,640 153,300 TECO Energy, Inc. 3,817,170 39,700 TXU Corp. 2,037,801 76,300 XCEL Energy, Inc. 1,639,687 ------------ 13,853,566 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 1.20% 37,300 Emerson Electric Co. 2,157,805 ------------ 2,157,805 ------------ FOOD: 3.34% 159,800 @ Kroger Co. 3,571,530 116,200 Sara Lee Corp. 2,449,496 ------------ 6,021,026 ------------ FOREST PRODUCTS & PAPER: 4.24% 35,700 Bowater, Inc. 1,869,966 49,100 Intl. Paper Co. 2,116,210 65,500 Temple-Inland, Inc. 3,647,040 ------------ 7,633,216 ------------ HEALTHCARE-PRODUCTS: 1.86% 89,100 Becton Dickinson & Co. 3,350,160 ------------ 3,350,160 ------------ HEALTHCARE-SERVICES: 1.71% 41,600 @ Wellpoint Health Networks 3,085,056 ------------ 3,085,056 ------------ INSURANCE: 15.89% 60,600 Allstate Corp. 2,331,888 30,100 Chubb Corp. 2,262,316 53,300 Cigna Corp. 5,652,465 57,100 Jefferson-Pilot Corp. 2,718,531 63,700 Lincoln National Corp. 2,855,034 57,400 Loews Corp. 3,277,540 74,700 Old Republic Intl. Corp. 2,480,040 32,000 @ Principal Financial Group 972,800 101,800 St. Paul Cos. 4,337,698 98,600 @ Travelers Property Casualty Corp. 1,730,430 ------------ 28,618,742 ------------ MACHINERY-CONSTRUCTION & MINING: 1.24% 42,700 Caterpillar, Inc. 2,231,929 ------------ 2,231,929 ------------ MINING: 2.92% 101,400 Alcoa, Inc. 3,546,972 87,100 @ Freeport-McMoRan Copper & Gold, Inc. 1,720,225 ------------ 5,267,197 ------------ MISCELLANEOUS MANUFACTURING: 4.73% 178,500 Honeywell Intl., Inc. 6,997,200 69,255 @@ Tyco Intl. Ltd. 1,520,147 ------------ 8,517,347 ------------ OIL & GAS: 10.81% 25,300 Amerada Hess Corp. 2,080,925 35,600 Anadarko Petroleum Corp. 1,806,700 41,580 Apache Corp. 2,315,174 23,400 ChevronTexaco Corp. 2,041,650 105,200 Diamond Offshore Drilling 3,548,396 33,800 Kerr-McGee Corp. 1,963,442 128,400 Marathon Oil Corp. 3,520,728 38,100 Phillips Petroleum Co. 2,192,655 ------------ 19,469,670 ------------ PHARMACEUTICALS: 5.84% 122,700 Bristol-Myers Squibb Co. 3,818,424 63,500 @ IVAX Corp. 830,580 66,100 Merck & Co, Inc. 3,774,310 48,700 Pharmacia Corp. 2,103,353 ------------ 10,526,667 ------------ PIPELINES: 2.16% 125,300 Dynegy, Inc. 1,113,917 108,100 EL Paso Corp. 2,772,765 ------------ 3,886,682 ------------ RETAIL: 6.21% 69,000 CVS Corp. 2,210,070 64,300 May Department Stores Co. 2,262,074 136,900 McDonald's Corp. 4,098,786 76,100 RadioShack Corp. 2,605,664 ------------ 11,176,594 ------------ SAVINGS & LOANS: 1.21% 56,200 Washington Mutual, Inc. 2,184,494 ------------ 2,184,494 ------------ SEMICONDUCTORS: 1.74% 119,200 @ Advanced Micro Devices, Inc. 1,362,456 156,100 @ LSI Logic Corp. 1,779,540 ------------ 3,141,996 ------------ TELECOMMUNICATIONS: 6.45% 164,800 @ 3Com Corp. 916,288 219,400 @ ADC Telecommunications, Inc. 734,990 363,386 @ AT&T Wireless Services, Inc. 2,947,061 318,400 @ Tellabs, Inc. 3,075,744 91,600 Verizon Communications, Inc. 3,938,800 ------------ 11,612,883 ------------ TOBACCO: 2.40% 75,415 Philip Morris Cos., Inc. 4,317,509 ------------ 4,317,509 ------------ Total Common Stock (Cost $165,465,867) 159,848,519 ------------ See Accompanying Notes to Financial Statements 94 ING Large Company Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 11.34% U.S GOVERNMENT AGENCY: 5.00% $ 9,000,000 FHLB Discount Note, 1.700%, due 06/03/02 $ 8,999,150 ------------ 8,999,150 ------------ U.S. TREASURY OBLIGATIONS: 4.69% 8,500,000 U.S. Treasury Bill, 1.965%, due 10/10/02 8,440,923 ------------ 8,440,923 ------------ REPURCHASE AGREEMENT: 1.65% 2,990,000 State Street Bank Repurchase Agreement, 1.680%, due 06/03/02, $2,990,419 to be received upon repurchase (Collateralized by USTN, 4.625%, Market Value $3,052,500, due 05/15/14) 2,990,000 ------------ Total Short-Term Investments (Cost $20,430,073) 20,430,073 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $ 185,895,940)* 100.09% $180,278,592 OTHER ASSETS AND LIABILITIES-NET -0.09% (157,294) ------- ------------ NET ASSETS 100.00% $180,121,298 ======= ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $187,224,050. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 10,995,778 Gross Unrealized Depreciation (17,941,237) ------------ Net Unrealized Depreciation $ (6,945,459) ============ See Accompanying Notes to Financial Statements 95 ING MagnaCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 90.28% BANKS: 1.46% 198,600 US Bancorp $ 4,696,890 ------------ 4,696,890 ------------ BEVERAGES: 1.44% 83,400 Coca-Cola Co. 4,633,704 ------------ 4,633,704 ------------ CHEMICALS: 1.49% 83,500 PPG Industries, Inc. 4,774,530 ------------ 4,774,530 ------------ COMMERCIAL SERVICES: 1.01% 178,200 @ Cendant Corp. 3,257,496 ------------ 3,257,496 ------------ COMPUTERS: 3.14% 207,500 @ EMC Corp.-Mass. 1,504,375 449,882 Hewlett-Packard Co. 8,588,247 ------------ 10,092,622 ------------ COSMETICS/PERSONAL CARE: 1.47% 72,800 Kimberly-Clark Corp. 4,726,176 ------------ 4,726,176 ------------ ELECTRIC: 11.05% 90,400 Duke Energy Corp. 2,893,704 150,000 Entergy Corp. 6,597,000 498,400 @ Reliant Resources, Inc. 4,709,880 420,900 Southern Co. 11,364,300 281,100 TECO Energy, Inc. 6,999,390 137,400 XCEL Energy, Inc. 2,952,726 ------------ 35,517,000 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 1.28% 71,000 Emerson Electric Co. 4,107,350 ------------ 4,107,350 ------------ FOOD: 1.59% 10,800 @ Safeway, Inc. 439,020 221,700 Sara Lee Corp. 4,673,436 ------------ 5,112,456 ------------ FOREST PRODUCTS & PAPER: 2.33% 64,800 Bowater, Inc. 3,394,224 95,000 International Paper Co. 4,094,500 ------------ 7,488,724 ------------ HEALTHCARE-SERVICES: 1.83% 79,400 @ Wellpoint Health Networks 5,888,304 ------------ 5,888,304 ------------ INSURANCE: 15.83% 113,800 Allstate Corp. 4,379,024 56,600 Chubb Corp. 4,254,056 100,400 Cigna Corp. 10,647,420 250,000 Jefferson-Pilot Corp. 11,902,500 109,300 Loews Corp. 6,241,030 142,500 Old Republic Intl. Corp. 4,731,000 60,200 @ Principal Financial Group 1,830,080 90,300 St. Paul Cos. 3,847,683 175,500 @ Travelers Property Casualty Corp. 3,080,025 ------------ 50,912,818 ------------ MINING: 4.36% 308,800 Alcoa, Inc. 10,801,824 163,700 @ Freeport-McMoRan Copper & Gold, Inc. 3,233,075 ------------ 14,034,899 ------------ MISCELLANEOUS MANUFACTURING: 5.00% 339,400 Honeywell Intl., Inc. 13,304,480 125,722 @@ Tyco Intl. Ltd. 2,759,598 ------------ 16,064,078 ------------ OIL & GAS: 9.35% 48,000 Amerada Hess Corp. 3,948,000 66,900 Anadarko Petroleum Corp. 3,395,175 76,560 Apache Corp. 4,262,861 44,600 ChevronTexaco Corp. 3,891,350 200,000 Conoco, Inc. 5,376,000 13,200 Exxon Mobil Corp. 527,076 23,000 GlobalSantaFe Corp. 776,250 64,100 Kerr-McGee Corp. 3,723,569 72,500 Phillips Petroleum Co. 4,172,375 ------------ 30,072,656 ------------ OIL & GAS SERVICES: 1.76% 304,700 Halliburton Co. 5,652,185 ------------ 5,652,185 ------------ PHARMACEUTICALS: 6.21% 219,900 Bristol-Myers Squibb Co. 6,843,288 114,500 @ IVAX Corp. 1,497,660 121,600 Merck & Co., Inc. 6,943,360 19,500 Pfizer, Inc. 674,700 92,700 Pharmacia Corp. 4,003,713 ------------ 19,962,721 ------------ PIPELINES: 2.15% 222,900 Dynegy, Inc. 1,981,581 192,400 EL Paso Corp. 4,935,060 ------------ 6,916,641 ------------ RETAIL: 6.56% 125,500 CVS Corp. 4,019,765 122,800 May Department Stores Co. 4,320,104 259,400 McDonald's Corp. 7,766,436 145,300 RadioShack Corp. 4,975,072 ------------ 21,081,377 ------------ SAVINGS & LOANS: 1.24% 102,500 Washington Mutual, Inc. 3,984,175 ------------ 3,984,175 ------------ SEMICONDUCTORS: 0.85% 240,000 @ Advanced Micro Devices, Inc. 2,743,200 ------------ 2,743,200 ------------ TELECOMMUNICATIONS: 6.47% 303,500 @ 3Com Corp. 1,687,460 412,800 @ ADC Telecommunications, Inc. 1,382,880 647,000 @ AT&T Wireless Services, Inc. 5,247,170 566,600 @ Tellabs, Inc. 5,473,356 163,000 Verizon Communications, Inc. 7,009,000 ------------ 20,799,866 ------------ TOBACCO: 2.41% 135,400 Philip Morris Cos., Inc. 7,751,650 ------------ 7,751,650 ------------ Total Common Stock (Cost $318,328,778) 290,271,518 ------------ See Accompanying Notes to Financial Statements 96 ING MagnaCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT: 9.80% REPURCHASE AGREEMENT: 9.80% $31,521,000 State Street Bank Repurchase Agreement dated 05/31/02, 1.680%, due 06/03/02, $31,525,413 to be received upon repurchase (Collateralized by $21,205,000 U.S. Treasury Bonds, 10.625%, Due 08/15/15, Market Value $32,156,174) $ 31,521,000 ------------ Total Short-Term Investment (Cost $31,521,000) 31,521,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $ 349,849,778)* 100.08% $321,792,518 OTHER ASSETS AND LIABILITIES-NET -0.08% (242,358) ------- ------------ NET ASSETS 100.00% $321,550,160 ======= ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 28,309,577 Gross Unrealized Depreciation (56,366,837) ------------ Net Unrealized Depreciation $(28,057,260) ============ See Accompanying Notes to Financial Statements 97 ING MidCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 93.39% AGRICULTURE: 5.52% 31,440 Loews Corp. $ 1,013,940 9,350 RJ Reynolds Tobacco Holdings, Inc. 661,045 23,640 UST, Inc. 906,121 ------------ 2,581,106 ------------ AIRLINES: 4.79% 62,780 @ AMR Corp. 1,315,241 35,300 Delta Air Lines, Inc. 926,625 ------------ 2,241,866 ------------ APPAREL: 3.63% 31,000 @ Reebok Intl. Ltd. 811,580 58,380 @@,@ Tommy Hilfiger Corp. 888,544 ------------ 1,700,124 ------------ AUTO PARTS & EQUIPMENT: 4.98% 79,010 Goodyear Tire & Rubber Co. 1,731,899 38,000 Visteon Corp. 598,500 ------------ 2,330,399 ------------ BUILDING MATERIALS: 1.45% 19,190 York Intl. Corp. 680,286 ------------ 680,286 ------------ CHEMICALS: 8.85% 29,190 @ Cytec Industries, Inc. 904,598 43,430 Great Lakes Chemical Corp. 1,103,991 18,010 Lubrizol Corp. 630,530 45,020 PolyOne Corp. 521,332 30,970 Sherwin-Williams Co. 978,652 ------------ 4,139,103 ------------ COAL: 3.13% 111,640 Massey Energy Co. 1,462,484 ------------ 1,462,484 ------------ COMMERCIAL SERVICES: 3.15% 355,830 @ Service Corp. Intl. 1,473,136 ------------ 1,473,136 ------------ COMPUTERS: 4.90% 26,850 @ NCR Corp. 981,368 114,490 @ Unisys Corp. 1,309,766 ------------ 2,291,134 ------------ ELECTRIC: 7.55% 39,680 Alliant Energy Corp. 1,091,994 31,920 @ Edison Intl. 595,627 19,500 Energy East Corp. 450,450 50,000 @ Mirant Corp. 475,000 14,000 PPL Corp. 495,460 60,740 Sierra Pacific Resources 423,358 ------------ 3,531,889 ------------ ELECTRICAL EQUIPMENT: 2.09% 26,460 Hubbell, Inc. 977,697 ------------ 977,697 ------------ FOOD: 3.40% 19,250 Sensient Technologies Corp. 459,498 61,500 @ Smithfield Foods, Inc. 1,131,600 ------------ 1,591,098 ------------ GAS: 1.09% 20,470 Sempra Energy 511,955 ------------ 511,955 ------------ HOUSEHOLD PRODUCTS/WARES: 3.40% 47,180 American Greetings 975,211 27,810 Tupperware Corp. 615,435 ------------ 1,590,646 ------------ INSURANCE: 12.33% 3,327 @ Alleghany Corp. 618,323 20,050 Allmerica Financial Corp. 973,428 7,560 American National Insurance 762,124 32,880 @ CNA Financial Corp. 874,608 17,030 Mony Group, Inc. 592,303 64,770 Phoenix Cos., Inc. 1,165,860 24,800 Safeco Corp. 793,352 ------------ 5,779,998 ------------ IRON/STEEL: 2.39% 54,450 United States Steel Corp. 1,118,403 ------------ 1,118,403 ------------ OFFICE/BUSINESS EQUIPMENT: 3.79% 197,960 Xerox Corp. 1,775,701 ------------ 1,775,701 ------------ PIPELINES: 2.81% 52,700 Aquila, Inc. 682,465 71,070 Dynegy, Inc. 631,812 ------------ 1,314,277 ------------ RETAIL: 3.95% 101,190 @ Toys R US, Inc. 1,846,718 ------------ 1,846,718 ------------ TELECOMMUNICATIONS: 7.88% 266,570 @ Avaya, Inc. 1,844,664 30,890 CenturyTel, Inc. 957,590 74,560 @ Comverse Technology, Inc. 883,536 ------------ 3,685,790 ------------ TOYS/GAMES/HOBBIES: 2.31% 70,710 Hasbro, Inc. 1,081,860 ------------ 1,081,860 ------------ Total Common Stock (Cost $44,166,262) 43,705,670 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT: 4.89% REPURCHASE AGREEMENT: 4.89% $ 2,286,000 State Street Bank Repurchase Agreement 1.680%, due 06/03/02, $2,286,320 to be received upon repurchase (Collateralized by U.S. Treasury Bond, 7.625%, Market Value $2,332,820, due 02/15/25) 2,286,000 ------------ Total Short-Term Investment (Cost $2,286,000) 2,286,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $ 46,452,262)* 98.28% $ 45,991,670 OTHER ASSETS AND LIABILITIES-NET 1.72% 802,864 ------- ------------ NET ASSETS 100.00% $ 46,794,534 ======= ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 1,464,062 Gross Unrealized Depreciation (1,924,654) ------------ Net Unrealized Depreciation $ (460,592) ============ See Accompanying Notes to Financial Statements 98 ING SmallCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 85.99% APPAREL: 5.54% 7,000 @ Reebok Intl. Ltd. $ 183,260 18,610 Russell Corp. 343,913 93,700 Stride Rite Corp. 740,230 43,430 @@,@ Tommy Hilfiger Corp. 661,005 ------------ 1,928,408 ------------ BANKS: 2.70% 9,930 Bank of Hawaii Corp. 287,474 43,710 State Financial Services Corp. 653,902 ------------ 941,376 ------------ BUILDING MATERIALS: 1.90% 18,650 York Intl. Corp. 661,143 ------------ 661,143 ------------ CHEMICALS: 11.53% 23,390 @ Cytec Industries, Inc. 724,856 33,440 Great Lakes Chemical Corp. 850,045 15,190 Lubrizol Corp. 531,802 34,160 @@,@ Octel Corp. 734,782 45,370 PolyOne Corp. 525,385 39,240 Wellman, Inc. 647,460 ------------ 4,014,330 ------------ COAL: 2.23% 59,270 Massey Energy Co. 776,437 ------------ 776,437 ------------ COMMERCIAL SERVICES: 4.55% 33,430 Kelly Services, Inc. 871,186 172,710 @ Service Corp. Intl. 715,019 ------------ 1,586,205 ------------ ELECTRIC: 0.44% 21,940 Sierra Pacific Resources 152,922 ------------ 152,922 ------------ ELECTRICAL EQUIPMENT: 3.32% 11,190 Hubbell, Inc. 413,471 33,950 Belden, Inc. 740,110 ------------ 1,153,581 ------------ ELECTRONICS: 1.02% 17,610 @ Kemet Corp. 356,074 ------------ 356,074 ------------ FOOD: 2.32% 33,820 Sensient Technologies Corp. 807,283 ------------ 807,283 ------------ HAND/MACHINE TOOLS: 2.50% 38,420 Starrett Co. 870,213 ------------ 870,213 ------------ HEALTHCARE-SERVICES: 2.57% 32,240 @ Pacificare Health Systems 894,338 ------------ 894,338 ------------ HOME BUILDERS: 4.29% 80,500 Fleetwood Enterprises, Inc. 836,395 59,900 @ National RV Holdings, Inc. 656,504 ------------ 1,492,899 ------------ HOUSEHOLD PRODUCTS/WARES: 3.99% 41,020 American Greetings 847,883 24,460 Tupperware Corp. 541,300 ------------ 1,389,183 ------------ HOUSEWARES: 1.32% 14,750 National Presto Industries, Inc. 460,938 ------------ 460,938 ------------ INSURANCE: 8.10% 4,709 @ Alleghany Corp. 875,168 3,560 American National Insurance 358,884 48,080 @ American Physicians Capital, Inc. 800,532 9,020 Landamerica Financial Group, Inc. 292,248 27,510 Phoenix Cos., Inc. 495,180 ------------ 2,822,012 ------------ IRON/STEEL: 3.36% 68,000 Ryerson Tull, Inc. 737,800 21,040 United States Steel Corp. 432,162 ------------ 1,169,962 ------------ LEISURE TIME: 2.31% 96,270 @ K2, Inc. 803,855 ------------ 803,855 ------------ MACHINERY-DIVERSIFIED: 1.90% 15,460 Tecumseh Products Co 660,915 ------------ 660,915 ------------ METAL FABRICATE/HARDWARE: 2.36% 97,420 @ Wolverine Tube, Inc. 823,199 ------------ 823,199 ------------ MISCELLANEOUS MANUFACTURER: 2.35% 43,610 Trinity Industries, Inc. 817,688 ------------ 817,688 ------------ OIL & GAS SERVICES: 1.40% 190,970 @ Seitel, Inc. 488,883 ------------ 488,883 ------------ RETAIL: 6.02% 37,810 Blair Corp. 866,983 27,700 Brown Shoe Co., Inc. 664,800 96,220 @ Syms Corp. 564,811 ------------ 2,096,594 ------------ SAVINGS & LOANS: 6.95% 16,700 First Bell Bancorp, Inc. 300,583 9,500 First Federal Bank of Arkansas 238,541 15,230 GA Financial, Inc. 290,893 17,480 PFF Bancorp, Inc. 588,901 31,100 @ Provident Financial Holdings 1,003,566 ------------ 2,422,484 ------------ TOYS/GAMES/HOBBIES: 1.02% 23,170 Hasbro, Inc. 354,501 ------------ 354,501 ------------ Total Common Stock (Cost $30,063,470) 29,945,423 ------------ See Accompanying Notes to Financial Statements 99 ING SmallCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT: 5.42% REPURCHASE AGREEMENT: 5.42% $ 1,889,000 State Street Bank Repurchase Agreement 1.680%, due 06/03/02, $1,889,264 to be received upon repurchase (Collateralized by U.S. Treasury Bond, 7.625%, Market Value $1,930,393, due 02/15/25) $ 1,889,000 ------------ Total Short-Term Investment (Cost $1,889,000) 1,889,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $ 31,952,470)* 91.41% $ 31,834,423 OTHER ASSETS AND LIABILITIES-NET 8.59% 2,991,666 ------- ------------ NET ASSETS 100.00% $ 34,826,089 ======= ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 1,393,634 Gross Unrealized Depreciation (1,511,681) ------------ Net Unrealized Depreciation $ (118,047) ============ See Accompanying Notes to Financial Statements 100 ING Convertible Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 6.95% HEALTHCARE-SERVICES: 2.80% 77,000 @ Community Health Systems, Inc. $ 2,266,880 174,468 @ Province Healthcare Co. 4,441,955 ------------ 6,708,835 ------------ INSURANCE: 0.49% 20,000 Prudential Financial, Inc. 1,182,800 ------------ 1,182,800 ------------ RETAIL: 1.60% 100,600 Wendy's Intl., Inc. 3,819,782 ------------ 3,819,782 ------------ SEMICONDUCTORS: 1.74% 175,500 @ Micron Technology, Inc. 4,138,290 ------------ 4,138,290 ------------ TRANSPORTATION: 0.32% 12,860 United Parcel Service, Inc. 776,487 ------------ 776,487 ------------ Total Common Stock (Cost $16,502,237) 16,626,194 ------------ Principal Amount Value - -------------------------------------------------------------------------------- CONVERTIBLE CORPORATE BONDS: 55.44% AUTO PARTS & EQUIPMENT: 1.62% $ 8,900,000 # Lear Corp., 0.000%, due 02/20/22 3,904,875 ------------ 3,904,875 ------------ BIOTECHNOLOGY: 3.13% 3,960,000 # Amgen, Inc., 0.000%, due 03/01/32 2,673,000 5,500,000 Genzyme Corp., 3.000%, due 03/01/32 4,826,250 ------------ 7,499,250 ------------ COMPUTERS: 2.30% 6,004,000 @@,# ASML Holding NV, 4.250%, due 11/30/04 5,493,660 ------------ 5,493,660 ------------ DISTRIBUTION/WHOLESALE: 2.27% 6,000,000 Costco Wholesale Corp., 0.000%, due 08/19/17 5,430,000 ------------ 5,430,000 ------------ DIVERSIFIED FINANCIAL SERVICES: 7.36% 8,000,000 Franklin Resources, Inc., 0.000%, due 05/11/31 4,730,000 3,975,000 Household Intl., Inc., 0.000%, due 08/02/21 3,289,313 9,460,000 Merrill Lynch & Co., Inc., 0.000%, due 05/23/31 4,694,525 9,000,000 Verizon Global Funding Corp., 0.000%, due 05/15/21 4,882,500 ------------ 17,596,338 ------------ ELECTRONICS: 1.99% 10,000,000 Solectron Corp., 0.000%, due 11/20/20 4,762,500 ------------ 4,762,500 ------------ HEALTHCARE-SERVICES: 6.15% 1,400,000 # Province Healthcare Co., 4.250%, due 10/10/08 1,589,000 8,000,000 Universal Health Services, Inc., 0.426%, due 06/23/20 4,960,000 8,000,000 Wellpoint Health Networks, 0.000%, due 07/02/19 8,160,000 ------------ 14,709,000 ------------ INSURANCE: 0.87% 1,970,000 # AmerUs Group Co., 2.000%, due 03/06/32 2,085,738 ------------ 2,085,738 ------------ INTERNET: 1.10% 4,965,000 America Online, Inc., 0.000%, due 12/06/19 2,631,450 ------------ 2,631,450 ------------ LODGING: 1.33% 10,000,000 @@ Four Seasons Hotels, Inc., 0.000%, due 09/23/29 3,187,500 ------------ 3,187,500 ------------ MACHINERY-DIVERSIFIED: 0.44% 1,000,000 Briggs & Stratton, 5.000%, due 05/15/06 1,060,000 ------------ 1,060,000 ------------ MEDIA: 2.06% 5,000,000 Clear Channel Communications, Inc., 1.500%, due 12/01/02 4,918,750 ------------ 4,918,750 ------------ MISCELLANEOUS MANUFACTURING: 1.10% 4,000,000 @@ Tyco Intl. Ltd., 0.000%, due 11/17/20 2,635,000 ------------ 2,635,000 ------------ OIL & GAS: 7.91% 3,498,000 Devon Energy Corp., 4.900%, due 08/15/08 3,471,765 4,200,000 Kerr-McGee Corp., 5.250%, due 02/15/10 4,709,250 2,465,000 Nabors Industries, Inc., 0.000%, due 02/05/21 1,479,000 10,000,000 Transocean, Inc., 1.500%, due 05/15/21 9,250,000 ------------ 18,910,015 ------------ PHARMACEUTICALS: 8.62% 8,000,000 Allergan, Inc., 0.000%, due 11/01/20 5,040,000 3,000,000 Alza Corp., 0.000%, due 07/28/20 2,565,000 4,800,000 Medarex, Inc., 4.500%, due 07/01/06 3,630,000 8,000,000 # Roche Holdings, Inc., 0.000%, due 05/06/12 4,490,000 7,118,000 # Roche Holdings, Inc., 0.010%, due 01/15/15 4,893,625 ------------ 20,618,625 ------------ RETAIL: 0.79% 1,960,000 # Best Buy Co., Inc., 2.250%, due 01/15/22 1,879,150 ------------ 1,879,150 ------------ See Accompanying Notes to Financial Statements 101 ING Convertible Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SEMICONDUCTORS: 4.87% $ 2,755,000 Burr-Brown Corp., 4.250%, due 02/15/07 $ 2,830,763 3,000,000 @@ Chartered Semiconductor Manufacturing Ltd., 2.500%, due 04/02/06 2,947,860 1,000,000 @@ Chartered Semiconductor Manufacturing Ltd., 2.500%, due 04/02/06 982,620 5,500,000 Cypress Semiconductor Corp., 4.000%, due 02/01/05 4,888,125 ------------ 11,649,368 ------------ SOFTWARE: 0.49% 2,500,000 Network Associates, Inc., 0.000%, due 02/13/18 1,175,000 ------------ 1,175,000 ------------ TELECOMMUNICATIONS: 0.91% 2,500,000 EchoStar Communications Corp., 4.875%, due 01/01/07 2,168,750 ------------ 2,168,750 ------------ TRANSPORTATION: 0.13% 250,000 # Airborne, Inc., 5.750%, due 04/01/07 303,750 ------------ 303,750 ------------ Total Convertible Bonds (Cost $ 132,796,206) 132,618,719 ------------ CORPORATE BONDS: 7.20% BIOTECHNOLOGY: 3.65% 2,360,000 @ Idec Pharmaceuticals Corp., 0.000%, due 02/16/19 4,135,900 5,511,000 Millennium Pharmaceuticals, Inc., 5.500%, due 01/15/07 4,594,796 ------------ 8,730,696 ------------ MEDIA: 2.26% 7,000,000 Comcast Corp., 0.000%, due 12/19/20 5,416,250 ------------ 5,416,250 ------------ OIL & GAS SERVICES: 0.81% 1,975,000 Cooper Cameron Corp., 1.750%, due 05/17/21 1,928,094 ------------ 1,928,094 ------------ TELECOMMUNICATIONS: 0.48% 2,000,000 Nextel Communications, Inc., 6.000%, due 06/01/11 1,145,000 ------------ 1,145,000 ------------ Total Corporate Bonds (Cost $19,296,819) 17,220,040 ------------ Shares Value - -------------------------------------------------------------------------------- PREFERRED STOCK: 18.95% AEROSPACE/DEFENSE: 0.47% 29,250 & Coltec Capital Trust 1,133,438 ------------ 1,133,438 ------------ AIRLINES: 1.37% 125,000 & Continental Airlines Finance Trust II 3,281,250 ------------ 3,281,250 ------------ AUTO MANUFACTURERS: 3.23% 109,500 & Ford Motor Co Capital Trust II 6,641,175 38,800 & General Motors Corp. 1,070,880 ------------ 7,712,055 ------------ DIVERSIFIED FINANCIAL SERVICES: 0.94% 88,300 & Gabelli Asset Management, Inc. 2,238,405 ------------ 2,238,405 ------------ ELECTRIC: 0.51% 35,000 Calpine Capital Trust II 1,216,250 ------------ 1,216,250 ------------ FOOD: 3.01% 140,000 & Suiza Capital Trust II 7,210,000 ------------ 7,210,000 ------------ FOREST PRODUCTS & PAPER: 0.49% 25,000 Intl. Paper Capital 1,181,250 ------------ 1,181,250 ------------ INSURANCE: 2.48% 62,000 & Reinsurance Group Of America 3,038,000 118,000 &,@ Travelers Property Casualty Corp. 2,885,100 ------------ 5,923,100 ------------ OIL & GAS SERVICES: 1.27% 57,005 Weatherford Intl., Inc. 3,049,766 ------------ 3,049,766 ------------ SAVINGS & LOANS: 5.18% 135,000 & Washington Mutual, Inc. 7,290,000 60,000 & Sovereign Capital Trust II 5,097,000 ------------ 12,387,000 ------------ TELECOMMUNICATIONS: 0.00% 51,932 @++ WinStar Communications, Inc. -- ------------ -- ------------ Total Preferred Stock (Cost $41,648,505) 45,332,514 ------------ Total Long-Term Investments (Cost $210,243,767) 211,797,467 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT: 10.93% REPURCHASE AGREEMENT: 10.93% $26,155,000 State Street Bank Repurchase Agreement 1.680%, due 06/03/02, $26,158,662 to be received upon repurchase (Collateralized by U.S. Treasury Bond, 7.625%, Market Value $26,679,666, due 02/15/25) 26,155,000 ------------ Total Short-Term Investment (Cost $26,155,000) 26,155,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $ 236,398,767)* 99.47% $237,952,467 OTHER ASSETS AND LIABILITIES-NET 0.53% 1,261,789 ------- ------------ NET ASSETS 100.00% $239,214,256 ======= ============ @ Non-income producing security @@ Foreign Issuer # Securities with purchase pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. & Payment-in-kind ++ Defaulted Security ADR American Depository Receipt * Cost for federal income tax purposes is $236,654,501. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 12,634,687 Gross Unrealized Depreciation (11,336,722) ------------ Net Unrealized Appreciation $ 1,297,965 ============ See Accompanying Notes to Financial Statements 102 ING Equity and Income Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 43.54% BANKS: 0.66% 31,200 US BanCorp. $ 737,880 ------------ 737,880 ------------ BEVERAGES: 0.80% 16,000 Coca-Cola Co. 888,960 ------------ 888,960 ------------ COMMERCIAL SERVICES: 0.50% 30,500 @ Cendant Corp. 557,540 ------------ 557,540 ------------ COMPUTERS: 1.16% 32,900 @ EMC Corp.-Mass. 238,525 55,384 Hewlett-Packard Co. 1,057,281 ------------ 1,295,806 ------------ COSMETICS/PERSONAL CARE: 0.65% 11,200 Kimberly-Clark Corp. 727,104 ------------ 727,104 ------------ ELECTRIC: 5.29% 15,000 Duke Energy Corp. 480,150 15,800 Entergy Corp. 694,884 10,800 FPL Group, Inc. 680,292 85,300 @ Reliant Resources, Inc. 806,085 32,700 Southern Co. 882,900 47,900 TECO Energy, Inc. 1,192,710 13,000 TXU Corp. 667,290 23,000 XCEL Energy, Inc. 494,270 ------------ 5,898,581 ------------ ELECTRICAL COMPONENT & EQUIPMENT: 0.58% 11,200 Emerson Electric Co. 647,920 ------------ 647,920 ------------ ENERGY: 0.00% 29,192 @,XX Orion Refining Corp. 292 ------------ 292 ------------ FOOD: 1.31% 18,200 @ Safeway, Inc. 739,830 34,100 Sara Lee Corp. 718,828 ------------ 1,458,658 ------------ FOREST PRODUCTS & PAPER: 1.10% 11,100 Bowater, Inc. 581,418 15,000 International Paper Co. 646,500 ------------ 1,227,918 ------------ HEALTHCARE-SERVICES: 0.81% 12,200 @ Wellpoint Health Networks 904,752 ------------ 904,752 ------------ INSURANCE: 7.04% 17,900 Allstate Corp. 688,792 8,900 Chubb Corp. 668,923 15,900 Cigna Corp. 1,686,195 46,000 John Hancock Financial Services, Inc. 1,687,740 17,200 Loews Corp. 982,120 21,900 Old Republic Intl.Corp. 727,080 9,500 @ Principal Financial Group 288,800 14,100 St. Paul Cos. 600,801 29,200 @ Travelers Property Casualty Corp. 512,460 ------------ 7,842,911 ------------ MINING: 1.78% 42,300 Alcoa, Inc. 1,479,654 25,700 @ Freeport-McMoRan Copper & Gold, Inc. 507,575 ------------ 1,987,229 ------------ MISCELLANEOUS MANUFACTURING: 2.28% 52,800 Honeywell Intl., Inc. 2,069,760 21,500 @@ Tyco Intl. Ltd. 471,925 ------------ 2,541,685 ------------ OIL & GAS: 5.24% 7,500 Amerada Hess Corp. 616,875 10,500 Anadarko Petroleum Corp. 532,875 12,760 Apache Corp. 710,477 7,000 ChevronTexaco Corp. 610,750 18,324 Exxon Mobil Corp. 731,677 10,000 Kerr-McGee Corp. 580,900 11,400 Phillips Petroleum Co. 656,070 13,000 @@ Royal Dutch Petroleum Co. ADR 715,000 18,000 Transocean, Inc. 687,060 ------------ 5,841,684 ------------ OIL & GAS SERVICES: 0.33% 20,000 Halliburton Co. 371,000 ------------ 371,000 ------------ PHARMACEUTICALS: 3.70% 36,500 Bristol-Myers Squibb Co. 1,135,880 19,300 @ IVAX Corp. 252,444 20,100 Merck & Co., Inc. 1,147,710 27,675 Pfizer, Inc. 957,555 14,600 Pharmacia Corp. 630,574 ------------ 4,124,163 ------------ PIPELINES: 1.04% 37,200 Dynegy, Inc. 330,708 32,100 EL Paso Corp. 823,365 ------------ 1,154,073 ------------ RETAIL: 3.04% 21,400 CVS Corp. 685,442 20,190 @,X International Fast Food Corp. -- 18,900 May Department Stores Co. 664,903 42,500 McDonald's Corp. 1,272,450 22,300 RadioShack Corp. 763,552 ------------ 3,386,347 ------------ SAVINGS & LOANS: 0.61% 17,600 Washington Mutual, Inc. 684,112 ------------ 684,112 ------------ SEMICONDUCTORS: 0.57% 55,000 @ Advanced Micro Devices, Inc. 628,650 ------------ 628,650 ------------ TELECOMMUNICATIONS: 3.86% 50,300 @ 3Com Corp. 279,667 65,700 @ ADC Telecommunications, Inc. 220,095 107,600 @ AT&T Wireless Services, Inc. 872,636 20,100 BellSouth Corp. 668,928 94,200 @ Tellabs, Inc. 909,972 31,448 Verizon Communications, Inc. 1,352,264 ------------ 4,303,562 ------------ TOBACCO: 1.19% 23,200 Philip Morris Cos., Inc. 1,328,200 ------------ 1,328,200 ------------ Total Common Stock (Cost $53,938,913) 48,539,027 ------------ See Accompanying Notes to Financial Statements 103 ING Equity and Income Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- CORPORATE BONDS: 22.25% AEROSPACE/DEFENSE: 0.38% $ 550,000 Simula, Inc., 8.000%, due 05/01/04 $ 418,000 ------------ 418,000 ------------ AUTO MANUFACTURERS: 0.44% 450,000 DaimlerChrysler NA Holding Corp., 7.750%, due 01/18/11 486,361 ------------ 486,361 ------------ BANKS: 1.47% 1,095,000 @@ Banco Santander Chile, 6.500%, due 11/01/05 1,136,419 500,000 Wachovia Corp., 4.950%, due 11/01/06 503,204 ------------ 1,639,623 ------------ BEVERAGES: 0.40% 450,000 Coca-Cola Co., 4.000%, due 06/01/05 450,698 ------------ 450,698 ------------ BUILDING MATERIALS: 0.39% 200,000 Dayton Superior Corp., 13.000%, due 06/15/09 203,000 225,000 Nortek, Inc., 8.875%, due 08/01/08 229,219 ------------ 432,219 ------------ CHEMICALS: 0.55% 500,000 Dow Chemical Co., 5.750%, due 12/15/08 500,575 800,000 ++ Sterling Chemicals, Inc., 11.750%, due 08/15/06 117,000 ------------ 617,575 ------------ COMMERCIAL SERVICES: 0.41% 200,000 Mail-Well, Inc., 8.750%, due 12/15/08 184,000 250,000 United Rentals, Inc., 10.750%, due 04/15/08 276,875 ------------ 460,875 ------------ DIVERSIFIED FINANCIAL SERVICES: 5.38% 160,000 @@ Amvescap PLC, 6.375%, due 05/15/03 164,247 500,000 Citigroup, Inc., 5.000%, due 03/06/07 501,864 700,000 Ford Motor Credit Co., 2.116%, due 04/28/05 669,848 500,000 Ford Motor Credit Co., 6.500%, due 01/25/07 507,509 550,000 General Motors Acceptance Corp., 6.125%, due 09/15/06 563,645 900,000 # Goldman Sachs Group LP, 6.625%, due 12/01/04 948,151 500,000 Household Finance Corp., 5.750%, due 01/30/07 498,590 400,000 John Deere Capital Corp., 2.210%, due 10/04/04 397,739 500,000 Lehman Brothers Holdings, Inc., 6.625%, due 01/18/12 509,359 250,000 Orion Power Holdings, Inc., 12.000%, due 05/01/10 231,250 450,000 Pemex Project Funding Master Trust, 9.125%, due 10/13/10 490,950 500,000 Sears Roebuck Acceptance, 6.700%, due 04/15/12 513,456 ------------ 5,996,608 ------------ ELECTRIC: 2.00% 200,000 Calpine Corp., 8.625%, due 08/15/10 167,526 100,000 Calpine Corp., 8.750%, due 07/15/07 83,097 450,000 @@ Empresa Nacional de Electricidad SA, 8.500%, due 04/01/09 460,387 450,000 Exelon Corp., 6.750%, due 05/01/11 461,052 500,000 Progress Energy, Inc., 7.750%, due 03/01/31 538,556 500,000 @@ Tenaga Nasional BHD , 7.625%, due 04/01/11 523,922 ------------ 2,234,540 ------------ ELECTRONICS: 0.22% 225,000 @@ Flextronics Intl. Ltd., 9.875%, due 07/01/10 244,687 ------------ 244,687 ------------ ENVIRONMENTAL CONTROL: 0.18% 200,000 Allied Waste North America, 8.875%, due 04/01/08 205,500 ------------ 205,500 ------------ FOOD: 1.39% 450,000 Conagra Foods, Inc., 9.750%, due 03/01/21 579,303 450,000 Delhaize America, Inc., 8.125%, due 04/15/11 489,127 450,000 Kroger Co., 7.500%, due 04/01/31 479,916 ------------ 1,548,346 ------------ FOREST PRODUCTS & PAPER: 0.17% 800,000 @@ Doman Industries Ltd., 8.750%, due 03/15/04 188,000 ------------ 188,000 ------------ HOLDING COMPANIES-DIVERSIFIED: 0.16% 180,000 Penhall Intl., Inc., 12.000%, due 08/01/06 178,200 ------------ 178,200 ------------ INSURANCE: 0.45% 500,000 # AIG SunAmerica Global Financing XII, 5.300%, due 05/30/07 506,245 ------------ 506,245 ------------ IRON/STEEL: 0.14% 100,000 AK Steel Corp., 7.875%, due 02/15/09 101,125 50,000 Armco, Inc., 9.000%, due 09/15/07 50,688 ------------ 151,813 ------------ See Accompanying Notes to Financial Statements 104 ING Equity and Income Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- LODGING: 0.82% $ 250,000 # Boyd Gaming Corp., 8.750%, due 04/15/12 $ 260,000 250,000 Mandalay Resort Group, 9.250%, due 12/01/05 262,187 125,000 # Prime Hospitality Corp., 8.375%, due 05/01/12 125,937 250,000 Station Casinos, Inc., 9.875%, due 07/01/10 270,000 ------------ 918,124 ------------ MEDIA: 2.20% 250,000 Adelphia Communications, 8.375%, due 02/01/08 181,250 500,000 AOL Time Warner, Inc., 7.700%, due 05/01/32 488,663 500,000 Charter Communications Holdings Corp., 8.625%, due 04/01/09 430,000 250,000 CSC Holdings, Inc., 7.250%, due 07/15/08 233,439 175,000 Echostar DBS Corp., 9.250%, due 02/01/06 176,750 350,000 Primedia, Inc., 8.875%, due 05/15/11 274,750 250,000 Sinclair Broadcast Group, Inc., 8.750%, due 12/15/07 256,562 400,000 Walt Disney Co., 4.875%, due 07/02/04 406,730 ------------ 2,448,144 ------------ MISCELLANEOUS MANUFACTURING: 0.32% 400,000 @@ Tyco Intl., 5.800%, due 08/01/06 354,826 ------------ 354,826 ------------ MULTI-NATIONAL: 0.45% 500,000 @@ Inter-American Development Bank, 4.000%, due 01/18/05 503,952 ------------ 503,952 ------------ OIL & GAS: 1.71% 400,000 Conoco, Inc., 5.900%, due 04/15/04 414,820 225,000 Energy Corp. of America, 9.500%, due 05/15/07 154,125 500,000 Kerr-McGee Corp., 7.875%, due 09/15/31 550,777 500,000 Marathon Oil Corp., 6.800%, due 03/15/32 484,887 300,000 Premcor Refining Group, Inc., 8.625%, due 08/15/08 297,000 ------------ 1,901,609 ------------ REITS: 0.24% 250,000 Felcor Lodging LP, 9.500%, due 09/15/08 261,875 ------------ 261,875 ------------ SOVEREIGN: 0.66% 307,853 @@ Brazil Intl. Bond, 8.000%, due 04/15/14 232,078 500,000 @@ Finland Government Intl. Bond, 4.750%, due 03/06/07 504,006 ------------ 736,084 ------------ TELECOMMUNICATIONS: 1.41% 975,000 ++ Adelphia Business Solutions, Inc., 12.000%, due 11/01/07 98 500,000 AT&T Wireless Services, Inc., 8.125%, due 05/01/12 488,101 500,000 Citizens Communications Co., 7.450%, due 01/15/04 509,167 450,000 Nextel Communications, Inc., 9.375%, due 11/15/09 293,625 425,000 NMS Communications Corp., 5.000%, due 10/15/05 279,439 2,000,000 #,++ SA Telecommunications, Inc., 10.000%, due 08/15/06 -- 500,000 ++ WinStar Communications, Inc., 12.750%, due 04/15/10 100 ------------ 1,570,530 ------------ TEXTILES: 0.24% 250,000 Simmons Co., 10.250%, due 03/15/09 268,125 ------------ 268,125 ------------ TRANSPORTATION: 0.07% 75,000 Gulfmark Offshore, Inc., 8.750%, due 06/01/08 75,750 ------------ 75,750 ------------ Total Corporate Bonds (Cost $ 28,316,240) 24,798,309 ------------ U.S. TREASURY OBLIGATIONS: 4.60% U.S. TREASURY BONDS: 0.87% 1,000,000 U.S. Treasury Bond, 5.375%, due 02/15/31 966,251 ------------ 966,251 ------------ U.S. TREASURY NOTES: 3.73% 1,050,000 U.S. Treasury Note, 4.375%, due 05/15/07 1,051,067 3,150,000 U.S. Treasury Note, 4.875%, due 02/15/12 3,110,628 ------------ 4,161,695 ------------ Total U.S. Treasury Obligations (Cost $ 7,074,531) 5,127,946 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS: 17.11% FEDERAL HOME LOAN MORTGAGE CORPORATION: 3.21% 788,726 5.500%, due 01/01/14 798,508 375,948 6.000%, due 04/01/14 386,971 1,203,496 6.500%, due 12/01/31 1,224,808 1,128,597 7.000%, due 06/01/29 1,167,132 ------------ 3,577,419 ------------ See Accompanying Notes to Financial Statements 105 ING Equity and Income Fund PORTFOLIO OF INVESTMENTS as of May 31, 2002 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 10.58% $2,000,000 3.625%, due 04/15/04 $ 2,015,030 1,492,273 6.000%, due 01/01/32 1,481,999 696,167 6.000%, due 02/01/32 691,379 1,177,470 6.500%, due 06/01/14 1,223,847 279,473 6.500%, due 08/01/15 289,205 679,062 6.500%, due 12/01/31 690,497 1,615,363 7.000%, due 03/01/15 1,699,003 1,799,046 7.500%, due 07/01/21 1,892,984 1,124,484 7.500%, due 11/01/29 1,178,336 407,780 7.500%, due 09/01/30 426,788 197,268 8.000%, due 08/01/30 209,463 ------------ 11,798,531 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 3.32% 2,635,344 6.500%, due 06/15/29 2,688,350 614,376 7.500%, due 11/15/29 647,520 339,240 8.000%, due 07/15/30 361,076 ------------ 3,696,946 ------------ Total U.S. Government Agency Obligations (Cost $ 16,409,142) 19,072,896 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS : 3.08% COMMERCIAL MBS: 1.52% 490,000 # Allied Capital Commercial Mortgage Trust, 6.710%, due 12/25/04 493,099 132,781 # Criimi Mae CMBS Corp., 5.700%, due 06/20/30 135,406 1,003,649 GMAC Commercial Mortgage Securities, Inc., 6.974%, due 05/15/08 1,066,906 ------------ 1,695,411 ------------ CREDIT CARD ABS: 0.90% 1,000,000 Fleet Credit Card Master Trust II, 2.010%, due 08/15/08 1,003,527 ------------ 1,003,527 ------------ HOME EQUITY ABS: 0.66% 700,000 Emergent Home Equity Loan Trust, 7.080%, due 12/15/28 $ 738,297 ------------ 738,297 ------------ Total Collateralized Mortgage Obligations (Cost $3,303,274) 3,437,235 ------------ Shares Value - -------------------------------------------------------------------------------- PREFERRED STOCK: 0.00% TELECOMMUNICATIONS: 0.00% 10,152 @,++,& Adelphia Business Solutions, Inc. 102 ------------ 102 ------------ Total Preferred Stock (Cost $203,040) 102 ------------ MUTUAL FUNDS: 3.49% INVESTMENT COMPANIES: 3.49% 114,416 B ING High Yield Bond Fund 987,414 386,152 B ING High Yield Opportunity Fund 2,907,723 ------------ 3,895,137 ------------ Total Mutual Funds (Cost $3,900,000) 3,895,137 ------------ WARRANTS: 0.01% BUILDING MATERIALS: 0.00% 400 @ Dayton Superior Corp. 4,000 ------------ 4,000 ------------ FOOD/BEVERAGE: 0.00% 370 @,XX North Atlantic Trading Co. 4 ------------ 4 ------------ MISCELLANEOUS MANUFACTURING: 0.01% 500 @,XX Packaged Ice, Inc. 6,800 ------------ 6,800 ------------ TELECOMMUNICATIONS: 0.00% 500 @ Iridium World Communications, Inc. 5 ------------ 5 ------------ Total Warrants (Cost $57,955) 10,809 ------------ Total Long-Term Investments (Cost $113,203,095) 104,881,461 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT: 5.99% REPURCHASE AGREEMENT: 5.99% $6,679,000 State Street Bank & Trust Repurchase Agreement dated 5/31/02, 1.680%, due 06/03/02, $6,679,936 to be received upon repurchase (Collateralized by 3,415,000 USTB, 13.250%, Market Value $5,113,963, due 05/15/14 and 1,140,000 USTB, 13.250%, Market Value $1,707,150, due 05/15/14) $ 6,679,000 ------------ Total Short-Term Investment (Cost $6,679,000) 6,679,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $ 119,882,095)* 100.07% $111,560,461 OTHER ASSETS AND LIABILITIES-NET -0.07% (79,904) ------- ------------ NET ASSETS 100.00% $111,480,557 ======= ============ @ 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. B Represents investments in an affiliated fund. ++ Defaulted Security & Payment in-kind security X Market Value determined by Pilgrim Valuation Committee appointed by the Funds Board of Directors. XX Value of securities obtained from one or more dealers making in the securities which have been adjusted based on the Fund's valuation procedures. ADR American Depository Receipt GDR Global Depository Receipt * Cost for federal income tax purposes is $120,029,173. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 5,316,316 Gross Unrealized Depreciation (13,785,028) ------------ Net Unrealized Depreciation $ (8,468,712) ============ See Accompanying Notes to Financial Statements 106 SHAREHOLDER MEETING INFORMATION (Unaudited) - -------------------------------------------------------------------------------- A special meeting of shareholders of the ING Retail Funds (formerly Pilgrim Retail funds) and Variable Products held February 21, 2002, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. A brief description of each matter voted upon as well as the results are outlined below:
SHARES VOTED SHARES AGAINST OR SHARES BROKER TOTAL VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED --------- -------- --------- -------- ------------ 1. To elect twelve (12) members of the Boards of Directors or Trustees to hold office until the election and qualification of their successors. ING GROWTH + VALUE FUND (FORMERLY PILGRIM GROWTH + VALUE FUND) Paul S. Doherty 40,103,350 1,331,666 -- -- 41,435,016 J. Michael Earley 40,143,517 1,291,499 -- -- 41,435,016 R. Barbara Gitenstein 40,143,684 1,291,332 -- -- 41,435,016 Walter H. May 40,110,138 1,324,878 -- -- 41,435,016 Thomas J. McInerney 40,116,462 1,318,554 -- -- 41,435,016 Jock Patton 40,134,748 1,300,268 -- -- 41,435,016 David W.C. Putnam 40,133,396 1,301,620 -- -- 41,435,016 Blaine E. Rieke 40,112,644 1,322,372 -- -- 41,435,016 Robert C. Salipante 40,135,125 1,299,891 -- -- 41,435,016 John G. Turner 40,121,104 1,313,912 -- -- 41,435,016 Roger B. Vincent 40,137,503 1,297,513 -- -- 41,435,016 Richard A. Wedemeyer 40,114,018 1,320,998 -- -- 41,435,016 ING GROWTH OPPORTUNITIES FUND (FORMERLY PILGRIM GROWTH OPPORTUNITIES FUND) Paul S. Doherty 23,484,530 542,064 -- -- 24,026,594 J. Michael Earley 23,489,864 536,730 -- -- 24,026,594 R. Barbara Gitenstein 23,487,532 539,062 -- -- 24,026,594 Walter H. May 23,486,640 539,954 -- -- 24,026,594 Thomas J. McInerney 23,485,419 541,175 -- -- 24,026,594 Jock Patton 23,487,438 539,156 -- -- 24,026,594 David W.C. Putnam 23,488,240 538,354 -- -- 24,026,594 Blaine E. Rieke 23,485,338 541,256 -- -- 24,026,594 Robert C. Salipante 23,486,078 540,516 -- -- 24,026,594 John G. Turner 23,486,041 540,553 -- -- 24,026,594 Roger B. Vincent 23,488,923 537,671 -- -- 24,026,594 Richard A. Wedemeyer 23,486,231 540,363 -- -- 24,026,594 ING LARGECAP GROWTH FUND (FORMERLY PILGRIM LARGECAP GROWTH FUND) Paul S. Doherty 13,149,044 407,783 -- -- 13,556,827 J. Michael Earley 13,151,871 404,956 -- -- 13,556,827 R. Barbara Gitenstein 13,148,454 408,373 -- -- 13,556,827 Walter H. May 13,150,896 405,931 -- -- 13,556,827 Thomas J. McInerney 13,148,853 407,974 -- -- 13,556,827 Jock Patton 13,149,790 407,037 -- -- 13,556,827 David W.C. Putnam 13,151,997 404,830 -- -- 13,556,827 Blaine E. Rieke 13,148,761 408,066 -- -- 13,556,827 Robert C. Salipante 13,147,214 409,613 -- -- 13,556,827 John G. Turner 13,150,696 405,858 -- -- 13,556,554 Roger B. Vincent 13,151,766 405,061 -- -- 13,556,827 Richard A. Wedemeyer 13,147,338 409,489 -- -- 13,556,827
107 SHAREHOLDER MEETING INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
SHARES VOTED SHARES AGAINST OR SHARES BROKER TOTAL VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED --------- -------- --------- -------- ------------ ING MIDCAP OPPORTUNITIES FUND (FORMERLY PILGRIM MIDCAP OPPORTUNITIES FUND) Paul S. Doherty 7,180,993 168,019 -- -- 7,349,012 J. Michael Earley 7,181,661 167,351 -- -- 7,349,012 R. Barbara Gitenstein 7,181,016 167,996 -- -- 7,349,012 Walter H. May 7,180,993 168,019 -- -- 7,349,012 Thomas J. McInerney 7,181,173 167,839 -- -- 7,349,012 Jock Patton 7,179,970 169,042 -- -- 7,349,012 David W.C. Putnam 7,181,661 167,351 -- -- 7,349,012 Blaine E. Rieke 7,180,993 168,019 -- -- 7,349,012 Robert C. Salipante 7,179,671 169,341 -- -- 7,349,012 John G. Turner 7,179,927 169,085 -- -- 7,349,012 Roger B. Vincent 7,181,661 167,351 -- -- 7,349,012 Richard A. Wedemeyer 7,180,993 168,019 -- -- 7,349,012 ING SMALLCAP OPPORTUNITIES (FORMERLY PILGRIM SMALLCAP OPPORTUNITIES FUND) Paul S. Doherty 11,778,247 386,925 -- -- 12,165,172 J. Michael Earley 11,782,786 382,386 -- -- 12,165,172 R. Barbara Gitenstein 11,780,554 384,618 -- -- 12,165,172 Walter H. May 11,782,429 382,743 -- -- 12,165,172 Thomas J. McInerney 11,774,480 390,692 -- -- 12,165,172 Jock Patton 11,777,673 387,499 -- -- 12,165,172 David W.C. Putnam 11,781,669 383,503 -- -- 12,165,172 Blaine E. Rieke 11,774,947 390,225 -- -- 12,165,172 Robert C. Salipante 11,773,044 392,128 -- -- 12,165,172 John G. Turner 11,777,990 387,182 -- -- 12,165,172 Roger B. Vincent 11,778,808 386,364 -- -- 12,165,172 Richard A. Wedemeyer 11,780,233 384,939 -- -- 12,165,172 ING RESEARCH ENHANCED INDEX FUND (FORMERLY PILGRIM RESEARCH ENHANCED INDEX FUND) Paul S. Doherty 15,144,161 269,863 -- -- 15,414,024 J. Michael Earley 15,151,959 262,065 -- -- 15,414,024 R. Barbara Gitenstein 15,144,908 269,116 -- -- 15,414,024 Walter H. May 15,147,859 266,165 -- -- 15,414,024 Thomas J. McInerney 15,151,959 262,065 -- -- 15,414,024 Jock Patton 15,148,283 265,741 -- -- 15,414,024 David W.C. Putnam 15,150,110 263,914 -- -- 15,414,024 Blaine E. Rieke 15,145,129 268,895 -- -- 15,414,024 Robert C. Salipante 15,151,731 262,293 -- -- 15,414,024 John G. Turner 15,151,688 262,336 -- -- 15,414,024 Roger B. Vincent 15,151,959 262,065 -- -- 15,414,024 Richard A. Wedemeyer 15,147,859 266,165 -- -- 15,414,024 ING LARGE COMPANY VALUE FUND (FORMERLY PILGRIM GROWTH AND INCOME FUND) Paul S. Doherty 5,176,821 173,897 -- -- 5,350,718 J. Michael Earley 5,178,651 172,067 -- -- 5,350,718 R. Barbara Gitenstein 5,178,882 171,946 -- -- 5,350,828 Walter H. May 5,176,821 173,897 -- -- 5,350,718 Thomas J. McInerney 5,179,238 171,480 -- -- 5,350,718 Jock Patton 5,167,484 183,234 -- -- 5,350,718 David W.C. Putnam 5,179,238 171,480 -- -- 5,350,718 Blaine E. Rieke 5,164,886 185,832 -- -- 5,350,718 Robert C. Salipante 5,179,077 171,641 -- -- 5,350,718 John G. Turner 5,168,082 182,636 -- -- 5,350,718 Roger B. Vincent 5,179,238 171,480 -- -- 5,350,718 Richard A. Wedemeyer 5,164,742 185,976 -- -- 5,350,718
108 SHAREHOLDER MEETING INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
SHARES VOTED SHARES AGAINST OR SHARES BROKER TOTAL VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED --------- -------- --------- -------- ------------ ING MAGNACAP FUND (FORMERLY PILGRIM MAGNACAP FUND) Paul S. Doherty 28,027,621 1,084,173 -- -- 29,111,794 J. Michael Earley 28,035,436 1,076,358 -- -- 29,111,794 R. Barbara Gitenstein 28,015,258 1,096,536 -- -- 29,111,794 Walter H. May 28,020,160 1,091,634 -- -- 29,111,794 Thomas J. McInerney 28,020,542 1,091,252 -- -- 29,111,794 Jock Patton 28,022,454 1,089,340 -- -- 29,111,794 David W.C. Putnam 28,029,873 1,081,921 -- -- 29,111,794 Blaine E. Rieke 28,027,075 1,084,719 -- -- 29,111,794 Robert C. Salipante 28,021,152 1,090,642 -- -- 29,111,794 John G. Turner 28,029,822 1,081,972 -- -- 29,111,794 Roger B. Vincent 28,036,236 1,075,558 -- -- 29,111,794 Richard A. Wedemeyer 28,032,304 1,079,490 -- -- 29,111,794 ING CONVERTIBLE FUND (FORMERLY PILGRIM CONVERTIBLE FUND) Paul S. Doherty 11,312,319 509,504 -- -- 11,821,823 J. Michael Earley 11,331,236 490,587 -- -- 11,821,823 R. Barbara Gitenstein 11,322,507 499,316 -- -- 11,821,823 Walter H. May 11,327,382 494,441 -- -- 11,821,823 Thomas J. McInerney 11,313,727 508,096 -- -- 11,821,823 Jock Patton 11,316,424 505,399 -- -- 11,821,823 David W.C. Putnam 11,316,952 504,871 -- -- 11,821,823 Blaine E. Rieke 11,315,814 506,009 -- -- 11,821,823 Robert C. Salipante 11,322,602 499,221 -- -- 11,821,823 John G. Turner 11,315,778 506,045 -- -- 11,821,823 Roger B. Vincent 11,328,762 493,061 -- -- 11,821,823 Richard A. Wedemeyer 11,313,739 508,084 -- -- 11,821,823 ING EQUITY AND INCOME FUND (FORMERLY PILGRIM BALANCED FUND) Paul S. Doherty 4,726,440 153,230 -- -- 4,879,670 J. Michael Earley 4,728,220 151,450 -- -- 4,879,670 R. Barbara Gitenstein 4,728,317 151,353 -- -- 4,879,670 Walter H. May 4,726,339 153,331 -- -- 4,879,670 Thomas J. McInerney 4,726,155 153,515 -- -- 4,879,670 Jock Patton 4,728,220 151,450 -- -- 4,879,670 David W.C. Putnam 4,727,040 152,630 -- -- 4,879,670 Blaine E. Rieke 4,726,440 153,230 -- -- 4,879,670 Robert C. Salipante 4,728,321 151,349 -- -- 4,879,670 John G. Turner 4,728,321 151,349 -- -- 4,879,670 Roger B. Vincent 4,727,040 152,630 -- -- 4,879,670 Richard A. Wedemeyer 4,726,339 153,331 -- -- 4,879,670 2. To Approve amendments to Declarations of Trust or Trust Instruments, as the case may be, for some of the Funds to, among other things, permit the Boards to determine the number of Directors/Trustees to the Funds. ING Growth + Value Fund* 16,285,597 985,960 950,056 23,213,403 41,435,016 ING Growth Opportunities Fund 13,500,022 448,121 373,958 9,704,494 24,026,595 ING MidCap Opportunities Fund 5,326,725 107,987 58,030 1,856,271 7,349,013 ING SmallCap Opportunities Fund 6,379,351 280,949 272,125 5,232,748 12,165,173 ING Research Enhanced Index Fund 6,441,895 172,811 212,579 8,586,740 15,414,025 3. Approval of Plans of Reorganization to change only the form of corporate organization of some of the Funds without changing the substance or investment aspects of the Funds. ING Growth + Value Fund 16,646,273 684,387 890,953 23,213,403 41,435,016 ING Growth Opportunities Fund 13,685,931 296,342 339,828 9,704,494 24,026,595
109 SHAREHOLDER MEETING INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
SHARES VOTED SHARES AGAINST OR SHARES BROKER TOTAL VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED --------- -------- --------- -------- ------------ ING LargeCap Growth Fund 9,096,740 172,902 305,595 3,981,590 13,556,827 ING SmallCap Opportunities Fund 6,488,648 182,411 261,367 5,232,747 12,165,173 ING Research Enhanced Index Fund 6,542,619 94,459 190,206 8,586,740 15,414,024 ING Large Company Value Fund 4,542,434 76,812 130,897 600,575 5,350,718 ING Magna Cap Fund * 19,151,002 631,789 1,049,536 8,279,467 29,111,794 ING Convertible Fund 7,970,572 274,685 404,027 3,172,539 11,821,823 ING Equity and Income Fund 3,336,040 94,100 134,167 1,315,364 4,879,671 5. To Confirm KPMG LLP as current independent auditors of certain Funds. ING Growth + Value Fund 39,708,142 568,411 1,158,463 -- 41,435,016 ING Growth Opportunities Fund 23,290,121 262,887 473,587 -- 24,026,595 ING LargeCap Growth Fund 12,971,028 195,693 390,106 -- 13,556,827 ING MidCap Opportunities Fund 7,213,978 65,370 69,665 -- 7,349,013 ING SmallCap Opportunities Fund 11,655,786 191,175 318,212 -- 12,165,173 ING Research Enhanced Index Fund 14,924,655 153,925 335,445 -- 15,414,025 ING Large Company Value Fund 5,166,218 51,772 132,728 -- 5,350,718 ING Magna Cap Fund 27,493,867 462,144 1,155,784 -- 29,111,795 ING Convertible Fund 11,040,397 297,155 484,271 -- 11,821,823 ING Equity and Income Fund 4,653,687 63,114 162,870 -- 4,879,671 6. To transact such other business as may properly come before the Special Meeting or any adjournment(s) or postponement(s) thereof. ING Growth + Value Fund 38,662,172 994,424 1,778,420 -- 41,435,016 ING Growth Opportunities Fund 22,885,855 420,732 720,008 -- 24,026,595 ING LargeCap Growth Fund 12,552,724 325,006 679,097 -- 13,556,827 ING MidCap Opportunities Fund 7,052,068 128,789 168,156 -- 7,349,013 ING SmallCap Opportunities Fund 11,330,237 285,796 549,140 -- 12,165,173 ING Research Enhanced Index Fund 14,768,157 215,096 430,772 -- 15,414,025 ING Large Company Value Fund 5,039,553 101,591 209,574 -- 5,350,718 ING Magna Cap Fund 26,824,030 612,474 1,675,291 -- 29,111,795 ING Convertible Fund 10,691,683 396,619 733,521 -- 11,821,823 ING Equity and Income Fund 4,509,355 86,892 283,424 -- 4,879,671
- ---------- * These Funds did not pass on the indicated proposals. 110 TAX INFORMATION (Unaudited) - -------------------------------------------------------------------------------- Dividends paid during the year ended May 31, 2002 were as follows: FUND NAME TYPE PER SHARE AMOUNT - --------- ---- ---------------- LargeCap Growth Class A NII $ 0.0041 Class Q NII $ 0.0096 SmallCap Opportunities All Classes LTCG $ 0.9900 Large Company Value Class A NII $ 0.0040 All Classes LTCG $ 0.2859 All Classes ROC $ 0.0392 MagnaCap Class A NII $ 0.0740 Class M NII $ 0.0215 Class Q NII $ 0.1101 All Classes LTCG $ 1.8987 Convertible Class A NII $ 0.4085 Class B NII $ 0.2807 Class C NII $ 0.2872 Class Q NII $ 0.4450 Class A STCG $ 0.0298 Class B STCG $ 0.0327 Class C STCG $ 0.0306 Class Q STCG $ 0.0290 Class A LTCG $ 0.0632 Class B LTCG $ 0.0692 Class C LTCG $ 0.0648 Class Q LTCG $ 0.0614 Equity and Income Class A NII $ 0.4523 Class B NII $ 0.3641 Class C NII $ 0.3715 Class Q NII $ 0.4699 Class T NII $ 0.3889 Class A STCG $ 0.0352 Class B STCG $ 0.0379 Class C STCG $ 0.0338 Class Q STCG $ 0.0350 Class T STCG $ 0.0378 Class A LTCG $ 0.0153 Class B LTCG $ 0.0164 Class C LTCG $ 0.0146 Class Q LTCG $ 0.0152 Class T LTCG $ 0.0164 - ---------- NII -- Net investment income STCG -- Short-term capital gain LTCG -- Long-term capital gain ROC -- Return of capital Of the ordinary distributions made during the fiscal year ended May 31, 2002, the following percentages qualify for the dividends received deduction available to corporate shareholders; 100.00%, 100.00%, 94.68%, 100.00%, 45.08% and 26.52% for LargeCap Growth, Financial Services, Large Company Value, MagnaCap, Convertible and Equity and Income, respectively. The above figure may differ from those cited elsewhere in this report due to differences in the calculation of income and gains for Securities and Exchange Commissions (book) purpose and Internal Revenue Service (tax) purposes. Shareholder are strongly advised to consult their own tax advisers with respect to the tax consequences of their Investments in the Funds. In January 2002, shareholders, excluding corporate shareholders, received an IRS 1099-DIV regarding the federal tax status of the dividends and distributions received by them in calendar 2001. 111 DIRECTOR/TRUSTEE AND OFFICER INFORMATION (Unaudited) - -------------------------------------------------------------------------------- The business and affairs of the Funds are managed under the direction of the Funds' Board of Directors/Trustees. Information pertaining to the Directors/Trustees and Officers of the Funds is set forth below:
NUMBER OF PRINCIPAL PORFOLIOS IN OTHER TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE OVERSEEN BY HELD BY AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS DIRECTOR/TRUSTEE DIRECTOR/TRUSTEE ------- -------------- ----------- --------------- ---------------- ---------------- INDEPENDENT DIRECTORS/TRUSTEES: Paul S. Doherty Director/Trustee 10-29-99 to Retired. Mr. Doherty was 106 Mr. Doherty is a 7337 E. Doubletree Ranch Rd. Present formerly President and Trustee of the Scottsdale, AZ 85258 Partner, Doherty, Wallace, GCG Trust Age: 67 Pillsbury and Murphy, (February 2002 to P.C.,Attorneys (1996 to present). 2001); a Director of Tambrands, Inc. (1993 to 1998); and a Trustee of each of the funds managed by Northstar Investment Management Corporation (1993 to 1999). J. Michael Earley Director/Trustee 2-22-02 to President and Chief 106 Mr. Earley is a 7337 E. Doubletree Ranch Rd. Present Executive Officer of Trustee of the Scottsdale, AZ 85258 Bankers Trust Company, N.A. GCG Trust (1997 Age: 56 (1992 to present). to present). R. Barbara Gitenstein Director/Trustee 2-22-02 to President of the College of 106 Dr. Gitenstein is 7337 E. Doubletree Ranch Rd. Present New Jersey (1999 to a Trustee of the Scottsdale, AZ 85258 present); Executive Vice GCG Trust (1997 Age: 53 President and Provost at to present). Drake University (1992 to 1998). Walter H. May Director/Trustee 10-29-99 to Retired. Mr. May was 106 Mr. May is a 7337 E. Doubletree Ranch Rd. Present formerly Managing Director Trustee for the Scottsdale, AZ 85258 and Director of Marketing Best Prep Charity Age: 65 for Piper Jaffray, Inc. (an (1991 to present) investment and the GCG Trust banking/underwriting firm). (February 2002 to Mr. May was formerly a present). Trustee of each of the funds managed by Northstar Investment Management Corporation (1996 to 1999). Jock Patton Director/Trustee 8-28-95 to Private Investor. Mr. 106 Mr. Patton is a 7337 E. Doubletree Ranch Rd. Present Patton was formerly Trustee of the Scottsdale, AZ 85258 Director and Chief GCG Trust Age: 56 Executive Officer of (February 2002 to Rainbow Multimedia Group, present); He is Inc. (January 1999 to also Director of December 2001); Director of Hypercom, Inc. Stuart Entertainment, Inc.; and JDA Software Directory of Artisoft, Inc. Group, Inc. (1994 to 1998); President (January 1999 to and co-owner of StockVal, present); Inc. (November 1992 to June National 1997) and a Partner and Airlines, Inc.; Director of the law firm of and BG Streich Lang, P.A. (1972 to Associates, Inc. 1993). David W.C. Putnam Director/Trustee 10-29-99 to President and Director of 106 Mr. Putnam is a 7337 E. Doubletree Ranch Rd. Present F.L. Putnam Securities Trustee of GCG Scottsdale, AZ 85258 Company, Inc. and its Trust (February Age: 62 affiliates. Mr. Putnam is 2002 to present); also President, Secretary Director of F.L. and Trustee of The Putnam Securities Principled Equity Market Company, Inc. Fund. Mr. Putnam was (June 1978 to formerly a Director/Trustee present); F.L. of Trust Realty Corp., Putnam Investment Anchor Investment Trust, Management Bow Ridge Mining Co., and Company (December each of the funds managed 2001 to present); by Northstar Investment Asian American Management Corporation Bank and Trust (1994 to 1999). Company (June 1992 to present); and Notre Dame Health Care Center (1991 to present). He is also a Trustee of The Principled Equity Market Fund (November 1996 to present); Progressive Capital Accumulation Trust (August 1998 to present); Anchor International Bond Trust (December 2000 to present); F.L. Putnam Foundation (December 2000 to present); Mercy Endowment Foundation (1995 to present); and an Honorary Trustee of Mercy Hospital (1973 to present).
112 DIRECTOR/TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
NUMBER OF PRINCIPAL PORFOLIOS IN OTHER TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE OVERSEEN BY HELD BY AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS DIRECTOR/TRUSTEE DIRECTOR/TRUSTEE ------- -------------- ----------- --------------- ---------------- ---------------- Blaine E. Rieke Director/Trustee 2-26-01 to General Partner of 106 Mr. Rieke is a 7337 E. Doubletree Ranch Rd. Present Huntington Partners, an Director/Trustee Scottsdale, AZ 85258 investment partnership of the Morgan Age: 68 (1997 to present). Mr. Chase Trust Co. Rieke was formerly Chairman (January 1998 to and Chief Executive Officer present) and the of Firstar Trust Company GCG Trust (1973 to 1996). Mr. Rieke (February 2002 to was formerly the Chairman present). of the Board and a Trustee of each of the funds managed by ING Investment Management Co. LLC. (1998 to 2001). Roger B. Vincent Director/Trustee 2-22-02 to President of Springwell 106 Mr. Vincent is a 7337 E. Doubletree Ranch Rd. Present Corporation, a corporate Trustee of the Scottsdale, AZ 85258 advisory firm (1989 to GCG Trust (1994 Age: 56 present). Mr. Vincent was to present) and a formerly a Director of Director of Tatham Offshore, Inc. (1996 AmeriGas Propane, to 2000) and Petrolane, Inc. (1998 to Inc. (1993 to 1995). present). Richard A. Wedemeyer Director/Trustee 2-26-01 to Vice President -- Finance 106 Mr. Wedemeyer is 7337 E. Doubletree Ranch Rd. Present and Administration -- of a Trustee of Scottsdale, AZ 85258 the Channel Corporation, an Touchstone Age: 65 importer of specialty alloy Consulting Group aluminum products (1996 to (1997 to present) present). Mr. Wedemeyer was and the GCG Trust formerly Vice President -- (February 2002 to Finance and Administration present). -- of Performance Advantage, Inc., a provider of training and consultation services (1992 to 1996), and Vice President -- Operations and Administration -- of Jim Henson Productions (1979 to 1997). Mr. Wedemeyer was a Trustee of each of the funds managed by ING Investment Management Co. LLC. (1998 to 2001).
113 DIRECTOR/TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
NUMBER OF PRINCIPAL PORFOLIOS IN OTHER TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE OVERSEEN BY HELD BY AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS DIRECTOR/TRUSTEE DIRECTOR/TRUSTEE ------- -------------- ----------- --------------- ---------------- ---------------- INTERESTED DIRECTORS: R. Glenn Hilliard(1) Director/Trustee 2-26-02 to Chairman and CEO of ING 106 Mr. Hilliard ING Americas Present Americas and a member of serves as a 5780 Powers Ferry Road, NW its Americas Executive member of the Atlanta, GA 30327 Committee (1999 to Board of Age: 59 present). Mr. Hilliard was Directors of the formerly Chairman and CEO Clemson of ING North America, University encompassing the U.S., Foundation, the Mexico and Canada regions Board of (1994 to 1999). Councilors for the Carter Center, a Trustee of the Woodruff Arts Center and sits on the Board of Directors for the High Museum of Art. Mr. Hilliard is also a Trustee of the GCG Trust (February 2002 to present). Thomas J. McInerey(2) Director/Trustee 2-26-01 to Chief Executive Officer, 156 Mr. McInerney 7337 E. Doubletree Ranch Rd. Present ING U.S. Financial Services serves as a Scottsdale, AZ 85258 (October 2001 to present); Director/Trustee Age: 45 President, Chief Executive of Aeltus Officer, and Director of Investment Northern Life Insurance Management, Inc. Company (2001 to present); (1997 to and President and Director present); each of of Aetna Life Insurance and the Aetna Funds Annuity Company (1997 to (April 2002 to present), Aetna Retirement present); Holdings, Inc. (1997 to Ameribest Life present), Aetna Investment Insurance Co. Adviser Holding Co. (2000 (2001 to to present), and Aetna present); Retail Holding Company Equitable Life (2000 to present). Mr. Insurance Co. McInerney was formerly (2001 to General Manager and Chief present); First Executive Officer of ING Columbine Life Worksite Division (since Insurance Co. December 2000 to October (2001 to 2001); President of Aetna present); Golden Financial Services (August American Life 1997 to December 2000); Insurance Co. Head of National Accounts (2001 to and Core Sales and present); Life Marketing for Aetna U.S. Insurance Company Healthcare (April 1996 to of Georgia (2001 March 1997); Head of to present); Corporate Strategies for Midwestern United Aetna Inc. (July 1995 to Life Insurance April 1996); and has held a Co. (2001 to variety of line and present); corporate staff positions ReliaStar Life since 1978. Insurance Co. (2001 to present); Security Life of Denver (2001 to present); Security Connecticut Life Insurance Co. (2001 to present); Southland Life Insurance Co. (2001 to present); USG Annuity and Life Company (2001 to present); United Life and Annuity Insurance Co. Inc (2001 to present); and the GCG Trust (February 2002 to present). Mr. McInerney is a member of the Board of the National Commission on Retirement Policy, the Governor[0092]s Council on Economic Competitiveness and Technology of Connecticut, the Board of Directors of the Connecticut Business and Industry Association, the Board of Trustees of the Bushnell, the Board for the Connecticut Forum, and the Board of the Metro Hartford Chamber of Commerce, and is Chairman of Concerned Citizens for Effective Government.
114 DIRECTOR/TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
NUMBER OF PRINCIPAL PORFOLIOS IN OTHER TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE OVERSEEN BY HELD BY AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS DIRECTOR/TRUSTEE DIRECTOR/TRUSTEE ------- -------------- ----------- --------------- ---------------- ---------------- John G. Turner(3) Chairman and 10-29-99 to President, Turner 106 Mr. Turner serves 7337 E. Doubletree Ranch Rd. Director/Trustee Present Investment Company (since as a member of Scottsdale, AZ 85258 January 2002). Mr. Turner the Board of the Age: 62 was formerly Vice Chairman GCG Trust. Mr. of ING Americas (2000 to Turner also 2001); Chairman and Chief serves as a Executive Officer of Director of the ReliaStar Financial Corp. Hormel Foods and ReliaStar Life Corporation (May Insurance Company (1993 to 2000 to present), 2000); Chairman of Shopko Stores, ReliaStar United Services Inc. (August 1999 Life Insurance Company to present), and (1995 to 1998); Chairman of M.A. Mortenson ReliaStar Life Insurance Co. (March 2002 Company of New York (1995 to present) to 2001); Chairman of Northern Life Insurance Company (1992 to 2000); Chairman and Director/Trustee of the Northstar affiliated investment companies (1993 to 2001) and Director, Northstar Investment Management Corporation and its affiliates (1993 to 1999).
- ---------- (1) Mr. Hilliard is an "interested person", as defined by the Investment Company Act of 1940, as amended (the "1940 Act"), because of his relationship with ING Americas, an affiliate of ING Investments, LLC. (2) Mr. McInerney is an "interested person", as defined by the 1940 Act, because of his affiliation with ING U.S. Worksite Financial Services, an affiliate of ING Investments, LLC. (3) Mr. Turner is an "interested person", as defined by the 1940 Act, because of his former affiliation with ING Americas, an affiliate of ING Investments, LLC. 115 DIRECTOR/TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS ------- -------------- ----------- --------------- OFFICERS: James M. Hennessy President, Chief March 2002 President and Chief Executive 7337 E. Doubletree Ranch Rd. Executive to Present Officer of ING Capital Scottsdale, AZ 85258 Officer, and (for the ING Corporation, LLC, ING Funds Age: 52 Chief Operating Funds) Services, LLC, ING Advisors, Inc., Officer ING Investments, LLC, Lexington Funds Distributor, Inc., Express President, Chief February America T.C. Inc. and EAMC Executive 2001 to Liquidation Corp. (since December Officer, and March 2002 2001); Executive Vice President Chief Operating (for the and Chief Operating Officer of ING Officer Pilgrim Quantitative Management, Inc. Funds) (since October 2001) and ING Funds Distributor, Inc. (since June Chief Operating July 2000 to 2000). Formerly, Senior Executive Officer February Vice President (June 2000 to 2001(for the December 2000) and Secretary Pilgrim (April 1995 to December 2000) of Funds) ING Capital Corporation, LLC, ING Funds Services, LLC, ING Investments, LLC, ING Advisors, Inc., Express America T.C. Inc., and EAMC Liquidation Corp.; and Executive Vice President, ING Capital Corporation, LLC and its affiliates (May 1998 to June 2000) and Senior Vice President, ING Capital Corporation, LLC and its affiliates (April 1995 to April 1998). Stanley D. Vyner Executive Vice March 2002 Executive Vice President of ING 7337 E. Doubletree Ranch Rd. President to Present Advisors, Inc. and ING Scottsdale, Arizona 85258 (for the ING Investments, LLC (since July Age: 51 Funds) 2000) and Chief Investment Officer of the International Executive Vice July 1996 to Portfolios, ING Investments, LLC President March 2002 (since July 1996). Formerly, (for the President and Chief Executive international Officer of ING Investments, LLC portfolios of (August 1996 to August 2000). the Pilgrim Funds) Mary Lisanti Executive Vice March 2002 Executive Vice President of ING 7337 E. Doubletree Ranch Rd. President to Present Investments, LLC and ING Advisors, Scottsdale, AZ 85258 (for the ING Inc. (since November 1999) and of vAge: 45 Funds) ING Quantitative Management, Inc. (since July 2000); Chief Executive Vice May 1998 to Investment Officer of the Domestic President March 2002 Equity Portfolios, ING (for the Investments, LLC (since 1999). domestic Formerly, Executive Vice President equity and Chief Investment Officer for portfolios of the Domestic Equity Portfolios of the Pilgrim Northstar Investment Management Funds) Corporation, whose name changed to Pilgrim Advisors, Inc. and subsequently became part of ING Investments, LLC (May 1998 to October 1999); Portfolio Manager with Strong Capital Management (May 1996 to 1998); a Managing Director and Head of Small- and Mid-Capitalization Equity Strategies at Bankers Trust Corp. (1993 to 1996).
116 DIRECTOR/TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS ------- -------------- ----------- --------------- OFFICERS: Michael J. Roland Executive Vice March 2002 Executive Vice President, Chief 7337 E. Doubletree Ranch Rd. President, to Present Financial Officer and Treasurer of Scottsdale, AZ 85258 Assistant (for the ING ING Funds Services, LLC, ING Funds Age: 44 Secretary and Funds) Distributor, Inc., ING Advisors, Principal Inc., ING Investments, LLC, ING Financial Quantitative Management, Inc., Officer Lexington Funds Distributor, Inc., Express America T.C. Inc. and EAMC Senior Vice June 1998 Liquidation Corp. (since December President and to March 2001). Formerly, Senior Vice Principal 2002 (for President, ING Funds Services, Financial the Pilgrim LLC, ING Investments, LLC, and ING Officer Funds) Funds Distributor, Inc. (June 1998 to December 2001) and Chief Financial Officer of Endeavor Group (April 1997 to June 1998). Ralph G. Norton III Senior Vice March 2002 Senior Vice President of ING 7337 E. Doubletree Ranch Rd. President to Present Investment Advisors, Inc. and ING Scottsdale, Arizona 85258 (for the ING Investments, LLC (since October Age: 42 Funds) 2001) and Chief Investment Officer of the Fixed Income Portfolios, Senior Vice August 2001 ING Investments, LLC (since President to March October 2001). Formerly, Senior 2002 (for Market Strategist, Aeltus the fixed Investment Management, Inc. income (January 2001 to August 2001) and portfolios of Chief Investment Officer, ING the Pilgrim Investments, LLC (1990 [0096] Funds) January 2001). Robert S. Naka Senior Vice March 2002 Senior Vice President and 7337 E. Doubletree Ranch Rd. President and to Present Assistant Secretary of ING Funds Scottsdale, AZ 85258 Assistant (for the ING Services, LLC, ING Funds Age: 38 Secretary Funds) Distributor, Inc., ING Advisors, Inc., ING Investments, LLC, ING Senior Vice November Quantitative Management, Inc. President and 1999 to (since October 2001) and Lexington Assistant March 2002 Funds Distributor, Inc. (since Secretary (for the December 2001). Formerly, Vice Pilgrim President, ING Investments, LLC Funds) (April 1997 to October 1999), ING Funds Services, LLC (February 1997 Assistant July 1994 to to August 1999) and Assistant Vice Secretary November President, ING Funds Services, LLC 1999 (for (August 1995 to February 1997). the Pilgrim Funds) Robyn L. Ichilov Vice President March 2002 Vice President of ING Funds 7337 E. Doubletree Ranch Rd. and Treasurer to Present Services, LLC (since October 2001) Scottsdale, AZ 85258 (for the ING and ING Investments, LLC (since Age: 34 Funds) August 1997); Accounting Manager, ING Investments, LLC (since Vice President May 1998 to November 1995). and Treasurer March 2002 (for the Pilgrim Funds) Vice President November 1997 to May 1998 (for the Pilgrim Funds)
117 DIRECTOR/TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS ------- -------------- ----------- --------------- OFFICERS: Kimberly A. Anderson Vice President March 2002 Vice President for ING 7337 E. Doubletree Ranch Rd. and Secretary to Present Quantitative Management, Inc. Scottsdale, AZ 85258 (for the ING (since October 2001); Vice Age: 37 Funds) President and Assistant Secretary of ING Funds Services, LLC, ING February Funds Distributor, Inc., ING 2001 to Advisors, Inc., ING Investments, March LLC (since October 2001) and 2002(for the Lexington Funds Distributor, Inc. Pilgrim (since December 2001). Formerly, Funds) Assistant Vice President of ING Funds Services, LLC (November 1999 to January 2001) and has held various other positions with ING Funds Services, LLC for more than the last five years. Lourdes R. Bernal Vice President March 2002 Vice President of ING Investments, 7337 E. Doubletree Ranch Rd. to Present LLC (since January 2002). Prior to Scottsdale, AZ 85258 (for certain joining ING Investments, LLC in Age: 32 ING Funds) 2002, Ms. Bernal was a Senior Manager in the Investment February Management Practice, 2002 to PricewaterhouseCoopers LLP (July Present (for 2000 to December 2001); Manager, the Pilgrim PricewaterhouseCoopers LLP (July Funds) 1998 to July 2000); Manager, Coopers & Lybrand LLP (July 1996 to June 1998); Senior Associate, Coopers & Lybrand LLP (July 1992 to June 1996); and Associate, Coopers & Lybrand LLP (August 1990 to June 1992). Todd Modic Assistant Vice March 2002 Director of Financial Reporting of 7337 E. Doubletree Ranch Rd. President to Present ING Investments, LLC (since March Scottsdale, AZ 85258 (for certain 2001). Formerly, Director of Age: 34 ING Funds) Financial Reporting, Axient Communications, Inc. (May 2000 to August 2001 January 2001) and Director of to March Finance, Rural/Metro Corporation 2002 (for (March 1995 to May 2000). the Pilgrim Funds) Maria M. Anderson Assistant Vice March 2002 Assistant Vice President of ING 7337 E. Doubletree Ranch Rd. President to Present Funds Services, LLC (since October Scottsdale, AZ 85258 (for certain 2001). Formerly, Manager of Fund Age: 43 ING Funds) Accounting and Fund Compliance, ING Investments, LLC (September August 2001 1999 to November 2001); Section to March Manager of Fund Accounting, Stein 2002 (for Roe Mutual Funds (July 1998 to the Pilgrim August 1999); and Financial Funds) Reporting Analyst, Stein Roe Mutual Funds (August 1997 to July 1998). Robert K. Kinsey Vice President March 2002 Vice President, ING Investments, 7337 E. Doubletree Ranch Rd. and Portfolio to Present LLC (since March 1999). Formerly, Scottsdale, Arizona 85258 Manager (for certain Vice President and Fixed Income Age: 42 (Equity and ING Funds) Portfolio Manager, Federated Income Fund) Investors (January 1995 to March March 1999 1999); Principal and Sub-Adviser, to March Harris Investment Management (July 2002 (for 1992 to January 1995). certain Pilgrim Funds)
118 DIRECTOR/TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS ------- -------------- ----------- --------------- OFFICERS: Edwin Schriver Senior Vice March 2002 Senior Vice President (since 7337 E. Doubletree Ranch Rd. President and to Present November 1999) and Senior Scottsdale, Arizona 85258 Senior Portfolio (for certain Portfolio Manager (since October Age: 56 Manager ING Funds) 2001) for ING Senior High Yield (Equity and Analyst, Dreyfus Corporation Income Fund) November (April 1998 to November 1999); and 1999 to President of Cresent City Research March 2002 (July 1993 to April 1998). (for certain Pilgrim Funds) Steven Rayner Vice President March 2002 Vice President of ING Investments, 7337 E. Doubletree Ranch Rd. and to Present LLC (since October 2001). Scottsdale, Arizona 85258 Co-Portfolio (for certain Formerly, Assistant Vice Age: 35 Manager ING Funds) President, ING Investments, LLC; (Financial January (February 1998 to January 2001) Services Fund) 2001 to and has held various other March 2002 positions with ING Investments, (for certain LLC and its predecessors since Pilgrim June 1995. Funds) Robert Kloss Vice President March 2002 Vice President of ING Investments, 7337 E. Doubletree Ranch Rd. and to Present LLC (since January 2001) and has Scottsdale, Arizona 85258 Co-Portfolio (for certain held various other positions with Age: 45 Manager ING Funds) ING Investments, LLC and its (Financial predecessors for the last five Services Fund) January years. 2001 to March 2002 (for certain Pilgrim Funds) Thomas Jackson Senior Vice March 2002 Senior Vice President, ING 7337 E. Doubletree Ranch Rd. President and to Present Investments, LLC (since June 2001) Scottsdale, Arizona 85258 Senior Portfolio (for certain and ING Advisors, Inc. (since Age: 56 Manager (Large ING Funds) October 2001); and Senior Company Portfolio Manager for ING Value, June 2001 Investments, LLC and ING Advisors, MagnaCap, Tax to March Inc. (since October 2001). Efficient Equity 2002 (for Formerly, Managing Director, and Equity and certain Prudential Investments (April 1990 Income Funds) Pilgrim to December 2000); and prior to Funds) April 1990, Co-Chief Investment Officer and Managing Director at Century Capital Associates and Red Oak Advisors. Jeffrey Bernstein Senior Vice March 2002 Senior Vice President (since 7337 E. Doubletree Ranch Rd. President and to Present October 1999) of ING Investments, Scottsdale, Arizona 85258 Senior Portfolio (for certain LLC and Senior Portfolio Manager Age: 35 Manager ING Funds) (since October 2001) for ING (Growth Advisors, Inc. and ING Opportunities, June 2000 Investments, LLC. Formerly, LargeCap to March Portfolio Manager, Northstar Growth, 2002 (for Investment Management Corporation, MidCap certain whose name changed to Pilgrim Opportunities Pilgrim Advisors, Inc. and subsequently and MidCap Funds) became part of ING Investments, Growth Funds) LLC (May 1998 to October 1999); Portfolio Manager, Strong Capital Management (1997 to May 1998); and Portfolio Manager, Berkeley Capital (1995 to 1997).
119 DIRECTOR/TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS ------- -------------- ----------- --------------- OFFICERS: Andrew Chow Vice President March 2002 Vice President, ING Investments, 7337 E. Doubletree Ranch Rd. and Portfolio to Present LLC (since September 2000). Scottsdale, Arizona 85258 Manager (for certain Formerly, Portfolio Manager, Age: 38 (Convertible ING Funds) Conseco Convertible Securities Fund) Fund (1998 to August 2000) and October managed convertible securities 2001 to accounts with Conseco (1991 to March 2002 1998). (for certain Pilgrim Funds) James Vail Senior Vice March 2002 Senior Vice President for ING 7337 E. Doubletree Ranch Rd. President and to Present Investments, LLC (since June 2001) Scottsdale, Arizona 85258 Portfolio (for certain and Portfolio Manager of ING Age: 57 Manager (Tax ING Funds) Investments, LLC and ING Advisors, Efficient Equity Inc. (since October 2001). Fund) June 2001 Formerly, Vice President, to March Lexington Management Corporation 2002 (for (which was acquired by ING certain Investments, LLC's parent company Pilgrim in July 2000) (1991 to 2000); and Funds) has held investment research positions with Chemical Bank, Oppenheimer & Co., Robert Fleming, Inc. and Beacon Trust Company, where he was a Senior Investment Analyst.
120 ING Funds Distributor, Inc. offers the funds listed below. Investors may obtain a copy of a prospectus of any ING Fund by calling ING Funds Distributor, Inc. at (800) 992-0180. Please read the prospectus carefully before investing or sending money. INTERNATIONAL EQUITY DOMESTIC EQUITY VALUE FUNDS ING Asia-Pacific Equity Fund ING Financial Services Fund ING Emerging Countries Fund ING Large Company Value Fund ING European Equity Fund ING MagnaCap Fund ING International Fund ING Tax Efficient Equity Fund ING International Growth Fund ING Value Opportunity Fund ING International SmallCap Growth Fund ING SmallCap Value Fund ING International Value Fund ING MidCap Value Fund ING Precious Metals Fund ING Russia Fund DOMESTIC EQUITY AND INCOME FUNDS ING Equity and Income Fund INTERNATIONAL GLOBAL EQUITY ING Convertible Fund ING Global Technology Fund ING Balanced Fund ING Global Real Estate Fund ING Growth and Income Fund ING Worldwide Growth Fund FIXED INCOME FUNDS DOMESTIC EQUITY FUNDS ING Bond Fund ING Growth Fund ING Classic Money Market Fund* ING Growth + Value Fund ING Government Fund ING Growth Opportunities Fund ING GNMA Income Fund ING LargeCap Growth Fund ING High Yield Opportunity Fund ING MidCap Opportunities Fund ING High Yield Bond Fund ING Small Company Fund ING Intermediate Bond Fund ING SmallCap Opportunities Fund ING Lexington Money Market Trust* ING Technology Fund ING National Tax Exempt Bond Fund ING Biotechnology Fund ING Money Market Fund* ING Aeltus Money Market Fund* DOMESTIC EQUITY INDEX FUNDS ING Strategic Income Fund ING Index Plus LargeCap Fund ING Index Plus MidCap Fund GENERATION FUNDS ING Index Plus SmallCap Fund ING Ascent Fund ING Research Enhanced Index Fund ING Crossroads Fund ING Legacy Fund LOAN PARTICIPATION FUNDS ING Prime Rate Trust ING Senior Income Fund * An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. INVESTMENT MANAGER ING Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 ADMINISTRATOR ING Funds Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 DISTRIBUTOR ING Funds Distributor, Inc. 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 1-800-992-0180 TRANSFER AGENT DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141-6368 CUSTODIAN State Street Bank & Trust 801 Pennsylvania Avenue Kansas City, Missouri 64105 LEGAL COUNSEL Dechert 1775 Eye Street, N.W. Washington, D.C. 20006 INDEPENDENT AUDITORS KPMG LLP 355 South Grand Avenue Los Angeles, California 90071 Prospectus containing more complete information regarding the Funds, including charges and expenses, may be obtained by calling ING Funds Distributor, Inc., at 1-800-992-0180. Please read the prospectus carefully before you invest or send money. [LION LOGO] ING FUNDS DOMEQIQAR053102-072902 -----END PRIVACY-ENHANCED MESSAGE-----