-----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, MKOzzH8vccE81zZMgmBb+tDqeoArGa+TyLT13aHQ0cGS/zJAIKly1h22f1OqiDoJ vklO3mLkS3XrC2/W/hA6AQ== 0000950147-03-000865.txt : 20030805 0000950147-03-000865.hdr.sgml : 20030805 20030804180937 ACCESSION NUMBER: 0000950147-03-000865 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030531 FILED AS OF DATE: 20030805 EFFECTIVENESS DATE: 20030805 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-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-01939 FILM NUMBER: 03821753 BUSINESS ADDRESS: STREET 1: 7337 E DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 18009920180 MAIL ADDRESS: STREET 1: 7337 E DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM INVESTMENT FUNDS INC/MD DATE OF NAME CHANGE: 19981113 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM INVESTMENT FUNDS INC DATE OF NAME CHANGE: 19950503 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM MAGNACAP FUND INC DATE OF NAME CHANGE: 19920703 N-CSR 1 e-10208.txt CERTIFIED SHAREHOLDER REPORT OMB APPROVAL OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-1939 ING Investment Funds, Inc. (Exact name of registrant as specified in charter) 7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258 (Address of principal executive offices) (Zip code) The Corporation Trust Incorporated, 300 E. Lombard Street, Baltimore, MD 21202 (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-992-0180 Date of fiscal year end: May 31 Date of reporting period: May 31, 2003 ITEM 1. REPORTS TO STOCKHOLDERS. The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1): ANNUAL REPORT May 31, 2003 DOMESTIC EQUITY GROWTH FUNDS ING Growth + Value Fund CLASSES A, B, C, M AND T ING Growth Opportunities Fund ING LargeCap Growth Fund ING MidCap Opportunities Fund ING SmallCap Opportunities Fund ING Disciplined LargeCap Fund DOMESTIC EQUITY VALUE FUNDS ING Financial Services Fund ING Large Company Value Fund ING MagnaCap Fund ING MidCap Value Fund ING SmallCap Value Fund ING Tax Efficient Equity Fund DOMESTIC EQUITY AND INCOME FUNDS ING Convertible Fund ING Equity and Bond Fund ING Real Estate Fund [PHOTO] [LION LOGO] ING FUNDS TABLE OF CONTENTS - -------------------------------------------------------------------------------- President's Letter ........................... 1 Portfolio Managers' Reports: Domestic Equity Growth Funds ............... 2 Domestic Equity Value Funds ................ 16 Domestic Equity and Income Funds ........... 24 Index Descriptions ........................... 32 Independent Auditors' Report ................. 33 Statements of Assets and Liabilities ......... 34 Statements of Operations ..................... 42 Statements of Changes in Net Assets .......... 46 Financial Highlights ......................... 54 Notes to Financial Statements ................ 80 Portfolios of Investments .................... 102 Trustee and Officer Information .............. 139 PRESIDENT'S LETTER - -------------------------------------------------------------------------------- [PHOTO] JAMES M. HENNESSY Dear Shareholder, It would be an understatement to refer to this past year as a challenging one for investors. There have been many events on the geopolitical front and numerous economic challenges that have tested investor resilience. We are now in a period of one of the longest economic downturns in U.S. history. Although few of us will take much comfort in the fact that we have coped with a particularly challenging time, perhaps we should. We at ING Funds remain optimistic about the future, preferring to see the positives that have emerged in the wake of recent difficulties. For instance, the quick actions on the part of the financial industry and government regulators that followed a string of recent corporate scandals may have helped regain investor trust and the tough new accounting standards now in place should help permanently improve our industry. Although I do not wish to be premature in my enthusiasm, I do believe that the gradual market upturn of recent months supports ING Funds' long-held philosophy that it is important to remain focused on long-term investment goals and maintain reasonable expectations. In recent months, we at ING Funds have made some changes to some of our fund management teams. We have also entered into new relationships with respected sub-advisers and are launching several new mutual funds. We have implemented improvements to our website that make it more accessible to investors and financial advisors alike. We remain committed to providing quality service and innovative products to help meet the needs of our investors, and we are excited and optimistic about the future. On behalf of ING Funds, I thank you for your continued support and confidence and look forward to serving you in the future. Sincerely, /s/ James M. Hennessy James M. Hennessy President ING Funds July 15, 2003 1 ING GROWTH + VALUE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: Louis Navellier, Navellier Fund Management, Inc., the Sub-Advisor* GOAL: ING Growth + Value Fund (the "Fund") seeks capital appreciation by investing in a diversified portfolio of equity securities, including common and preferred stock. MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31, 2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad measures of market performance) declined 7.73% and 8.06%, respectively. The market's decline was evident in measures of mid-cap growth and small-cap growth stocks as well. Two indices of such performance, the Russell Midcap Growth Index fell 5.84%, and the Russell 2000 Growth Index dropped 9.59%. The reporting period was marked by continued disappointment in the economic numbers but strength in consumer spending, buoyed by record refinancing. During the final months of the fiscal year, investors were focused on geopolitical uncertainties, especially the potential for armed conflict in Iraq. Once the coalition forces did, in fact, enter Iraq, the market began trading up off its March 11 low. Through the first week of April, the overall market gained an additional 4%. Recent market leadership has centered on the technology group, with value stocks trailing the overall market by a small margin. We have seen some institutional investors purchasing tech stocks, hoping the sector would provide the most leveraged upside returns if a widespread economic recovery ensues. To date, fundamentals have not, in our opinion, justified this type of anticipatory buying. As value investors, we are willing to forgo a small amount of short-term upside return whenever we see this kind of speculative buying, When the markets settle, we expect investors will once again focus on the fundamentals of individual companies. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -20.88% compared to the Russell 3000 Index for which the total return was -7.73%. PORTFOLIO SPECIFICS: In the semiannual report, we stated that the Fund underperformed the index in the first half primarily due to stock selection in the consumer discretionary and technology sectors. In the six months since, the Fund returned 1.81% and the index 9.34%. During this period, the source of the underperformance was again mainly stock selection, this time in the healthcare and technology sectors, partly offset by favorable stock selection in industrials. Sector selection also detracted from performance. In the most noteworthy cases, we were overweight in technology, which has performed relatively poorly, and were underweight in the financial sector, which was a better-than-average performer in the index. Over the last six months, sector weights underwent significant change. Principally, we cut our underweight in financials by one-third, halved the overweight in technology and reduced our heavy overweight in consumer discretionary stocks to a small amount. MARKET OUTLOOK: Value stocks have recently been trailing their growth counterparts. While we believe this is a short-term reactionary move, equities across the spectrum are very reasonably priced today. This, in combination with low interest rates and fairly indifferent/low consumer sentiment, makes for one of the best investment opportunities we have seen in at least five years. Adding in such factors as stock market fear, post-war reconstruction uncertainty, record low interest rates, and a business environment that has been extremely conservative, we believe the upside potential for our equity market far exceeds the downside risk. * Effective June 16, 2003 ING Investments, LLC assumed direct management of the Fund. Since that date the Fund has been managed by a team of investment professionals led by Matthew S. Price and David C. Campbell. 2 Portfolio Managers' Report ING GROWTH + VALUE FUND - --------------------------------------------------------------------------------
11/18/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 -------- ------- ------- ------- ------- ------- ------- ------- ING Growth + Value Fund Class A With Sales Charge $ 9,425 $ 9,614 $11,337 $14,912 $24,511 $16,452 $11,806 $ 9,340 ING Growth + Value Fund Class A Without Sales Charge $10,000 $10,200 $12,029 $15,822 $26,006 $17,456 $12,526 $ 9,910 Russell 2000 Growth Index $10,000 $10,844 $13,148 $12,795 $14,063 $14,863 $14,788 $13,578 Russell 3000 Growth Index $10,000 $11,170 $14,496 $17,133 $19,159 $17,297 $15,140 $13,970
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ----------------------------------------- SINCE INCEPTION 1 YEAR 5 YEAR 11/18/96 ------ ------ -------- Including Sales Charge: Class A (1) -25.45% -4.93% -1.04% Class B (2) -25.36% -4.80% -0.84% Class C (3) -22.24% -4.50% -0.86% Excluding Sales Charge: Class A -20.88% -3.80% -0.14% Class B -21.43% -4.49% -0.84% Class C -21.45% -4.50% -0.86% Russell 2000 Index -8.18% 0.65% 4.82%(4) Russell 3000 Index -7.73% -0.74% 5.28%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Growth + Value Fund against the Russell 2000 Index and the Russell 3000 Index. The Indices have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 12/01/96. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller and mid-sized companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the mix of growth and value securities in which the Fund invests. See accompanying index descriptions on page 32. 3 ING GROWTH OPPORTUNITIES FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC.* GOAL: The Growth Opportunities Fund seeks long-term growth of capital through investment in a portfolio consisting primarily of common stocks of U.S. companies that the managers feel have above-average prospects for growth. MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31, 2003. For the period, the Russell 3000 and the S&P 500 index (two broad measures of market performance) declined 7.73% and 8.06%, respectively. The market's decline was evident in measures of mid cap growth and small cap growth stocks as well. The Russell Midcap Growth index fell 5.84%, and the Russell 2000 Growth index dropped 9.59%. The results for the six months ending May 31, 2003 were more encouraging. The Russell 3000 Index advanced 4.92% during the six-month period and the S&P 500 moved up 3.87%. Indeed, the returns for the latest three months -- ended May 31, 2003 -- were even better. In the three-month period, the Russell 3000 index moved up 15.90% and the S&P 500 advanced 15.05%. We think that a major part of this advance can be attributed to a resurgence in those stocks that were most beaten-up over the last several years. We expect, though, that as this speculation broadens out, the advance may become more sustainable, albeit somewhat less explosive. MARKET OUTLOOK: After several years of declines, the stock market appeared to be in a recovery mode from mid-March through the end of May, 2003. This seemed in part to reflect some improvement in corporate profit trends; in addition the market's advance may well have reflected investors' increasing optimism about the economy's growth later this year and into 2004. There are reasons to believe that the conditions are favorable for both the economy and for common stocks. The combination of low interest rates (with the possibility of even further Federal Reserve loosening) and stimulative tax cuts could well spur an acceleration of the economy. And inflation certainly is not an imminent concern, notwithstanding the toll that energy prices are taking on the economy. The Fund's investment discipline is not dependent on the forecast for the economy. The Fund will build a diversified portfolio of mostly smaller common stocks selected for their growth prospects, reasonable valuation, and evidence of relative strength. PERFORMANCE: For the year ended May 31, 2003, the ING Growth Opportunities Fund had a total return of -16.03% compared to the S&P 500 index for which the total return was -8.06%. PORTFOLIO SPECIFICS: In the semi annual report we stated that the Fund under-performed the index in the first half year and this was primarily due to exposure to more cyclically sensitive Technology stocks such as semiconductors. In the six months since the date of the semi-annual report, the Fund returned 1.00% and the index 3.96%. During this period, the source of the underperformance was mainly sector selection. We over weighted the Technology sector, which was a laggard for most of the period and were underweight in the Utilities and Financial sectors, which were relatively strong. Over the last six months, sector weights underwent significant change with both the substantial over weight in Technology and under weight in Financials more than halved. * A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 4 Portfolio Managers' Report ING GROWTH OPPORTUNITIES FUND - --------------------------------------------------------------------------------
6/1/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ------- ------- ------- ------- ING Growth Opportunities Fund Class A With Sales Charge $ 9,427 $11,577 $13,940 $17,012 $22,349 $35,726 $22,156 $15,805 $13,272 ING Growth Opportunities Fund Class A Without Sales Charge $10,000 $12,282 $14,788 $18,047 $23,709 $37,899 $23,504 $16,767 $14,080 Russell 3000 Index $10,000 $13,008 $16,255 $21,095 $24,932 $27,880 $25,170 $22,032 $20,328 S&P 500 Index $10,000 $12,844 $16,622 $21,722 $26,289 $29,042 $25,977 $22,380 $20,575 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 -------------------------------------------------------- SINCE INCEPTION OF CLASS A, B AND C 1 YEAR 5 YEAR 10 YEAR 6/5/95 ------ ------ ------- ------ Including Sales Charge: Class A (1) -20.85% -5.97% -- 3.61% Class B (2) -20.72% -5.75% -- 3.68% Class C (3) -17.42% -5.46% -- 3.69% Class T (4) -19.89% -5.48% 4.04% -- Excluding Sales Charge: Class A -16.03% -4.84% -- 4.38% Class B -16.55% -5.52% -- 3.68% Class C -16.59% -5.46% -- 3.69% Class T -16.55% -5.48% 4.04% -- Russell 3000 Index -7.73% -0.74% 9.63% 9.27% S&P 500 Index -8.06% -1.08% 9.93% 9.44%(5)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Growth Opportunities Fund against the Russell 3000 Index and the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Reflects deduction of the Class T deferred sales charge of 4% for the 1 year return. (5) Since inception performance for the index is shown from 6/1/95. (6) The Fund may invest in securities of large, mid- and small-capitalization companies, and the Russell 3000 Index tracks a larger number of companies than the S&P 500 Index with a large range of market capitalizations. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller and mid-size companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the growth securities in which the Fund invests. See accompanying index descriptions on page 32. 5 ING LARGECAP GROWTH FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail, CFA, Senior Vice President, ING Investments, LLC.* GOAL: The ING LargeCap Growth Fund (the "Fund") seeks long-term capital appreciation by investing in equity securities of large U.S. companies. MARKET OVERVIEW: The S&P 500 Index posted a loss of 8.06% over the 12 months ended May 31, 2003. Declines occurred in the first half of the period due to accounting concerns, conflict with Iraq, and concerns regarding the strength of the U.S. economic rebound. However, the market retraced a significant portion of those losses this year after the successful resolution of the war and mounting evidence of improving corporate earnings. Within the market, leadership has swung sharply back and forth between defensive stocks and former growth stocks. The sharp rallies of the fourth quarter of 2002 and from April 2003 have favored the smallest stocks within the index, especially those trading at low dollar prices. For the whole period financials, health care and information technology stocks were the strongest performers. The utilities and consumer discretionary sectors suffered the worst performance during the period. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -13.56% compared to the Russell 1000 Growth Index for which the total return was -7.85%. PORTFOLIO SPECIFICS: In the semi annual report we stated that underperformance in the first half year was primarily due to the underperformance of cyclically sensitive Technology stocks such as semiconductors. In the six-months since the date of the semi-annual report, the Fund returned 2.80% and the index 3.83%. During the period stock selection was neutral over all with relative gains in the Technology and Health Care sectors more or less balancing relative losses in Financials and Energy. Sector selection detracted slightly from performance on balance: we held on average an over weight in Technology, which was a laggard for most of the period, and an over weight in Energy which was generally strong, (although, as noted, the results of our stock selections were in the opposite direction). Over the last six months, sector weights did not undergo significant change. The largest pair of changes was the reduction of our over weight in Telecommunications stocks and an increase in Consumer Discretionary stocks, both by about 3 1/2%. MARKET OUTLOOK: While we expect the recovery to continue at a more moderate pace as compared to prior cycles, our optimism has improved at the margin. The economic cycle is greatly influenced by psychology and the inventory cycle. Although the consumer has been supported by a housing refinance boom during the down cycle, business spending has been weak. Once corporate psychology improves to the point that pent up projects are released, the positive feedback loop of psychology and the inventory cycle can be put into play. Inventories remain at very low levels, so there is reason to believe that the boost to the economy from inventory growth could be substantial. Meanwhile, government authorities are doing everything possible to set a recovery in motion. The combined monetary and fiscal stimulus of the Fed rate cuts, mortgage refinancings, and the most recent tax cut will continue to inject tremendous additional liquidity into the financial system. In summary, the economic outlook has improved. Reduced geo-political uncertainty and aggressive economic policy conditions have lowered investors' risk aversion and improved capital market sentiment. This condition has reduced the financial distress of consumers, corporations and emerging markets government borrowers alike, setting the stage for improved growth in the quarters ahead. This enhanced economic backdrop should bode well for corporate profit growth and investor sentiment. * Effective June 2, 2003, Wellington Management Company, LLP became the Sub-Advisor. Andrew J. Shilling, Senior Vice Presidentand Partner is the portfolio manager. 6 Portfolio Managers' Report ING LARGECAP GROWTH FUND - --------------------------------------------------------------------------------
7/21/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ------- ------- ING LargeCap Growth Fund Class A With Sales Charge $ 9,427 $11,949 $20,505 $30,828 $19,446 $13,224 $11,431 ING LargeCap Growth Fund Class A Without Sales Charge $10,000 $12,675 $21,752 $32,702 $20,628 $14,028 $12,126 Russell 1000 Growth Index $10,000 $11,375 $14,357 $17,946 $12,614 $ 9,982 $ 9,198 S&P 500 Index $10,000 $11,586 $14,022 $15,491 $13,856 $11,937 $10,975
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 -------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEAR 7/21/97 Including Sales Charge: Class A (1) -18.52% -2.04% 2.31% Class B (2) -18.40% -1.90% 2.51% Class C (3) -15.14% -1.59% 2.62% Excluding Sales Charge: Class A -13.62% -0.88% 3.34% Class B -14.17% -1.52% 2.66% Class C -14.15% -1.59% 2.62% Russell 1000 Growth Index(4) -7.85% -4.16% 2.49%(4) S&P 500 Index -8.06% -1.08% 1.61%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING LargeCap Growth Fund against the Russell 1000 Growth Index and the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5%, 2% and 1%, respectively, for the 1 year, 5 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 8/1/97. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. From time to time, the stock market may not favor the large company growth-oriented securities in which the Fund invests. See accompanying index descriptions on page 32. 7 ING MIDCAP OPPORTUNITIES FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC.* GOAL: The ING MidCap Opportunities Fund (the "Fund") seeks long-term capital appreciation by investing primarily in the common stock of mid-sized U.S. companies. MARKET OVERVIEW: The U.S. equity markets declined during the year ending May 31, 2003. For the period, the Russell MidCap Growth index declined 5.84%. Mid-sized stocks were not alone in their decline. The Russell 2000 Growth index fell 9.59%, the S&P 500 was down 8.06% and the Dow Jones Industrials dropped 8.90%. The NASDAQ Composite, down 1.23%, held up a little better following its steep drop in the two preceding years. The results for the six months ending May 31, 2003 were more encouraging. The Russell MidCap Growth index advanced 10.00% during the six-month period. Indeed, the returns for the latest three months -- ended May 31, 2003 -- were even better. In the three-month period, the Russell MidCap Growth index moved up 19.27%. We think that a major part of this advance can be attributed to a resurgence in those stocks that were most beaten-up over the last several years. We expect, though, that as this speculation broadens out, the advance may become more sustainable, albeit somewhat less explosive. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -8.91% compared to the Russell Mid Cap Growth Index for which the total return was -5.84% and the S&P MidCap 400 Index for which the total return was -9.14%. PORTFOLIO SPECIFICS: In the semi annual report we stated that the Fund outperformed the index in the first half year and this was primarily due to stock selection in the transportation, telecommunications and financial sectors. In the six months since the date of the semi-annual report, the Fund returned 4.01% and the index 10.00%. During this period, the source of the underperformance was mainly stock selection in the Healthcare and Industrials sectors. We estimate that these accounted for approximately half of the underperformance. Sector selection also detracted from performance. We held on average an over weight in Technology which was a laggard for most of the period and were underweight in the Healthcare sector which was relatively strong. Over the last six months, sector weights underwent significant change with the substantial over weight in Technology taken to an underweight and the under weight in Healthcare stocks reduced considerably. MARKET OUTLOOK: After several years of declines, the stock market appeared to be in a recovery mode from mid-March through the end of May 2003. This seemed in part to reflect some improvement in corporate profit trends; in addition the market's advance may well have reflected investors' increasing optimism about the economy's growth later this year and into 2004. There are reasons to believe that the conditions are favorable for both the economy and for common stocks. The combination of low interest rates (with the possibility of even further Federal Reserve loosening) and stimulative tax cuts could well spur an acceleration of the economy. And inflation certainly is not an imminent concern, notwithstanding the toll that energy prices are taking on the economy. The Fund's investment discipline is not dependent on the forecast for the economy. The Fund will build a diversified portfolio of mostly smaller common stocks selected for their growth prospects, reasonable valuation, and evidence of relative strength. * A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 8 ING MIDCAP OPPORTUNITIES FUND Portfolio Manager's Report - --------------------------------------------------------------------------------
8/20/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ------- ING MidCap Opportunities Fund Class A With Sales Charge $ 9,425 $14,581 $24,651 $18,865 $14,375 $13,094 ING MidCap Opportunities Fund Class A Without Sales Charge $10,000 $15,470 $26,155 $20,016 $15,252 $13,893 S&P MidCap 400 Index $10,000 $14,218 $17,268 $19,154 $19,612 $17,820 Russell MidCap Growth Index $10,000 $14,521 $20,869 $15,801 $13,091 $12,326
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------- SINCE INCEPTION 1 YEAR 8/20/98 ------ ------- Including Sales Charge: Class A (1) -14.16% 5.80% Class B (2) -14.04% 6.14% Class C (3) -10.38% 6.38% Excluding Sales Charge: Class A -8.91% 7.12% Class B -9.51% 6.47% Class C -9.47% 6.38% Russell MidCap Growth Index(4) -5.84% 4.50%(5) S&P MidCap 400 Index -9.14% 12.93%(5) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING MidCap Opportunities Fund against the S&P MidCap 400 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) The Fund normally invests in mid-cap companies that the portfolio managers feel have above average prospects for growth. The Russell MidCap Growth Index tracks the performance of mid-cap growth companies. (5) Since inception performance for the index is shown from 9/1/98. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of mid-size companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the mid-cap growth securities in which the Fund invests. See accompanying index descriptions on page 32. 9 ING SMALLCAP OPPORTUNITIES FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC.* GOAL: The Small Cap Opportunities Fund (the "Fund") seeks capital appreciation through investing primarily in common stocks of smaller, lesser-known U.S. companies. MARKET OVERVIEW: The U.S. equity markets declined during the year ending May 31, 2003. For the period, the Russell 2000 Growth index declined 9.59%. This small cap growth index fared slightly worse than other broad market measures: The Russell Midcap Growth index fell 5.84%, the S&P 500 was down 8.06% and the Dow Jones Industrials dropped 8.90%. The NASDAQ Composite, down 1.23%, held up a little better following its steep drop in the two preceding years. The results for the six months ending May 31, 2003 were more encouraging. The Russell 2000 Growth index advanced 9.00% during the six-month period. Indeed, the returns for the latest three months -- ended May 31, 2003 -- were even better. In the three-month period, the Russell 2000 Growth index moved up 23.64%, leading all the major market indexes. We think that a major part of this advance can be attributed to a resurgence in those stocks that were most beaten-up over the last several years. We expect, though, that as this speculation broadens out, the advance may become more sustainable, albeit somewhat less explosive PERFORMANCE: For the year ended May 31, 2003, the ING SmallCap Opportunities Fund had a total return of -24.46% compared to the Russell 2000 index for which the total return was -8.18%. PORTFOLIO SPECIFICS: In the semi annual report we stated that underperformance in the first half year was primarily due to exposure to consumer related stocks. In the six-months since the date of the semi-annual report, the Fund returned - -2.76% and the index 9.00%. During this period, the source of the underperformance was mainly stock selection in the Health Care and Technology sectors. We estimate that these accounted for approximately half and a quarter of the underperformance respectively. Sector selection also detracted from performance. We held on average an over weight in Technology, which was a laggard for most of the period and were underweight in the Financial sector which was relatively strong. Over the last six months, sector weights underwent significant change with the strong over weight in Technology reduced considerably and the under weight in Financial stocks halved. MARKET OUTLOOK: After several years of declines, the stock market appeared to be in a recovery mode from mid-March through the end of May 2003. This seemed in part to reflect some improvement in corporate profit trends; in addition the market's advance may well have reflected investors' increasing optimism about the economy's growth later this year and into 2004. There are reasons to believe that the conditions are favorable for both the economy and for common stocks. The combination of low interest rates (with the possibility of even further Federal Reserve loosening) and stimulative tax cuts could well spur an acceleration of the economy. And inflation certainly is not an imminent concern, notwithstanding the toll that energy prices are taking on the economy. The Fund's investment discipline is not dependent on the forecast for the economy. The Fund will build a diversified portfolio of mostly smaller common stocks selected for their growth prospects, reasonable valuation, and evidence of relative strength. * A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 10 Portfolio Manager's Report ING SMALLCAP OPPORTUNITIES FUND - --------------------------------------------------------------------------------
6/5/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ------- ------- ------- ------- ING SmallCap Opportunities Fund Class A With Sales Charge $ 9,427 $13,196 $12,928 $15,263 $16,604 $34,571 $29,477 $18,907 $14,283 ING SmallCap Opportunities Fund Class A Without Sales Charge $10,000 $13,998 $13,714 $16,191 $17,614 $36,674 $31,271 $20,057 $15,152 Russell 2000 Growth Index $10,000 $14,460 $13,679 $15,847 $16,470 $19,713 $16,611 $13,983 $12,642 Russell 2000 Index $10,000 $13,589 $14,536 $17,624 $17,150 $18,851 $19,923 $19,823 $18,200 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ----------------------------------------------------------- SINCE INCEPTION OF CLASS A, B AND C 1 YEAR 5 YEAR 10 YEAR 6/5/95 ------ ------ ------- ------ Including Sales Charge: Class A (1) -28.81% -2.48% -- 4.56% Class B (2) -28.71% -2.25% -- 4.62% Class C (3) -25.75% -2.02% -- 4.59% Class T (4) -27.93% -1.90% 4.61% -- Excluding Sales Charge: Class A -24.46% -1.32% -- 5.34% Class B -24.96% -1.99% -- 4.62% Class C -25.00% -2.02% -- 4.59% Class T -24.92% -1.90% 4.61% -- Russell 2000 Growth Index(5) -9.59% -4.42% 4.17% 2.97%(6) Russell 2000 Index -8.18% 0.65% 8.12% 7.77%(6)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING SmallCap Opportunities Fund against the Russell 2000 Growth Index and the Russell 2000 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Reflects deduction of the Class T deferred sales charge of 4% for the 1 year return. (5) The Fund normally invests in small-cap companies that the portfolio manager believes have above average prospects for growth. The Russell 2000 Growth Index tracks the performance of small-cap growth companies. (6) Since inception performance for the index is shown from 6/1/95. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the small size growth companies in which the Fund invests. See accompanying index descriptions on page 32. 11 ING DISCIPLINED LARGECAP FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Hugh T.M. Whelan, CFA, Aeltus Investment Management, Inc., the Sub-Advisor. GOAL: The ING Disciplined LargeCap Fund (formerly, ING Research Enhanced Index Fund) (the "Fund") seeks capital appreciation by investing at least 80% of its net assets in stocks included in the S&P 500. MARKET OVERVIEW: The S&P 500 Index posted a loss of 8.06% over the 12 months ended May 31, 2003. Declines occurred in the first half of the period due to accounting concerns, conflict with Iraq, and concerns regarding the strength of the U.S. economic rebound. However, the market retraced a significant portion of those losses this year after the successful resolution of the war and mounting evidence of improving corporate earnings. Within the market, leadership has swung sharply back and forth between defensive stocks and former growth stocks. The sharp rallies of the fourth quarter of 2002 and from April 2003 have favored the smallest stocks within the index, especially those trading at low dollar prices. For the whole period financials, health care and information technology stocks were the strongest performers. The utilities and consumer discretionary sectors suffered the worst performance during the period. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -9.73%, compared to -8.06% for the S&P 500 Index. PORTFOLIO SPECIFICS: Our return attribution analysis indicates that the bulk of the underperformance was due to stock selection, especially in April - May of 2003. The models we use to determine our overweights and underweights measure three things: business momentum/earnings quality, valuation, and market recognition. In looking at what was effective and what was not, we were hurt primarily by our market recognition variables, including price momentum, analyst estimate revision, and short interest during the rally in 2003. This was due to the fact that market's recent focus on small, low priced stocks represents a sharp change in market leadership and is unsupported by our measures of positive analyst estimate revisions. Only some of our valuation factors, like price to free cash flow, cash as a percentage of market value, and forward P/E were effective during the period. While the Fund benefited from its underweights in less fundamentally attractive stocks in 2002, this year our underweights have detracted from performance as the stocks with the poorest fundamentals according to our measures have had the best performance on balance. The largest individual detractors from performance were our overweights of Home Depot and Cisco, and our underweight in AIG. Positive contributors to performance were our underweights in Altria Group, Baxter International, and Electronic Data Systems. The Fund's sector allocation did not have a significant impact on performance, as is typically the case because we maintain sector exposures that are very close to those of our benchmark. MARKET OUTLOOK: Our bottom-up quantitative ranking process is leading us currently to modest overweights in industrials and financials and small underweights in the healthcare and consumer discretionary sectors. Our fully invested approach will continue to focus on the goal of adding performance through strong individual stock selection -- not through sector or style rotation -- while maintaining overall portfolio characteristics that are representative of the S&P 500 Index. We believe that if the current rally continues, our model will identify the strongest performing stocks based on our research which shows that stocks with attractive valuations, strong underlying business momentum, and clear market recognition usually outperform stocks, which have the worst scores in these areas over the long run. Portfolio Manager's Report ING DISCIPLINED LARGECAP FUND - --------------------------------------------------------------------------------
12/30/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 -------- ------- ------- ------- ------- ------- ING Disciplined LargeCap Fund Class A With Sales Charge $ 9,425 $10,123 $10,719 $ 9,421 $ 8,047 $ 7,264 ING Disciplined LargeCap Fund Class A Without Sales Charge $10,000 $10,740 $11,373 $ 9,996 $ 8,538 $ 7,707 S&P 500 Index $10,000 $10,647 $11,763 $10,521 $ 9,064 $ 8,333
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------- SINCE INCEPTION 1 YEAR 12/30/98 ------ -------- Including Sales Charge: Class A (1) -14.88% -6.98% Class B (2) -14.93% -6.82% Class C (3) -11.34% -6.40% Excluding Sales Charge: Class A -9.73% -5.72% Class B -10.45% -6.40% Class C -10.45% -6.40% S&P 500 Index -8.06% -4.04%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Disciplined LargeCap Fund against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 01/01/99. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Derivatives are subject to the risk of changes in the market price of the security and the risk of loss due to changes in interest rates. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Fund. From time to time, the stock market may not favor the large company growth oriented securities in which the Fund invests. See accompanying index descriptions on page 32. 13 ING FINANCIAL SERVICES FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: Steven L. Rayner, CFA, CPA, Vice-President and Portfolio Manager; Robert M. Kloss, Vice-President & Portfolio Manager. ING Investments, LLC, Investment Adviser. GOAL: The Financial Services Fund (the "Fund") seeks long-term capital appreciation by investing primarily in the equity securities of companies engaged in financial services. MARKET OVERVIEW: The six months ended May 31, 2003 could be termed "a tale of two markets" for the Fund, our benchmark financial index, and the broader market index, all of which had declined by double-digit percentages as of mid-March, but subsequently rallied strongly to post mid-single-digit gains for the period. Continued lackluster economic data and a mixed picture for corporate earnings plagued the markets during the first calendar quarter of 2003, with the then-impending Iraqi conflict acting as a further overhang. However, even as war finally came and proceeded tentatively in the early stages, indications of improving economic conditions began to emerge. By the time the war ended in a decisive if not unexpected victory, the markets were in full rally mode, with many of the more credit- and market-sensitive companies benefiting the most in the general upturn. Most of the sub-groups in our financial universe advanced during the period, though the route taken to achieve those gains varied widely. The more economically-sensitive groups, such as the consumer finance companies, brokers, and asset managers, were generally quite weak early in the year, but roared back as the rally took hold in the second calendar quarter of 2003. Certain defensive areas, including banks, some life insurers, and the property/casualty insurers, held up better early in the year, but then watched passively as beaten-down sub-sectors advanced more swiftly in the subsequent rally. The S&P Financials Index rose 6.13% during the six months ending May 31, 2003, surpassing the 3.87% return posted by the broader market as measured by the S&P 500 Index. For the full 12-month period ending May 31, 2003, the S&P Financials Index declined -4.08%, outperforming the -8.06% decline in the S&P 500 Index. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -6.98% compared to the - -4.08% return for the S&P Financials Index. PORTFOLIO SPECIFICS: The Fund moved incrementally to take advantage of depressed valuations early in the period, moving our offensive/defensive bias from a mildly defensive stance to a neutral-to-slightly-offensive position by the end of the fiscal year. As the rally off the mid-March lows progressed, many of our holdings performed well, though we were underweighted in certain names versus our index, which held back the Fund's relative performance. Among the individual stocks that were significant contributors to performance during the year ended May 31, 2003 were: securities brokers Lehman Brothers and Goldman Sachs; diversified financials, American Express and CitiGroup; regional banks, UCBH Holdings, Prosperity Bancshares, and Alabama National; and disability insurer, Delphi Financial Group. Conversely, our two multiline insurers, American International Group and Hartford Financial Services, produced sharply negative results during the fiscal year, as both were beset by reserving issues and continued concerns over potential casualty and asbestos liabilities. Our significant bet on the mortgage insurance sub-sector has yet to pay off, though one of our two holdings has produced a slight profit. We are still convinced that the eventual waning of the seemingly endless refinance boom will see these companies earn substantial profits as policy persistency improves and expenses moderate. We continue to search all areas of our financial universe for distinctive values in attractively-priced names. MARKET OUTLOOK: Six months ago, we wrote about our expectation that improved earnings prospects might be the catalyst to finally get the markets and our sector moving forward again. While we are happy to see that optimism over the earnings outlook has helped fuel the recent advance, we are not convinced that the most deserving stocks in our universe have received the most investor attention. Thus, we have concentrated on finding what we believe to be the best relative values among those companies leveraged to an economic recovery, as opposed to those that might be derailed by overly exuberant expectations or by the prospect of higher interest rates looming somewhere down the road. We continue to see considerable value within our universe of financial stocks, though we feel selectivity will be key. 14 Portfolio Manager's Report ING FINANCIAL SERVICES FUND - --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ING Financial Services Fund Class A With Sales Charge $ 9,422 $10,182 $11,071 $14,761 $22,743 $34,654 $31,249 $26,386 $35,807 $38,349 $35,674 ING Financial Services Fund Class A Without Sales Charge $10,000 $10,806 $11,750 $15,667 $24,138 $36,780 $33,166 $28,004 $38,003 $40,701 $37,862 S&P 500 Index $10,000 $10,743 $12,576 $15,891 $19,939 $25,705 $29,068 $29,821 $31,947 $27,024 $24,674 S&P Financials Index $10,000 $10,880 $12,658 $16,845 $24,553 $34,593 $37,457 $38,068 $44,094 $41,391 $39,404
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 -------------------------------------------------- SINCE INCEPTION OF CLASS B 1 YEAR 5 YEAR 10 YEAR 10/17/97 ------ ------ ------- -------- Including Sales Charge: Class A (1) -12.33% -0.60% 13.56% -- Class B (2) -12.00% -0.46% -- 2.85% Excluding Sales Charge: Class A -6.98% 0.58% 14.24% -- Class B -7.66% -0.18% -- 2.97% S&P 500 Index -8.06% -1.08% 9.93% 2.38%(3) S&P 500 Financials Index -4.08% 2.65% 14.69% 6.03%(3) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Financial Services Fund against the S&P 500 Index and S&P 500 Financials Index. The Indices have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Prior to October 20, 1997, the Fund operated as a closed-end investment company. All performance information prior to this date reflects the historical expense levels of the Fund as a closed-end investment company without adjustment for the higher annual expenses of the Fund's Class A shares. Performance would have been lower if adjusted for these expenses. Ten-year returns assume no participation in the 1992 rights offering and full participation in the 1993 rights offering, and reflect an additional investment of $3,639 into the Fund. A simultaneous investment of the same amount is included in each index for comparative reasons. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5%, 2% and 1%, respectively, for the 1 year, 5 year and since inception returns. (3) Since inception performance for the index is shown from 11/1/97. PRINCIPAL RISK FACTOR(S): Because the Fund's portfolio is concentrated in the financial services industry, it may be subject to greater risk than a portfolio that is not concentrated in one industry. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. The Fund may invest in small- and mid-sized companies, which may be more susceptible to price swings and less liquid than larger companies. The value of convertible or debt securities may fall when interest rates rise. Profitability of financial services companies are more affected by changes in interest rates than some other companies. See accompanying index descriptions on page 32. 15 ING LARGE COMPANY VALUE FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by William F. Coughlin, CFA, ING Investments, LLC.* GOAL: The Large Company Value Fund's (the "Fund") principal objective is long-term capital appreciation through investment in a diversified portfolio consisting primarily of common stocks of large companies. Income is a secondary objective. MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31, 2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad measures of market performance) declined 7.73% and 8.06%, respectively. The market's decline was evident in measures of mid-cap growth and small-cap growth stocks as well. The Russell MidCap Growth Index fell 5.84%, and the Russell 2000 Growth Index dropped 9.59%. The reporting period was marked by continued disappointment in the economic numbers but strength in consumer spending, buoyed by record refinancing. During the final months of the fiscal year, investors were focused on geopolitical uncertainties, especially the potential for armed conflict in Iraq conflict. Once the coalition forces did, in fact, enter Iraq, the market began trading up off its March 11 low. Through the first week of April, the overall market gained an additional 4%. Recent market leadership has centered on the technology group, with value stocks trailing the overall market by a small margin. We have seen some institutional investors purchasing tech stocks, hoping the sector would provide the most leveraged upside returns if a widespread economic recovery ensues. To date, fundamentals have not, in our opinion, justified this type of anticipatory buying. As value investors, we are willing to forgo a small amount of short-term upside return whenever we see this kind of speculative buying, When the markets settle, we expect investors will once again focus on the fundamentals of individual companies. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -15.21% compared to the S&P/Barra Value index for which the total return was -8.70%. PORTFOLIO SPECIFICS: In the semiannual report we stated that the Fund underperformed the index in the first half year, and this was primarily due to exposure to electric utilities. In the six months since the last semiannual report, the Fund returned 1.98% and the index 5.61%. During this period, the source of the underperformance was mainly sector selection. In the most noteworthy cases, we were overweight technology when it was performing poorly, and were underweighted in utilities, which was the best performing sector in the index. This was partly offset by our overweight in the strong health care sector. By contrast, the aggregate effect of stock selection was much smaller, although some of the components were individually significant. Stock selection in the financials and consumer discretionary sectors had an adverse effect on performance, while stock selection in technology and telecommunications was positive. Over the last six months, sector weights underwent significant change. We cut our underweight in financials by two-thirds, halved the overweight in health care and converted the overweight in technology to an underweight. MARKET OUTLOOK: Value stocks have recently been trailing their growth counterparts. While we believe this is a short-term reactionary move, equities across the spectrum are very reasonably priced today. This, in combination with low interest rates and fairly indifferent/low consumer sentiment, makes for one of the best investment opportunities we have seen in at least five years. Adding in such factors as stock market fear, post-war reconstruction uncertainty, record low interest rates, and a business environment that has been extremely conservative, we believe the upside potential for our equity market far exceeds the downside risk. * A team of investment professionals led by William F. Coughlin, CFA, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 16 Portfolio Manager's Report ING LARGE COMPANY VALUE FUND - --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ING Large Company Value Fund Class A With Sales Charge $ 9,427 $ 9,738 $ 9,598 $10,703 $12,924 $13,765 $13,691 $27,000 $24,980 $21,775 $18,462 ING Large Company Value Fund Class A Without Sales Charge $10,000 $10,330 $10,182 $11,353 $13,710 $14,602 $14,523 $28,641 $26,498 $23,098 $19,584 S&P Barra Value Index $10,000 $10,743 $12,576 $15,891 $19,939 $25,705 $29,068 $29,821 $31,947 $27,024 $24,674 S&P 500 Index $10,000 $10,426 $12,531 $16,094 $20,828 $27,219 $32,942 $36,392 $32,551 $28,044 $25,783 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ---------------------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS B OF CLASS C 1 YEAR 5 YEAR 10 YEAR 8/22/00 9/26/00 ------ ------ ------- ------- ------- Including Sales Charge: Class A (1) -20.08% -4.05% 6.32% -- -- Class B (2) -19.99% -- -- -17.22% -- Class C (3) -16.72% -- -- -- -16.25% Excluding Sales Charge: Class A -15.21% -2.90% 6.95% -- -- Class B -15.78% -- -- -16.46% -- Class C -15.88% -- -- -- -16.25% S&P Barra Value Index(4) -8.70% -0.81% 9.45% -8.15%(5) -8.39%(6) S&P 500 Index -8.06% -1.08% 9.93% -13.96%(5) -12.60%(6)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of the ING Large Company Value Fund against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) The Fund normally invests in companies that the portfolio manager considers to be undervalued compared to the overall stock market. The S&P Barra Value Index tracks the performance of companies with low price-to-book ratios. (5) Since inception performance for the index is shown from 9/1/00. (6) Since inception performance for the index is shown from 10/1/00. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller and mid-sized companies may entail greater price volatility than investing in stocks of larger companies. The Fund may also invest in foreign securities. International investing does pose special risks, including currency fluctuations, economic and political risks not found in investments that are solely domestic. From time to time, the stock market may not favor the large company value securities in which the Fund invests. See accompanying index descriptions on page 32. 17 ING MAGNACAP FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by William F. Coughlin, CFA, ING Investments, LLC.* GOAL: The ING MagnaCap Fund (the "Fund") seeks growth of capital, with dividend income as a secondary consideration. MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31, 2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad measures of market performance) declined 7.73% and 8.06%, respectively. The market's decline was evident in measures of mid-cap growth and small-cap growth stocks as well. The Russell MidCap Growth Index fell 5.84%, and the Russell 2000 Growth Index dropped 9.59%. The reporting period was marked by continued disappointment in the economic numbers but strength in consumer spending was buoyed by record refinancing. During the final months of the fiscal year, investors were focused on geopolitical uncertainties, especially the potential for armed conflict in Iraq. Once the coalition forces did, in fact, enter Iraq, the market began trading up off its March 11 low. Through the first week of April, the overall market gained an additional 4%. Recent market leadership has centered on the technology group, with value stocks trailing the overall market by a small margin. We have seen some institutional investors purchasing tech stocks, hoping the sector would provide the most leveraged upside returns if a widespread economic recovery ensues. To date, fundamentals have not, in our opinion, justified this type of anticipatory buying. As value investors, we are willing to forgo a small amount of short-term upside return whenever we see this kind of speculative buying. When the markets settle, we expect investors will once again focus on the fundamentals of individual companies. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -12.46% compared to the S&P 500 Index for which the total return was -8.06%. PORTFOLIO SPECIFICS: In the semi-annual report we stated that the Fund underperformed the index in the first half year, and this was primarily due to exposure to electric utilities. In the six months since the last semi-annual report, the Fund returned 2.92% and the index 3.96%. During this period, the source of the underperformance was mainly sector selection, although the components were individually small. In the largest case, we underweighted utilities, which was the best performing sector in the index. By contrast, the aggregate effect of stock selection was minor, although some of the components were individually significant. Stock selection in financials and the consumer sectors had an adverse effect on performance, while stock selection in healthcare and industrials was positive. Over the last six months, portfolio sector weights underwent significant change. The primary change was to move to an overweight in financials and reduced the underweight in the consumer sectors. This was financed by increased underweights in technology and healthcare. MARKET OUTLOOK: Value stocks have recently been trailing their growth counterparts. While we believe this is a short-term reactionary move, equities across the spectrum are very reasonably priced today. This, in combination with low interest rates and fairly indifferent/low consumer sentiment, makes for one of the best investment opportunities we have seen in at least five years. Adding in such factors as stock market fear, post-war reconstruction uncertainty, record low interest rates, and a business environment that has been extremely conservative, we believe the upside potential for our equity market far exceeds the downside risk. * A team of investment professionals led by William F. Coughlin, CFA, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 18 Portfolio Manager's Report ING MAGNACAP FUND - --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ING MagnaCap Fund Class A With Sales Charge $ 9,422 $10,178 $11,889 $14,684 $18,394 $22,906 $25,700 $27,287 $25,891 $23,069 $20,196 ING MagnaCap Fund Class A Without Sales Charge $10,000 $10,802 $12,618 $15,584 $19,523 $24,312 $27,276 $28,960 $27,479 $24,485 $21,435 S&P Barra Value Index $10,000 $10,743 $12,576 $15,891 $19,939 $25,705 $29,068 $29,821 $31,947 $27,024 $24,674 S&P 500 Index $10,000 $10,426 $12,531 $16,094 $20,828 $27,219 $32,942 $36,392 $32,551 $28,044 $25,783 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 --------------------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS B AND M OF CLASS C 1 YEAR 5 YEAR 10 YEAR 7/17/95 6/1/99 ------ ------ ------- ------- ------ Including Sales Charge: Class A (1) -17.51% -3.63% 7.28% -- -- Class B (2) -17.38% -3.41% -- 5.86% -- Class C (3) -14.49% -- -- -- -6.66% Class M (4) -15.89% -3.59% -- 5.66% -- Excluding Sales Charge: Class A -12.46% -2.49% 7.92% -- -- Class B -13.03% -3.18% -- 5.86% -- Class C -13.11% -- -- -- -6.66% Class M -12.85% -2.91% -- 6.14% -- S&P Barra Value Index(5) -8.70% -0.81% 9.45% 8.14%(6) -4.01% S&P 500 Index -8.06% -1.08% 9.93% 8.87%(6) -5.94%
Based upon a $10,000 initial investment, the graph and table above illustrate the total return of ING MagnaCap Fund against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Reflects deduction of the maximum Class M sales charge of 3.50%. (5) The Fund invests in value securities that meet the Fund's disciplined investment criteria. The S&P Barra Value Index tracks the performance of companies with low price-to-book ratios. (6) Since inception performance for the index is shown from 8/01/95. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. International investing does pose special risks including currency fluctuation, economical and political risks not found in domestic investments. See accompanying index descriptions on page 32. 19 ING MIDCAP VALUE FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: The Mid Cap Investment Committee of Brandes Investment Partners L.P. the Fund's sub-adviser. GOAL: The Fund seeks long-term capital appreciation by investing at least 80% of its assets in equity securities of U.S. issuers with equity market capitalizations greater than $1 billion but no greater than $5 billion at the time of purchase. MARKET OVERVIEW: For the year ended May 31, 2003, the S&P 500 Index declined 8.06%. Similarly, the Russell MidCap Value Index, which aims to measure the performance of medium-sized U.S. stocks, shed 5.73%. Early in the period, U.S. equity prices retreated amid continued concerns regarding corporate accounting improprieties and mixed economic reports. To bolster the sluggish economy, the U.S. Federal Reserve Board cut interest rates a half percent in November. In early 2003, stock prices continued to languish, as consumer confidence reached its lowest level in nearly 10 years and the unemployment rate stayed at 6%. Uncertainty surrounding U.S. military action in Iraq also weighed on sentiment. Stocks rebounded substantially in April and May, however, as evidence of improving corporate profits, improving consumer sentiment, and the end of large-scale combat in Iraq paralleled strong returns. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -16.94% compared to the Russell MidCap Value Index for which the total return was -5.73%. PORTFOLIO SPECIFICS: During the year, declines for holdings in the auto components industry had the most significant influence on the Fund's returns. Goodyear Tire & Rubber (2.1% of the Fund) and Visteon (1.6%) were among positions registering declines. Holdings in the airlines and insurance industries, such as AMR (airlines -- 1.6%) and Allmerica Financial (insurance -- 0.9%), also tended to decline. While a majority of the Fund's holdings declined during the period, advances for positions in industries such as food products and semiconductors & equipment contributed positively to performance. Other top performers included holdings such as PG&E (electric utilities -- 1.9%) and Lucent Technologies (communications equipment -- 2.0%). During the period, we sold Reebok International (textiles, apparel & luxury goods -- 0.0%) as its market price advanced to our estimate of its intrinsic value. In addition, we sold positions such as Comverse Technology (wireless telecom services -- 0.0%) and Massey Energy (metals & mining -- 0.0%) to pursue other investment opportunities. Positions added during the year included firms such as CIT Group (diversified financial services -- 3.8%) and El Paso (electric utilities -- 2.5%). We purchased each new position at price levels that we believe offer significant potential for long-term appreciation. We also added to select existing positions at price levels that we consider attractive. As of May 31, 2003, the Fund's most significant weightings lie in the insurance and electric utilities industries. Keep in mind that weightings are not the product of industry-level forecasts or opinions, but merely stem from our company-by-company search for compelling investment opportunities. MARKET OUTLOOK: As value investors, we offer no predictions regarding the short-term direction of the overall market. A key teaching from Ben Graham -- widely considered the father of the value investing approach -- is that, in the short term, the stock market is a voting machine, with a stock's price reflecting only the stock's popularity with investors on any given day. In the long term, however, the market is more of a weighing machine, aligning a stock's price to reflect the fair value of the underlying business. For value investors, this means that a stock's price and its fair value often "detach" from one another in the short term. Because of the manic-depressive nature of the overall market -- where sentiment can shift between sweeping, carefree optimism and overwhelming fear and uncertainty seemingly overnight -- prices of stocks tend to fluctuate much more than the intrinsic value of the companies they represent. This irrationality can materialize on the upside, lifting prices to dangerously lofty heights. It can also appear on the downside, dragging prices for select stocks to bargain levels. We target the latter situation, purchasing stocks that are trading at discounts to their fair values and then holding these stocks until the market recognizes their inherent worth. By confidently approaching the short-term vagaries of the market with rational, objective analysis, we believe we can identify compelling investment opportunities and deliver superior long-term results. 20 Portfolio Manager's Report ING MIDCAP VALUE FUND - -------------------------------------------------------------------------------- 2/1/02 5/31/02 5/31/03 ------ ------- ------- ING MidCap Value Fund Class A With Sales Charge $ 9,425 $ 9,689 $ 8,048 ING MidCap Value Fund Class A Without Sales Charge $10,000 $10,280 $ 8,538 Russell MidCap Value Index $10,000 $10,659 $10,048 TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------------------------ SINCE INCEPTION SINCE INCEPTION OF CLASS A OF CLASS B AND C 1 YEAR 02/01/2002 02/04/02 ------ ---------- -------- Including Sales Charge: Class A (1) -21.74% -15.07% -- Class B (2) -21.46% -- -13.51% Class C (3) -18.14% -- -10.84% Excluding Sales Charge: Class A -16.94% -11.20% -- Class B -17.40% -- -10.84% Class C -17.32% -- -10.84% Russell MidCap Value Index -5.73% 1.05% 0.36%(4) Based upon a $10,000 initial investment, the graph and table above illustrate the total return of ING MidCap Value Fund against the Russell MidCap Value Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5.00% for the since inception return. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the since inception return. (4) Since inception performance for the index is shown from 02/01/02. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in equity securities. In exchange for higher growth potential, investing in stocks of mid-size companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the mid-cap value securities in which the Fund invests. See accompanying index descriptions on page 32. 21 ING SMALLCAP VALUE FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: The SmallCap Investment Committee of Brandes Investment Partners L.P. the Fund's sub-adviser. GOAL: The Fund seeks long-term capital appreciation by investing at least 80% of its assets in equity securities of U.S. issuers with equity market capitalizations of $1.5 billion or less at the time of purchase. MARKET OVERVIEW: For the year ended May 31, 2003, the S&P 500 Index declined 8.06%. Similarly, the Russell 200 Value Index, which aims to measure the performance of smaller U.S. stocks, shed 8.78%. Early in the period, U.S. equity prices retreated amid continued concerns regarding corporate accounting improprieties and mixed economic reports. To bolster the sluggish economy, the U.S. Federal Reserve Board cut interest rates a half percent in November. In early 2003, stock prices continued to languish, as consumer confidence reached its lowest level in nearly 10 years and the unemployment rate stayed at 6%. Uncertainty surrounding U.S. military action in Iraq also weighed on sentiment. Stocks rebounded substantially in April and May, however, as evidence of improving corporate profits, improving consumer sentiment, and the end of large-scale combat in Iraq paralleled strong returns. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -9.83% compared to the Russell 200 Value Index for which the total return was -8.78%. PORTFOLIO SPECIFICS: During the year, declines for holdings in the metals & mining industry had the most significant influence on the Fund's returns. Stillwater Mining (1.4% of the Fund) and Wolverine Tube (2.3%) were among positions registering declines. Holdings in the textiles, apparel & luxury goods and electrical equipment industries, such as Tommy Hilfiger (textiles, apparel & luxury goods -- 2.2%) and Belden (electrical equipment -- 2.5%), also tended to decline. While a majority of the Fund's holdings declined during the period, advances for positions in industries such as communications equipment and wireless telecom services contributed positively to performance. Other top performers included holdings such as Avaya (communications equipment -- 4.0%) and Fleetwood Enterprises (household durables -- 2.8%). During the period, we sold positions such as American Physicians Capital (insurance) and Syms (specialty retail) as their market prices advanced to our estimates of their intrinsic values. In addition, we sold select holdings to pursue other investment opportunities. Positions added during the year included firms such as Goodyear Tire & Rubber (auto components -- 3.6%) and Gateway (computers & peripherals -- 2.5%). We purchased each new position at price levels that we believe offer significant potential for long-term appreciation. We also added to select existing positions at price levels that we consider attractive. As of May 31, 2003, the Fund's most significant weighting lies in the metals & mining industry. Keep in mind that weightings are not the product of industry-level forecasts or opinions, but merely stem from our company-by-company search for compelling investment opportunities. MARKET OUTLOOK: As value investors, we offer no predictions regarding the short-term direction of the overall market. A key teaching from Ben Graham -- widely considered the father of the value investing approach -- is that, in the short term, the stock market is a voting machine, with a stock's price reflecting only the stock's popularity with investors on any given day. In the long term, however, the market is more of a weighing machine, aligning a stock's price to reflect the fair value of the underlying business. For value investors, this means that a stock's price and its fair value often "detach" from one another in the short term. Because of the manic-depressive nature of the overall market -- where sentiment can shift between sweeping, carefree optimism and overwhelming fear and uncertainty seemingly overnight, prices of stocks tend to fluctuate much more than the intrinsic value of the companies they represent. This irrationality can materialize on the upside, lifting prices to dangerously lofty heights. It can also appear on the downside, dragging prices for select stocks to bargain levels. We target the latter situation, purchasing stocks that are trading at discounts to their fair values and then holding these stocks until the market recognizes their inherent worth. By confidently approaching the short-term vagaries of the market with rational, objective analysis, we believe we can identify compelling investment opportunities and deliver strong long-term results. 22 ING SMALLCAP VALUE FUND Portfolio Manager's Report - --------------------------------------------------------------------------------
2/1/02 5/31/02 5/31/03 ------- ------- ------- ING SmallCap Value Fund Class A With Sales Charge $ 9,425 $10,009 $ 9,026 ING SmallCap Value Fund Class A Without Sales Charge $10,000 $10,620 $ 9,576 Russell 200 Value Index $10,000 $ 9,977 $ 9,101 TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION SINCE INCEPTION OF CLASS A OF CLASS B OF CLASS C 1 YEAR 02/01/2002 02/04/02 02/07/02 ------ ---------- -------- -------- Including Sales Charge: Class A (1) -15.03% -7.42% -- -- Class B (2) -14.96% -- -5.76% -- Class C (3) -11.43% -- -- -2.18% Excluding Sales Charge: Class A -9.83% -3.20% -- -- Class B -10.53% -- -2.83% -- Class C -10.55% -- -- -2.18% Russell 200 Value Index -8.78% -6.82% -6.82%(4) -6.82%(4)
Based upon a $10,000 initial investment, the graph and table above illustrate the total return of ING SmallCap Value Fund against the Russell 200 Value Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5.00% for the since inception return. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the since inception return. (4) Since inception performance for the index is shown from 02/01/2002. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in equity securities. In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the small cap value securities in which the Fund invests. See accompanying index descriptions on page 32. 23 ING TAX EFFICIENT EQUITY FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail CFA, Senior Vice-President, ING Investment, LLC.* GOAL: The ING Tax Efficient Fund (the "Fund") seeks capital appreciation. The Fund seeks to provide taxable investors with a high total return on an after tax basis. MARKET OVERVIEW: After slowing over geopolitical concerns early in 2003, the economy appears to be showing signs of improvement. Rail and truck shipments are recovering modestly and demand for natural resources has stabilized. Housing remains robust reflecting the low interest rate environment. The consumer while cautious, continues to demonstrate resiliency despite a rising unemployment environment. Under this umbrella, the stock market has rebounded sharply as the Iraqi concerns have diminished and the domestic economy may have bottomed. Lastly the weaker U.S. dollar has restored a degree of positive outlook to those exporting sectors whose business had been harmed by the greenback's strength of the last few years. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, provided a total return of -13.24% compared to a -8.06% total return for the S&P 500 Index. PORTFOLIO SPECIFICS: During the last twelve months the Fund underperformed the S&P 500 Index reflecting several holdings that because of company specific issues were down substantially. Those included Tenet Health Care, Baxter International, Kimberly Clark and Ford Motor Company. MARKET OUTLOOK: We believe the markets are poised to resume their upward bias after second quarter earnings reports are digested and management comments regarding current and prospecture business conditions are released. The various forms of stimulus are in place for a better economy, rising corporate profits and higher stock prices. Consider the low interest rate environment, fiscal stimulus, weakened U.S. dollar and the impact of recent consumer home refinancings should have on the economy. This has produced anemic fixed income returns, and smaller returns for money market funds. In our opinion these all point to potentially higher equity prices especially given the recent change in tax treatment of dividends. We are encouraged by the outlook for equities. Within this environment the Tax Efficient Equity Fund continues to search for attractively valued stocks that can report above average earnings growth over the intermediate term and are selling at relatively attractive levels. * A team of investment professionals led by James A. Vail, CFA, Senior Vice President, ING Investments, LLC assumed responsiblity for the Fund on April 21, 2003. 24 Portfolio Manager's Report ING TAX EFFICIENT EQUITY FUND - --------------------------------------------------------------------------------
12/15/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 -------- ------- ------- ------- ------- ------- ING Tax Efficient Equity Fund Class A With Sales Charge $ 9,425 $10,886 $11,984 $10,930 $ 9,460 $ 8,207 ING Tax Efficient Equity Fund Class A Without Sales Charge $10,000 $11,550 $12,715 $11,597 $10,037 $ 8,708 S&P 500 Index $10,000 $11,261 $12,440 $11,127 $ 9,587 $ 8,813
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 --------------------------------- SINCE INCEPTION 1 YEAR 12/15/98 ------ -------- Including Sales Charge: Class A (1) -18.24% -4.33% Class B (2) -18.10% -4.08% Class C (3) -14.74% -3.74% Excluding Sales Charge: Class A -13.24% -3.05% Class B -13.79% -3.65% Class C -13.88% -3.74% S&P 500 Index -8.06% -2.77%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Tax Efficient Equity Fund against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 12/01/98. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. The Fund is managed to provide high after-tax returns. Therefore, it may not provide as high a return before tax as other funds, and as a result may not be suitable for investors who are not subject to current income tax. In exchange for higher growth potential, investing in stocks of mid-size and smaller companies may entail greater price volatility than investing in those of large companies. See accompanying index descriptions on page 32. 25 ING CONVERTIBLE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Anuradha Sahai, Vice President, ING Investments, LLC.* GOAL: The ING Convertible Fund (the "Fund") seeks to maximize long-term total return by investing at least 80% in convertible securities consisting of capital appreciation and current income. MARKET OVERVIEW: The convertible indices, the S&P 500, and the NASDAQ Composite benchmark witnessed significant volatility during the one-year period ending May 31, 2003. The economic malaise that started turning around towards the latter half of this period was the underlying driver of the ups and downs witnessed. Additional factors contributing to the volatility were revelations of massive corporate accounting frauds, SEC investigations leading to reduced Wall Street credibility and the Iraqi situation -- all in all leading to an action packed one-year period. The credit markets were also very volatile with corporate bond spreads widening and then remarkably tightening towards the end of this period. The turnaround occurred following the October low with equities rallying and credit spreads tightening on improving economic numbers and an additional interest rate cut by the Fed. As an asset class, convertibles outperformed stocks over the one-year period. Initially, with the decrease in equity valuations, their bond-like feature helped convertibles outperform equities. The strong recent up trend in equities along with credit spread tightening helped the convertible market outperform in the latter part of this period too. Liquidity in the market remains good in contrast to some fixed income markets. Hedge funds reportedly have plenty of buying power and there continues to be a large appetite for convertible new issuance. The traditional ability to hedge incremental holdings of convertible securities by shorting the underlying common stock continues to allow both dealers and hedge funds to position convertibles more easily than they can accommodate straight corporate debt. New issuance picked up in the last couple of months with May witnessing 48 new deals raising just over $14 billion. A number of large deals have come to market largely resulting from issuers' reluctance to go to the equity market as stock valuations came down and due to their inability to raise capital in the straight debt market at attractive rates. With demand for paper high as a result of increased inflows and companies able to raise cheap capital in the convertible market, issuance continues to remain high. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, returned 7.80% compared to 11.20% for the First Boston Convertible Index. PORTFOLIO SPECIFICS: The fund performance improved from its repositioning to a more market weighted stance. Short-term defensive posturing with respect to equity sensitivity augmented performance. Risk management measures helped the fund weather the significant volatility the markets witnessed and improve risk-adjusted returns. The Fund benefited from favorable security selection in technology, media, industrials and consumer staples sectors and had a beneficial under weight sensitivity to the consumer discretionary sector. This was somewhat offset by underperformance in the transportation and utilities sectors. Underperformance versus the benchmark was largely due to the under weighting of the fund in riskier names that outperformed towards the latter half of this period. MARKET OUTLOOK: We believe the recent surge in the equity markets, led by over optimism in the strength of the economy, may be unsustainable in the near term. Economic indicators are improving, albeit gradually. Despite the indications that the Fed may ease further, we think the profitability outlook for firms will only slowly improve. Businesses simply do not have much pricing power and indeed this aspect is one of the reasons why inflation should remain under control during the economic recovery. In these volatile times, we believe that convertible securities are attractive relative to comparable alternative asset classes. We continue to look for companies across the spectrum that will benefit from a gradually recovering economy as we expect the market will likely reward companies that typically benefit in the recovery part of the cycle. A bottom up approach, which relies on fundamental analysis and careful security selection within our broader top down sector positioning strategy, continues to be the foundation for our investment decisions. * A team of investment professionals led by Anuradha Sahai, Vice President, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 26 Portfolio Managers' Report ING CONVERTIBLE FUND - --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98 ------- ------- ------- ------- ------- ------- ING Convertible Fund Class A With Sales Charge $ 9,424 $10,427 $10,671 $13,797 $15,752 $19,180 ING Convertible Fund Class A Without Sales Charge $10,000 $11,064 $11,323 $14,640 $16,714 $20,352 Credit Suisse First Boston Convertible Index $10,000 $10,344 $11,685 $14,164 $15,158 $17,513 5/31/99 5/31/00 5/31/01 5/31/02 5/31/2003 ------- ------- ------- ------- --------- ING Convertible Fund Class A With Sales Charge $23,572 $32,071 $28,732 $25,151 $27,111 ING Convertible Fund Class A Without Sales Charge $25,012 $34,030 $30,169 $26,687 $28,767 Credit Suisse First Boston Convertible Index $19,317 $24,588 $23,308 $21,430 $23,830 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 --------------------------------------------------------------- SINCE INCEPTION OF CLASS B 1 YEAR 5 YEAR 10 YEAR 5/31/95 ------ ------ ------- ------- Including Sales Charge: Class A (1) 1.57% 5.90% 11.01% -- Class B (2) 2.16% 6.26% -- 11.74% Class C (3) 6.15% 6.53% 10.96% -- Excluding Sales Charge: Class A 7.80% 7.17% 11.65% -- Class B 7.16% 6.53% -- 11.74% Class C 7.15% 6.53% 10.96% -- First Boston Convertible Index 11.20% 6.35% 9.07% 9.32%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Convertible Fund against the First Boston Convertible Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75% (2) Reflects deduction of the Class B deferred sales charge of 5% and 2% respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for index is shown from 6/1/95. PRINCIPAL RISK FACTOR(S): The credit standing of the issuer and other factors may affect the investment value of a convertible security. The market value of convertible debt securities tends to vary inversely with the level of interest rates. Lower rated securities may be less liquid than higher quality investments. The Fund also has exposure to financial, market and interest rate risks. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio and in some cases, the lower market prices for those instruments. The Fund may also invest in small and medium sized companies, which may be more susceptible to greater price volatility than larger companies. See accompanying index descriptions on page 32. 27 ING EQUITY AND BOND FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail, CFA, manages the equity portion of the Fund, with a team led by James B. Kauffman manages the fixed income portion of the Fund. Both are ING Investments, LLC. GOAL: The ING Equity and Bond Fund (the "Fund") seeks a balance of long-term capital appreciation and current income by investing in both equities and bonds. MARKET REVIEW: EQUITIES: The last twelve months witnessed a volatile equity market as measured by the S&P 500, and despite recent strength, the Index has yet to reach its June 2002 level of 1050. Beginning in June 2002, the market was buffeted by concerns over the integrity of the U.S. economic and financial systems as reports of fraud, accounting irregularities and fears of an economic slow down took center stage. During the third quarter of 2002, the S&P 500 dropped 24% to 800, subsequently recovered to 962 but retested the 800 level again in October. We saw a recovery in the fourth quarter of 2002 but the market settled into a narrow trading range before Iraqi War fears again drove the Index back to the 800 level. Since then, the successful completion of the Iraqi campaign, and evidence that the aggressive Federal Reserve loosening appears to be leading to an economic rebound contributred to a dramatic market ralley in May. Since the bottom in March, the S&P 500 is up 23%. While in the short term this may be over extended, we believe we are on the verge of a recovery witnessed by recent strength in consumer confidence and business surveys suggesting the worst may be over. Additionally, the recent tax cut should spur activity in the third quarter leading to a better economy for the last quarter of 2003 and into 2004. The market has historically anticipated changes in the economy and we believe the strength in May may be signaling better times ahead. BONDS: 2002 witnessed some of the greatest volatility and sudden credit turbulence in recent memory. As the year progressed, scores of erstwhile investment grade names -- many of which were in the top fifty corporate issuers by size -- plummeted to junk. Moreover, the credit default swap markets provided hedge funds the means to exploit the illiquidity in widely held or tarnished names. Disappointing earnings and a relentless equity market tailspin prompted institutional investors to seek refuge in U.S. Treasuries, mortgage-backed securities, and higher quality emerging market debt. Geo-political uncertainties exacerbated the flight to quality and pushed U.S. Treasuries to a forty-year low during the year. Low rates, in turn, incited a riot of mortgage refinancing. By the beginning of the fourth quarter U.S. domestic investment grade credit risk premia stood at historic levels. The magnitude of the Fed's November's rate cut surprised the markets, and risk taking returned. Hedge funds scrambled to cover shorts in the credit default swaps market while traditional bond investors sold Treasuries to add spread product in both high yield and investment grade sectors. Despite the turmoil in specific sectors, bonds out-performed equities for the third year in a row as the Lehman Brothers Aggregate Bond Index posted a positive 10.26% in 2002. With the advent of the first quarter of 2003, capital markets became increasingly focused on the pending war with Iraq. Early January witnessed the continuation of the late 2002 rallies; however, as the likelihood of hostilities increased, investors bid up short-dated Treasuries at the expense of stocks. The prices of gold and energy shot up dramatically. In May of 2003 the Federal Reserve sent an unequivocal message to the markets with the release of its new policy statement: "the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup in inflation from its already low level." Subsequent comments from Fed officials reiterated their concern about the slow recovery and the steps they are willing to take to forestall deflationary expectations. With the prospect of an extended period of accommodative monetary policy, the Treasury market promptly rallied to forty-five year lows. Asian central banks and our own domestic mortgage buyers also added Treasuries: the former to defend the dollar versus their local currency, and the later to offset the evaporating duration of their holdings. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class A shares, excluding sales charges, returned -0.66% compared to -8.70% for the S&P Barra Value Index, 11.58% for the Lehman Brothers Aggregate Bond Index and 0.04% for the Composite Index (60% S&P 500 Index / 40% Lehman Brothers Aggregate Bond Index). PORTFOLIO SPECIFICS: EQUITIES: The Equity portfolio lagged the S&P Barra Value Index reflecting it's overweight in utilities and consumer staples for the last twelve months but benefited from its over weight in the information sector, industrials and telecommuication services. Utilities were specifically hurt by financial fears based on lingering Enron effects and the need to pursue equity offering to shore up weak balance sheets. BONDS: The Fund benefited from strict credit disciplines during 2002 -- a period of unprecedented financial fraud and deteriorating earnings. Security selection and sector allocation, by and large, produced positive alpha. The addition of high yield, emerging market, and euro-denominated bonds in the fourth quarter of the calendar year aided performance into 2003. MARKET OUTLOOK: EQUITIES: While the market has done well in the near term and may need to consolidate recent gains, we believe the intermediate to longer term direction may be higher. The combined forces of lower interest rates, tax cuts, a weaker U.S. dollar and its positive impact on domestic exports should lay the foundation for an improving U.S. economy as we progress through 2003 and into 2004. Recall that 2004 is a presidential election year and historically markets do well into this event. The Equity Portfolio will continue to search for undervalued situations where near to intermediate catalysts could unleash that perceived value. BONDS: Weak aggregate demand has followed the capital expenditure binge years of the late 1990's. Ultimately the stimulative effects of negative real rates, a weakening dollar, and tax cuts will likely boost the domestic economy out of its lethargy. And we do not agree with the school of thought that draws parallels between our current slow growth predicament and the decade long recession in Japan. In the U. S. fiscal and monetary policy has been largely proactive, and overleveraged companies have been allowed to fail. The big question for bond investors is how long rates will stay low and when will the economy gain traction. Given that excess capacity is high for this stage of a "recovery" and that pricing power is weak, the outlook is murky; but we do not anticipate a deflationary spiral. In response to these historically low interest rates we are slightly short in duration and have moved to an underweight in mortgages. 28 Portfolio Managers' Report ING EQUITY AND BOND FUND - --------------------------------------------------------------------------------
5/31/93 5/31/94 5/31/95 5/31/96 5/31/97 5/31/98 ------- ------- ------- ------- ------- ------- ING Equity and Bond Fund Class A With Sales Charge $ 9,423 $ 9,342 $10,369 $12,976 $13,978 $17,749 ING Equity and Bond Fund Class A Without Sales Charge $10,000 $ 9,914 $11,004 $13,771 $14,833 $18,835 S&P Barra Value Index $10,000 $10,743 $12,576 $15,891 $19,939 $25,705 Lehman Brothers Aggregate Bond Index $10,000 $10,071 $11,227 $11,720 $12,694 $14,080 Lipper Balanced Fund Index $10,000 $10,368 $11,563 $13,468 $15,776 $18,951 Composite Index (60% S&P 500 Index / 40% Lehman Brothers Aggregate Bond Index) $10,000 $10,286 $12,003 $14,201 $17,148 $21,036 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ING Equity and Bond Fund Class A With Sales Charge $20,686 $20,650 $20,702 $19,567 $19,438 ING Equity and Bond Fund Class A Without Sales Charge $21,952 $21,914 $21,969 $20,765 $20,628 S&P Barra Value Index $29,068 $29,821 $31,947 $27,024 $24,674 Lehman Brothers Aggregate Bond Index $14,693 $15,002 $16,970 $18,345 $20,469 Lipper Balanced Fund Index $20,948 $22,127 $22,592 $21,485 $21,126 Composite Index (60% S&P 500 Index / 40% Lehman Brothers Aggregate Bond Index) $24,135 $25,911 $25,577 $24,234 $24,243 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 --------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS B OF CLASS T 1 YEAR 5 YEAR 10 YEAR 5/31/95 3/31/00 ------ ------ ------- ------- ------- Including Sales Charge: Class A (1) -6.40% 0.64% 6.87% -- -- Class B (2) -6.15% 0.95% -- 7.54% -- Class C (3) -2.24% 1.18% 6.83% -- -- Class T (4) -4.91% -- -- -- -4.20% Excluding Sales Charge: Class A -0.66% 1.83% 7.51% -- -- Class B -1.29% 1.19% -- 7.54% -- Class C -1.27% 1.18% 6.83% -- -- Class T -1.03% -- -- -- -3.95% S&P Barra Value Index -8.70% -0.81% 9.45% 8.79%(5) -5.91%(6) Lehman Brothers Aggregate Bond Index 11.58% 7.77% 7.43% 7.80%(5) 10.19%(6) Lipper Balanced Fund Index -1.67% 2.20% 7.77% 7.82%(5) -2.32%(6) Composite Index (60% S&P 500 Index/40% Lehman Brothers Aggregate Bond Index) 0.04% 2.88% 9.26% 9.18%(5) -3.06%(6)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Equity and Income Fund against the S&P Barra Value Index, Lehman Brothers Aggregate Bond Index, Lipper Balanced Fund Index and Composite Index (60% S&P 500 Index, 40% Lehman Brothers Aggregate Bond Index). The Indices have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Reflects deduction of the Class T deferred sales charge of 4% and 3%, respectively, for the 1 year and since inception returns. (5) Since inception performance for the index is shown from 6/1/95. (6) Since inception performance for the index is shown from 4/1/00. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in equity securities. Credit, interest rate and other risks that accompany debt investments. The Fund may invest up to 20% of its total assets in foreign securities. International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio and in some cases, the lower market prices for those instruments. High yield securities and securities of smaller companies may be less liquid than other investments. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Fund. See accompanying index descriptions on page 32. 29 ING REAL ESTATE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: T. Ritson Ferguson, CFA, Managing Director and Chief Investment Officer, Kenneth D. Campbell, Managing Director, Clarion CRA Securities, L.P. the Sub-Adviser. GOAL: The ING Real Estate Fund (the "Fund") seeks total return through investment in common and preferred stocks of U.S. real estate investment trusts (REITs) and real estate companies. MARKET OVERVIEW: Real estate securities continued their relative outperformance versus broad equities for the year ended May 31, 2003 as real estate securities recorded total return of +3.08% during this time period versus -8.06% for the S&P 500 and -8.18% for small cap equities as measured by the Russell 2000 index. This continues an outperformance streak which has persisted over the past three years as real estate securities are +13.95% per annum for the three years ended May 31, 2003 versus -10.86% per annum for the S&P 500 and -1.16% per annum for small cap stocks (Russell 2000). Investors' appetite for yield and stability in cash flows continue to generate strong funds flow into the sector as real estate mutual funds flow in 2003 year-to-date exceeds $1 billion according to AMG data. The sub-adviser expects continued healthy funds flow in the near to intermediate term via both open end and closed end real estate mutual funds. Much of the total return over the past year has been achieved during the past three months as REITs have benefited from a combination of factors, the most important of which are the sense that the economy may be entering a recovery phase, which would be good for job growth and thus commercial real estate demand, combined with an attractive current income component in an investment landscape starved for yield. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided a total return of 4.13% compared to the Wilshire Real Estate Securities Index which returned 3.10% for the same period. For the period ended May 31, 2003, the Fund's Class B shares, excluding sales changes, provided a total return of 12.77% (from November 20, 2002, commencement of operations of the class). PORTFOLIO SPECIFICS: Property type selection was the major contributor to relative outperformance over the past year as the retail property types (malls and shopping centers) have significantly outperformed the other major property groups (office and apartments). The Fund's overweights in shopping centers (+23.8% for the year) and malls (+21.7%) combined with underweights in the underperforming office (-1.2%) and apartments (-2.8%) have both contributed to relative outperformance. Also contributing has been a sharp underweight in the beleaguered hotel sector (-20.3% for the year) which is still attempting to regain its footing following several years of weak demand induced by a weak economy and exacerbated by international events. MARKET OUTLOOK: We remain constructive on the outlook for returns to an actively managed real estate stock portfolio. By our estimates, the average REIT is trading at a 1.2% discount to the private market value of the company's real estate. Also, REITs are still trading at about 10 times forward 4-quarter earnings which is still well below the average REIT pricing multiple of 12 times forward earnings. Funds flows to real estate stock funds remain strong indicating investors still are attracted to the attractive yield and total return potential of REITs. The size of the public real estate company universe continues to grow. Initial Public Offerings for Maguire Properties (the largest office space owner in Downtown Los Angeles) and American Financial Realty (an acquirer of corporate-owned properties, primarily single-tenant bank branches and multi-tenant office buildings whose Chairman is Lewis Ranieri, a pioneer of mortgage backed securities) are expected in late June. With the prospect of continued positive funds flow, reasonable valuations, and attractive dividend yields, the investment thesis for real estate securities we believe remains favorable. 30 Portfolio Managers' Report ING REAL ESTATE FUND - --------------------------------------------------------------------------------
12/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 -------- ------- ------- ------- ------- ------- ------- ------- ING Real Estate Fund Class I Without Sales Charge $10,000 $10,162 $11,962 $11,079 $11,189 $13,301 $15,828 $16,482 Wilshire Real Estate Security Index $10,000 $10,148 $11,404 $10,746 $10,674 $13,043 $15,324 $15,799 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 --------------------------------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION SINCE INCEPTION SINCE INCEPTION OF CLASS A OF CLASS B OF CLASS C OF CLASS I 1 YEAR 5 YEAR 12/20/02 11/20/02 1/17/03 12/31/96 ------ ------ -------- -------- ------- -------- Including Sales Charge: Class A(1) -- -- 6.25% -- -- -- Class B(2) -- -- -- 7.77% -- -- Class C(3) -- -- -- -- 13.56% -- Class I(4) 4.13% 6.62% -- -- -- 8.11% Excluding Sales Charge: Class A -- -- 12.06% -- -- -- Class B -- -- -- 12.77% -- -- Class C -- -- -- -- 15.03% -- Class I(4) 4.13% 6.62% -- -- -- 8.11% Wilshire Real Estate Security Index 3.10% 6.74% 11.30%(5) 12.93%(6) 14.65%(7) 7.39%(8)
Based upon a $10,000 initial investment, the graph and table above illustrate the total return of ING Real Estate Fund against the Wilshire Real Estate Security Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of the sales charges. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. * Because Class A shares did not have a full year's performance during the year ended May 31, 2003, the dollar amounts in the graph are based upon the performance of Class I shares of the Fund. Class A shares would have substantially similar annual returns as the Class I shares because the classes are invested in the same portfolio of securities. Annual returns would differ only to the extent Class I and Class A shares have different expenses. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% for the since inception return. (3) Reflects deduction of the Class C deferred sales charge of 1% for the since inception return. (4) Reflects performance of predecessor mutual fund, CRA Realty Shares portfolio through November 4, 2002, when the reorganization was completed. (5) Since inception for the index is shown from 01/01/03. (6) Since inception for the index is shown from 12/01/02. (7) Since inception for the index is shown from 02/01/03. (8) Since inception for the index is shown from 01/01/97. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in real estate equities and volatility due to non-diversification of investments. Subject to risks similar to those associated with the direct ownership of real estate. The Fund primarily invests in common and preferred stocks of U.S. real estate investment trusts (REITs) and real estate companies. Risk of concentration -- because the Fund's investments are concentrated in the real estate industry, the value of the Fund may be subject to greater volatility than a fund with a portfolio that is less concentrated. These companies are sensitive to factors such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and credit worthiness of the issuer. REITs may also be affected by tax and regulatory requirements. The Fund may invest in small- and mid-sized companies, which may be more susceptible to price swings than larger companies. Securities of smaller companies trade in lower volume and may be less liquid than securities of large, more established companies. See accompanying index descriptions on page 32. 31 INDEX DESCRIPTIONS - -------------------------------------------------------------------------------- The DOW JONES INDUSTRIAL AVERAGE is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. The FIRST BOSTON CONVERTIBLE INDEX is an index representing the universe of convertible securities. The LEHMAN BROTHERS AGGREGATE BOND INDEX is a widely recognized index of publicly issued fixed rate U.S. government, investment grade mortgage-backed and corporate debt securities. The MERRILL LYNCH HIGH YIELD MASTER II INDEX is an unmanaged market value-weighted index of all domestic and Yankee high yield bonds, including deferred interest bonds and payment-in-kind securities. Issues included in the index have maturities of one year or more and have credit rating lower than BBB-/Baa3 but are not in default. The NASDAQ 100 FINANCIAL INDEX is a capitalization-weighted index of the 100 largest financial companies, as well as foreign issues, including American Depositary Receipts, traded on the Nasdaq National Market System and SmallCap Market. The NASDAQ 100 INDEX is a modified capitalization-weighted index of the 100 largest and most active non-financial domestic and international issues listed on the Nasdaq. The NASDAQ COMPOSITE INDEX is a broad-based capitalization-weighted index of all Nasdaq National Market & SmallCap stocks. The RUSSELL 1000 GROWTH INDEX is an index that measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The RUSSELL 200 VALUE INDEX measures the performance of those Russell 200 companies with lower price-to-book ratios and lower forecasted growth values. The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The RUSSELL 2000 INDEX consists of the smallest 2,000 companies in the Russell 3000 Index. The RUSSELL 3000 INDEX measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The RUSSELL MIDCAP GROWTH INDEX consists of securities with capitalizations between $450 million and $3.8 billion with greater than average growth orientation. The RUSSELL MIDCAP INDEX measures the performance of the 800 smallest companies in the Russell 1000 Index. The RUSSELL MIDCAP VALUE INDEX is an index that measures the performance of Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 FINANCIALS INDEX is a capitalization-weighted index of all stocks designed to measure the performance of the financial sector of the S&P Index. The S&P 500 INDEX is a capitalization-weighted index of 500 stocks chosen for market size, liquidity, and industry group representation. The S&P BARRA GROWTH INDEX is a capitalization-weighted index of all the stocks in the S&P 500 Index that have high price-to-book ratios. The S&P BARRA VALUE INDEX is a capitalization-weighted index of all the stocks in the S&P 500 Index that have low price-to-book ratios. The S&P MIDCAP 400 INDEX is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. The WILSHIRE REAL ESTATE SECURITY INDEX measures the performance of publicly traded real estate securities, such as Real Estate Investment Trusts (REITs) and Real Estate Operating Companies (REOCs). The index is capitalization-weighted. All indices are unmanaged. An investor cannot invest directly in an index. 32 INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The Class A, B, C, M and T shareholders and the Boards of Directors and Trustees of ING Equity Trust, ING Investment Funds, Inc., and ING Mayflower Trust: We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of ING Growth + Value Fund, ING Growth Opportunities Fund, ING LargeCap Growth Fund, ING MidCap Opportunities Fund, ING SmallCap Opportunities Fund, ING Disciplined LargeCap Fund (formerly ING Research Enhanced Index Fund), ING Financial Services Fund, ING Large Company Value Fund, ING MagnaCap Fund, ING MidCap Value Fund, ING SmallCap Value Fund, ING Tax Efficient Equity Fund, ING Convertible Fund, ING Equity and Bond Fund, and ING Real Estate Fund as of May 31, 2003, and the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein for the ING Financial Services Fund, ING Real Estate Fund, ING Large Company Value Fund, ING MagnaCap Fund, ING MidCap Value Fund, and ING SmallCap Value Fund, the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein ending on or after December 31, 2000 for the ING Growth Opportunities Fund, ING MidCap Opportunities Fund, and ING SmallCap Opportunities Fund, and the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein ending on or after May 31, 2001 for the ING Growth + Value Fund, ING Disciplined LargeCap Fund, and ING Tax Efficient Equity Fund and the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein ending on or after June 30, 1999 for the ING LargeCap Growth Fund, ING Convertible Fund, and ING Equity and Bond Fund. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. For all periods ending prior to January 1, 2000 the financial highlights of the ING Growth Opportunities Fund, ING MidCap Opportunities Fund, and ING SmallCap Opportunities Fund were audited by other auditors whose report thereon dated February 17, 2000 expressed an unqualified opinion on those financial highlights. For all periods ending prior to November 1, 2000, the financial highlights, of the ING Growth + Value Fund, ING Disciplined LargeCap Fund, and ING Tax Efficient Equity Fund were audited by other auditors whose report thereon dated December 5, 2000 expressed an unqualified opinion on those financial highlights. For all periods ending prior to April 1, 1999, the financial highlights of the ING LargeCap Growth Fund, ING Convertible Fund and ING Equity and Income Fund were audited by other auditors whose report thereon dated May 7, 1999 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2003 by correspondence with the custodian and brokers, or by other appropriate audit procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above, excluding those financial statements and financial highlights which were indicated above as having been audited by others, present fairly, in all material respects, the financial position of each of the aforementioned funds, as of May 31, 2003, the results of their operations, the changes in their net assets, and their financial highlights for the periods specified in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Boston, Massachusetts July 11, 2003 33 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING GROWTH + GROWTH LARGECAP VALUE OPPORTUNITIES GROWTH FUND FUND FUND ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 199,816,760 $ 177,115,733 $ 172,895,754 Short-term investments at amortized cost 4,794,000 2,618,000 1,282,000 Cash 390 503 563 Receivables: Investment securities sold 4,011,832 -- -- Fund shares sold 175,257 25,267 71,903 Dividends and interest 43,436 102,359 57,941 Prepaid expenses 31,562 38,672 36,008 ------------- ------------- ------------- Total assets 208,873,237 179,900,534 174,344,169 ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased 814,532 1,001,030 -- Payable for fund shares redeemed 857,364 1,457,964 338,631 Payable to affiliates 466,682 337,671 254,047 Payable for trustee fees 7,039 6,124 8,968 Other accrued expenses and liabilities 343,027 268,602 377,993 ------------- ------------- ------------- Total liabilities 2,488,644 3,071,391 979,639 ------------- ------------- ------------- NET ASSETS $ 206,384,593 $ 176,829,143 $ 173,364,530 ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 720,789,830 $ 622,948,756 $ 567,594,251 Undistributed net investment income -- -- -- Accumulated net realized loss on investments (540,538,181) (469,328,851) (426,892,932) Net unrealized appreciation of investments 26,132,944 23,209,238 32,663,211 ------------- ------------- ------------- NET ASSETS $ 206,384,593 $ 176,829,143 $ 173,364,530 ============= ============= ============= * Cost of investments in securities $ 173,683,816 $ 153,906,495 $ 140,232,543
See Accompanying Notes to Financial Statements 34 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
ING ING ING GROWTH + GROWTH LARGECAP VALUE OPPORTUNITIES GROWTH FUND FUND FUND ------------- ------------- ------------- CLASS A: Net Assets $ 51,218,411 $ 49,944,101 $ 40,940,814 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 6,502,888 4,474,864 2,856,870 Net asset value and redemption price per share $ 7.88 $ 11.16 $ 14.33 Maximum offering price per share (5.75%)(1) $ 8.36 $ 11.84 $ 15.20 CLASS B: Net Assets $ 105,172,828 $ 50,620,167 $ 72,574,856 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 14,063,729 4,873,454 5,186,003 Net asset value and redemption price per share(2) $ 7.48 $ 10.39 $ 13.99 Maximum offering price per share $ 7.48 $ 10.39 $ 13.99 CLASS C: Net Assets $ 49,782,705 $ 24,014,717 $ 31,515,588 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 6,660,625 2,307,923 2,258,786 Net asset value and redemption price per share(2) $ 7.47 $ 10.41 $ 13.95 Maximum offering price per share $ 7.47 $ 10.41 $ 13.95 CLASS I: Net Assets n/a $ 44,704,146 $ 22,155,643 Shares authorized n/a unlimited unlimited Par value n/a $ 0.01 $ 0.00 Shares outstanding n/a 3,874,545 1,505,795 Net asset value and redemption price per share n/a $ 11.54 $ 14.71 Maximum offering price per share n/a $ 11.54 $ 14.71 CLASS Q: Net Assets $ 210,649 $ 2,658 $ 6,177,629 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 26,984 240 421,358 Net asset value and redemption price per share $ 7.81 $ 11.07 $ 14.66 Maximum offering price per share $ 7.81 $ 11.07 $ 14.66 CLASS T: Net Assets n/a $ 7,543,354 n/a Shares authorized n/a unlimited n/a Par value n/a $ 0.01 n/a Shares outstanding n/a 719,377 n/a Net asset value and redemption price per share(2) n/a $ 10.49 n/a Maximum offering price per share n/a $ 10.49 n/a
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements 35 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING ING MIDCAP SMALLCAP DISCIPLINED FINANCIAL OPPORTUNITIES OPPORTUNITIES LARGECAP SERVICES FUND FUND FUND FUND ------------- ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 167,296,926 $ 277,580,542 $ 82,242,505 $ 296,084,235 Short-term investments at amortized cost 5,959,000 2,911,000 -- 16,339,000 Cash 944 315 28,482 908 Receivables: Investment securities sold -- -- 931,942 1,051,490 Fund shares sold 46,262 200,168 410,096 68,249 Dividends and interest 36,956 18,754 128,854 220,985 Other -- 74,677 -- -- Prepaid expenses 31,047 52,055 29,819 18,860 ------------- ------------- ------------- ------------- Total assets 173,371,135 280,837,511 83,771,698 313,783,727 ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased 1,877,472 195,650 764,497 3,439,842 Payable for fund shares redeemed 309,512 1,190,446 128,804 582,044 Payable to affiliates 358,871 546,709 124,697 336,922 Payable for trustee fees 6,697 6,058 2,842 7,976 Other accrued expenses and liabilities 166,140 264,151 160,438 442,282 ------------- ------------- ------------- ------------- Total liabilities 2,718,692 2,203,014 1,181,278 4,809,066 ------------- ------------- ------------- ------------- NET ASSETS $ 170,652,443 $ 278,634,497 $ 82,590,420 $ 308,974,661 ============= ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 336,384,095 $ 630,562,076 $ 140,555,354 $ 290,263,842 Undistributed net investment income -- -- -- 693,010 Accumulated net realized loss on investments (183,783,471) (393,085,385) (59,470,517) (725,878) Net unrealized appreciation (depreciation) of investments 18,051,819 41,157,806 1,505,583 18,743,687 ------------- ------------- ------------- ------------- NET ASSETS $ 170,652,443 $ 278,634,497 $ 82,590,420 $ 308,974,661 ============= ============= ============= ============= * Cost of investments in securities $ 149,245,107 $ 236,422,736 $ 80,736,922 $ 277,340,548
See Accompanying Notes to Financial Statements 36 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
ING ING ING ING MIDCAP SMALLCAP DISCIPLINED FINANCIAL OPPORTUNITIES OPPORTUNITIES LARGECAP SERVICES FUND FUND FUND FUND ------------- ------------- ------------- ------------- CLASS A: Net Assets $ 44,009,739 $ 118,569,934 $ 7,204,515 $ 182,132,654 Shares authorized unlimited unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 $ 0.00 Shares outstanding 4,347,267 6,528,066 946,862 9,464,558 Net asset value and redemption price per share $ 10.12 $ 18.16 $ 7.61 $ 19.24 Maximum offering price per share (5.75%)(1) $ 10.74 $ 19.27 $ 8.07 $ 20.41 CLASS B: Net Assets $ 43,182,807 $ 85,464,506 $ 34,357,914 $ 126,842,007 Shares authorized unlimited unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 $ 0.00 Shares outstanding 4,408,128 5,067,344 4,659,172 6,633,586 Net asset value and redemption price per share(2) $ 9.80 $ 16.87 $ 7.37 $ 19.12 Maximum offering price per share $ 9.80 $ 16.87 $ 7.37 $ 19.12 CLASS C: Net Assets $ 67,730,055 $ 63,406,199 $ 21,478,271 n/a Shares authorized unlimited unlimited unlimited n/a Par value $ 0.01 $ 0.01 $ 0.01 n/a Shares outstanding 6,948,484 3,767,039 2,912,637 n/a Net asset value and redemption price per share(2) $ 9.75 $ 16.83 $ 7.37 n/a Maximum offering price per share $ 9.75 $ 16.83 $ 7.37 n/a CLASS I: Net Assets $ 10,843,973 $ 8,510,032 $ 19,549,720 Shares authorized unlimited unlimited unlimited n/a Par value $ 0.01 $ 0.01 $ 0.01 n/a Shares outstanding 1,049,680 465,819 2,532,248 n/a Net asset value and redemption price per share $ 10.33 $ 18.27 $ 7.72 n/a Maximum offering price per share $ 10.33 $ 18.27 $ 7.72 n/a CLASS Q: Net Assets $ 4,885,869 $ 905,921 n/a n/a Shares authorized unlimited unlimited n/a n/a Par value $ 0.01 $ 0.01 n/a n/a Shares outstanding 479,635 49,718 n/a n/a Net asset value and redemption price per share $ 10.19 $ 18.22 n/a n/a Maximum offering price per share $ 10.19 $ 18.22 n/a n/a CLASS T: Net Assets n/a $ 1,777,905 n/a n/a Shares authorized n/a unlimited n/a n/a Par value n/a $ 0.01 n/a n/a Shares outstanding n/a 104,293 n/a n/a Net asset value and redemption price per share(2) n/a $ 17.05 n/a n/a Maximum offering price per share n/a $ 17.05 n/a n/a
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements 37 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING LARGE COMPANY ING MIDCAP SMALLCAP VALUE MAGNACAP VALUE VALUE FUND FUND FUND FUND ------------- ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 133,646,066 $ 228,187,761 $ 37,639,860 $ 31,645,342 Short-term investments at amortized cost 4,169,000 4,312,000 1,767,000 349,000 Cash 673 155 588 109 Receivables: Investment securities sold -- -- 799,868 -- Fund shares sold 34,081 1,901,885 222,690 87,703 Dividends and interest 332,338 521,471 51,149 32,583 Prepaid expenses 29,095 37,270 35,632 32,242 Reimbursement due from manager -- -- 7,380 4,870 ------------- ------------- ------------- ------------- Total assets 138,211,253 234,960,542 40,524,167 32,151,849 ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased -- -- 883,984 -- Payable for fund shares redeemed 55,285 3,652,140 47,341 71,368 Payable to affiliates 123,123 253,747 55,820 46,028 Payable for trustee fees 64,875 8,819 1,913 1,118 Other accrued expenses and liabilities 136,318 292,048 58,238 56,345 ------------- ------------- ------------- ------------- Total liabilities 379,601 4,206,754 1,047,296 174,859 ------------- ------------- ------------- ------------- NET ASSETS $ 137,831,652 $ 230,753,788 $ 39,476,871 $ 31,976,990 ============= ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 181,344,848 $ 305,810,446 $ 49,590,357 $ 36,213,792 Undistributed net investment income (accumulated net investment loss) 772,491 695,252 (29,333) (29,333) Accumulated net realized loss on investments (41,992,494) (75,742,327) (2,585,042) (808,792) Net unrealized depreciation of investments (2,293,193) (9,583) (7,499,111) (3,398,677) ------------- ------------- ------------- ------------- NET ASSETS $ 137,831,652 $ 230,753,788 $ 39,476,871 $ 31,976,990 ============= ============= ============= ============= * Cost of investments in securities $ 135,939,259 $ 228,197,344 $ 45,138,971 $ 35,044,019
See Accompanying Notes to Financial Statements 38 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
ING ING ING LARGE COMPANY ING MIDCAP SMALLCAP VALUE MAGNACAP VALUE VALUE FUND FUND FUND FUND ------------- ------------- ------------- ------------- CLASS A: Net Assets $ 133,145,915 $ 156,902,117 $ 15,025,992 $ 12,280,182 Shares authorized unlimited 80,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 10,769,173 17,794,228 1,797,146 1,301,395 Net asset value and redemption price per share $ 12.36 $ 8.82 $ 8.36 $ 9.44 Maximum offering price per share (5.75%)(1) $ 13.11 $ 9.36 $ 8.87 $ 10.02 CLASS B: Net Assets $ 3,538,332 $ 50,677,491 $ 12,204,760 $ 8,232,893 Shares authorized unlimited 80,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 290,720 5,977,938 1,463,482 876,675 Net asset value and redemption price per share(2) $ 12.17 $ 8.48 $ 8.34 $ 9.39 Maximum offering price per share $ 12.17 $ 8.48 $ 8.34 $ 9.39 CLASS C: Net Assets $ 1,133,146 $ 8,291,408 $ 12,034,420 $ 11,240,831 Shares authorized unlimited 20,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 93,405 977,255 1,443,372 1,197,927 Net asset value and redemption price per share(2) $ 12.13 $ 8.48 $ 8.34 $ 9.38 Maximum offering price per share $ 12.13 $ 8.48 $ 8.34 $ 9.38 CLASS I: Net Assets n/a $ 6,853 $ 197,428 $ 222,463 Shares authorized n/a 50,000,000 unlimited unlimited Par value n/a $ 0.00 $ 0.001 $ 0.001 Shares outstanding n/a 777 23,527 23,556 Net asset value and redemption price per share n/a $ 8.82 $ 8.39 $ 9.44 Maximum offering price per share n/a $ 8.82 $ 8.39 $ 9.44 CLASS M: Net Assets n/a $ 7,444,943 n/a n/a Shares authorized n/a 5,000,000 n/a n/a Par value n/a $ 0.00 n/a n/a Shares outstanding n/a 857,721 n/a n/a Net asset value and redemption price per share(3) n/a $ 8.68 n/a n/a Maximum offering price per share n/a $ 8.99 n/a n/a CLASS Q: Net Assets $ 14,259 $ 7,430,976 $ 14,271 $ 621 Shares authorized unlimited 20,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 1,154 842,392 1,707 65 Net asset value and redemption price per share $ 12.36 $ 8.82 $ 8.36 $ 9.53 Maximum offering price per share $ 12.36 $ 8.82 $ 8.36 $ 9.53
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.50 of net asset value. On purchases of $50,000 or more, the offering price is reduced. See Accompanying Notes to Financial Statements 39 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING TAX EFFICIENT ING EQUITY AND REAL EQUITY CONVERTIBLE BOND ESTATE FUND FUND FUND FUND ------------- ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 31,300,288 $ 189,580,911 $ 70,345,035 $ 122,881,843 Short-term investments at amortized cost 1,049,000 1,761,000 3,847,000 3,723,531 Cash 606 636 588 -- Foreign currencies at value** -- 1,375,627 16,388 -- Receivables: Investment securities sold 352,601 8,162,816 1,965,047 9,566,587 Fund shares sold 433 850,447 3,475 577,263 Dividends and interest 46,082 941,490 431,235 168,774 Prepaid expenses 21,914 30,328 35,209 73,189 Reimbursement due from manager -- -- 9,946 33,544 ------------- ------------- ------------- ------------- Total assets 32,770,924 202,703,255 76,653,923 137,024,731 ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased 127,440 7,981,513 4,177,131 8,972,920 Payable for fund shares redeemed 6,445 396,718 14,989 916,012 Payable to affiliates 35,695 291,896 93,255 85,403 Payable for trustee fees 2,668 6,681 2,360 4,313 Other accrued expenses and liabilities 57,834 212,402 83,832 112,947 ------------- ------------- ------------- ------------- Total liabilities 230,082 8,889,210 4,371,567 10,091,595 ------------- ------------- ------------- ------------- NET ASSETS $ 32,540,842 $ 193,814,045 $ 72,282,356 $ 126,933,136 ============= ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 42,195,516 $ 281,613,140 $ 89,675,208 $ 109,309,007 Undistributed net investment income (accumulated net investment loss) -- 1,969,917 489,189 1,409,425 Accumulated net realized loss on investments (9,221,785) (99,435,025) (14,473,208) (2,371,039) Net unrealized appreciation (depreciation) of investments and foreign securities (432,889) 9,666,013 (3,408,833) 18,585,743 ------------- ------------- ------------- ------------- NET ASSETS $ 32,540,842 $ 193,814,045 $ 72,282,356 $ 126,933,136 ============= ============= ============= ============= * Cost of investment in securities $ 31,733,177 $ 179,920,420 $ 73,764,509 $ 104,562,177 ** Cost of foreign currencies $ 1,373,697 $ 15,128
See Accompanying Notes to Financial Statements 40 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
ING ING ING TAX EFFICIENT ING EQUITY AND REAL EQUITY CONVERTIBLE BOND ESTATE FUND FUND FUND FUND ------------- ------------- ------------- ------------- CLASS A: Net Assets $ 26,418,249 $ 51,008,431 $ 32,178,931 $ 981,708 Shares authorized unlimited unlimited unlimited unlimited Par Value $ 0.001 $ 0.00 $ 0.00 $ 0.00 Shares outstanding 3,054,742 3,147,772 2,747,082 88,758 Net asset value and redemption price per share $ 8.65 $ 16.20 $ 11.71 $ 11.06 Maximum offering price per share (5.75%)(1) $ 9.18 $ 17.19 $ 12.42 $ 11.73 CLASS B: Net Assets $ 5,220,031 $ 72,363,716 $ 22,348,364 $ 149,053 Shares authorized unlimited unlimited unlimited unlimited Par Value $ 0.001 $ 0.00 $ 0.00 $ 0.00 Shares outstanding 618,851 4,068,410 1,771,673 13,434 Net asset value and redemption price per share $ 8.44 $ 17.79 $ 12.61 $ 11.10 Maximum offering price per share $ 8.44 $ 17.79 $ 12.61 $ 11.10 CLASS C: Net Assets $ 902,562 $ 66,412,379 $ 14,239,832 $ 157,483 Shares authorized unlimited unlimited unlimited unlimited Par Value $ 0.001 $ 0.00 $ 0.00 $ 0.00 Shares outstanding 107,709 3,996,625 1,270,582 13,852 Net asset value and redemption price per share $ 8.38 $ 16.62 $ 11.21 $ 11.37 Maximum offering price per share $ 8.38 $ 16.62 $ 11.21 $ 11.37 CLASS Q: Net Assets n/a $ 4,029,519 $ 222,355 n/a Shares authorized n/a unlimited unlimited n/a Par Value n/a $ 0.00 $ 0.00 n/a Shares outstanding n/a 256,076 19,120 n/a Net asset value and redemption price per share n/a $ 15.74 $ 11.63 n/a Maximum offering price per share n/a $ 15.74 $ 11.63 n/a CLASS I: Net Assets n/a n/a n/a $ 125,644,892 Shares authorized n/a n/a n/a unlimited Par Value n/a n/a n/a $ 0.00 Shares outstanding n/a n/a n/a 10,971,426 Net asset value and redemption price per share n/a n/a n/a $ 11.45 Maximum offering price per share n/a n/a n/a $ 11.45 CLASS T: Net Assets n/a n/a $ 3,292,874 n/a Shares authorized n/a n/a unlimited n/a Par Value n/a n/a $ 0.00 n/a Shares outstanding n/a n/a 261,871 n/a Net asset value and redemption price per share n/a n/a $ 12.57 n/a Maximum offering price per share(2) n/a n/a $ 12.57 n/a
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.50 of net asset value. On purchase of $50,000 or more, the offering price is reduced. See Accompanying Notes to Financial Statements 41 STATEMENTS OF OPERATIONS for the year ended May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING GROWTH + GROWTH LARGECAP VALUE OPPORTUNITIES GROWTH FUND FUND FUND ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes* $ 993,338 $ 736,359 $ 1,139,917 Interest 131,450 38,744 62,570 ------------- ------------- ------------- Total investment income 1,124,788 775,103 1,202,487 ------------- ------------- ------------- EXPENSES: Investment management fees 2,446,841 1,865,117 1,411,271 Distribution and service fees: Class A 183,274 181,023 156,226 Class B 1,214,839 561,674 783,154 Class C 618,262 277,053 351,769 Class Q 707 9 24,503 Class T -- 80,140 -- Transfer agent fees: Class A 63,087 70,722 134,260 Class B 125,501 65,603 235,602 Class C 63,719 32,227 105,756 Class I -- 417 21,065 Class Q 258 -- 10,071 Class T -- 10,479 -- Administrative service fees 528,208 451,608 188,169 Shareholder reporting expense 370,476 242,036 273,368 Registration fees 68,095 72,593 72,137 Professional fees 57,917 71,743 47,781 Custody and accounting expense 80,566 64,052 68,192 Trustee fees 13,360 12,516 13,738 Miscellaneous expense 26,947 26,063 16,049 Insurance expense 6,441 5,030 4,849 ------------- ------------- ------------- Total expenses 5,868,498 4,090,105 3,917,960 Less: Net waived and reimbursed fees -- -- 303,212 ------------- ------------- ------------- Net expenses 5,868,498 4,090,105 3,614,748 ------------- ------------- ------------- Net investment loss (4,743,710) (3,315,002) (2,412,261) ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS: Net realized gain (loss) on: Investments (96,541,901) (55,971,035) (67,621,730) Options -- -- 215,589 ------------- ------------- ------------- (96,541,901) (55,971,035) (67,406,141) Net change in unrealized appreciation of investments and options 21,655,719 7,993,868 27,230,077 ------------- ------------- ------------- Net realized and unrealized loss on investments and options (74,886,182) (47,977,167) (40,176,064) ------------- ------------- ------------- DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (79,629,892) $ (51,292,169) $ (42,588,325) ============= ============= ============= *Foreign taxes $ 3,692 $ 4,232 $ 1,956
See Accompanying Notes to Financial Statements 42 STATEMENTS OF OPERATIONS for the year ended May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING ING MIDCAP SMALLCAP DISCIPLINED FINANCIAL OPPORTUNITIES OPPORTUNITIES LARGECAP SERVICES FUND FUND FUND FUND ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes* $ 537,557 $ 176,584 $ 1,604,373 $ 6,141,620 Interest 119,238 77,461 9,790 264,941 Other -- -- 83 -- ------------- ------------- ------------- ------------- Total investment income 656,795 254,045 1,614,246 6,406,561 ------------- ------------- ------------- ------------- EXPENSES: Investment management fees 1,844,018 3,072,328 621,856 2,320,797 Distribution and service fees: Class A 138,698 376,048 23,793 453,878 Class B 469,009 967,874 374,229 1,303,483 Class C 703,533 731,979 251,645 -- Class Q 11,576 4,038 -- -- Class T -- 23,584 -- -- Transfer agent fees: Class A 55,341 177,597 9,105 600,391 Class B 56,208 137,021 42,883 431,502 Class C 85,374 103,606 28,806 -- Class I 104 296 527 -- Class Q 56 70 -- -- Class T -- 3,508 -- -- Administrative service fees 368,961 662,980 127,997 13,848 Shareholder reporting expense 148,438 344,937 78,576 355,809 Registration fees 105,376 113,584 61,115 38,679 Professional fees 34,863 75,228 26,272 74,330 Custody and accounting expense 62,614 102,884 63,992 76,140 Trustee fees 10,532 18,681 5,762 15,084 Miscellaneous expense 16,922 35,455 9,489 13,429 Insurance expense 4,348 7,862 2,024 6,490 ------------- ------------- ------------- ------------- Total expenses 4,115,971 6,959,560 1,728,071 5,703,860 Less: Net waived and reimbursed fees 600,861 -- -- -- ------------- ------------- ------------- ------------- Net expenses 3,515,110 6,959,560 1,728,071 5,703,860 ------------- ------------- ------------- ------------- Net investment income (loss) (2,858,315) (6,705,515) (113,825) 702,701 ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES: Net realized gain (loss) on: Investments (35,686,206) (136,228,953) (18,654,392) (725,878) Future agreements -- -- (96,660) -- ------------- ------------- ------------- ------------- (35,686,206) (136,228,953) (18,751,052) (725,878) Net change in unrealized appreciation (depreciation) of investments 3,498,927 23,893,365 4,799,759 (34,505,470) ------------- ------------- ------------- ------------- Net realized and unrealized loss on investments and futures (32,187,279) (112,335,588) (13,951,293) (35,231,348) ------------- ------------- ------------- ------------- DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (35,045,594) $(119,041,103) $ (14,065,118) $ (34,528,647) ============= ============= ============= ============= *Foreign taxes $ 8,003 $ 965 $ 55 $ --
See Accompanying Notes to Financial Statements 43 STATEMENTS OF OPERATIONS for the year ended May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING LARGE COMPANY ING MIDCAP SMALLCAP VALUE MAGNACAP VALUE VALUE FUND FUND FUND FUND ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes* $ 2,987,094 $ 5,007,199 $ 557,715 $ 355,978 Interest 70,920 104,405 9,400 11,952 ------------- ------------- ------------- ------------- Total investment income 3,058,014 5,111,604 567,115 367,930 ------------- ------------- ------------- ------------- EXPENSES: Investment management fees 966,292 1,827,489 340,332 304,618 Distribution and service fees: Class A 328,932 475,206 37,535 33,225 Class B 35,515 541,655 100,823 75,550 Class C 12,641 73,185 88,066 94,019 Class M -- 59,689 -- -- Class Q 35 17,188 29 3 Transfer agent fees: Class A 196,705 277,212 30,593 26,781 Class B 5,311 94,591 20,866 15,427 Class C 1,884 12,842 18,332 19,409 Class I -- -- 18 85 Class M -- 13,896 -- -- Class Q 18 206 -- -- Administrative service fees 136,403 22,309 34,033 30,462 Shareholder reporting expense 53,852 234,332 15,007 14,499 Registration fees 64,489 62,844 68,063 48,641 Professional fees 44,948 50,617 10,934 7,799 Custody and accounting expense 43,987 53,915 20,924 20,368 Trustee fees 9,301 18,032 2,150 1,820 Offering expense -- -- 86,958 86,959 Miscellaneous expense 4,474 10,171 1,055 3,811 Insurance expense 2,597 5,268 677 517 ------------- ------------- ------------- ------------- Total expenses 1,907,384 3,850,647 876,395 783,993 Less: Net waived and reimbursed fees -- -- 141,380 125,566 ------------- ------------- ------------- ------------- Net expenses 1,907,384 3,850,647 735,015 658,427 ------------- ------------- ------------- ------------- Net investment income (loss) 1,150,630 1,260,957 (167,900) (290,497) ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (33,175,923) (73,313,713) (2,585,042) (808,791) Net change in unrealized depreciation of investments 3,324,155 28,047,677 (7,038,519) (3,280,630) ------------- ------------- ------------- ------------- Net realized and unrealized loss on investments (29,851,768) (45,266,036) (9,623,561) (4,089,421) ------------- ------------- ------------- ------------- DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (28,701,138) $ (44,005,079) $ (9,791,461) $ (4,379,918) ============= ============= ============= ============= * Foreign taxes $ 30,752 $ 29,242 $ -- $ --
See Accompanying Notes to Financial Statements 44 STATEMENTS OF OPERATIONS for the year ended May 31, 2003 - --------------------------------------------------------------------------------
ING ING TAX EFFICIENT ING EQUITY AND EQUITY CONVERTIBLE BOND FUND FUND FUND ------------- ------------- ------------- YEAR YEAR YEAR ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, 2003 2003 2003 ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes* $ 462,259 $ 2,305,647 $ 1,295,580 Interest 18,982 5,712,891 2,352,750 Other -- 31 86,683 ------------- ------------- ------------- Total investment income 481,241 8,018,569 3,735,013 ------------- ------------- ------------- EXPENSES: Investment management fees 266,318 1,445,588 663,570 Distribution and service fees: Class A 92,791 171,004 161,939 Class B 58,158 721,206 239,747 Class C 9,624 664,962 145,777 Class Q -- 13,211 465 Class T -- -- 26,019 Transfer agent fees: Class A 46,777 102,116 89,148 Class B 10,255 150,921 46,084 Class C 1,697 139,199 28,029 Class I -- -- -- Class Q -- 3,639 339 Class T -- -- 6,670 Administrative service fees 33,290 192,745 88,476 Shareholder reporting expense 15,622 160,206 91,690 Registration fees 42,933 60,799 62,970 Professional fees 8,498 53,865 67,093 Custody and accounting expense 4,283 36,256 45,128 Trustee fees 1,221 9,377 4,320 Offering expense -- -- -- Miscellaneous expense 625 19,655 5,607 Insurance expense 728 4,084 1,827 ------------- ------------- ------------- Total expenses 592,820 3,948,833 1,774,898 Less: Net waived and reimbursed fees 59,733 -- 92,274 ------------- ------------- ------------- Net expenses 533,087 3,948,833 1,682,624 ------------- ------------- ------------- Net investment income (loss) (51,846) 4,069,736 2,052,389 ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on: Investments (7,613,046) (1,592,033) (10,772,241) Foreign currencies -- 42,333 1,427 ------------- ------------- ------------- Net realized gain (loss) on imvestments and foreign currencies (7,613,046) (1,549,700) (10,770,814) ------------- ------------- ------------- Net change in unrealized appreciation (depreciation) on: Investments 1,166,471 8,106,791 4,911,541 Foreign currencies -- 5,522 1,260 ------------- ------------- ------------- Net change in unrealized appreciation (depreciation) on investments and foreign currencies 1,166,471 8,112,313 4,912,801 ------------- ------------- ------------- Net realized and unrealized loss on investments and foreign currencies (6,446,575) 6,562,613 (5,858,013) ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,498,421) $ 10,632,349 $ (3,805,624) ============= ============= ============= *Foreign taxes $ 1,708 $ -- $ 4,563 ING REAL ESTATE FUND ------------- ------------- SEVEN MONTHS YEAR ENDED ENDED MAY 31, OCTOBER 31, 2003 2002 ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes* $ 3,280,063 $ 4,787,321 Interest 27,098 48,361 Other -- -- ------------- ------------- Total investment income 3,307,161 4,835,682 ------------- ------------- EXPENSES: Investment management fees 440,210 641,719 Distribution and service fees: Class A 263 -- Class B 480 -- Class C 56 -- Class Q -- -- Class T -- -- Transfer agent fees: Class A 238 -- Class B 86 -- Class C 13 -- Class I 70,738 33,037 Class Q -- -- Class T -- -- Administrative service fees 62,885 137,461 Shareholder reporting expense 17,775 16,703 Registration fees 8,791 12,941 Professional fees 31,167 29,769 Custody and accounting expense 21,064 13,813 Trustee fees 3,150 6,811 Offering expense 81,575 5,375 Miscellaneous expense 10,576 1,689 Insurance expense -- -- ------------- ------------- Total expenses 749,067 899,318 Less: Net waived and reimbursed fees 118,117 79 ------------- ------------- Net expenses 630,950 899,239 ------------- ------------- Net investment income (loss) 2,676,211 3,936,443 ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on: Investments 3,228,787 2,174,768 Foreign currencies -- -- ------------- ------------- Net realized gain (loss) on imvestments and foreign currencies 3,228,787 2,174,768 ------------- ------------- Net change in unrealized appreciation (depreciation) on: Investments 11,405,743 (193,441) Foreign currencies -- -- ------------- ------------- Net change in unrealized appreciation (depreciation) on investments and foreign currencies 11,405,743 (193,441) ------------- ------------- Net realized and unrealized loss on investments and foreign currencies 14,634,530 1,981,327 ------------- ------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 17,310,741 $ 5,917,770 ============= ============= *Foreign taxes $ -- $ --
See Accompanying Notes to Financial Statements 45 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING GROWTH + VALUE FUND ------------------------------ YEAR YEAR ENDED ENDED MAY 31, MAY 31, 2003 2002 ------------- ------------- FROM OPERATIONS: Net investment loss $ (4,743,710) $ (8,512,418) Net realized loss on investments (96,541,901) (135,053,076) Net change in unrealized appreciation (depreciation) of investments 21,655,719 (36,957,292) ------------- ------------- Net decrease in net assets resulting from operations (79,629,892) (180,522,786) ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 22,504,824 118,982,140 Cost of shares redeemed (111,119,568) (233,711,496) ------------- ------------- Net decrease in net assets resulting from capital share transactions (88,614,744) (114,729,356) ------------- ------------- Net decrease in net assets (168,244,636) (295,252,142) ------------- ------------- NET ASSETS: Beginning of year 374,629,229 669,881,371 ------------- ------------- End of year $ 206,384,593 $ 374,629,229 ============= ============= Undistributed net investment income at end of year $ -- $ -- ============= =============
See Accompanying Notes to Financial Statements 46 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING GROWTH OPPORTUNITIES FUND ING LARGECAP GROWTH FUND ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (3,315,002) $ (7,224,856) $ (2,412,261) $ (5,792,622) Net realized loss on investments and options (55,971,035) (148,410,703) (67,406,141) (178,879,014) Net change in unrealized appreciation of investments 7,993,868 8,273,970 27,230,077 22,043,801 ------------- ------------- ------------- ------------- Net decrease in net assets resulting from operations (51,292,169) (147,361,589) (42,588,325) (162,627,835) ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- -- -- (23,490) Class Q -- -- -- (16,054) ------------- ------------- ------------- ------------- Total distributions -- -- -- (39,544) ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 14,322,951 57,584,228 37,811,932 162,524,986 Dividends reinvested -- -- -- 30,939 ------------- ------------- ------------- ------------- 14,322,951 57,584,228 37,811,932 162,555,925 Cost of shares redeemed (79,882,586) (147,726,009) (101,232,282) (236,666,205) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from capital share transactions (65,559,635) (90,141,781) (63,420,350) (74,110,280) ------------- ------------- ------------- ------------- Net decrease in net assets (116,851,804) (237,503,370) (106,008,675) (236,777,659) ------------- ------------- ------------- ------------- NET ASSETS: Beginning of year 293,680,947 531,184,317 279,373,205 516,150,864 ------------- ------------- ------------- ------------- End of year $ 176,829,143 $ 293,680,947 $ 173,364,530 $ 279,373,205 ============= ============= ============= ============= Undistributed net investment income at end of year $ -- $ -- $ -- $ -- ============= ============= ============= =============
See Accompanying Notes to Financial Statements 47 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING MIDCAP OPPORTUNITIES FUND ING SMALLCAP OPPORTUNITIES FUND ------------------------------ ------------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (2,858,315) $ (1,564,711) $ (6,705,515) $ (7,943,203) Net realized loss on investments (35,686,206) (22,181,991) (136,228,953) (116,051,246) Net change in unrealized depreciation of investments 3,498,927 (13,180,504) 23,893,365 (59,155,762) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from operations (35,045,594) (36,927,206) (119,041,103) (183,150,211) ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net realized gains: Class A -- -- -- (4,420,476) Class B -- -- -- (5,306,452) Class C -- -- -- (2,073,539) Class I -- -- -- (6) Class Q -- -- -- (74,783) Class T -- -- -- (332,277) ------------- ------------- ------------- ------------- Total distributions -- -- -- (12,207,533) ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 19,074,655 23,229,928 64,613,733 169,513,918 Net proceeds from shares issued in merger -- 217,968,703 -- 191,995,534 Dividends reinvested -- -- -- 8,872,522 ------------- ------------- ------------- ------------- 19,074,655 241,198,631 64,613,733 370,381,974 Cost of shares redeemed (98,427,376) (45,911,969) (144,373,057) (162,003,224) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (79,352,721) 195,286,662 (79,759,324) 208,378,750 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets (114,398,315) 158,359,456 (198,800,427) 13,021,006 ------------- ------------- ------------- ------------- NET ASSETS: Beginning of year 285,050,758 126,691,302 477,434,924 464,413,918 ------------- ------------- ------------- ------------- End of year $ 170,652,443 $ 285,050,758 $ 278,634,497 $ 477,434,924 ============= ============= ============= ============= Undistributed net investment income at end of year $ -- $ -- $ -- $ -- ============= ============= ============= =============
See Accompanying Notes to Financial Statements 48 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING DISCIPLINED LARGECAP FUND ING FINANCIAL SERVICES FUND ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment income (loss) $ (113,825) $ (532,669) $ 702,701 $ 911,107 Net realized gain (loss) on investments and futures (18,751,052) (29,106,092) (725,878) 49,364,650 Net change in unrealized appreciation (depreciation) of investments 4,799,759 4,441,583 (34,505,470) (24,870,475) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (14,065,118) (25,197,178) (34,528,647) 25,405,282 ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- -- (904,133) (3,328,116) Class B -- -- -- (1,134,098) Net realized gains: Class A -- -- (11,242,235) (23,952,454) Class B -- -- (7,757,255) (17,422,370) ------------- ------------- ------------- ------------- Total distributions -- -- (19,903,623) (45,837,038) ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 10,784,368 13,127,048 26,466,948 46,429,622 Dividends reinvested -- -- 13,242,563 30,404,940 ------------- ------------- ------------- ------------- 10,784,368 13,127,048 39,709,511 76,834,562 Cost of shares redeemed (35,260,799) (48,152,451) (78,411,061) (89,674,778) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from capital share transactions (24,476,431) (35,025,403) (38,701,550) (12,840,216) ------------- ------------- ------------- ------------- Net decrease in net assets (38,541,549) (60,222,581) (93,133,820) (33,271,972) ------------- ------------- ------------- ------------- NET ASSETS: Beginning of year 121,131,969 181,354,550 402,108,481 435,380,453 ------------- ------------- ------------- ------------- End of year $ 82,590,420 $ 121,131,969 $ 308,974,661 $ 402,108,481 ============= ============= ============= ============= Undistributed net investment income at end of year $ -- $ -- $ 693,010 $ 909,210 ============= ============= ============= =============
See Accompanying Notes to Financial Statements 49 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING LARGE COMPANY VALUE FUND ING MAGNACAP FUND ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment income $ 1,150,630 $ 624,008 $ 1,260,957 $ 1,362,303 Net realized gain (loss) on investments (33,175,923) 3,709,737 (73,313,713) 9,984,802 Net change in unrealized depreciation of investments 3,324,155 (32,312,425) 28,047,677 (58,176,380) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from operations (28,701,138) (27,978,680) (44,005,079) (46,829,275) ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (383,585) (48,577) (541,544) (1,450,626) Class C -- -- -- -- Class M -- -- -- (25,317) Class Q (51) -- (37,713) (90,550) Net realized gains Class A -- (3,414,346) -- (36,928,549) Class B -- (76,886) -- (15,231,540) Class C -- (40,009) -- (1,660,037) Class M -- -- -- (2,235,251) Class Q -- (375) -- (1,561,541) Tax return of capital Class A -- (542,803) -- -- Class B -- (12,223) -- -- Class C -- (6,360) -- -- Class Q -- (60) -- -- ------------- ------------- ------------- ------------- Total distributions (383,636) (4,141,639) (579,257) (59,183,411) ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 12,076,101 23,772,105 19,818,980 42,905,807 Dividends reinvested 316,244 3,625,709 509,567 47,870,369 ------------- ------------- ------------- ------------- 12,392,345 27,397,814 20,328,547 90,776,176 Cost of shares redeemed (25,597,217) (36,480,872) (66,540,583) (92,733,007) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from capital share transactions (13,204,872) (9,083,058) (46,212,036) (1,956,831) ------------- ------------- ------------- ------------- Net decrease in net assets (42,289,646) (41,203,377) (90,796,372) (107,969,517) ------------- ------------- ------------- ------------- NET ASSETS: Beginning of year 180,121,298 221,324,675 321,550,160 429,519,677 ------------- ------------- ------------- ------------- End of year $ 137,831,652 $ 180,121,298 $ 230,753,788 $ 321,550,160 ============= ============= ============= ============= Undistributed net investment income at end of year $ 772,491 $ -- $ 695,252 $ -- ============= ============= ============= =============
See Accompanying Notes to Financial Statements 50 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING MIDCAP VALUE FUND ING SMALLCAP VALUE FUND ------------------------------ ------------------------------ YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(1) 2003 2002(1) ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (167,900) $ (18,723) $ (290,497) $ (33,829) Net realized gain (loss) on investments (2,585,042) 477,240 (808,791) 286,427 Net change in unrealized depreciation of investments (7,038,519) (460,592) (3,280,630) (118,047) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (9,791,461) (2,075) (4,379,918) 134,551 ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (66,920) -- (53,921) -- Class B (10,431) -- (269) -- Class C (8,620) -- (8,732) -- Class I (1,546) -- (2,331) -- Class Q (105) -- -- -- Net realized gains: Class A (197,711) -- (119,158) -- Class B (153,548) -- (76,523) -- Class C (125,926) -- (90,831) -- Class I (2,253) -- (2,504) -- Class Q (180) -- (6) -- ------------- ------------- ------------- ------------- Total distributions (567,240) -- (354,275) -- ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 20,390,316 48,636,078 16,776,369 36,135,334 Dividends reinvested 452,894 -- 266,141 -- ------------- ------------- ------------- ------------- 20,843,210 48,636,078 17,042,510 36,135,334 Cost of shares redeemed (17,802,172) (1,839,469) (15,157,416) (1,443,796) ------------- ------------- ------------- ------------- Net increase in net assets resulting from capital share transactions 3,041,038 46,796,609 1,885,094 34,691,538 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets (7,317,663) 46,794,534 (2,849,099) 34,826,089 ------------- ------------- ------------- ------------- NET ASSETS: Beginning of period 46,794,534 -- 34,826,089 -- ------------- ------------- ------------- ------------- End of period $ 39,476,871 $ 46,794,534 $ 31,976,990 $ 34,826,089 ============= ============= ============= ============= Undistributed net investment income (accumulated net investment loss) at end of period $ (29,333) $ 45,818 $ (29,333) $ 22,825 ============= ============= ============= =============
- ---------- (1) Fund commenced operations on February 1, 2002. See Accompanying Notes to Financial Statements 51 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING TAX EFFICIENT EQUITY FUND ING CONVERTIBLE FUND ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment income (loss) $ (51,846) $ (90,424) $ 4,069,736 $ 4,316,249 Net realized loss on investments (7,613,046) (1,193,339) (1,549,700) (94,733,125) Net change in unrealized appreciation (depreciation) of investments 1,166,471 (6,022,227) 8,112,313 47,508,825 ------------- ------------- ------------- ------------- Net decrease in net assets resulting from operations (6,498,421) (7,305,990) 10,632,349 (42,908,051) ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- -- (1,038,306) (1,989,161) Class B -- -- (1,007,242) (1,691,488) Class C -- -- (1,039,451) (1,695,959) Class Q -- -- (129,825) (462,156) Net realized gains Class A -- -- -- (434,317) Class B -- -- -- (598,881) Class C -- -- -- (546,683) Class Q -- -- -- (78,772) ------------- ------------- ------------- ------------- Total distributions -- -- (3,214,824) (7,497,417) ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 591,224 2,485,351 19,562,889 49,293,522 Dividends reinvested -- -- 2,040,333 4,837,275 ------------- ------------- ------------- ------------- 591,224 2,485,351 21,603,222 54,130,797 Cost of shares redeemed (6,371,872) (5,132,267) (74,420,958) (136,764,084) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from capital share transactions (5,780,648) (2,646,916) (52,817,736) (82,633,287) ------------- ------------- ------------- ------------- Net decrease in net assets (12,279,069) (9,952,906) (45,400,211) (133,038,755) ------------- ------------- ------------- ------------- NET ASSETS: Beginning of year 44,819,911 54,772,817 239,214,256 372,253,011 ------------- ------------- ------------- ------------- End of year $ 32,540,842 $ 44,819,911 $ 193,814,045 $ 239,214,256 ============= ============= ============= ============= Undistributed net investment income at end of year $ -- $ -- $ 1,969,917 $ 1,072,672 ============= ============= ============= =============
See Accompanying Notes to Financial Statements 52 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING EQUITY AND BOND FUND ING REAL ESTATE FUND ------------------------------ ----------------------------------------------- YEAR YEAR SEVEN MONTHS YEAR YEAR ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, OCTOBER 31, OCTOBER 31, 2003 2002 2003 2002 2001 (000) ------------- ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment income $ 2,052,389 $ 3,351,411 $ 2,676,211 $ 3,936,443 $ 3,587 Net realized gain (loss) on investments (10,770,814) (1,232,233) 3,228,787 2,174,768 1,844 Net change in unrealized appreciation (depreciation) of investments 4,912,801 (9,585,022) 11,405,743 (193,441) (466) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (3,805,624) (7,465,844) 17,310,741 5,917,770 4,965 ------------- ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (1,077,960) (2,123,367) (3,557) -- -- Class B (368,267) (917,202) (1,521) -- -- Class C (273,453) (647,607) (74) -- -- Class I -- -- (2,053,561) (3,936,443) (3,587) Class Q (4,292) (13,963) -- -- -- Class T (62,879) (182,065) -- -- -- Net realized gains Class A -- (236,326) -- -- -- Class B -- (137,507) -- -- -- Class C -- (85,407) -- -- -- Class Q -- (1,525) -- -- -- Class T -- (23,977) -- -- -- In excess of net investment income Class I -- -- -- (1,294,844) (577) ------------- ------------- ------------- ------------- ------------- Total distributions (1,786,851) (4,368,946) (2,058,713) (5,231,287) (4,164) ------------- ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 13,090,514 36,437,605 23,221,408 31,057,798 13,726 Dividends reinvested 1,413,761 3,439,849 1,220,646 3,749,980 3,110 ------------- ------------- ------------- ------------- ------------- 14,504,275 39,877,454 24,442,054 34,807,778 16,836 Cost of shares redeemed (48,110,001) (44,643,957) (10,091,863) (14,351,398) (5,896) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (33,605,726) (4,766,503) 14,350,191 20,456,380 10,940 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets (39,198,201) (16,601,293) 29,602,219 21,142,863 11,741 ------------- ------------- ------------- ------------- ------------- NET ASSETS: Beginning of period 111,480,557 128,081,850 97,330,917 76,188,054 64,447 ------------- ------------- ------------- ------------- ------------- End of period $ 72,282,356 $ 111,480,557 $ 126,933,136 $ 97,330,917 $ 76,188 ============= ============= ============= ============= ============= Undistributed net investment income at end of period $ 489,189 $ 222,224 $ 1,409,425 $ 214,000 $ 161 ============= ============= ============= ============= =============
See Accompanying Notes to Financial Statements 53 ING GROWTH + VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A --------------------------------------------------------------------- YEAR YEAR SEVEN MONTHS ENDED ENDED ENDED YEAR ENDED OCTOBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.96 13.88 24.91 19.76 10.44 12.15 Income (loss) from investment operations: Net investment loss $ (0.13) (0.15) (0.13) (0.20) (0.17) (0.11) Net realized and unrealized gain (loss) on investments $ (1.95) (3.77) (8.68) 7.81 9.49 (1.42) Total from investment operations $ (2.08) (3.92) (8.81) 7.61 9.32 (1.53) Less distributions from: Net realized gains on investments $ -- -- 2.16 2.46 -- 0.18 Tax return of capital $ -- -- 0.06 -- -- -- Total distributions $ -- -- 2.22 2.46 -- 0.18 Net asset value, end of period $ 7.88 9.96 13.88 24.91 19.76 10.44 TOTAL RETURN(2) % (20.88) (28.24) (38.02) 40.18 89.27 (12.63) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 51,218 90,290 160,251 257,601 81,225 33,425 Ratios to average net assets: Net expenses(3) % 1.87 1.78 1.77 1.57 1.69 1.72 Net investment loss(3) % (1.42) (1.18) (1.52) (1.22) (1.30) (0.92) Portfolio turnover rate % 294 255 95 163 197 162 CLASS B --------------------------------------------------------------------- YEAR YEAR SEVEN MONTHS ENDED ENDED ENDED YEAR ENDED OCTOBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.52 13.36 24.17 19.34 10.29 12.08 Income (loss) from investment operations: Net investment loss $ (0.18) (0.23) (0.19) (0.36) (0.27) (0.16) Net realized and unrealized gain (loss) on investments $ (1.86) (3.61) (8.40) 7.65 9.32 (1.45) Total from investment operations $ (2.04) (3.84) (8.59) 7.29 9.05 (1.61) Less distributions from: Net realized gains on investments $ -- -- 2.16 2.46 -- 0.18 Tax return of capital $ -- -- 0.06 -- -- -- Total distributions $ -- -- 2.22 2.46 -- 0.18 Net asset value, end of period $ 7.48 9.52 13.36 24.17 19.34 10.29 TOTAL RETURN(2) % (21.43) (28.74) (38.31) 39.33 87.95 (13.38) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 105,173 185,950 326,139 507,282 227,227 105,991 Ratios to average net assets: Net expenses(3) % 2.57 2.48 2.47 2.27 2.39 2.45 Net investment loss(3) % (2.12) (1.88) (2.22) (1.92) (2.00) (1.67) Portfolio turnover rate % 294 255 95 163 197 162
- ---------- (1) The fund changed its fiscal year end to May 31. (2) Total return is calculated assuming reinvestment of dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. See Accompanying Notes to Financial Statements 54 ING GROWTH + VALUE FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C --------------------------------------------------------------------- YEAR YEAR SEVEN MONTHS ENDED ENDED ENDED YEAR ENDED OCTOBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.51 13.35 24.16 19.33 10.29 12.08 Income (loss) from investment operations: Net investment loss $ (0.20) (0.25) (0.19) (0.33) (0.26) (0.16) Net realized and unrealized gain (loss) on investments $ (1.84) (3.59) (8.40) 7.62 9.30 (1.45) Total from investment operations $ (2.04) (3.84) (8.59) 7.29 9.04 (1.61) Less distributions from: Net realized gains on investments $ -- -- 2.16 2.46 -- 0.18 Tax return of capital $ -- -- 0.06 -- -- -- Total distributions $ -- -- 2.22 2.46 -- 0.18 Net asset value, end of period $ 7.47 9.51 13.35 24.16 19.33 10.29 TOTAL RETURN(2) % (21.45) (28.76) (38.33) 39.35 87.85 (13.38) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 49,783 97,993 183,037 280,484 84,391 37,456 Ratios to average net assets: Net expensese(3) % 2.57 2.48 2.47 2.27 2.40 2.46 Net investment loss(3) % (2.11) (1.88) (2.22) (1.92) (2.01) (1.69) Portfolio turnover rate % 294 255 95 163 197 162
- ---------- (1) The fund changed its fiscal year end to May 31. (2) Total return is calculated assuming reinvestment of dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. See Accompanying Notes to Financial Statements 55 ING GROWTH OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A --------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.29 18.63 25.45 33.17 26.06 21.26 Income (loss) from investment operations: Net investment income (loss) $ (0.20) (0.27) (0.11) (0.21) (0.15) (0.08) Net realized and unrealized gain (loss) on investments $ (1.93) (5.07) (6.71) (6.02) 20.10 5.09 Total from investment operations $ (2.13) (5.34) (6.82) (6.23) 19.95 5.01 Less distributions from: Net realized gains on investments $ -- -- -- 1.49 12.84 0.21 Total distributions $ -- -- -- 1.49 12.84 0.21 Net asset value, end of period $ 11.16 13.29 18.63 25.45 33.17 26.06 TOTAL RETURN(1) % (16.03) (28.66) (26.80) (19.11) 93.26 23.61 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 49,944 89,619 158,754 206,590 101,260 29,358 Ratios to average net assets: Net expenses(3) % 1.85 1.80 1.73 1.46 1.39 1.37 Net investment loss % (1.46) (1.62) (1.34) (0.86) (0.98) (0.47) Portfolio turnover rate % 355 473 217 326 286 98 CLASS B --------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.45 17.58 24.09 31.70 25.46 20.93 Income (loss) from investment operations: Net investment income (loss) $ (0.25) (0.37) (0.17) (0.35) (0.18) (0.23) Net realized and unrealized gain (loss) on investments $ (1.81) (4.76) (6.34) (5.77) 19.26 4.97 Total from investment operations $ (2.06) (5.13) (6.51) (6.12) 19.08 4.74 Less distributions from: Net realized gains on investments $ -- -- -- 1.49 12.84 0.21 Total distributions $ -- -- -- 1.49 12.84 0.21 Net asset value, end of period $ 10.39 12.45 17.58 24.09 31.70 25.46 TOTAL RETURN(2) % (16.55) (29.18) (27.02) (19.66) 91.84 22.69 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 50,620 88,274 162,106 224,299 88,305 15,480 Ratios to average net assets: Net expenses(3) % 2.55 2.50 2.43 2.16 2.10 2.13 Net investment loss(3) % (2.15) (2.32) (2.04) (1.56) (1.69) (1.26) Portfolio turnover rate % 355 473 217 326 286 98
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than a year. See Accompanying Notes to Financial Statements 56 ING GROWTH OPPORTUNITIES FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C --------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.48 17.62 24.13 31.75 25.48 20.91 Income (loss) from investment operations: Net investment loss $ (0.26) (0.41) (0.17) (0.31) (0.10) (0.27) Net realized and unrealized gain (loss) on investments $ (1.81) (4.73) (6.34) (5.82) 19.21 5.05 Total from investment operations $ (2.07) (5.14) (6.51) (6.13) 19.11 4.78 Less distributions from: Net realized gains on investments $ -- -- -- 1.49 12.84 0.21 Total distributions $ -- -- -- 1.49 12.84 0.21 Net asset value, end of period $ 10.41 12.48 17.62 24.13 31.75 25.48 TOTAL RETURN(2) % (16.59) (29.17) (26.98) (19.65) 91.90 22.90 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 24,015 45,901 93,537 130,389 21,006 1,625 Ratios to average net assets: Net expenses(3) % 2.55 2.50 2.43 2.16 2.10 2.13 Net investment loss(3) % (2.15) (2.32) (2.04) (1.56) (1.69) (1.24) Portfolio turnover rate % 355 473 217 326 286 98 CLASS T --------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.57 17.73 24.29 31.93 25.59 21.02 Income (loss) from investment operations: Net investment loss $ (0.25) (0.40) (0.17) (0.50) (0.39) (0.36) Net realized and unrealized gain (loss) on investments $ (1.83) (4.76) (6.39) (5.65) 19.57 5.14 Total from investment operations $ (2.08) (5.16) (6.56) (6.15) 19.18 4.78 Less distributions from: Net realized gains on investments $ -- -- -- 1.49 12.84 0.21 Total distributions $ -- -- -- 1.49 12.84 0.21 Net asset value, end of period $ 10.49 12.57 17.73 24.29 31.93 25.59 TOTAL RETURN(2) % (16.55) (29.10) (27.01) (19.60) 91.72 22.79 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 7,543 13,157 29,666 48,095 83,772 52,023 Ratios to average net assets: Net expenses(3) % 2.50 2.45 2.38 2.11 2.03 2.05 Net investment loss(3) % (2.11) (2.27) (1.99) (1.51) (1.62) (1.19) Portfolio turnover rate % 355 473 217 326 286 98
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than a year. See Accompanying Notes to Financial Statements 57 ING LARGECAP GROWTH FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ---------------------------------------------------------------------------- YEAR YEAR ELEVEN MONTHS YEAR THREE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(1) 2000 1999(2) 1999 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 16.59 24.40 43.12 28.09 24.94 15.73 Income (loss) from investment operations: Net investment loss $ (0.15) (0.18) (0.20) (0.22) (0.02) (0.08) Net realized and unrealized gain (loss) on investments $ (2.11) (7.63) (18.05) 15.63 3.17 9.77 Total from investment operations $ (2.26) (7.81) (18.25) 15.41 3.15 9.69 Less distributions from: Net investment income $ -- 0.00* -- -- -- -- Net realized gains on investments $ -- -- 0.47 0.38 -- 0.48 Total distributions $ -- 0.00* 0.47 0.38 -- 0.48 Net asset value, end of period $ 14.33 16.59 24.40 43.12 28.09 24.94 TOTAL RETURN(3): % (13.62) (31.99) (42.67) 55.35 12.63 63.06 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 40,941 65,642 161,824 186,261 30,108 12,445 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.60 1.58 1.47 1.36 1.43 1.59 Gross expenses prior to expense reimbursement(4) % 1.76 1.58 1.47 1.36 1.45 2.24 Net investment loss after expense reimbursement(4)(5) % (0.96) (1.12) (0.78) (0.87) (0.56) (0.65) Portfolio turnover rate % 291 536 331 139 27 253 CLASS B ---------------------------------------------------------------------------- YEAR YEAR ELEVEN MONTHS YEAR THREE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(1) 2000 1999(2) 1999 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 16.30 24.14 42.94 28.15 25.04 15.64 Income (loss) from investment operations: Net investment loss $ (0.24) (0.43) (0.41) (0.39) (0.05) (0.08) Net realized and unrealized gain (loss) on investments $ (2.07) (7.41) (17.92) 15.56 3.16 9.71 Total from investment operations $ (2.31) (7.84) (18.33) 15.17 3.11 9.63 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ -- -- 0.47 0.38 -- 0.23 Total distributions $ -- -- 0.47 0.38 -- 0.23 Net asset value, end of period $ 13.99 16.30 24.14 42.94 28.15 25.04 TOTAL RETURN(3): % (14.17) (32.48) (43.04) 55.37 12.42 62.28 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 72,575 116,738 224,572 333,256 49,057 20,039 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.25 2.23 2.12 2.01 2.08 2.24 Gross expenses prior to expense reimbursement(4) % 2.41 2.23 2.12 2.01 2.10 2.89 Net investment loss after expense reimbursement(4)(5) % (1.61) (1.77) (1.43) (1.52) (1.21) (1.28) Portfolio turnover rate % 291 536 331 139 27 253
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 58 ING LARGECAP GROWTH FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ---------------------------------------------------------------------------- YEAR YEAR ELEVEN MONTHS YEAR THREE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(1) 2000 1999(2) 1999 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 16.25 24.07 42.82 28.07 24.97 15.63 Income (loss) from investment operations: Net investment loss $ (0.25) (0.48) (0.39) (0.35) (0.06) (0.07) Net realized and unrealized gain (loss) on investments $ (2.05) (7.34) (17.89) 15.48 3.16 9.65 Total from investment operations $ (2.30) (7.82) (18.28) 15.13 3.10 9.58 Less distributions from: Net realized gains on investments $ -- -- 0.47 0.38 -- 0.24 Total distributions $ -- -- 0.47 0.38 -- 0.24 Net asset value, end of period $ 13.95 16.25 24.07 42.82 28.07 24.97 TOTAL RETURN(3): % (14.15) (32.49) (43.04) 54.38 12.41 61.97 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 31,516 54,048 117,222 152,682 17,755 8,004 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.25 2.23 2.12 2.01 2.08 2.25 Gross expenses prior to expense reimbursement(4) % 2.41 2.23 2.12 2.01 2.10 2.90 Net investment loss after expense reimbursement(4)(5) % (1.61) (1.77) (1.43) (1.52) (1.21) (1.26) Portfolio turnover rate % 291 536 331 139 27 253
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 59 ING MIDCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A -------------------------------------------------------------------- YEAR YEAR FIVE MONTHS YEAR ENDED ENDED ENDED ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998(2) ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 11.11 14.58 19.12 21.29 12.96 10.00 Income (loss) from investment operations: Net investment loss $ (0.12) (0.17)* (0.11) (0.15) (0.09) (0.03) Net realized and unrealized gain (loss) on investments $ (0.87) (3.30) (4.43) 0.16 12.01 2.99 Total from investment operations $ (0.99) (3.47) (4.54) 0.01 11.92 2.96 Less distributions from: Net realized gains on investments $ -- -- -- 2.18 3.59 -- Total distributions $ -- -- -- 2.18 3.59 -- Net asset value, end of period $ 10.12 11.11 14.58 19.12 21.29 12.96 TOTAL RETURN(3): % (8.91) (23.80) (23.74) (0.35) 103.24 29.60 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 44,010 68,106 24,265 25,742 6,291 610 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.50 1.77 2.06 1.66 1.74 1.80 Gross expenses prior to expense reimbursement(4) % 1.83 1.99 2.06 1.66 1.74 2.42 Net investment loss after expense reimbursement(4)(5) % (1.15) (1.45) (1.52) (0.96) (1.34) (1.10) Portfolio turnover rate 345 399 182 188 201 61 CLASS B -------------------------------------------------------------------- YEAR YEAR FIVE MONTHS YEAR ENDED ENDED ENDED ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998(2) ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.83 14.30 18.79 21.12 12.97 10.00 Income (loss) from investment operations: Net investment loss $ (0.20) (0.25)* (0.14) (0.24) (0.07) (0.03) Net realized and unrealized gain (loss) on investments $ (0.83) (3.22) (4.35) 0.09 11.81 3.00 Total from investment operations $ (1.03) (3.47) (4.49) (0.15) 11.74 2.97 Less distributions from: Net realized gains on investments $ -- -- -- 2.18 3.59 -- Total distributions $ -- -- -- 2.18 3.59 -- Net asset value, end of period $ 9.80 10.83 14.30 18.79 21.12 12.97 TOTAL RETURN(3): % (9.51) (24.27) (23.90) (1.13) 101.73 29.70 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 43,183 69,621 28,448 35,551 8,252 140 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.20 2.47 2.76 2.36 2.40 2.50 Gross expenses prior to expense reimbursement(4) % 2.53 2.69 2.76 2.36 2.40 3.27 Net investment loss after expense reimbursement(4)(5) % (1.85) (2.15) (2.22) (1.66) (2.00) (2.05) Portfolio turnover rate 345 399 182 188 201 61
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) The Fund commenced operations on August 20, 1998. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 60 ING MIDCAP OPPORTUNITIES FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C -------------------------------------------------------------------- YEAR YEAR FIVE MONTHS YEAR ENDED ENDED ENDED ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998(2) ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.77 14.24 18.72 21.03 12.96 10.00 Income (loss) from investment operations: Net investment gain (loss) $ (0.19) (0.25)* (0.14) (0.24) (0.07) (0.04) Net realized and unrealized gain (loss) on investments $ (0.83) (3.22) (4.34) 0.11 11.73 3.00 Total from investment operations $ (1.02) (3.47) (4.48) (0.13) 11.66 2.96 Less distributions from: Net realized gains on investments $ -- -- -- 2.18 3.59 -- Total distributions $ -- -- -- 2.18 3.59 -- Net asset value, end of period $ 9.75 10.77 14.24 18.72 21.03 12.96 TOTAL RETURN(3): % (9.47) (24.37) (23.93) (1.03) 101.16 29.60 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 67,730 100,888 18,901 25,939 4,560 87 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.20 2.47 2.76 2.36 2.36 2.50 Gross expenses prior to expense reimbursement(4) % 2.53 2.69 2.76 2.36 2.36 3.22 Net investment loss after expense reimbursement(4)(5) % (1.85) (2.15) (2.22) (1.66) (1.98) (2.04) Portfolio turnover rate % 345 399 182 188 201 61
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) The Fund commenced operations on August 20, 1998. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 61 ING SMALLCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A -------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 24.04 38.78 47.17 59.35 29.00 27.77 Income (loss) from investment operations: Net investment loss $ (0.35) (0.51)* (0.23) (0.54) (0.32) (0.27) Net realized and unrealized gain (loss) on investments $ (5.53) (13.24) (8.16) (2.74) 38.23 2.23 Total from investment operations $ (5.88) (13.75) (8.39) (3.28) 37.91 1.96 Less distributions from: Net realized gains on investments $ -- 0.99 -- 8.90 7.56 0.73 Total distributions $ -- 0.99 -- 8.90 7.56 0.73 Net asset value, end of period $ 18.16 24.04 38.78 47.17 59.35 29.00 TOTAL RETURN(2) % (24.46) (35.86) (17.79) (6.04) 146.94 7.59 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 118,570 183,810 159,641 177,286 123,377 45,461 Ratios to average net assets: Expenses(3) % 1.88 1.81 1.69 1.45 1.43 1.47 Net investment loss(3) % (1.80) (1.70) (1.41) (1.05) (1.21) (0.70) Portfolio turnover rate % 357 427 104 134 223 257 CLASS B --------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 22.48 36.60 44.64 57.06 28.26 27.27 Income (loss) from investment operations: Net investment loss $ (0.48) (0.68)* (0.33) (0.96) (0.60) (0.48) Net realized and unrealized gain (loss) on investments $ (5.13) (12.45) (7.71) (2.56) 36.96 2.20 Total from investment operations $ (5.61) (13.13) (8.04) (3.52) 36.36 1.72 Less distributions from: Net realized gains on investments $ -- 0.99 -- 8.90 7.56 0.73 Total distributions $ -- 0.99 -- 8.90 7.56 0.73 Net asset value, end of period $ 16.87 22.48 36.60 44.64 57.06 28.26 TOTAL RETURN(2) % (24.96) (36.31) (18.01) (6.71) 145.24 6.84 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 85,465 154,899 206,968 266,348 264,677 124,065 Ratios to average net assets: Expenses(3) % 2.58 2.51 2.39 2.15 2.15 2.18 Net investment loss(3) % (2.50) (2.40) (2.11) (1.75) (1.93) (1.43) Portfolio turnover rate % 357 427 104 134 223 257
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Total return is calculated assuming reinvestment of dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. * Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 62 ING SMALLCAP OPPORTUNITIES FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C -------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 22.44 36.53 44.54 56.98 28.24 27.26 Income (loss) from investment operations: Net investment loss $ (0.49) (0.67)* (0.33) (0.97) (0.53) (0.55) Net realized and unrealized gain (loss) on investments $ (5.12) (12.43) (7.68) (2.57) 36.83 2.26 Total from investment operations $ (5.61) (13.10) (8.01) (3.54) 36.30 1.71 Less distributions from: Net realized gains on investments $ -- 0.99 -- 8,90 7.56 0.73 Total distributions $ -- 0.99 -- 8.90 7.56 0.73 Net asset value, end of period $ 16.83 22.44 36.53 44.54 56.98 28.24 TOTAL RETURN(2) % (25.00) (36.30) (17.98) (6.76) 145.12 6.81 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 63,406 119,498 78,658 104,094 72,581 29,746 Ratios to average net assets: Expenses(3) % 2.58 2.51 2.39 2.15 2.18 2.22 Net investment loss(3) % (2.50) (2.40) (2.11) (1.75) (1.96) (1.45) Portfolio turnover rate % 357 427 104 134 223 257 CLASS T -------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 22.71 36.94 45.04 57.39 28.36 27.34 Income (loss) from investment operations: Net investment loss $ (0.58) (0.68)* (0.34) (0.90) (0.65) (0.51) Net realized and unrealized gain (loss) on investments $ (5.08) (12.56) (7.76) (2.55) 37.24 2.26 Total from investment operations $ (5.66) (13.24) (8.10) (3.45) 36.59 1.75 Less distributions from: Net realized gains on investments $ -- 0.99 -- 8.90 7.56 0.73 Total distributions $ -- 0.99 -- 8.90 7.56 0.73 Net asset value, end of period $ 17.05 22.71 36.94 45.04 57.39 28.36 TOTAL RETURN(2) % (24.92) (36.27) (17.99) (6.52) 145.51 6.94 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 1,778 4,877 16,316 23,441 33,634 18,203 Ratios to average net assets: Expenses(3) % 2.53 2.46 2.34 2.10 2.06 2.10 Net investment loss(3) % (2.45) (2.35) (2.06) (1.70) (1.85) (1.33) Portfolio turnover rate % 357 427 104 134 223 257
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Total return is calculated assuming reinvestment of dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. * Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 63 ING DISCIPLINED LARGECAP FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ----------------------------------------------------------- YEAR YEAR SEVEN MONTHS PERIOD ENDED ENDED ENDED YEAR ENDED ENDED MAY 31, MAY 31, MAY 31, OCT. 31, OCT. 31, 2003 2002 2001(1) 2000 1999(2) ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.43 9.87 11.17 11.14 10.00 Income (loss) from investment operations: Net investment income (loss) $ 0.03 0.03 (0.01) -- 0.01 Net realized and unrealized gain (loss) on investments $ (0.85) (1.47) (1.29) 0.18 1.13 Total from investment operations $ (0.82) (1.44) (1.30) 0.18 1.14 Less distributions from: Net realized gains on investments $ -- -- -- 0.15 -- Total distributions $ -- -- -- 0.15 -- Net asset value, end of period $ 7.61 8.43 9.87 11.17 11.14 TOTAL RETURN(3) % (9.73) (14.59) (11.64) 1.55 11.40 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 7,205 9,883 12,748 23,571 27,091 Ratios to average net assets: Net expenses after expense reimbursement(4) % 1.54 1.33 1.45 1.37 1.29(5) Gross expenses prior to expense reimbursement(4) % 1.54 1.33 1.45 1.37 1.56 Net investment income (loss) after expense reimbursement(4) % 0.32 0.12 (0.13) 0.01 0.23(5) Portfolio turnover rate % 106 149 26 57 26 CLASS B ----------------------------------------------------------- YEAR YEAR SEVEN MONTHS PERIOD ENDED ENDED ENDED YEAR ENDED ENDED MAY 31, MAY 31, MAY 31, OCT. 31, OCT. 31, 2003 2002 2001(1) 2000 1999(2) ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.23 9.70 11.04 11.09 10.00 Income (loss) from investment operations: Net investment income (loss) $ (0.03) (0.07) (0.05) (0.08) (0.02) Net realized and unrealized gain (loss) on investments $ (0.83) (1.40) (1.29) 0.18 1.11 Total from investment operations $ (0.86) (1.47) (1.34) 0.10 1.09 Less distributions from: Net realized gains on investments $ -- -- -- 0.15 -- Total distributions $ -- -- -- 0.15 -- Net asset value, end of period $ 7.37 8.23 9.70 11.04 11.09 TOTAL RETURN(3) % (10.45) (15.15) (12.14) 0.83 10.90 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 34,358 53,185 76,726 94,028 99,249 Ratios to average net assets: Net expenses after expense reimbursement(4) % 2.24 2.03 2.15 2.07 1.99(5) Gross expenses prior to expense reimbursement(4) % 2.24 2.03 2.15 2.07 2.29 Net investment loss after expense reimbursement(4) % (0.43) (0.58) (0.83) (0.70) (0.49)(5) Portfolio turnover rate % 106 149 26 57 26
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) The Fund commenced operations on December 30, 1998. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) Expenses calculated net of taxes and advisor reimbursement. See Accompanying Notes to Financial Statements 64 ING DISCIPLINED LARGECAP FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C --------------------------------------------------------- YEAR YEAR SEVEN MONTHS PERIOD ENDED ENDED ENDED YEAR ENDED ENDED MAY 31, MAY 31, MAY 31, OCTOBER 31, OCT. 31, 2003 2002 2001(1) 2000 1999(2) ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.23 9.70 11.05 11.09 10.00 Income (loss) from investment operations: Net investment loss $ (0.04) (0.09) (0.05) (0.08) (0.02) Net realized and unrealized gain (loss) on investments $ (0.82) (1.38) (1.30) 0.19 1.11 Total from investment operations $ (0.86) (1.47) (1.35) 0.11 1.09 Less distributions from: Net realized gains on investments $ -- -- -- 0.15 -- Total distributions $ -- -- -- 0.15 -- Net asset value, end of period $ 7.37 8.23 9.70 11.05 11.09 TOTAL RETURN(3) % (10.45) (15.15) (12.22) 0.92 10.90 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 21,478 36,486 66,252 88,449 75,941 Ratios to average net assets: Net expenses after expense reimbursement(4) % 2.24 2.03 2.15 2.07 1.99(5) Gross expenses prior to expense reimbursement(4) % 2.24 2.03 2.15 2.07 2.27 Net investment loss after expense reimbursement(4) % (0.43) (0.58) (0.83) (0.70) (0.49)(5) Portfolio turnover rate % 106 149 26 57 26
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) The Fund commenced operations on December 30, 1998. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) Expenses calculated net of taxes and advisor reimbursement. See Accompanying Notes to Financial Statements 65 ING FINANCIAL SERVICES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ------------------------------------------------------------------- ELEVEN SIX YEAR YEAR MONTHS YEAR YEAR MONTHS ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, 2003 2002 2001(1) 2000 1999 1998(2) ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 22.11 23.36 16.42 24.38 27.52 25.87 Income (loss) from investment operations: Net investment income $ 0.12 0.14 0.31 0.32 0.29 0.11 Net realized and unrealized gain (loss) on investments $ (1.78) 1.29 7.11 (5.30) (2.70) 1.54 Total from investment operations $ (1.66) 1.43 7.42 (4.98) (2.41) 1.65 Less distributions from: Net investment income $ 0.09 0.33 0.33 0.25 0.18 -- Net realized gains on investments $ 1.12 2.35 0.15 2.73 0.55 -- Tax return of capital $ -- -- -- -- -- -- Total distributions $ 1.21 2.68 0.48 2.98 0.73 -- Net asset value, end of period $ 19.24 22.11 23.36 16.42 24.38 27.52 TOTAL RETURN(3) % (6.98) 7.05 46.01 (22.44) (8.61) 6.38 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period ($millions) $ 182 231 252 210 403 549 Ratio to average net assets: Expenses(4) % 1.52 1.48 1.42 1.41 1.39 1.20 Net investment income(4) % 0.54 0.54 1.48 1.46 1.09 0.94 Portfolio turnover rate % 19 43 39 10 29 2 CLASS B ------------------------------------------------------------------- ELEVEN SIX YEAR YEAR MONTHS YEAR YEAR MONTHS ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, 2003 2002 2001(1) 2000 1999 1998(2) ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 22.03 23.28 16.35 24.21 27.40 25.85 Income (loss) from investment operations: Net investment income (loss) $ (0.07) (0.04) 0.15 0.22 0.08 0.01 Net realized and unrealized gain (loss) on investments $ (1.72) 1.29 7.12 (5.32) (2.66) 1.54 Total from investment operations $ (1.79) 1.25 7.27 (5.10) (2.58) 1.55 Less distributions from: Net investment income $ -- 0.15 0.19 0.03 0.06 -- Net realized gains on investments $ 1.12 2.35 0.15 2.73 0.55 -- Tax return of capital $ -- -- -- -- -- -- Total distributions $ 1.12 2.50 0.34 2.76 0.61 -- Net asset value, end of period $ 19.12 22.03 23.28 16.35 24.21 27.40 TOTAL RETURN(3) % (7.66) 6.22 45.01 (23.00) (9.31) 6.00 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period ($millions) $ 127 171 183 148 343 360 Ratio to average net assets: Expenses(4) % 2.27 2.23 2.17 2.16 2.14 1.95 Net investment income (loss)(4) % (0.21) (0.21) 0.73 0.71 0.34 0.19 Portfolio turnover rate % 19 43 39 10 29 2
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Effective June 30, 1998, the Financial Services Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. See Accompanying Notes to Financial Statements 66 ING LARGE COMPANY VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A -------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000(2) 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.62 17.14 18.10 22.38 21.91 20.27 Income (loss) from investment operations: Net investment income (loss) $ 0.10 (0.27) (0.03) (0.01) 0.05 -- Net realized and unrealized gain (loss) on investments $ (2.33) (1.92) (0.93) (0.51) 3.33 4.30 Total from investment operations $ (2.23) (2.19) (0.96) (0.52) 3.38 4.30 Less distributions from: Net investment income $ 0.03 0.00* -- -- 0.05 -- Net realized gains from investments $ -- 0.29 -- 3.76 2.86 2.66 Tax return of capital $ -- 0.04 -- -- -- -- Total distributions $ 0.03 0.33 -- 3.76 2.91 2.66 Net asset value, end of period $ 12.36 14.62 17.14 18.10 22.38 21.91 TOTAL RETURN(3) % (15.21) (12.83) (5.30) (3.13) 15.54 21.42 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 133,146 173,655 212,962 226,905 254,532 245,790 Ratios to average net assets: Expenses(4) % 1.37 1.27 1.48 1.09 0.95 1.16 Net investment income (loss)(4) % 0.87 0.35 (0.32) (0.06) 0.21 0.06 Portfolio turnover rate % 103 88 54 85 86 63 CLASS B ---------------------------------------------------- YEAR YEAR FIVE MONTHS AUGUST 22, ENDED ENDED ENDED 2000(5) THRU MAY 31, MAY 31, MAY 31, DECEMBER 31, 2003 2002 2001(1) 2000 ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.45 17.09 18.09 24.16 Income (loss) from investment operations: Net investment income (loss) $ 0.01 (0.34) (0.05) (0.02) Net realized and unrealized loss on investments $ (2.29) (1.97) (0.95) (2.73) Total from investment operations $ (2.28) (2.31) (1.00) (2.75) Less distributions from: Net realized gains on investments $ -- 0.29 -- 3.32 Tax return of capital $ -- 0.04 -- -- Total distributions $ -- 0.33 -- 3.32 Net asset value, end of period $ 12.17 14.45 17.09 18.09 TOTAL RETURN(3) % (15.78) (13.60) (5.53) (11.95) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 3,538 4,552 4,901 722 Ratios to average net assets: Expenses(4) % 2.12 2.02 2.23 1.84 Net investment income (loss)(4) % 0.12 (0.40) (1.07) (0.81) Portfolio turnover rate % 103 88 54 85
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Effective July 26, 2000, ING Investments, LLC. became the Investment Manager of the Fund. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return information for less than one year is not annualized. (4) Annualized for periods less than one year. (5) Commencement of offerings of shares. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 67 ING LARGE COMPANY VALUE FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C -------------------------------------------------- YEAR YEAR FIVE MONTHS SEPTEMBER 26, ENDED ENDED ENDED 2000(2) THRU MAY 31, MAY 31, MAY 31, DECEMBER 31, 2003 2002 2001(1) 2000 ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.42 17.04 18.05 23.40 Income (loss) from investment operations: Net investment loss $ 0.02 (0.42) (0.03) (0.02) Net realized and unrealized loss on investments $ (2.31) (1.87) (0.98) (2.01) Total from investment operations $ (2.29) (2.29) (1.01) (2.03) Less distributions from: Net realized gains on investments $ -- 0.29 -- 3.32 Tax return of capital $ -- 0.04 -- -- Total distributions $ -- 0.33 -- 3.32 Net asset value, end of period $ 12.13 14.42 17.04 18.05 TOTAL RETURN(3) % (15.88) (13.52) (5.60) (9.30) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 1,133 1,895 3,462 160 Ratios to average net assets: Expenses(4) % 2.12 2.02 2.23 1.64 Net investment income (loss)(4) % 0.12 (0.40) (1.07) (0.81) Portfolio turnover rate % 103 88 54 85
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Commencement of offerings of shares. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return information for less than one year is not annualized. (4) Annualized for periods less than one year. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 68 ING MAGNACAP FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A --------------------------------------------------------------------- YEAR YEAR ELEVEN MONTHS ENDED ENDED ENDED YEAR ENDED JUNE 30, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.11 13.54 15.84 17.69 17.07 15.92 Income (loss) from investment operations: Net investment income $ 0.06 0.07 0.05 0.07 0.07 0.04 Net realized and unrealized gain (loss) on investments $ (1.32) (1.53) (0.38) (0.08) 2.37 3.02 Total from investment operations $ (1.26) (1.46) (0.33) (0.01) 2.44 3.06 Less distributions from: Net investment income $ 0.03 0.07 0.09 0.05 0.04 0.06 Net realized gains on investments $ -- 1.90 1.88 1.79 1.78 1.85 Total distributions $ 0.03 1.97 1.97 1.84 1.82 1.91 Net asset value, end of period $ 8.82 10.11 13.54 15.84 17.69 17.07 TOTAL RETURN(2): % (12.46) (10.96) (2.77) (0.36) 15.93 20.53 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 156,902 211,602 277,722 303,864 368,508 348,759 Ratios to average net assets: Expenses(3) % 1.45 1.34 1.31 1.29 1.35 1.37 Net investment income(3) % 0.73 0.59 0.33 0.41 0.41 0.29 Portfolio turnover rate % 110 75 92 26 48 53 CLASS B -------------------------------------------------------------------- YEAR YEAR ELEVEN MONTHS ENDED ENDED ENDED YEAR ENDED JUNE 30, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.75 13.14 15.44 17.36 16.86 15.81 Income (loss) from investment operations: Net investment loss $ 0.00* (0.02) (0.01) (0.05) (0.04) (0.04) Net realized and unrealized gain (loss) on investments $ (1.27) (1.47) (0.41) (0.08) 2.32 2.97 Total from investment operations $ (1.27) (1.49) (0.42) (0.13) 2.28 2.93 Less distributions from: Net investment income $ -- -- -- -- -- 0.03 Net realized gains on investments $ -- 1.90 1.88 1.79 1.78 1.85 Total distributions $ -- 1.90 1.88 1.79 1.78 1.88 Net asset value, end of period $ 8.48 9.75 13.14 15.44 17.36 16.86 TOTAL RETURN(2): % (13.03) (11.61) (3.40) (1.11) 15.12 19.76 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 50,677 79,685 112,286 87,167 116,227 77,787 Ratios to average net assets: Expenses(3) % 2.15 2.04 2.01 1.99 2.05 2.07 Net investment income (loss)(3) % 0.03 (0.11) (0.37) (0.29) (0.29) (0.41) Portfolio turnover rate % 110 75 92 26 48 53
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 69 ING MAGNACAP FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ---------------------------------------------------------- YEAR YEAR ELEVEN MONTHS YEAR JUNE 1, ENDED ENDED ENDED ENDED 1999(2) TO MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, 2003 2002 2001(1) 2000 1999 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.76 13.14 15.44 17.37 16.69 Income (loss) from investment operations: Net investment loss $ 0.00* (0.01) (0.01) (0.10) -- Net realized and unrealized gain (loss) on investments $ (1.28) (1.47) (0.41) (0.04) 0.68 Total from investment operations $ (1.28) (1.48) (0.42) (0.14) 0.68 Less distributions from: Net investment income $ -- -- -- -- -- Net realized gains on investments $ -- 1.90 1.88 1.79 -- Total distributions $ -- 1.90 1.88 1.79 -- Net asset value, end of period $ 8.48 9.76 13.14 15.44 17.37 TOTAL RETURN(3): % (13.11) (11.53) (3.41) (1.17) 4.07 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 8,291 9,693 10,887 3,660 601 Ratios to average net assets: Expenses(4) % 2.15 2.04 2.01 1.99 1.12 Net investment income (loss)(4) % 0.03 (0.11) (0.37) (0.29) 0.42 Portfolio turnover rate % 110 75 92 26 48 CLASS M -------------------------------------------------------------------- YEAR YEAR ELEVEN MONTHS ENDED ENDED ENDED YEAR ENDED JUNE 30, MAY 31, MAY 31, MAY 31, ------------------------------- 2003 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.96 13.36 15.64 17.51 16.95 15.87 Income (loss) from investment operations: Net investment income (loss) $ 0.03 0.02 -- (0.01) (0.01) -- Net realized and unrealized gain (loss) on investments $ (1.31) (1.50) (0.39) (0.06) 2.35 2.98 Total from investment operations $ (1.28) (1.48) (0.39) (0.07) 2.34 2.98 Less distributions from: Net investment income $ -- 0.02 0.01 0.01 -- 0.05 Net realized gains on investments $ -- 1.90 1.88 1.79 1.78 1.85 Total distributions $ -- 1.92 1.89 1.80 1.78 1.90 Net asset value, end of period $ 8.68 9.96 13.36 15.64 17.51 16.95 TOTAL RETURN(3): % (12.85) (11.30) (3.21) (0.71) 15.41 20.00 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 7,445 12,074 17,440 13,050 16,351 14,675 Ratios to average net assets: Expenses(4) % 1.90 1.79 1.76 1.74 1.80 1.82 Net investment income (loss)(4) % 0.28 0.14 (0.12) (0.04) (0.04) (0.16) Portfolio turnover rate % 110 75 92 26 48 53
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Commencement of offering of shares. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 70 ING MIDCAP VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A CLASS B CLASS C ------------------- ------------------- ------------------- YEAR PERIOD YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(1) 2003 2002(2) 2003 2002(2) ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.28 10.00 10.27 9.87 10.26 9.87 Income (loss) from investment operations: Net investment income (loss) $ 0.00* 0.00* (0.06) (0.01) (0.05) (0.01) Net realized and unrealized gain (loss) on investments $ (1.77) 0.28 (1.75) 0.41 (1.75) 0.40 Total from investment operations $ (1.77) 0.28 (1.81) 0.40 (1.80) 0.39 Less distributions from: Net investment income $ 0.04 -- 0.01 -- 0.01 -- Net realized gains on investments $ 0.11 -- 0.11 -- 0.11 -- Total distributions $ 0.15 -- 0.12 -- 0.12 -- Net asset value, end of period $ 8.36 10.28 8.34 10.27 8.34 10.26 TOTAL RETURN(3): % (16.94) 2.80 (17.40) 4.05 (17.32) 3.95 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 15,026 25,325 12,205 11,656 12,034 9,731 Ratios to average net assets: Net expenses after reimbursement (4)(5) % 1.75 1.61 2.50 2.36 2.50 2.36 Gross expenses prior to expense reimbursement(4) % 2.17 3.05 2.92 3.80 2.92 3.80 Net investment income (loss) after expense reimbursement(4)(5) % (0.10) 0.04 (0.82) (0.71) (0.81) (0.71) Portfolio turnover rate % 72 13 72 13 72 13
- ---------- (1) The Fund commenced operations on February 1, 2002 (2) Class B and Class C commenced offering of shares on February 4, 2002. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not anualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses subject to possible recoupment by ING Investments, LLC within three years. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 71 ING SMALLCAP VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A CLASS B CLASS C ------------------- ------------------- ------------------- YEAR PERIOD YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(1) 2003 2002(2) 2003 2002(3) ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.62 10.00 10.60 9.85 10.60 9.76 Income (loss) from investment operations: Net investment loss $ (0.05) (0.01) (0.11) (0.02) (0.10) (0.01) Net realized and unrealized gain on investments $ (1.00) 0.63 (1.01) 0.77 (1.02) 0.85 Total from investment operations $ (1.05) 0.62 (1.12) 0.75 (1.12) 0.84 Less distributions from: Net investment income $ 0.04 -- -- -- 0.01 -- Net realized gains on investments $ 0.09 -- 0.09 -- 0.09 -- Total distributions $ 0.13 -- 0.09 -- 0.10 -- Net asset value, end of period $ 9.44 10.62 9.39 10.60 9.38 10.60 TOTAL RETURN(4): % (9.83) 6.20 (10.53) 7.61 (10.55) 8.61 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 12,280 18,435 8,233 7,889 11,241 8,468 Ratios to average net assets: Net expenses after reimbursement (5)(6) % 1.75 1.62 2.50 2.37 2.50 2.37 Gross expenses prior to expense reimbursement(5) % 2.17 3.65 2.92 4.40 2.92 4.40 Net investment loss after expense reimbursement(5)(6) % (0.54) (0.39) (1.29) (1.14) (1.28) (1.14) Portfolio turnover rate % 54 12 54 12 54 12
- ---------- (1) The fund commenced operations on February 1, 2002 (2) Class B commenced offering of shares on February 4, 2002. (3) Class C commenced offering of shares on February 7, 2002. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not anualized. (5) Annualized for periods less than one year. (6) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 72 ING TAX EFFICIENT EQUITY FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ----------------------------------------------------------- YEAR YEAR SEVEN MONTHS ENDED ENDED ENDED YEAR ENDED OCTOBER 31, MAY 31, MAY 31, MAY 31, ---------------------- 2003 2002 2001(1) 2000 1999(2) ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.97 11.52 12.37 11.99 10.00 Income (loss) from investment operations: Net investment income (loss) $ 0.00* -- 0.02 0.05 0.04 Net realized and unrealized gain (loss) on investments $ (1.32) (1.55) (0.84) 0.38 1.95 Total from investment operations $ (1.32) (1.55) (0.82) 0.43 1.99 Less distributions from: Net investment income $ -- -- 0.03 0.05 -- Total distributions $ -- -- 0.03 0.05 -- Net asset value, end of period $ 8.65 9.97 11.52 12.37 11.99 TOTAL RETURN(3) % (13.24) (13.45) (6.66) 3.62 19.90 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 26,418 35,159 42,640 47,647 45,714 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.45 1.44 1.40 1.31 1.28 Gross expenses prior to expense reimbursement(4) % 1.65 1.63 1.78 2.22 2.40 Ratio of net investment income (loss) after expense reimbursement(4)(5) % (0.01) (0.02) 0.25 0.36 0.49 Portfolio turnover rate % 69 27 9 14 9 CLASS B ---------------------------------------------------------- YEAR YEAR SEVEN MONTHS ENDED ENDED ENDED YEAR ENDED OCTOBER 31, MAY 31, MAY 31, MAY 31, ---------------------- 2003 2002 2001(1) 2000 1999(2) ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.79 11.41 12.28 11.96 10.00 Income (loss) from investment operations: Net investment income (loss) $ (0.07) (0.09) (0.03) (0.04) (0.01) Net realized and unrealized gain (loss) on investments $ (1.28) (1.53) (0.83) 0.39 1.97 Total from investment operations $ (1.35) (1.62) (0.86) 0.35 1.96 Less distributions from: Net investment income $ -- -- 0.01 0.03 -- Total distributions $ -- -- 0.01 0.03 -- Net asset value, end of period $ 8.44 9.79 11.41 12.28 11.96 TOTAL RETURN(3) % (13.79) (14.20) (6.97) 2.94 19.60 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 5,220 8,268 9,930 8,268 7,059 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.20 2.19 2.05 1.96 1.95 Gross expenses prior to expense reimbursement(4) % 2.30 2.28 2.43 2.47 2.66 Ratio of net investment loss after expense reimbursement(4)(5) % (0.76) (0.77) (0.40) (0.29) (0.14) Portfolio turnover rate % 69 27 9 14 9
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) The Fund commenced operations on December 15, 1998. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than a year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 73 ING TAX EFFICIENT EQUITY FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ----------------------------------------------------------- YEAR YEAR SEVEN MONTHS ENDED ENDED ENDED YEAR ENDED OCTOBER 31, MAY 31, MAY 31, MAY 31, ---------------------- 2003 2002 2001(1) 2000 1999(2) ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.73 11.33 12.20 11.92 10.00 Income (loss) from investment operations: Net investment loss $ (0.07) (0.10) (0.01) (0.04) -- Net realized and unrealized gain (loss) on investments $ (1.28) (1.50) (0.85) 0.39 1.92 Total from investment operations $ (1.35) (1.60) (0.86) 0.35 1.92 Less distributions from: Net investment income $ -- -- 0.01 0.07 -- Total distributions $ -- -- 0.01 0.07 -- Net asset value, end of period $ 8.38 9.73 11.33 12.20 11.92 TOTAL RETURN(3) % (13.88) (14.12) (7.01) 2.91 19.20 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 903 1,392 2,202 2,870 1,222 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.20 2.19 2.05 1.95 1.97 Gross expenses prior to expense reimbursement(4) % 2.30 2.28 2.43 2.47 2.64 Ratio of net investment loss after expense reimbursement(4)(5) % (0.76) (0.77) (0.40) (0.32) (0.14) Portfolio turnover rate % 69 27 9 14 9
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) The Fund commenced operations on December 15, 1998. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than a year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 74 ING CONVERTIBLE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A -------------------------------------------------------------------- ELEVEN THREE YEAR YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(1) 2000 1999(2) 1999 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 15.35 17.89 27.70 23.27 21.92 19.12 Income (loss) from investment operations: Net investment income $ 0.38 0.30 0.85 0.42 0.10 0.40 Net realized and unrealized gain (loss) on investments $ 0.78 (2.34) (5.29) 8.02 1.35 3.17 Total from investment operations $ 1.16 (2.04) (4.44) 8.44 1.45 3.57 Less distributions from: Net investment income $ 0.31 0.41 0.51 0.32 0.10 0.41 Net realized gains on investments $ -- 0.09 4.86 3.69 -- 0.36 Total distributions $ 0.31 0.50 5.37 4.01 0.10 0.77 Net asset value, end of period $ 16.20 15.35 17.89 27.70 23.27 21.92 TOTAL RETURN(3): % 7.80 (11.44) (17.78) 39.88 6.62 19.17 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 51,008 60,692 98,896 131,218 73,133 65,742 Ratio to average net assets: Net expenses after expense reimbursement/recoupment(4)(5) % 1.59 1.46 1.42 1.35 1.45 1.53 Gross expenses prior to expense reimbursement/recoupment(4) % 1.59 1.46 1.41 1.35 2.10 1.65 Net investment income after expense reimbursement/recoupment(4)(5) % 2.57 1.93 2.20 1.78 1.82 2.08 Portfolio turnover rate % 97 100 145 129 28 138 CLASS B -------------------------------------------------------------------- ELEVEN THREE YEAR YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(1) 2000 1999(2) 1999 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 16.83 19.56 30.20 25.34 23.86 20.56 Income (loss) from investment operations: Net investment income $ 0.35 0.24 0.49 0.29 0.07 0.29 Net realized and unrealized gain (loss) on investments $ 0.83 (2.59) (5.49) 8.77 1.47 3.47 Total from investment operations $ 1.18 (2.35) (5.00) 9.06 1.54 3.76 Less distributions from: Net investment income $ 0.22 0.28 0.34 0.19 0.06 0.27 Net realized gains on investments $ -- 0.10 5.30 4.01 -- 0.19 Total distributions $ 0.22 0.38 5.64 4.20 0.06 0.46 Net asset value, end of period $ 17.79 16.83 19.56 30.20 25.34 23.86 TOTAL RETURN(3): % 7.16 (12.04) (18.26) 39.21 6.47 18.52 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 72,364 88,650 125,366 139,704 68,091 58,736 Ratio to average net assets: Net expenses after expense reimbursement/recoupment(4)(5) % 2.24 2.11 2.07 2.00 2.10 2.18 Gross expenses prior to expense reimbursement/recoupment(4) % 2.24 2.11 2.06 2.00 2.10 2.30 Net investment income after expense reimbursement/recoupment(4)(5) % 1.92 1.28 1.55 1.13 1.17 1.44 Portfolio turnover rate % 97 100 145 129 28 138
- ---------- (1) The Fund changed its fiscal year end to May 31 (2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 75 ING CONVERTIBLE FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C -------------------------------------------------------------------- ELEVEN THREE YEAR YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY, 31 MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(1) 2000 1999(2) 1999 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 15.75 18.33 28.33 23.78 22.40 19.55 Income (loss) from investment operations: Net investment income $ 0.32 0.22 0.58 0.28 0.07 0.28 Net realized and unrealized gain (loss) on investments $ 0.78 (2.42) (5.26) 8.22 1.37 3.25 Total from investment operations $ 1.10 (2.20) (4.68) 8.50 1.44 3.53 Less distributions from: Net investment income $ 0.23 0.29 0.35 0.19 0.06 0.25 Net realized gains on investments $ -- 0.09 4.97 3.76 -- 0.43 Total distributions $ 0.23 0.38 5.32 3.95 0.06 0.68 Net asset value, end of period $ 16.62 15.75 18.33 28.33 23.78 22.40 TOTAL RETURN(3): % 7.15 (12.03) (18.25) 39.24 6.45 18.45 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 66,412 81,247 118,363 156,592 100,276 95,998 Ratio to average net assets: Net expenses after expense reimbursement/recoupment(4)(5) % 2.24 2.11 2.07 2.00 2.10 2.18 Gross expenses prior to expense reimbursement/recoupment(4) % 2.24 2.11 2.06 2.00 2.10 2.30 Net investment income after expense reimbursement/recoupment(4)(5) % 1.92 1.28 1.55 1.13 1.17 1.44 Portfolio turnover rate % 97 100 145 129 28 138
- ---------- (5) The Fund changed its fiscal year end to May 31 (2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 76 ING EQUITY AND BOND FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A -------------------------------------------------------------------- ELEVEN THREE YEAR YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(1) 2000 1999(2) 1999 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.06 13.30 15.04 19.23 19.03 19.53 Income (loss) from investment operations: Net investment income $ 0.31 0.39 0.93 0.51 0.10 0.36 Net realized and unrealized gain (loss) on investments $ (0.41) (1.13) (1.01) (0.60) 0.17 2.58 Total from investment operations $ (0.10) (0.74) (0.08) (0.09) 0.27 2.94 Less distributions from: Net investment income $ 0.25 0.45 0.51 0.39 0.07 0.43 Net realized gains on investments $ -- 0.05 1.15 3.71 -- 3.01 Total distributions $ 0.25 0.50 1.66 4.10 0.07 3.44 Net asset value, end of period $ 11.71 12.06 13.30 15.04 19.23 19.03 TOTAL RETURN(3): % (0.66) (5.55) (0.61) (1.01) 1.42 17.10 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 32,179 57,042 61,477 63,592 9,619 9,519 Ratio to average net assets: Net expenses after expense reimbursement/recoupment(4)(5) % 1.60 1.48 1.32 1.40 1.49 1.59 Gross expenses prior to expense reimbursement/recoupment(4) % 1.71 1.45 1.53 1.61 1.75 1.97 Net investment income after expense reimbursement/recoupment(4)(5) % 2.62 3.11 3.54 3.26 2.06 2.08 Portfolio turnover rate % 129 145 76 173 63 165 CLASS B -------------------------------------------------------------------- ELEVEN THREE YEAR YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(1) 2000 1999(2) 1999 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.97 14.28 16.09 20.59 20.38 20.07 Income (loss) from investment operations: Net investment income $ 0.29 0.32 0.80 0.44 0.07 0.28 Net realized and unrealized gain (loss) on investments $ (0.47) (1.22) (0.98) (0.64) 0.18 2.74 Total from investment operations $ (0.18) (0.90) (0.18) (0.20) 0.25 3.02 Less distributions from: Net investment income $ 0.18 0.36 0.39 0.33 0.04 0.31 Net realized gains on investments $ -- 0.05 1.24 3.97 -- 2.40 Total distributions $ 0.18 0.41 1.63 4.30 0.04 2.71 Net asset value, end of period $ 12.61 12.97 14.28 16.09 20.59 20.38 TOTAL RETURN(3): % (1.29) (6.26) (1.21) (1.58) 1.24 16.49 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 22,348 31,682 35,828 41,026 7,157 6,048 Ratio to average net assets: Net expenses after expense reimbursement/recoupment(4)(5) % 2.25 2.13 1.97 2.05 2.14 2.24 Gross expenses prior to expense reimbursement/recoupment(4) % 2.36 2.10 2.18 2.26 2.40 2.62 Net investment income after expense reimbursement/recoupment(4)(5) % 1.97 2.46 2.89 2.61 1.41 1.43 Portfolio turnover rate % 129 145 76 173 63 165
- ---------- (1) The Fund changed its fiscal year end to May 31 (2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 77 ING EQUITY AND BOND FUND (CONTINUED) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C -------------------------------------------------------------------- ELEVEN THREE YEAR YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(1) 2000 1999(2) 1999 ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 11.57 12.78 14.45 18.53 18.35 19.90 Income (loss) from investment operations: Net investment income $ 0.17 0.34 0.74 0.45 0.06 0.26 Net realized and unrealized gain (loss) on investments $ (0.34) (1.13) (0.91) (0.62) 0.16 2.52 Total from investment operations $ (0.17) (0.79) (0.17) (0.17) 0.22 2.78 Less distributions from: Net investment income $ 0.19 0.37 0.39 0.34 0.04 0.28 Net realized gains on investments $ -- 0.05 1.11 3.57 -- 4.05 Total distributions $ 0.19 0.42 1.50 3.91 0.04 4.33 Net asset value, end of period $ 11.21 11.57 12.78 14.45 18.53 18.35 TOTAL RETURN(3): % (1.27) (6.20) (1.28) (1.53) 1.21 16.34 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 14,240 18,007 22,679 25,838 21,331 21,655 Ratio to average net assets: Net expenses after expense reimbursement/recoupment(4)(5) % 2.25 2.13 1.97 2.05 2.14 2.23 Gross expenses prior to expense reimbursement/recoupment(4) % 2.36 2.10 2.18 2.26 2.40 2.61 Net investment income after expense reimbursement/recoupment(4)(5) % 1.96 2.46 2.89 2.61 1.41 1.43 Portfolio turnover rate % 129 145 76 173 63 165 CLASS T -------------------------------------------- ELEVEN YEAR YEAR MONTHS MARCH 31, ENDED ENDED ENDED 2000(6)TO MAY 31, MAY 31, MAY 31, JUNE 30, 2003 2002 2001(1) 2000 ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.93 14.23 16.10 16.83 Income (loss) from investment operations: Net investment income $ 0.29 0.28 1.00 0.09 Net realized and unrealized gain (loss) on investments $ (0.44) (1.14) (1.16) (0.82) Total from investment operations $ (0.15) (0.86) (0.16) (0.73) Less distributions from: Net investment income $ 0.21 0.39 0.48 -- Net realized gains on investments $ -- 0.05 1.23 -- Total distributions $ 0.21 0.44 1.71 -- Net asset value, end of period $ 12.57 12.93 14.23 16.10 TOTAL RETURN(3): % (1.03) (6.04) (1.06) (4.34) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 3,293 4,559 7,725 10,953 Ratio to average net assets: Net expenses after expense reimbursement/recoupment(4)(5) % 2.00 1.88 1.86 1.70 Gross expenses prior to expense reimbursement/recoupment(4) % 2.11 1.85 1.84 1.91 Net investment income after expense reimbursement/recoupment(4)(5) % 2.22 2.71 2.77 2.96 Portfolio turnover rate % 129 145 76 173
- ---------- (1) The Fund changed its fiscal year end to May 31. (2) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (6) Commencement of offering of shares. See Accompanying Notes to Financial Statements 78 ING REAL ESTATE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A CLASS B CLASS C ------------ ------------ ----------- DECEMBER 20, NOVEMBER 20, JANUARY 17, 2002(1) TO 2002(1) TO 2003(1) TO MAY 31, MAY 31, MAY 31, 2003 2003 2003 ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.06 10.00 9.96 Income from investment operations: Net investment income $ 0.16 0.12 (0.01)* Net realized and unrealized gain (loss) on investments $ 1.04 1.15 1.50 Total from investment operations $ 1.20 1.27 1.49 Less distribution from: Net investment income $ 0.20 0.17 0.08 Total distributions $ 0.20 0.17 0.08 Net asset value, end of period $ 11.06 11.10 11.37 TOTAL RETURN(2): % 12.06 12.77 15.03 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period ($000) $ 982 149 157 Ratio to average net assets: Net expenses after expense reimbursement(3)(4) % 1.45 2.20 2.20 Gross expenses prior to expense reimbursement(3) % 1.53 2.30 2.30 Net investment income after expense reimbursement(3)(4) % 0.01 1.91 (1.62) Portfolio turnover rate % 62 62 62
- ---------- (1) Commencement of operations of the class. (2) Total return is calculated assuming reinvestment of dividends and capital gains distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 79 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- NOTE 1 -- ORGANIZATION ORGANIZATION. The ING Funds contained within this book are comprised of ING Equity Trust ("IET"), ING Investment Funds, Inc. ("IIF") and ING Mayflower Trust ("IMT"), all of which are open-end investment management companies registered under the Investment Company Act of 1940, as amended. IET is a Massachusetts business trust organized in 1998 with nineteen separate series (Portfolios). Thirteen of the Portfolios in this report are: ING Growth Opportunities Fund ("Growth Opportunities"), ING LargeCap Growth Fund ("LargeCap Growth"), ING MidCap Opportunities Fund ("MidCap Opportunities"), ING SmallCap Opportunities Fund ("SmallCap Opportunities"), ING Disciplined LargeCap Fund ("Disciplined LargeCap", formerly ING Research Enhanced Index), ING Financial Services Fund ("Financial Services"), ING Large Company Value Fund ("Large Company Value"), ING MidCap Value Fund ("MidCap Value"), ING SmallCap Value Fund ("SmallCap Value"), ING Tax Efficient Equity Fund ("Tax Efficient Equity"), ING Convertible Fund ("Convertible"), ING Equity and Bond Fund ("Equity and Bond", formerly ING Equity and Income Fund) and ING Real Estate Fund ("Real Estate", formerly CRA Realty Shares Portfolio). IIF is a Maryland Corporation organized in 1969 with one Portfolio, ING MagnaCap Fund ("MagnaCap"). IMT is a Massachusetts business trust organized in 1993 with two separate series (Portfolios). One of the Portfolios in this report is ING Growth + Value Fund ("Growth + Value"). The investment objective of each Fund is described in each Fund's prospectus. Each Fund offers at least two of the following classes of shares: Class A, Class B, Class C, Class I, Class M, Class Q and Class T. The separate classes of shares differ principally in the applicable sales charges (if any), distribution fees, shareholder servicing fees and transfer agency fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Fund and earn income from the portfolio pro rata based on the average daily net assets of each class, without distinction between share classes. Dividends are determined separately for each class based on income and expenses allocable to each class. Realized gains are allocated to each class pro rata based on the net assets of each class on the date of distribution. No class preferential dividend rights exist. Differences in per share dividend rates generally results from the relative weighting of pro rata income and realized gain allocations and from differences in separate class expenses, including distribution, and shareholder servicing fees. Class B shares, along with their pro rata reinvested dividend shares, automatically convert to Class A shares approximately eight years after purchase. REORGANIZATION. On December 17, 2001, the Boards of Directors/Trustees of each of various ING Funds approved plans of reorganization which were intended to decrease the number of corporate entities under which the ING Funds are organized (the "Reorganization") and to align the open-end funds with similar open-end funds that share the same prospectus. The Reorganization only resulted in a change in corporate form of some of the ING Funds, with no change in the substance or investment aspects of the ING Funds. The Reorganization was consummated to align the ING Funds' corporate structures and expedite the Funds' required filings with the Securities and Exchange Commission. Shareholders of Growth + Value and MagnaCap did not approve the Reorganization; therefore those Funds remain part of ING Mayflower Trust and ING Investment Funds, Inc., respectively. As a result of the Reorganization, the following ING Funds reorganized into series of ING Equity Trust: Convertible, Equity and Bond, Financial Services, Growth Opportunities, LargeCap Growth, Large Company Value Fund, Disciplined LargeCap, SmallCap Opportunities and Tax Efficient Equity (collectively, the "Reorganizing Funds"). In this regard, the Board approved the creation of a new series of ING Equity Trust to serve as "shells" (the "Shell Funds") into which the Reorganized Funds were reorganized. The plans of reorganization provided for, among other things, the transfer of the assets and liabilities of the Reorganizing Funds to the Shell Funds. Prior to September 23, 2002, the effective date of the Reorganization, the Shell Funds had only nominal assets. For accounting purposes, each Reorganizing Fund is considered the surviving entity, and the financial statements shown for periods prior to September 23, 2002 are the financial statements of the Reorganized Fund. MidCap Opportunities, MidCap Value Fund and SmallCap Value were originally organized as series of ING Equity Trust, and were not involved in the Reorganization. 80 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Prior to the Reorganization, Convertible, Equity and Bond, and LargeCap Growth were series of ING Mutual Funds ("IMF"). IMF is a Delaware business trust registered as an open-end management investment company organized in 1992. Prior to the Reorganization, Financial Services was the sole series of ING Financial Services Fund, Inc. ING Financial Services Fund, Inc. was a Maryland corporation registered as an open-end management investment company organized in 1985. Prior to the Reorganization, Tax Efficient Equity was a series of ING Funds Trust ("IFT"). IFT is a Delaware business trust registered as an open-end management investment company organized on July 30, 1998. Prior to the Reorganization, Growth Opportunities was the sole series of ING Growth Opportunities Fund, a Massachusetts business trust registered as an open-end management investment company organized in 1986. Prior to the Reorganization, SmallCap Opportunities was the sole series of ING SmallCap Opportunities Fund, a Massachusetts business trust registered as an open-end management investment company organized in 1986. Prior to the Reorganization, Large Company Value was the sole series of ING Large Company Value Fund, Inc., a Maryland corporation registered as an open-end, diversified management investment company organized in April 1991. Prior to the Reorganization, Disciplined LargeCap was a series of IMT. As discussed above, IMT is a Massachusetts business trust registered as an open-end management investment company organized in 1993. On November 4, 2002, pursuant to an Agreement and Plan of Reorganization dated August 20, 2002, all of the assets and liabilities of the CRA Realty Shares Portfolio (the "Acquired Fund") were transferred to a newly created series of the ING Equity Trust, the ING Real Estate Fund (the "Acquiring Fund") in exchange for shares of the Acquiring Fund. These shares were then distributed to shareholders of the Acquired Fund and the Acquired Fund was terminated. This reorganization was accounted for as tax-free reorganization under the Internal Revenue Code. Accordingly, no gain or loss was recognized by the shareholders of the Acquired Fund upon the exchange of their Acquired Fund Shares for shares of the Acquiring Fund. Prior to November 4, 2002, Real Estate was organized as a series of The Advisors' Inner Circle Fund, a Massachusetts business trust registered as an open-end management investment company, established July 18, 1991. Effective October 1, 2002, ING Funds Distributor, Inc. changed its name to ING Funds Distributor, LLC and is a wholly owned subsidiary of ING Groep N.V. ("ING"). ING is a global financial institution active in the fields of insurance, banking and asset management in more than 65 countries. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Funds in the preparation of their financial statements. Such policies are in conformity with accounting principles generally accepted in the United States of America for investment companies. A. SECURITY VALUATION. Investments in equity securities traded on a national securities exchange are valued at the last reported sale price. Portfolio securities reported by NASDAQ will be valued at NASDAQ official closing price. Securities traded on an exchange or NASDAQ for which there has been no sale and securities traded in the over-the-counter-market are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by each Fund's custodian. Debt securities are valued at bid prices obtained from independent services or from one or more dealers making markets in the securities. U.S. Government obligations are valued by using market quotations or independent pricing services which uses prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Securities for which market quotations are not readily 81 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- available are valued at their respective fair values as determined in good faith and in accordance with policies set by the Board. Among elements of analysis, the Board has authorized the use of one or more research services to assist with the determination of the fair value of foreign securities in light of significant events. Research services use statistical analyses and quantitative models to help determine fair value as of the time a Fund calculates its net asset value. Investments in mutual funds are valued at the closing Net Asset Value (NAV) per share. Investments in securities maturing in less than 60 days at the date of acquisition are valued at amortized cost, which, when combined with accrued interest, approximates market value. B. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Securities transactions are accounted for on the trade date. Realized gains and losses are reported on the basis of identified cost of securities sold. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date, or for certain foreign securities, when the information becomes available to the funds. Premium amortization and discount accretion are determined by the effective yield method. C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Market value of investment securities, other assets and liabilities -- at the exchange rates prevailing at the end of the day. (2) Purchases and sales of investment securities, income and expenses -- at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Funds do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities which are subject to foreign withholding tax upon disposition, liabilities are recorded on the statement of assets and liabilities for the estimated tax withholding based on the securities current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and the U.S. Government. These risks include but are not limited to revaluation of currencies and future adverse political and economic developments which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and the U.S. Government. D. FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS. Certain funds may enter into foreign currency exchange transactions to convert to and from different foreign currencies and to and from the U.S. dollar in connection with the planned purchases or sales of securities. The Funds either enter into these transactions on a spot basis at the spot rate prevailing in the foreign currency exchange market or use forward foreign currency contracts to purchase or sell foreign currencies. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation. Risks may arise upon entering into forward contracts from the potential inability of counterparties to meet the terms of their forward contracts and 82 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. Each Fund may enter into futures contracts involving foreign currency, interest rates, securities and security indices, for hedging purposes only. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of foreign currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Fund is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Fund agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margins and are recorded as unrealized gains or losses by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. There were no open futures contracts at May 31, 2003. E. DISTRIBUTIONS TO SHAREHOLDERS. The Funds record distributions to their shareholders on ex-dividend date. Each Fund pays dividends, if any, as follows: ANNUALLY SEMI-ANNUALLY QUARTERLY -------- ------------- --------- Growth + Value MagnaCap Convertible Growth Opportunities Large Company Value Equity and Bond LargeCap Growth Real Estate Midcap Opportunities SmallCap Opportunities Disciplined LargeCap Financial Services MidCap Value SmallCap Value Tax Efficient Equity Each Fund distributes capital gains, to the extent available, annually. F. FEDERAL INCOME TAXES. It is the policy of the Funds to comply with the requirements of the Subchapter M of Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of their net investment income and any net realized capital gains to their shareholders. Therefore, a federal income tax or excise tax provision is not required. In addition, by distributing during each calendar year substantially all of its net investment income and net realized capital gains, each Fund intends not to be subject to any federal excise tax. The Board intends to offset any net capital gains with any available capital loss carryforward until each carryforward has been fully utilized or expires. In addition, no capital gain distribution shall be made until the capital loss carryforward has been fully utilized or expires. G. USE OF ESTIMATES. Management of the Funds has made certain estimates and assumptions relating to the reporting of assets, liabilities, income, and expenses to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. H. REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System or with member banks of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase the agreement at a mutually agreed upon time and price. The resale price is in excess of the purchase price and reflects an agreed upon interest rate for the period of time the agreement is outstanding. The period of the repurchase agreements is usually short, from overnight to one week, while the underlying securities generally have longer maturities. Each Fund will always receive as collateral securities acceptable to it whose market value is equal to at least 100% of the carrying amount of the repurchase agreements, plus accrued interest, being invested by the Fund. The underlying collateral is valued daily on a mark to market basis to assure that the value, including accrued interest is at least equal to the repurchase price. If the seller defaults, a Fund might incur a loss or delay in the realization of proceeds if the value of the collateral securing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. 83 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- I. OPTIONS CONTRACTS. All Funds may purchase put and call options and may write (sell) put options and covered call options. The Funds may engage in option transactions as a hedge against adverse movements in the value of portfolio holdings or to increase market exposure. Option contracts are valued daily and unrealized gains or losses are recorded based upon the last sales price on the principal exchange on which the options are traded. The Funds will realize a gain or loss upon the expiration or closing of the option contract. When an option is exercised, the proceeds on sales of the underlying security for a written call option, the purchase cost of the security for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Realized and unrealized gains or losses on option contracts are reflected in the accompanying financial statements. The risk in writing a call option is that the Funds give up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Funds may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Funds pay a premium whether or not the option is exercised. Risks may also arise from an illiquid secondary market or from the inability of counterparties to meet the terms of the contract. J. SECURITIES LENDING. Each Fund had the option to temporarily loan up to 33 1/3% of its total assets to brokers, dealers or other financial institutions in exchange for a negotiated lender's fee. The borrower is required to fully collateralize the loans with cash, letters of credit or U.S. Government securities. Generally, in the event of counterparty default, the Funds have the right to use collateral to offset losses incurred. There would be potential loss to the Funds in the event the Funds are delayed or prevented from exercising their right to dispose of the collateral. The Funds bear the risk of loss with respect to the investment of collateral. Engaging in securities lending could have a leverage effect, which may intensify the credit, market and other risks associated with investing in a Fund. There were no securities on loan as of May 31, 2003. K. OFFERING COSTS. Offering costs are capitalized and amortized on a straight line basis over a period of twelve months. NOTE 3 -- INVESTMENT TRANSACTIONS For the year ended May 31, 2003, the cost of purchases and proceeds from the sales of securities, excluding short-term securities, were as follows: PURCHASES SALES -------------- -------------- Growth+ Value $ 706,782,738 $ 801,760,722 Growth Opportunities 699,915,562 766,500,161 LargeCap Growth 541,244,697 603,507,472 MidCap Opportunities 625,749,686 708,520,580 SmallCap Opportunities 1,108,186,765 1,178,620,201 Disciplined LargeCap 94,105,244 118,416,204 Financial Services 55,603,860 98,711,637 Large Company Value 141,233,597 137,577,889 MagnaCap 254,774,488 271,259,925 MidCap Value 28,104,223 24,546,472 SmallCap Value 22,037,663 16,248,323 Tax Efficient Equity 22,535,441 28,369,745 Convertible 178,599,186 210,029,061 Equity and Bond 109,856,591 131,868,826 Real Estate 81,446,336 65,054,934 84 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES The Funds entered into an Investment Management Agreement with ING Investments, LLC (the "Manager", the "Investment Manager" or the "Adviser") a wholly-owned subsidiary of ING. The investment management agreements compensate the Manager with a fee, computed daily and payable monthly, based on the average daily net assets of each Fund, at the following annual rates: AS A PERCENT OF AVERAGE NET ASSETS ---------------------------------- Growth+ Value 1.00% Growth Opportunities 0.95% LargeCap Growth 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in excess of $1 billion MidCap Opportunities 1.00% SmallCap Opportunities 1.00% Disciplined LargeCap 0.70% Financial Services 1.00% on first $30 million; 0.75% on next $95 million; and 0.70% in excess of $125 million Large Company Value 0.75% on first $100 million; 0.60% on next $50 million; 0.50% on next $100 million; and 0.40% in excess of $250 million MagnaCap 1.00% on first $30 million; 0.75% on next $220 million; 0.625% on next $250 million; and 0.50% in excess of $500 million MidCap Value 1.00% SmallCap Value 1.00% Tax Efficient Equity 0.80% Convertible 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in excess of $1 billion Equity and Bond 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in excess of $1 billion Real Estate 0.70% Navellier Fund Management, Inc. ("Navellier"), a registered investment advisor, serves as Sub-Adviser to the Growth + Value Fund pursuant to a subadvisory agreement between the Manager and Navellier. Aeltus Investment Management, Inc. ("Aeltus"), a registered investment advisor, serves as Sub-Adviser to the Disciplined LargeCap Fund pursuant to a subadvisory agreement between the Manager and Aeltus. Prior to August 1, 2001, J.P. Morgan Investment Management, Inc. served as Sub-Adviser to the Fund. Brandes Investment Partners, LP ("Brandes"), a registered investment advisor, serves as Sub-Adviser to the MidCap Value and SmallCap Value Funds pursuant to a subadvisory agreement between the Manager and Brandes. Delta Asset Management ("Delta"), a registered investment advisor and a wholly owned indirect subsidiary of ING, served as Sub-Adviser to the Tax Efficient Equity Fund pursuant to a subadvisory agreement dated October 30, 1998 between the Manager and Delta. Effective March 15, 2002, the Manager terminated the subadvisory agreement with Delta and assumed responsibility over the day-to-day management of the Fund directly. Clarion CRA Securities, L.P. ("CRA"), a registered investment advisor, became the Sub-Adviser to the Real Estate Fund pursuant a subadvisory agreement, dated November 4, 2002, between the Manager and CRA. Prior to November 4, 2002, CRA served as the investment advisor to Real Estate. ING Funds Services, LLC (the "Administrator" or "IFS"), serves as administrator to each Fund except Financial Services and MagnaCap. The Funds pay the Administrator a fee calculated at an annual rate of 0.10% of each Funds' average daily net assets. Financial Services and MagnaCap have entered into a service agreement with IFS whereby IFS will act as Shareholder Service Agent for the Funds. The agreement provides that IFS will be compensated for incoming and outgoing shareholder telephone calls and letters, and all reasonable out-of-pocket expenses incurred in connection with the performance of such services. Prior to March 1, 2002, IFS acted as Shareholder Service Agent for LargeCap Growth, Convertible and Equity and Income. 85 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Growth + Value, Growth Opportunities, MidCap Opportunities, SmallCap Opportunities and Disciplined LargeCap also pay IFS an annual shareholder account servicing fee of $5.00, payable semi-annually, for each account of beneficial owners of shares. NOTE 5 -- DISTRIBUTION AND SERVICE FEES Each share class of the Funds (except as noted below) has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING Funds Distributor, LLC (the "Distributor") is reimbursed or compensated (depending on the class of shares) by the Funds for expenses incurred in the distribution of each Fund's shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled to a payment each month to reimburse or compensate expenses incurred in the distribution and promotion of each Fund's shares, including expenses incurred in printing prospectuses and reports used for sales purposes, expenses incurred in preparing and printing sales literature and other such distribution related expenses, including any distribution or shareholder servicing fees ("Service Fees") paid to securities dealers who have executed a distribution agreement with the Distributor. Under the 12b-1 Plans, each class of shares of the Fund pays the Distributor a combined Distribution and Service Fee based on average daily net assets at the following rates:
CLASS A CLASS B CLASS C CLASS I CLASS M CLASS Q CLASS T ------- ------- ------- ------- ------- ------- ------- Growth + Value 0.30% 1.00% 1.00% N/A N/A 0.25% N/A Growth Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95% LargeCap Growth 0.35 1.00 1.00 N/A N/A 0.25 N/A MidCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 N/A SmallCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95 Disciplined LargeCap 0.30 1.00 1.00 N/A N/A 0.25 N/A Financial Services 0.25 1.00 N/A N/A N/A N/A N/A Large Company Value 0.25 1.00 1.00 N/A N/A 0.25 N/A MagnaCap 0.30 1.00 1.00 N/A 0.75% 0.25 N/A MidCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A SmallCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A Tax Efficient Equity 0.35 1.00 1.00 N/A N/A N/A N/A Convertible 0.35 1.00 1.00 N/A N/A 0.25 N/A Equity and Bond 0.35 1.00 1.00 N/A N/A 0.25 0.75 Real Estate 0.25 1.00 1.00 N/A N/A 0.25 N/A
Beginning March 1, 2001, the Distributor agreed to waive 0.10% of the Distribution fee for the Tax Efficient Equity Fund for Class A only. For the year ended May 31, 2003, the Distributor has retained $109,775 as sales charges from the proceeds of Class A Shares sold, $62,206 and $71,485 from the proceeds of Class A Shares and Class C Shares redeemed, respectively and $135 from the proceeds of Class M Shares sold. 86 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES At May 31, 2003, the Funds had the following amounts recorded in payable to affiliates on the accompanying Statements of Assets and Liabilities (see Notes 4, 5 and 7): ACCRUED ACCRUED INVESTMENT ACCRUED DISTRIBUTION MANAGEMENT ADMINISTRATIVE AND SERVICE FEES AND SERVICE FEES FEES TOTAL ---------- ---------------- ---------- ---------- Growth + Value $ 170,969 $ 154,582 $ 141,131 $ 466,682 Growth Opportunities 139,093 118,490 80,088 337,671 LargeCap Growth 137,621 14,711 101,715 254,047 MidCap Opportunities 172,245 83,444 103,182 358,871 SmallCap Opportunities 226,575 168,697 151,437 546,709 Disciplined LargeCap 48,362 27,566 48,769 124,697 Financial Services 189,110 6,389 141,423 336,922 Large Company Value 80,631 11,315 31,177 123,123 MagnaCap 154,656 5,330 93,761 253,747 MidCap Value 30,872 3,087 21,861 55,820 SmallCap Value 25,523 2,552 17,953 46,028 Tax Efficient Equity 22,447 2,689 10,559 35,695 Convertible 145,204 16,044 130,648 291,896 Equity and Bond 45,292 6,039 41,924 93,255 Real Estate 74,460 10,649 294 85,403 At May 31, 2003, State Street Bank and Trust Company and Norwest Bank owned 5.74% and 21.96% respectively, of the Growth Opportunities Fund. State Street Bank and Trust Company also owned 5.21% of the SmallCap Opportunities Fund. ING National Trust, a wholly-owned indirect subsidiary of ING Groep N.V., held 12.13% and 4.09% of LargeCap Growth Fund and Large Company Value Fund, respectively. Realiastar owned 5.50% of the MidCap Opportunities Fund, and 23.76% of the Disciplined LargeCap Fund. At May 31,2003, certain non-affiliated individuals and entities owned separately the following percentage of the Real Estate Fund: 20.56%, 6.42%, 5.40%, 5.27% and 5.13%. ING Life Insurance & Annuity Company, a wholly-owned indirect subsidiary of ING Groep N.V., held 60.01% of the Tax Efficient Equity Fund. Investment activities of these shareholders could have a material impact on the Funds. Included in realized losses of the MagnaCap Fund is $289,895 in reimbursements for investment losses made by the Investment Adviser. NOTE 7 -- EXPENSE LIMITATIONS For the following Funds, the Manager has voluntarily agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the levels listed below:
CLASS A CLASS B CLASS C CLASS I CLASS Q CLASS T ------- ------- ------- ------- ------- ------- LargeCap Growth(1) 1.60% 2.25% 2.25% N/A 1.50% N/A MidCap Opportunities(2) 1.50 2.20 2.20 1.20% 1.35 N/A Large Company Value 2.75 3.50 3.50 N/A 2.75 N/A MidCap Value 1.75 2.50 2.50 1.50 1.75 N/A SmallCap Value 1.75 2.50 2.50 1.50 1.75 N/A Tax Efficient Equity(3) 1.45 2.20 2.20 N/A N/A N/A Convertible(1) 1.60 2.25 2.25 N/A 1.50 N/A Equity and Bond(1)(4) 1.60 2.25 2.25 N/A 1.50 2.00% Real Estate 1.45 2.20 2.20 1.00 1.25 N/A
- ---------- (1) Prior to November 1, 2001, the expense limitation rate for Class Q was 1.25%. (2) Prior to January 1, 2002, there was no expense limitation for the Fund. (3) Prior to March 1, 2001, the expense limitation rates for Class A, Class B and Class C were 1.30%, 1.95% and 1.95%, respectively. (4) Prior to November 1, 2001, the expense limitation rate for Class T was 1.75%. 87 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Each Fund will at a later date reimburse the Manager for expenses waived during the previous 36 months, but only if, after such reimbursement, the Fund's expense ratio does not exceed the percentage described above. Waived and reimbursed fees and any recoupment by the Manager of such waived and reimbursed fees are reflected on the accompanying Statements of Operations for each Fund. Outstanding reimbursement balances due to the Funds, if any, under their respective expense limitation agreements are reflected in Reimbursement Due from Manager on the accompanying Statements of Assets and Liabilities. As of May 31, 2003, the cumulative amounts of reimbursed fees that are subject to possible recoupment by the Manager are as follows: LargeCap Growth $293,050 MidCap Opportunities 834,643 MidCap Value 248,002 SmallCap Value 227,214 Tax Efficient Equity 175,505 Equity and Bond 354,988 Real Estate 118,117 NOTE 8 -- LINE OF CREDIT All of the Funds included in this report, in addition to certain other funds managed by the Adviser, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement") with State Street Bank and Trust Company for an aggregate amount of $125,000,000. The proceeds may be used only to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the Funds; and (3) enable the Funds to meet other emergency expenses as defined in the Credit Agreement. The Funds to which the line of credit is available pay a commitment fee equal to 0.10% per annum on the daily unused portion of the committed line amount payable quarterly in arrears. At May 31, 2003, the Funds did not have any loans outstanding under the line of credit. NOTE 9 -- CAPITAL SHARES Transactions in capital shares and dollars were as follows:
CLASS A SHARES CLASS B SHARES ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ING GROWTH + VALUE (NUMBER OF SHARES) Shares sold 1,525,553 7,573,521 775,059 1,829,213 Shares redeemed (4,091,241) (10,051,567) (6,243,894) (6,707,089) ------------- ------------- ------------- ------------- Net decrease in shares outstanding (2,565,688) (2,478,046) (5,468,835) (4,877,876) ============= ============= ============= ============= ING GROWTH + VALUE ($) Shares sold $ 12,691,301 $ 83,819,458 $ 5,705,478 $ 20,197,659 Shares redeemed (32,447,566) (111,034,969) (47,161,811) (71,726,807) ------------- ------------- ------------- ------------- Net decrease $ (19,756,265) $ (27,215,511) $ (41,456,333) $ (51,529,148) ============= ============= ============= ============= CLASS C SHARES CLASS Q SHARES ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ING GROWTH + VALUE (NUMBER OF SHARES) Shares sold 555,346 1,324,639 2,650 27,404 Shares redeemed (4,193,623) (4,731,745) (15,845) (19,970) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (3,638,277) (3,407,106) (13,195) 7,434 ============= ============= ============= ============= ING GROWTH + VALUE ($) Shares sold $ 4,087,044 $ 14,652,114 $ 21,001 $ 312,909 Shares redeemed (31,396,649) (50,714,645) (113,542) (235,075) ------------- ------------- ------------- ------------- Net increase (decrease) $ (27,309,605) $ (36,062,531) $ (92,541) $ 77,834 ============= ============= ============= =============
88 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ------------- ------------- ING GROWTH OPPORTUNITIES (NUMBER OF SHARES) Shares sold 978,264 2,688,274 237,656 599,172 180,590 580,309 Shares redeemed (3,247,365) (4,465,341) (2,452,695) (2,729,664) (1,551,613) (2,210,476) ------------- ------------- ------------- ------------- ------------- ------------- Net decrease in shares outstanding (2,269,101) (1,777,067) (2,215,039) (2,130,492) (1,371,023) (1,630,167) ============= ============= ============= ============= ============= ============= ING GROWTH OPPORTUNITIES ($) Shares sold $ 10,243,050 $ 40,004,026 $ 2,305,753 $ 8,476,731 $ 1,773,541 $ 8,201,102 Shares redeemed (34,151,206) (64,658,384) (24,220,971) (37,036,999) (15,424,361) (29,810,181) ------------- ------------- ------------- ------------- ------------- ------------- Net decrease $ (23,908,156) $ (24,654,358) $ (21,915,218) $ (28,560,268) $ (13,650,820) $ (21,609,079) ============= ============= ============= ============= ============= ============= CLASS T SHARES CLASS I SHARES CLASS Q SHARES ------------------------------ ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ------------- ------------- ING GROWTH OPPORTUNITIES (NUMBER OF SHARES) Shares sold -- 1,728 53 792 -- 55,711 Shares redeemed (327,604) (627,535) (271,522) (1,013) (517) (479,835) ------------- ------------- ------------- ------------- ------------- ------------- Net decrease in shares outstanding (327,604) (625,807) (271,469) (221) (517) (424,124) ============= ============= ============= ============= ============= ============= ING GROWTH OPPORTUNITIES ($) Shares sold $ -- $ 21,321 $ 607 $ 13,222 $ -- $ 867,826 Shares redeemed (3,256,317) (8,967,880) (2,824,023) (14,464) (5,708) (7,238,101) ------------- ------------- ------------- ------------- ------------- ------------- Net decrease $ (3,256,317) $ (8,946,559) $ (2,823,416) $ (1,242) $ (5,708) $ (6,370,275) ============= ============= ============= ============= ============= ============= CLASS A SHARES CLASS B SHARES ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ING LARGECAP GROWTH (NUMBER OF SHARES) Shares sold 1,731,633 2,658,138 408,627 855,661 Shares issued as reinvestment of dividends -- 939 -- 124 Shares redeemed (2,830,849) (5,335,128) (2,383,990) (2,997,437) ------------- ------------- ------------- ------------- Net decrease in shares outstanding (1,099,216) (2,676,051) (1,975,363) (2,141,652) ============= ============= ============= ============= ING LARGECAP GROWTH ($) Shares sold $ 23,912,505 $ 52,212,562 $ 5,315,977 $ 16,971,200 Shares issued as reinvestment of dividends -- 18,730 -- 3,107 Shares redeemed (38,399,684) (103,167,640) (31,662,290) (56,761,530) ------------- ------------- ------------- ------------- Net decrease $ (14,487,179) $ (50,936,348) $ (26,346,313) $ (39,787,223) ============= ============= ============= =============
89 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS C SHARES CLASS I SHARES CLASS Q SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002(1) 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING LARGECAP GROWTH (NUMBER OF SHARES) Shares sold 224,913 639,475 289,678 1,838,570 133,122 2,029,559 Shares issued as reinvestment of dividends -- 51 -- -- -- 404 Shares redeemed (1,291,661) (2,184,382) (325,759) (296,694) (706,874) (1,540,016) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,066,748) (1,544,856) (36,081) 1,541,876 (573,752) 489,947 ============ ============ ============ ============ ============ ============ ING LARGECAP GROWTH ($) Shares sold $ 2,920,608 $ 12,898,628 $ 3,894,597 $ 36,212,393 $ 1,768,245 $ 44,230,203 Shares issued as reinvestment of dividends -- 901 -- -- -- 8,201 Shares redeemed (17,091,851) (41,155,563) (4,467,218) (5,342,391) (9,611,239) (30,239,081) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(14,171,243) $(28,256,034) $ (572,621) $ 30,870,002 $ (7,842,994) $ 13,999,323 ============ ============ ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on January 8, 2002.
CLASS A SHARES CLASS B SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING MIDCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold 992,635 1,348,381 266,036 360,114 Shares issued in merger -- 5,001,056 -- 4,822,131 Shares redeemed (2,775,471) (1,883,562) (2,287,890) (741,630) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,782,836) 4,465,875 (2,021,854) 4,440,615 ============ ============ ============ ============ ING MIDCAP OPPORTUNITIES ($) Shares sold $ 9,131,612 $ 15,945,265 $ 2,389,023 $ 4,209,707 Shares issued in merger -- 57,460,972 -- 54,010,417 Shares redeemed (25,266,178) (21,781,921) (20,376,679) (8,323,034) ------------ ------------ ------------ ------------ Net increase (decrease) $(16,134,566) $ 51,624,316 $(17,987,656) $ 49,897,090 ============ ============ ============ ============ CLASS C SHARES CLASS I SHARES CLASS Q SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING MIDCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold 186,646 171,335 204,879 431 441,646 91,512 Shares issued in merger -- 8,539,378 -- -- -- 981,467 Shares redeemed (2,602,475) (673,551) (2,687,084) -- (550,075) (694,816) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (2,415,829) 8,037,162 (2,482,205) 431 (108,429) 378,163 ============ ============ ============ ============ ============ ============ ING MIDCAP OPPORTUNITIES ($) Shares sold $ 1,634,606 $ 1,957,505 $ 1,868,172 $ 5,008 $ 4,051,242 $ 1,112,443 Shares issued in merger -- 95,170,477 -- -- -- 11,326,837 Shares redeemed (23,006,547) (7,569,185) (24,766,277) -- (5,011,695) (8,237,829) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(21,371,941) $ 89,558,797 $(22,898,105) $ 5,008 $ (960,453) $ 4,201,451 ============ ============ ============ ============ ============ ============
90 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING SMALLCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold 2,959,197 4,108,446 297,293 636,080 182,010 508,063 Shares issued in merger -- 2,414,351 -- 1,849,518 -- 3,423,776 Shares issued as reinvestment of dividends -- 125,361 -- 137,050 -- 46,233 Shares redeemed (4,076,167) (3,119,480) (2,120,010) (1,386,958) (1,741,349) (805,214) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,116,970) 3,528,678 (1,822,717) 1,235,690 (1,559,339) 3,172,858 ============ ============ ============ ============ ============ ============ ING SMALLCAP OPPORTUNITIES ($) Shares sold $ 53,600,429 $120,715,302 $ 4,862,420 $ 17,982,622 $ 2,953,005 $ 14,450,521 Shares issued in merger -- 61,806,247 -- 44,285,046 -- 81,805,796 Shares issued as reinvestment of dividends -- 3,576,353 -- 3,669,830 -- 1,235,346 Shares redeemed (73,261,386) (90,422,365) (35,339,503) (37,810,172) (29,151,596) (21,787,806) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(19,660,957) $ 95,675,537 $(30,477,083) $ 28,127,326 $(26,198,591) $ 75,703,857 ============ ============ ============ ============ ============ ============ CLASS T SHARES CLASS I SHARES CLASS Q SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING SMALLCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold -- 334 167,562 518,042 18,182 21,261 Shares issued in merger -- -- -- -- -- 159,919 Shares issued as reinvestment of dividends -- 11,694 -- -- -- 2,615 Shares redeemed (110,464) (238,967) (146,229) (73,562) (120,129) (105,090) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (110,464) (226,939) 21,333 444,480 (101,947) 78,705 ============ ============ ============ ============ ============ ============ ING SMALLCAP OPPORTUNITIES ($) Shares sold $ -- $ 8,901 $ 2,851,630 $ 15,648,216 $ 346,249 $ 708,356 Shares issued in merger -- -- -- -- -- 4,098,445 Shares issued as reinvestment of dividends -- 316,205 -- 5 -- 74,783 Shares redeemed (1,899,687) (6,826,551) (2,570,785) (1,925,564) (2,150,100) (3,230,766) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ (1,899,687) $ (6,501,445) $ 280,845 $ 13,722,657 $ (1,803,851) $ 1,650,818 ============ ============ ============ ============ ============ ============ CLASS A SHARES CLASS B SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING DISCIPLINED LARGECAP (NUMBER OF SHARES) Shares sold 1,293,110 332,209 179,270 653,975 Shares redeemed (1,518,287) (451,951) (1,981,016) (2,101,755) ------------ ------------ ------------ ------------ Net decrease in shares outstanding (225,177) (119,742) (1,801,746) (1,447,780) ============ ============ ============ ============ ING DISCIPLINED LARGECAP ($) Shares sold $ 8,987,874 $ 2,956,464 $ 1,245,114 $ 5,692,149 Shares redeemed (10,542,573) (4,015,022) (13,755,648) (18,419,336) ------------ ------------ ------------ ------------ Net decrease $ (1,554,699) $ (1,058,558) $(12,510,534) $(12,727,187) ============ ============ ============ ============
91 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS C SHARES CLASS I SHARES CLASS Q SHARES ---------------------------- ---------------------------- -------------- YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2002 ------------ ------------ ------------ ------------ ------------ ING DISCIPLINED LARGECAP (NUMBER OF SHARES) Shares sold 77,832 478,885 466 3 30,192 Shares redeemed (1,596,429) (2,874,370) (10) -- (76,493) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,518,597) (2,395,485) 456 3 (46,301) ============ ============ ============ ============ ============ ING DISCIPLINED LARGECAP ($) Shares sold $ 548,074 $ 4,203,945 $ 3,306 $ 25 $ 274,465 Shares redeemed (10,962,505) (25,015,303) (73) -- (702,790) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(10,414,431) $(20,811,358) $ 3,233 $ 25 $ (428,325) ============ ============ ============ ============ ============ CLASS A SHARES CLASS B SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING FINANCIAL SERVICES (NUMBER OF SHARES) Shares sold 1,082,704 1,099,754 347,119 983,303 Shares issued as reinvestment of dividends 432,021 833,422 326,747 654,507 Shares redeemed (2,484,607) (2,285,584) (1,819,279) (1,739,227) ------------ ------------ ------------ ------------ Net decrease in shares outstanding (969,882) (352,408) (1,145,413) (101,417) ============ ============ ============ ============ ING FINANCIAL SERVICES ($) Shares sold $ 20,078,234 $ 24,798,434 $ 6,388,714 $ 21,631,188 Shares issued as reinvestment of dividends 7,547,322 17,026,809 5,695,241 13,378,131 Shares redeemed (45,376,537) (51,066,969) (33,034,524) (38,607,809) ------------ ------------ ------------ ------------ Net decrease $(17,750,981) $ (9,241,726) $(20,950,569) $ (3,598,490) ============ ============ ============ ============ CLASS A SHARES CLASS B SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING LARGE COMPANY VALUE (NUMBER OF SHARES) Shares sold 869,928 1,373,253 126,112 121,663 Shares issued as reinvestment of dividends 27,501 233,778 -- 5,594 Shares redeemed (2,008,682) (2,149,663) (150,332) (99,057) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,111,253) (542,632) (24,220) 28,200 ============ ============ ============ ============ ING LARGE COMPANY VALUE ($) Shares sold $ 10,249,499 $ 20,940,770 $ 1,444,075 $ 1,825,895 Shares issued as reinvestment of dividends 316,244 3,503,302 -- 83,179 Shares redeemed (23,130,520) (32,730,767) (1,711,384) (1,527,433) ------------ ------------ ------------ ------------ Net increase (decrease) $(12,564,777) $ (8,286,695) $ (267,309) $ 381,641 ============ ============ ============ ============
92 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS C SHARES CLASS Q SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002(1) ------------ ------------ ------------ ------------ ING LARGE COMPANY VALUE (NUMBER OF SHARES) Shares sold 32,926 64,684 -- 1,337 Shares issued as reinvestment of dividends -- 2,645 -- -- Shares redeemed (70,915) (139,077) (183) -- ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (37,989) (71,748) (183) 1,337 ============ ============ ============ ============ ING LARGE COMPANY VALUE ($) Shares sold $ 382,527 $ 986,051 $ -- $ 19,389 Shares issued as reinvesment of dividends -- 39,228 -- -- Shares redeemed (753,542) (2,222,672) (1,771) -- ------------ ------------ ------------ ------------ Net increase (decrease) $ (371,015) $ (1,197,393) $ (1,771) $ 19,389 ============ ============ ============ ============ CLASS A SHARES CLASS B SHARES CLASS C SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING MAGNACAP (NUMBER OF SHARES) Shares sold 1,637,596 2,200,329 342,031 1,165,942 455,850 491,490 Shares issued as reinvestment of dividends 58,790 3,100,059 52 1,123,166 20 119,279 Shares redeemed (4,837,146) (4,883,156) (2,535,432) (2,663,961) (471,682) (446,035) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (3,140,760) 417,232 (2,193,349) (374,853) (15,812) 164,734 ============ ============ ============ ============ ============ ============ ING MAGNACAP ($) Shares sold $ 13,316,165 $ 24,358,517 $ 2,679,550 $ 12,626,363 $ 3,661,386 $ 5,208,521 Shares issued as reinvestment of dividends 471,273 31,776,032 407 11,153,042 174 1,185,640 Shares redeemed (39,584,790) (54,127,863) (20,001,817) (28,380,740) (3,860,761) (4,684,503) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(25,797,352) $ 2,006,686 $(17,321,860) $ (4,601,335) $ (199,201) $ 1,709,658 ============ ============ ============ ============ ============ ============ CLASS M SHARES CLASS Q SHARES CLASS I SHARES ---------------------------- ---------------------------- -------------- YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 ------------ ------------ ------------ ------------ ------------ ING MAGNACAP (NUMBER OF SHARES) Shares sold 19,464 38,778 -- 25,363 777 Shares issued as reinvestment of dividends -- 207,863 4,708 161,336 -- Shares redeemed (374,176) (339,171) (2,564) (172,009) -- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (354,712) (92,530) 2,144 14,690 777 ============ ============ ============ ============ ============ ING MAGNACAP ($) Shares sold $ 155,322 $ 418,837 $ -- $ 293,569 $ 6,557 Shares issued as reinvestment of dividends -- 2,103,577 37,713 1,652,078 -- Shares redeemed (3,054,885) (3,695,461) (38,330) (1,844,440) -- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ (2,899,563) $ (1,173,047) $ (617) $ 101,207 $ 6,557 ============ ============ ============ ============ ============
93 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES ---------------------------- ---------------------------- YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(1) 2003 2002(2) ------------ ------------ ------------ ------------ ING MIDCAP VALUE (NUMBER OF SHARES) Shares sold 1,049,073 2,605,647 818,080 1,153,304 Shares issued as reinvestment of dividends 34,385 -- 18,033 -- Shares redeemed (1,749,286) (142,673) (507,980) (17,955) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (665,828) 2,462,974 328,133 1,135,349 ============ ============ ============ ============ ING MIDCAP VALUE ($) Shares sold $ 7,733,617 $ 26,775,675 $ 6,257,727 $ 11,840,128 Shares issued as reinvestment of dividends 232,444 -- 121,903 -- Shares redeemed (11,804,691) (1,470,743) (3,593,419) (184,720) ------------ ------------ ------------ ------------ Net increase (decrease) $ (3,838,630) $ 25,304,932 $ 2,786,211 $ 11,655,408 ============ ============ ============ ============ CLASS C SHARES CLASS I SHARES CLASS Q SHARES ---------------------------- ---------------------------- ---------------------------- YEAR PERIOD YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(2) 2003 2002(3) 2003 2002(4) ------------ ------------ ------------ ------------ ------------ ------------ ING MIDCAP VALUE Shares sold 822,471 965,747 21,374 6,888 550 1,115 Shares issued as reinvestment of dividends 13,972 -- 562 -- 42 -- Shares redeemed (341,110) (17,708) (5,297) -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase in shares outstanding 495,333 948,039 16,639 6,888 592 1,115 ============ ============ ============ ============ ============ ============ ING MIDCAP VALUE ($) Shares sold $ 6,239,930 $ 9,937,739 $ 154,508 $ 70,941 $ 4,534 $ 11,595 Shares issued as reinvestment of dividends 94,463 -- 3,799 -- 285 -- Shares redeemed (2,367,968) (184,006) (36,094) -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase $ 3,966,425 $ 9,753,733 $ 122,213 $ 70,941 $ 4,819 $ 11,595 ============ ============ ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on February 1, 2002. (2) Commenced offering of shares on February 4, 2002. (3) Commenced offering of shares on March 4, 2002. (4) Commenced offering of shares on April 17, 2002. 94 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES ---------------------------- ---------------------------- YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(1) 2003 2002(2) ------------ ------------ ------------ ------------ ING SMALL CAP VALUE (NUMBER OF SHARES) Shares sold 746,668 1,818,913 490,662 783,600 Shares issued as reinvestment of dividends 16,962 -- 6,823 -- Shares redeemed (1,197,761) (83,387) (364,790) (39,620) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (434,131) 1,735,526 132,695 743,980 ============ ============ ============ ============ ING SMALL CAP VALUE ($) Shares sold $ 6,815,426 $ 19,106,892 $ 4,485,147 $ 8,286,464 Shares issued as reinvestment of dividends 145,698 -- 58,605 -- Shares redeemed (10,467,147) (875,665) (3,120,196) (426,160) ------------ ------------ ------------ ------------ Net increase (decrease) $ (3,506,023) $ 18,231,227 $ 1,423,556 $ 7,860,304 ============ ============ ============ ============ CLASS C SHARES CLASS I SHARES CLASS Q SHARES ---------------------------- ---------------------------- ---------------------------- YEAR PERIOD YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(3) 2003 2002(4) 2003 2002(5) ------------ ------------ ------------ ------------ ------------ ------------ ING SMALL CAP VALUE (NUMBER OF SHARES) Shares sold 566,589 812,089 30,646 2,469 -- 760 Shares issued as reinvestment of dividends 6,643 -- 564 -- -- -- Shares redeemed (174,091) (13,303) (10,123) -- (695) -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 399,141 798,786 21,087 2,469 (695) 760 ============ ============ ============ ============ ============ ============ ING SMALL CAP VALUE ($) Shares sold $ 5,189,793 $ 8,706,900 $ 286,003 $ 26,848 $ -- $ 8,230 Shares issued as reinvestment of dividends 57,003 -- 4,835 -- -- -- Shares redeemed (1,484,104) (141,971) (78,363) -- (7,606) -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ 3,762,692 $ 8,564,929 $ 212,475 $ 26,848 $ (7,606) $ 8,230 ============ ============ ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on February 1, 2002. (2) Commenced offering of shares on February 4, 2002. (3) Commenced offering of shares on February 7, 2002. (4) Commenced offering of shares on March 7, 2002. (5) Commenced offering of shares on April 30, 2002.
CLASS A SHARES CLASS B SHARES CLASS C SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING TAX EFFICIENT EQUITY (NUMBER OF SHARES) Shares sold 52,162 116,135 16,842 101,337 4,153 21,565 Shares redeemed (525,395) (289,152) (242,184) (127,655) (39,527) (72,785) ------------ ------------ ------------ ------------ ------------ ------------ Net decrease in shares outstanding (473,233) (173,017) (225,342) (26,318) (35,374) (51,220) ============ ============ ============ ============ ============ ============ ING TAX EFFICIENT EQUITY ($) Shares sold $ 426,204 $ 1,204,789 $ 132,368 $ 1,057,889 $ 32,652 $ 222,673 Shares redeemed (4,130,250) (3,055,624) (1,924,280) (1,336,968) (317,342) (739,675) ------------ ------------ ------------ ------------ ------------ ------------ Net decrease $ (3,704,046) $ (1,850,835) $ (1,791,912) $ (279,079) $ (284,690) $ (517,002) ============ ============ ============ ============ ============ ============
95 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING CONVERTIBLE (NUMBER OF SHARES) Shares sold 538,399 1,958,879 421,161 614,464 Shares issued as reinvestment of dividends 51,808 110,965 41,633 88,673 Shares redeemed (1,397,320) (3,641,803) (1,662,300) (1,844,627) ------------ ------------ ------------ ------------ Net decrease in shares outstanding (807,113) (1,571,959) (1,199,506) (1,141,490) ============ ============ ============ ============ ING CONVERTIBLE ($) Shares sold $ 8,104,116 $ 30,523,457 $ 6,866,145 $ 10,852,858 Shares issued as reinvestment of dividends 762,272 1,758,845 674,288 1,536,619 Shares redeemed (20,483,502) (57,093,216) (26,789,834) (31,743,142) ------------ ------------ ------------ ------------ Net decrease $(11,617,114) $(24,810,914) $(19,249,401) $(19,353,665) ============ ============ ============ ============ CLASS C SHARES CLASS Q SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING CONVERTIBLE (NUMBER OF SHARES) Shares sold 283,725 450,714 17,167 30,682 Shares issued as reinvestment of dividends 32,094 64,090 8,275 32,307 Shares redeemed (1,478,629) (1,812,332) (347,993) (1,190,010) ------------ ------------ ------------ ------------ Net decrease in shares outstanding (1,162,810) (1,297,528) (322,551) (1,127,021) ============ ============ ============ ============ ING CONVERTIBLE ($) Shares sold $ 4,341,342 $ 7,434,361 $ 251,286 $ 482,846 Shares issued as reinvestment of dividends 485,833 1,039,698 117,940 502,113 Shares redeemed (22,218,447) (29,432,206) (4,929,175) (18,495,520) ------------ ------------ ------------ ------------ Net decrease $(17,391,272) $(20,958,147) $ (4,559,949) $(17,510,561) ============ ============ ============ ============ CLASS A SHARES CLASS B SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING EQUITY AND BOND (NUMBER OF SHARES) Shares sold 804,559 2,044,167 235,194 568,337 Shares issued as reinvestment of dividends 87,922 169,074 20,392 53,496 Shares redeemed (2,874,377) (2,107,628) (926,352) (688,620) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,981,896) 105,613 (670,766) (66,787) ============ ============ ============ ============ ING EQUITY AND BOND ($) Shares sold $ 8,696,083 $ 25,609,560 $ 2,763,564 $ 7,552,484 Shares issued as reinvestment of dividends 945,153 2,077,020 237,706 706,119 Shares redeemed (31,480,050) (26,287,880) (10,795,160) (9,177,528) ------------ ------------ ------------ ------------ Net increase (decrease) $(21,838,814) $ 1,398,700 $ (7,793,890) $ (918,925) ============ ============ ============ ============
96 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS C SHARES CLASS Q SHARES CLASS T SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING EQUITY AND BOND (NUMBER OF SHARES) Shares sold 151,062 262,677 5,355 9,956 666 325 Shares issued as reinvestment of dividends 16,285 38,349 404 1,271 5,021 14,320 Shares redeemed (453,636) (518,494) (2,579) (23,460) (96,290) (204,914) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (286,289) (217,468) 3,180 (12,233) (90,603) (190,269) ============ ============ ============ ============ ============ ============ ING EQUITY AND BOND ($) Shares sold $ 1,566,442 $ 3,148,057 $ 56,544 $ 123,222 $ 7,881 $ 4,282 Shares issued as reinvestment of dividends 168,388 452,175 4,292 15,488 58,222 189,047 Shares redeemed (4,682,884) (6,149,939) (27,501) (288,266) (1,124,406) (2,740,344) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ (2,948,054) $ (2,549,707) $ 33,335 $ (149,556) $ (1,058,303) $ (2,547,015) ============ ============ ============ ============ ============ ============ CLASS A CLASS B CLASS C CLASS I ------------ ------------ ------------ -------------------------------------------- PERIOD PERIOD PERIOD PERIOD YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, OCT. 31, OCT. 31, 2003(1) 2003(3) 2003(4) 2003(2) 2002(5)(6) 2001(5)(6) ------------ ------------ ------------ ------------ ------------ ------------ ING REAL ESTATE (NUMBER OF SHARES) Shares sold 94,587 16,002 13,845 2,062,228 2,943 1,355 Shares issued as reinvestment of dividends 341 28 7 115,070 343 303 Shares redeemed (6,170) (2,596) -- (962,686) (1,331) (589) ------------ ------------ ------------ ------------ ------------ ------------ Net increase in shares outstanding 88,758 13,434 13,852 1,214,612 1,955 1,069 ============ ============ ============ ============ ============ ============ ING REAL ESTATE ($) Shares sold $ 1,008,855 $ 165,222 $ 156,401 $ 21,890,930 $ 31,057 $ 13,726 Shares issued as reinvestment of dividends 3,536 294 74 1,216,742 3,751 3,110 Shares redeemed (64,742) (26,513) -- (10,000,608) (14,352) (5,896) ------------ ------------ ------------ ------------ ------------ ------------ Net increase $ 947,649 $ 139,003 $ 156,475 $ 13,107,064 $ 20,456 $ 10,940 ============ ============ ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on December 20, 2002. (2) Changed its fiscal year to May 31. (3) Commenced offering of shares on November 20, 2002. (4) Commenced offering of shares on January 17, 2003. (5) Reflects history of a predecessor mutual fund (see Note 1) (6) Dollar amounts in thousands. 97 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 10 -- WHEN ISSUED SECURITIES The Equity and Income Fund, at times, may purchase FNMA/GNMA certificates on a delayed delivery, forward or when-issued basis with payment and delivery often taking place a month or more after the initiation of the transaction. It is the Fund's policy to record when-issued FNMA/GNMA certificates (and the corresponding obligation to pay for the securities) at the time the purchase commitment becomes fixed -- generally on the trade date. It is also the Fund's policy to segregate assets to cover its commitments for when-issued securities on trade date. NOTE 11 -- REORGANIZATIONS On May 17, 2002 certain Funds, as listed below (each an: "Acquiring Fund"), acquired the assets and certain liabilities of other Funds, also listed below (each an "Acquired Fund"), in a tax-free reorganization in exchange for shares of the Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired Fund's shareholders. The number and value of shares issued by the Acquiring Fund are presented in Note 9 -- Capital Shares. Net assets and unrealized appreciation/(depreciation) as of the reorganization dates were as follows:
ACQUIRED FUND ACQUIRING ACQUIRED TOTAL NET ASSETS OF TOTAL NET ASSETS OF UNREALIZED FUND FUND ACQUIRED FUND ACQUIRING FUND APPRECIATION ---- ---- ------------- -------------- ------------ MidCap Opportunities Fund Pilgrim MidCap Growth Fund $217,968,703 $ 84,663,797 $20,262,576 SmallCap Opportunities Fund Pilgrim SmallCap Growth Fund 191,995,534 319,795,499 16,636,048
The net assets of MidCap Opportunities Fund and SmallCap Opportunities after the acquisition were approximately $302,632,500 and $511,791,033 respectively. NOTE 12 - FEDERAL INCOME TAXES Dividends paid by the Funds from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. The tax composition of dividends and distributions to shareholders for year or period ended May 31, 2003 were as follows: ORDINARY TAX-EXEMPT LONG-TERM RETURN INCOME INCOME CAPITAL GAINS OF CAPITAL ----------- ----------- ------------- ----------- Growth + Value $ -- $ -- $ -- $ -- Growth Opportunities -- -- -- -- LargeCap Growth -- -- -- -- MidCap Opportunities -- -- -- -- SmallCap Opportunities -- -- -- -- Disciplined LargeCap -- -- -- -- Financial Services 1,544,833 -- 18,358,790 -- Large Company Value 383,636 -- -- -- MagnaCap 579,257 -- -- -- MidCap Value 567,240 -- -- -- SmallCap Value 354,275 -- -- -- Tax Efficient Equity -- -- -- -- Convertible 3,214,824 -- -- -- Equity and Bond 1,786,851 -- -- -- Real Estate 2,058,713 -- -- -- 98 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- The tax composition of dividends and distributions to shareholders for year ended May 31, 2002 were as follows: ORDINARY TAX-EXEMPT LONG-TERM RETURN INCOME INCOME CAPITAL GAINS OF CAPITAL ----------- ----------- ------------- ----------- Growth + Value $ -- $ -- $ -- $ -- Growth Opportunities -- -- -- -- LargeCap Growth 39,544 -- -- -- MidCap Opportunities -- -- -- -- SmallCap Opportunities -- -- 12,207,533 -- Disciplined LargeCap -- -- -- -- Financial Services 9,145,857 -- 36,691,181 -- Large Company Value 667,555 -- 2,912,638 561,447 MagnaCap 1,362,303 -- 57,821,108 -- MidCap Value -- -- -- -- SmallCap Value -- -- -- -- Tax Efficient Equity -- -- -- -- Convertible 5,995,821 -- 1,501,596 -- Equity and Bond 4,225,295 -- 143,651 -- Real Estate(1)(2) 4,948,496 -- -- 282,791 The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. Key differences are the treatment of short-term capital gains, foreign currency transactions, wash sale deferrals and other differences. To the extend that these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassifications. To the extent distributions exceed net investment income and/or net realized capital gains for tax purposes, they are reported as distributions of paid-in capital. Accordingly, the following amounts represent current year permanent tax differences that have been reclassified as of May 31, 2003: ACCUMULATED NET PAID-IN UNDISTRIBUTED NET REALIZED GAINS (LOSSES) CAPITAL INVESTMENT INCOME ON INVESTMENTS ------------ ----------------- ------------- Growth + Value $ (4,743,710) $ 4,743,710 $ -- Growth Opportunities (3,315,110) 3,315,002 108 LargeCap Growth (2,412,261) 2,412,261 -- MidCap Opportunities (2,858,218) 2,858,315 (97) SmallCap Opportunities (6,705,515) 6,705,515 -- Disciplined LargeCap (116,588) 113,825 2,763 Financial Services 2,994 (14,767) 11,773 Large Company Value (5,497) 5,497 -- MagnaCap (13,552) 13,552 -- MidCap Value (182,749) 180,371 2,378 SmallCap Value (306,186) 303,592 2,594 Tax Efficient Equity (51,846) 51,846 -- Convertible -- 42,333 (42,333) Equity and Bond -- 1,427 (1,427) Real Estate(3) (1,663,184) 1,006,010 657,174 - ---------- (1) For the year ended October 31, 2002. (2) Composition of dividends and distributions presented herein and within the financial statements may differ from final amounts reported based on the Fund's tax year end of December 31, 2002. (3) For the tax year ended December 31, 2002. 99 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Capital loss carryforwards, which may be used to offset future realized capital gains for federal income tax purposes were as follows at May 31, 2003: AMOUNT EXPIRATION DATES ------------ ---------------- Growth + Value $521,848,512 2009-2011 Growth Opportunities 463,537,631 2009-2011 LargeCap Growth 418,624,352 2008-2011 MidCap Opportunities 183,253,255 2007-2011 SmallCap Opportunities 372,918,566 2008-2011 Disciplined LargeCap 43,471,296 2008-2011 Financial Services 561,113 2011 Large Company Value 13,580,973 2011 MagnaCap 10,576,002 2011 MidCap Value 2,489,425 2011 SmallCap Value 370,613 2011 Tax Efficient Equity 7,756,432 2007-2011 Convertible 99,314,637 2010-2011 Equity and Bond 6,627,917 2010-2011 Real Estate(4) 4,405,808 2007-2008 A portion of the amount of these losses may be limited in the future for MidCap Opportunities and SmallCap Opportunities due to previous fund mergers. The following represents the tax basis components of distributable earnings as of May 31, 2003:
POST UNDISTRIBUTED CAPITAL OCTOBER UNDISTRIBUTED LONG-TERM UNREALIZED LOSS LOSSES ORDINARY INCOME CAPITAL GAINS APPRECIATION CARRYFORWARDS DEFERRED --------------- ------------- ------------- ------------- ------------- Growth + Value $ -- $ -- $ 26,132,944 $(521,848,512) (18,689,669) Growth Opportunities -- -- 23,075,483 (463,537,631) (5,657,465) LargeCap Growth -- -- 29,896,904 (418,624,352) (5,502,273) MidCap Opportunities -- -- 17,883,544 (183,253,255) (361,941) SmallCap Opportunities -- -- 38,796,880 (372,918,566) (17,805,896) Disciplined LargeCap -- -- (3,543,180) (43,471,296) (10,950,458) Financial Services 693,010 -- 18,578,922 (561,113) -- Large Company Value 772,491 -- (2,293,193) (13,580,973) (28,411,521) MagnaCap 695,252 -- (316,103) (10,576,002) (64,859,805) MidCap Value -- -- (7,499,111) (2,489,425) (95,617) SmallCap Value -- -- (3,759,526) (370,613) (77,331) Tax Efficient Equity -- -- (1,177,626) (7,756,432) (720,616) Convertible 1,975,440 -- 9,540,102 (99,314,637) -- Equity and Bond 490,450 -- (3,433,610) (6,627,917) (7,821,774) Real Estate(4) -- -- 18,414,124 (4,405,808) --
- ---------- (4) As of the tax year ended December 31, 2002. NOTE 13 -- ILLIQUID SECURITIES Pursuant to guidelines adopted by the Funds' Board of Directors, the following securities have been deemed to be illiquid. The Funds currently limit investment in illiquid securities to 15% of the Fund's net assets, at market value, at time of purchase.
INITIAL PERCENT ACQUISITION OF NET FUND SECURITY SHARES DATE COST VALUE ASSETS ---- -------- ------ ---- ---------- ----- ------ Convertible Winstar Communications 51,932 11/06/98 $2,364,096 $ 0 0.00% Equity and Bond Dayton Superior 400 08/31/01 7,446 4 0.00% Iridium World Comm 500 08/31/01 50,507 5 0.00% North Atlantic Trading, Inc. 370 08/31/01 0 0 0.00% SA Telecommunications -- 08/06/96 2,000,000 0 0.00% ---------- --- ---- 4,422,049 9 0.00% ========== === ====
100 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 14 -- SUBSEQUENT EVENTS On December 10, 2002, ING Biotechnology Fund was liquidated pursuant to a Plan of Liquidation and Dissolution of Series adopted by the Board of Trustees of ING Equity Trust on November 6, 2002. On January 7, 2003, the Board of Trustees of ING Funds approved a proposal to reorganize the ING Large Company Value Fund, "Disappearing Fund" into the ING MagnaCap Fund, "Surviving Fund" (the "2003 Reorganization"). The proposed reorganization is subject to approval by shareholders of the Disappearing Fund. If shareholder approval is obtained, it is expected that the 2003 Reorganization would take place late in 2003. Effective June 2, 2003, Wellington Management Company, LLC became the Sub-Advisor for the LargeCap Growth Fund. Andrew J. Shilling, Vice President and Partner is the portfolio manager. 101 ING Growth + Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 96.8% AGRICULTURE: 2.1% 188,600 Delta & Pine Land Co. $ 4,422,670 ------------ 4,422,670 ------------ AIRLINES: 1.2% 337,500 @ Airtran Holdings, Inc. 2,504,250 ------------ 2,504,250 ------------ APPAREL: 6.6% 100,500 @ Coach, Inc. 4,937,565 244,200 @ Quiksilver, Inc. 4,134,306 89,700 @ Timberland Co. 4,448,223 ------------ 13,520,094 ------------ BANKS: 3.5% 281,200 UCBH Holdings, Inc. 7,297,140 ------------ 7,297,140 ------------ BIOTECHNOLOGY: 3.6% 85,800 @ Genzyme Corp. 4,074,642 116,300 @ Integra LifeSciences Holdings Corp. 3,281,986 ------------ 7,356,628 ------------ COMMERCIAL SERVICES: 4.7% 62,600 @ Apollo Group, Inc. 3,657,092 109,400 @ Iron Mountain, Inc. 4,321,300 86,100 Rollins, Inc. 1,774,521 ------------ 9,752,913 ------------ COMPUTERS: 5.9% 123,600 @ NetScreen Technologies, Inc. 2,767,404 198,200 @ Storage Technology Corp. 5,351,400 323,600 @ Western Digital Corp. 4,051,472 ------------ 12,170,276 ------------ DIVERSIFIED FINANCIAL SERVICES: 2.0% 55,300 Countrywide Financial Corp. 4,072,845 ------------ 4,072,845 ------------ ELECTRONICS: 4.2% 141,800 @ Dionex Corp. 5,296,230 127,600 @ Trimble Navigation Ltd. 3,436,268 ------------ 8,732,498 ------------ ENTERTAINMENT: 3.3% 76,400 @ International Game Technology 6,726,256 ------------ 6,726,256 ------------ ENVIRONMENTAL CONTROL: 2.0% 247,600 @ Tetra Tech, Inc. 4,196,820 ------------ 4,196,820 ------------ HEALTHCARE-PRODUCTS: 2.0% 243,100 @ Visx, Inc. 4,217,785 ------------ 4,217,785 ------------ INSURANCE: 4.1% 166,300 First American Corp. 4,503,404 80,200 WR Berkley Corp. 3,949,850 ------------ 8,453,254 ------------ INTERNET: 8.1% 117,700 @ Amazon.Com, Inc. 4,230,138 170,300 @ United Online, Inc. 3,668,262 222,400 @ Verity, Inc. 4,625,920 419,000 @ WebMD Corp. 4,164,860 ------------ 16,689,180 ------------ OFFICE/BUSINESS EQUIPMENT: 2.1% 398,200 @ Xerox Corp. 4,352,326 ------------ 4,352,326 ------------ OIL & GAS: 3.7% 45,600 @ Evergreen Resources, Inc. 2,428,656 69,600 Patina Oil & Gas Corp. 2,755,464 59,700 Pogo Producing Co. 2,555,160 ------------ 7,739,280 ------------ OIL & GAS SERVICES: 2.5% 214,500 Halliburton Co. 5,120,115 ------------ 5,120,115 ------------ PHARMACEUTICALS: 13.0% 204,200 @ BioMarin Pharmaceuticals, Inc. 2,334,006 94,500 @ Hi-Tech Pharmacal Co., Inc. 3,196,084 186,400 @ Medicines Co. 4,361,760 117,200 @ Pharmaceutical Resources, Inc. 4,809,888 213,600 @ Sepracor, Inc. 4,859,400 144,300 @@ Teva Pharmaceutical Industries ADR 7,314,423 ------------ 26,875,561 ------------ PIPELINES: 1.5% 92,800 Questar Corp. 2,995,584 ------------ 2,995,584 ------------ RETAIL: 4.5% 201,700 @ Tractor Supply Co. 9,137,010 ------------ 9,137,010 ------------ SEMICONDUCTORS: 1.5% 135,000 @ DSP Group, Inc. 3,141,450 ------------ 3,141,450 ------------ SOFTWARE: 7.1% 146,700 @ Avid Technology, Inc. 4,949,658 190,100 @ Citrix Systems, Inc. 4,149,883 269,800 @ Progress Software Corp. 5,512,014 ------------ 14,611,555 ------------ TELECOMMUNICATIONS: 5.4% 301,100 @ Interdigital Communications Corp. 7,738,270 64,300 @@ Mobile Telesystems ADR 3,459,340 ------------ 11,197,610 ------------ TRANSPORTATION: 2.2% 141,500 @@ UTI Worldwide, Inc. 4,533,660 ------------ 4,533,660 ------------ Total Common Stock (Cost $173,683,816) 199,816,760 ------------ See Accompanying Notes to Financial Statements 102 ING Growth + Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Pricipal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 2.3% REPURCHASE AGREEMENT: 2.3% $ 4,794,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $4,794,451 to be received upon repurchase (Collateralized by $4,015,000 U.S. Treasury Bonds, 6.000%, Market Value $4,893,534, due 02/15/26) $ 4,794,000 ------------ Total Short-Term Investments (Cost $4,794,000) 4,794,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $178,477,816)* 99.1% $204,610,760 OTHER ASSETS AND LIABILITIES-NET 0.9 1,773,833 ----- ------------ NET ASSETS 100.0% $206,384,593 ===== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 27,002,307 Gross Unrealized Depreciation (869,363) ------------ Net Unrealized Appreciation $ 26,132,944 ============ See Accompanying Notes to Financial Statements 103 ING Growth Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 97.0% APPAREL: 1.5% 53,400 @ Coach, Inc. $ 2,623,542 ------------ 2,623,542 ------------ AUTO PARTS & EQUIPMENT: 1.0% 21,900 Johnson Controls, Inc. 1,823,175 ------------ 1,823,175 ------------ BANKS: 4.0% 47,200 Bank of America Corp. 3,502,240 72,800 Wells Fargo & Co. 3,516,240 ------------ 7,018,480 ------------ BIOTECHNOLOGY: 2.2% 28,600 @ Amgen, Inc. 1,850,706 78,100 @ Digene Corp. 2,022,790 ------------ 3,873,496 ------------ COMMERCIAL SERVICES: 2.9% 43,700 @ FTI Consulting, Inc. 1,604,227 35,300 @ Kroll, Inc. 819,313 97,700 @ Pharmaceutical Product Development, Inc. 2,740,485 ------------ 5,164,025 ------------ COMPUTERS: 11.1% 62,300 @ CACI Intl., Inc. 2,059,015 58,100 @ Dell Computer Corp. 1,817,949 345,400 @ EMC Corp. 3,737,228 110,300 Hewlett-Packard Co. 2,150,850 33,300 International Business Machines Corp. 2,931,732 215,700 @ Network Appliance, Inc. 3,673,371 131,014 @ Veritas Software Corp. 3,635,639 ------------ 20,005,784 ------------ DIVERSIFIED FINANCIAL SERVICES: 4.8% 88,900 Citigroup, Inc. 3,646,678 62,100 JP Morgan Chase & Co. 2,040,606 23,800 SLM Corp. 2,856,000 ------------ 8,543,284 ------------ ELECTRONICS: 1.6% 60,400 @ Gentex Corp. 1,880,856 46,400 @ Jabil Circuit, Inc. 973,936 ------------ 2,854,792 ------------ ENERGY-ALTERNATE SOURCES: 0.4% 33,600 @ Headwaters, Inc. 638,064 ------------ 638,064 ------------ ENGINEERING & CONSTRUCTION: 2.1% 50,000 Fluor Corp. 1,774,500 47,500 @ Jacobs Engineering Group, Inc. 1,854,400 ------------ 3,628,900 ------------ FOOD: 2.6% 39,600 @ Dean Foods Co. 1,811,700 25,800 @ Performance Food Group Co. 933,960 62,400 Sysco Corp. 1,930,656 ------------ 4,676,316 ------------ HEALTHCARE-PRODUCTS: 6.2% 18,800 @@ Alcon, Inc. 799,000 20,600 @ Boston Scientific Corp. 1,073,260 31,100 Johnson & Johnson 1,690,285 36,600 Medtronic, Inc. 1,783,518 51,515 @ St. Jude Medical, Inc. 2,889,992 16,400 @ Varian Medical Systems, Inc. 914,300 38,600 @ Zimmer Holdings, Inc. 1,731,596 ------------ 10,881,951 ------------ HEALTHCARE-SERVICES: 1.9% 25,500 A Aetna, Inc. 1,464,210 19,000 UnitedHealth Group, Inc. 1,822,860 ------------ 3,287,070 ------------ INSURANCE: 3.2% 99,700 Aflac, Inc. 3,281,127 18,200 American Intl. Group 1,053,416 27,000 WR Berkley Corp. 1,329,750 ------------ 5,664,293 ------------ INTERNET: 6.5% 61,900 @ Amazon.Com, Inc. 2,224,686 19,037 @ eBay, Inc. 1,936,253 89,000 @ USA Interactive 3,422,050 188,900 @ WebMD Corp. 1,877,666 68,440 @ Yahoo!, Inc. 2,042,934 ------------ 11,503,589 ------------ MACHINERY-DIVERSIFIED: 0.5% 37,800 @ Cognex Corp. 864,108 ------------ 864,108 ------------ MEDIA: 3.7% 98,400 @ Cablevision Systems Corp. 1,905,024 61,800 @ Comcast Corp. 1,781,076 33,500 @ EchoStar Communications Corp. 1,124,930 37,800 New York Times Co. 1,810,620 ------------ 6,621,650 ------------ MISCELLANEOUS MANUFACTURING: 1.9% 13,200 3M Co. 1,669,404 24,900 Danaher Corp. 1,666,308 ------------ 3,335,712 ------------ OIL & GAS: 8.7% 44,915 Apache Corp. 2,960,797 98,600 Exxon Mobil Corp. 3,589,040 82,655 @,@@ Nabors Industries Ltd. 3,726,087 87,200 @ Patterson-UTI Energy, Inc. 3,190,648 85,400 XTO Energy, Inc. 1,832,684 ------------ 15,299,256 ------------ PHARMACEUTICALS: 7.4% 54,600 @ AdvancePCS 1,813,266 64,900 @,@@ Biovail Corp. 3,026,936 30,700 @ Express Scripts, Inc. 2,009,008 49,500 @ Medimmune, Inc. 1,754,775 101,088 Omnicare, Inc. 2,744,539 55,300 Pfizer, Inc. 1,715,406 ------------ 13,063,930 ------------ See Accompanying Notes to Financial Statements 104 ING Growth Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- RETAIL: 10.2% 28,600 @ 99 Cents Only Stores $ 908,908 106,700 @ Abercrombie & Fitch Co. 3,046,285 56,200 CBRL Group, Inc. 2,027,696 78,400 @ Chico's FAS, Inc. 1,677,760 101,800 Gap, Inc. 1,730,600 23,300 @ HOT Topic, Inc. 621,411 39,250 @ Pacific Sunwear of California 881,555 118,500 @ Staples, Inc. 2,297,715 94,900 Tiffany & Co. 3,108,924 32,300 Wal-Mart Stores, Inc. 1,699,303 ------------ 18,000,157 ------------ SEMICONDUCTORS: 5.5% 203,900 @ Altera Corp. 3,931,192 50,600 Linear Technology Corp. 1,839,816 130,000 @ Xilinx, Inc. 3,883,100 ------------ 9,654,108 ------------ SOFTWARE: 2.6% 45,700 First Data Corp. 1,892,894 106,600 Microsoft Corp. 2,623,426 ------------ 4,516,320 ------------ TELECOMMUNICATIONS: 4.5% 123,300 @ Cisco Systems, Inc. 2,007,324 330,100 @ Corning, Inc. 2,413,031 66,800 @ Nextel Communications, Inc. 1,001,332 86,400 @ Utstarcom, Inc. 2,561,760 ------------ 7,983,447 ------------ Total Common Stock (Cost $148,823,817) 171,525,449 ------------ MUTUAL FUNDS: 3.1% EQUITY FUND: 3.1% 128,100 @ Nasdaq-100 Index Tracking Stock 3,816,099 18,300 SPDR Trust Series 1 1,774,185 ------------ 5,590,284 ------------ Total Mutual Funds (Cost $5,082,678) 5,590,284 ------------ Total Long-Term Investments (Cost $153,906,495) 177,115,733 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 1.5% REPURCHASE AGREEMENT: 1.5% $ 2,618,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $2,618,247 to be received upon repurchase (Collateralized by $2,195,000 U.S. Treasury Bonds, 6.000%, Market Value $2,675,295, due 02/15/26) $ 2,618,000 ------------ Total Short-Term Investments (Cost $2,618,000) 2,618,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $156,524,495)* 101.6% $179,733,733 OTHER ASSETS AND LIABILITIES-NET (1.6) (2,904,590) ----- ------------ NET ASSETS 100.0% $176,829,143 ===== ============ @ Non-income producing security @@ Foreign Issuer A Related Party * Cost for federal income tax purposes is $156,658,250. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 24,150,195 Gross Unrealized Depreciation (1,074,712) ------------ Net Unrealized Appreciation $ 23,075,483 ============ See Accompanying Notes to Financial Statements 105 ING LargeCap Growth Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 96.5% APPAREL: 1.0% 31,400 Nike, Inc. $ 1,758,086 ------------ 1,758,086 ------------ BIOTECHNOLOGY: 3.3% 88,300 @ Amgen, Inc. 5,713,893 ------------ 5,713,893 ------------ COMPUTERS: 11.9% 447,300 @ EMC Corp. 4,839,786 255,500 Hewlett-Packard Co. 4,982,250 93,300 International Business Machines Corp. 8,214,132 93,600 @ Veritas Software Corp. 2,597,400 ------------ 20,633,568 ------------ COSMETICS/PERSONAL CARE: 1.9% 54,500 Avon Products, Inc. 3,321,230 ------------ 3,321,230 ------------ DIVERSIFIED FINANCIAL SERVICES: 6.8% 43,100 Goldman Sachs Group, Inc. 3,512,650 116,100 JP Morgan Chase & Co. 3,815,046 37,300 SLM Corp. 4,476,000 ------------ 11,803,696 ------------ HEALTHCARE-PRODUCTS: 7.1% 17,600 @@ Alcon, Inc. 748,000 50,000 @ Boston Scientific Corp. 2,605,000 90,400 @ Guidant Corp. 3,822,112 65,500 @ St. Jude Medical, Inc. 3,674,550 33,300 @ Zimmer Holdings, Inc. 1,493,838 ------------ 12,343,500 ------------ HEALTHCARE-SERVICES: 1.9% 34,000 UnitedHealth Group, Inc. 3,261,960 ------------ 3,261,960 ------------ INSURANCE: 2.2% 64,500 American Intl. Group 3,733,260 ------------ 3,733,260 ------------ INTERNET: 10.8% 161,000 @ Amazon.Com, Inc. 5,786,340 61,300 @ eBay, Inc. 6,234,823 222,700 @ Yahoo!, Inc. 6,647,595 ------------ 18,668,758 ------------ LEISURE TIME: 0.4% 18,000 Harley-Davidson, Inc. 758,880 ------------ 758,880 ------------ MEDIA: 5.2% 210,270 @ Comcast Corp. 6,144,567 91,500 @ COX Communications, Inc. 2,834,670 ------------ 8,979,237 ------------ MISCELLANEOUS MANUFACTURING: 4.2% 70,100 General Electric Co. 2,011,870 302,300 @@ Tyco Intl. Ltd. 5,350,710 ------------ 7,362,580 ------------ OIL & GAS: 2.5% 65,030 Apache Corp. 4,286,777 ------------ 4,286,777 ------------ OIL & GAS SERVICES: 2.6% 190,800 Halliburton Co. 4,554,396 ------------ 4,554,396 ------------ PHARMACEUTICALS: 7.7% 34,700 Allergan, Inc. 2,502,217 18,800 @ Gilead Sciences, Inc. 991,888 93,800 @ Medimmune, Inc. 3,325,210 59,800 Merck & Co., Inc. 3,323,684 104,700 Pfizer, Inc. 3,247,794 ------------ 13,390,793 ------------ RETAIL: 6.7% 294,500 Gap, Inc. 5,006,500 34,300 @ Kohl's Corp. 1,795,605 115,900 @ Staples, Inc. 2,247,301 48,100 Wal-Mart Stores, Inc. 2,530,541 ------------ 11,579,947 ------------ SEMICONDUCTORS: 11.8% 81,100 @ Analog Devices, Inc. 3,126,405 94,600 Linear Technology Corp. 3,439,656 84,100 Maxim Integrated Products 3,297,561 133,000 @ Novellus Systems, Inc. 4,608,450 84,700 Texas Instruments, Inc. 1,736,350 139,700 @ Xilinx, Inc. 4,172,839 ------------ 20,381,261 ------------ SOFTWARE: 4.9% 165,200 @ Microsoft Corp. 4,065,572 337,000 @ Oracle Corp. 4,384,370 ------------ 8,449,942 ------------ TELECOMMUNICATIONS: 3.6% 267,800 @ Cisco Systems, Inc. 4,359,784 120,800 @ Nextel Communications, Inc. 1,810,792 ------------ 6,170,576 ------------ Total Common Stock (Cost $135,576,856) 167,152,340 ------------ MUTUAL FUNDS: 3.3% EQUITY FUND: 3.3% 42,400 @ Internet HOLDRs Trust 1,582,368 87,400 @ Nasdaq-100 Index Tracking Stock 2,603,646 52,000 Semiconductor HOLDRs Trust 1,557,400 ------------ 5,743,414 ------------ Total Mutual Funds (Cost $4,655,687) 5,743,414 ------------ Total Long-Term Investments (Cost $140,232,543) 172,895,754 ------------ See Accompanying Notes to Financial Statements 106 ING LargeCap Growth Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 0.7% REPURCHASE AGREEMENT: 0.7% $ 1,282,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $1,282,121 to be received upon repurchase (Collateralized by $1,075,000 U.S. Treasury Bonds, 6.000%, Market Value $1,310,224, due 02/15/26) $ 1,282,000 ------------ Total Short-Term Investments (Cost $1,282,000) 1,282,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $141,514,543)* 100.5% $174,177,754 OTHER ASSETS AND LIABILITIES-NET (0.5) (813,224) ----- ------------ NET ASSETS 100.0% $173,364,530 ===== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $144,280,850. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 32,871,935 Gross Unrealized Depreciation (2,975,031) ------------ Net Unrealized Appreciation $ 29,896,904 ============ See Accompanying Notes to Financial Statements 107 ING MidCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 97.0% APPAREL: 1.2% 41,800 @ Coach, Inc. $ 2,053,634 ------------ 2,053,634 ------------ AUTO PARTS & EQUIPMENT: 1.0% 20,300 Johnson Controls, Inc. 1,689,975 ------------ 1,689,975 ------------ BANKS: 0.5% 24,700 Bank of Hawaii Corp. 862,524 ------------ 862,524 ------------ BUILDING MATERIALS: 1.0% 22,700 @ American Standard Cos., Inc. 1,679,573 ------------ 1,679,573 ------------ COMMERCIAL SERVICES: 8.4% 70,900 @ Aramark Corp. 1,488,191 30,500 @ Career Education Corp. 1,873,005 21,800 @ Corporate Executive Board Co. 919,960 36,500 @ Education Management Corp. 1,735,210 46,400 @ FTI Consulting, Inc. 1,703,344 33,900 @ Kroll, Inc. 786,819 25,800 Paychex, Inc. 787,416 129,300 @ Pharmaceutical Product Development, Inc. 3,626,865 33,800 @ Weight Watchers Intl., Inc. 1,439,204 ------------ 14,360,014 ------------ COMPUTERS: 7.8% 34,700 @ Affiliated Computer Services, Inc. 1,607,998 59,800 @ CACI Intl., Inc. 1,976,390 23,100 @ Lexmark Intl., Inc. 1,718,640 225,800 @ Network Appliance, Inc. 3,845,374 28,900 Reynolds & Reynolds Co. 855,440 121,500 @ Veritas Software Corp. 3,371,625 ------------ 13,375,467 ------------ DIVERSIFIED FINANCIAL SERVICES: 1.1% 24,300 Bear Stearns Cos., Inc. 1,877,661 ------------ 1,877,661 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 1.0% 104,900 @ American Power Conversion 1,626,999 ------------ 1,626,999 ------------ ELECTRONICS: 2.9% 112,700 @ Gentex Corp. 3,509,478 66,700 @ Jabil Circuit, Inc. 1,400,033 ------------ 4,909,511 ------------ ENGINEERING & CONSTRUCTION: 2.0% 44,700 Fluor Corp. 1,586,403 45,700 @ Jacobs Engineering Group, Inc. 1,784,128 ------------ 3,370,531 ------------ ENVIRONMENTAL CONTROL: 0.5% 37,000 @ Republic Services, Inc. 884,670 ------------ 884,670 ------------ FOOD: 2.6% 58,000 @ Dean Foods Co. 2,653,500 48,700 @ Performance Food Group Co. 1,762,940 ------------ 4,416,440 ------------ HEALTHCARE-PRODUCTS: 6.0% 13,300 CR Bard, Inc. 932,995 47,800 @ St. Jude Medical, Inc. 2,681,580 73,900 @ Steris Corp. 1,666,445 60,200 @ Varian Medical Systems, Inc. 3,356,150 37,100 @ Zimmer Holdings, Inc. 1,664,306 ------------ 10,301,476 ------------ HEALTHCARE-SERVICES: 2.9% 23,300 A Aetna, Inc. 1,337,886 91,700 Health Management Associates, Inc. 1,710,205 21,600 @ WellPoint Health Networks 1,843,344 ------------ 4,891,435 ------------ HOME FURNISHINGS: 0.5% 12,100 Harman Intl. Industries, Inc. 897,820 ------------ 897,820 ------------ INSURANCE: 1.0% 35,900 WR Berkley Corp. 1,768,075 ------------ 1,768,075 ------------ INTERNET: 4.9% 110,000 @ USA Interactive 4,229,500 172,500 @ WebMD Corp. 1,714,650 80,200 @ Yahoo!, Inc. 2,393,970 ------------ 8,338,120 ------------ MACHINERY-DIVERSIFIED: 2.1% 36,700 @ Cognex Corp. 838,962 73,300 Rockwell Automation, Inc. 1,733,545 14,600 @ Zebra Technologies Corp. 1,065,639 ------------ 3,638,146 ------------ MEDIA: 4.6% 79,000 @ Cablevision Systems Corp. 1,529,440 83,200 @ EchoStar Communications Corp. 2,793,856 34,900 New York Times Co. 1,671,710 59,300 @ Univision Communications, Inc. 1,770,105 ------------ 7,765,111 ------------ MISCELLANEOUS MANUFACTURING: 0.9% 23,000 Danaher Corp. 1,539,160 ------------ 1,539,160 ------------ See Accompanying Notes to Financial Statements 108 ING MidCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- OIL & GAS: 7.1% 26,100 Apache Corp. $ 1,720,512 33,900 Devon Energy Corp. 1,762,800 76,700 @,@@ Nabors Industries Ltd. 3,457,635 94,100 @ Patterson-UTI Energy, Inc. 3,443,119 79,300 XTO Energy, Inc. 1,701,778 ------------ 12,085,844 ------------ OIL & GAS SERVICES: 1.3% 52,400 @ BJ Services Co. 2,133,204 ------------ 2,133,204 ------------ PACKAGING & CONTAINERS: 0.9% 81,100 @ Pactiv Corp. 1,585,505 ------------ 1,585,505 ------------ PHARMACEUTICALS: 9.7% 49,900 @ Advance PCS 1,657,179 23,500 Allergan, Inc. 1,694,585 62,500 @,@@ Biovail Corp. 2,915,000 62,610 @ Celgene Corp. 1,970,963 28,800 @ Express Scripts, Inc. 1,884,672 86,500 @ Medimmune, Inc. 3,066,425 29,700 Mylan Laboratories 857,736 93,800 Omnicare, Inc. 2,546,670 ------------ 16,593,230 ------------ RETAIL: 10.4% 53,200 @ 99 Cents Only Stores 1,690,696 96,700 @ Abercrombie & Fitch Co. 2,760,785 10,100 @ Autozone, Inc. 845,168 40,900 @ Bed Bath & Beyond, Inc. 1,711,256 51,000 CBRL Group, Inc. 1,840,080 69,600 @ Chico's FAS, Inc. 1,489,440 22,500 @ HOT Topic, Inc. 600,075 62,100 @ Sonic Corp. 1,607,769 123,400 @ Staples, Inc. 2,392,726 86,700 Tiffany & Co. 2,840,292 ------------ 17,778,287 ------------ SAVINGS & LOANS: 1.0% 63,867 New York Community Bancorp, Inc. 1,769,107 ------------ 1,769,107 ------------ SEMICONDUCTORS: 3.2% 196,500 @ Altera Corp. 3,788,520 47,800 Linear Technology Corp. 1,738,008 ------------ 5,526,528 ------------ SOFTWARE: 2.9% 43,300 @ D&B Corp. 1,682,205 59,500 Fair Isaac Corp. 3,317,125 ------------ 4,999,330 ------------ TELECOMMUNICATIONS: 3.7% 265,500 @ Corning, Inc. 1,940,805 92,900 @ Juniper Networks, Inc. 1,289,452 61,000 @ Nextel Communications, Inc. 914,390 72,600 @ Utstarcom, Inc. 2,152,590 ------------ 6,297,237 ------------ TOYS/GAMES/HOBBIES: 1.0% 74,800 Mattel, Inc. 1,608,948 ------------ 1,608,948 ------------ TRANSPORTATION: 2.9% 68,900 CH Robinson Worldwide, Inc. 2,561,013 67,200 Expeditors Intl. Washington, Inc. 2,347,968 ------------ 4,908,981 ------------ Total Common Stock (Cost $147,626,148) 165,532,543 ------------ MUTUAL FUND: 1.0% EQUITY FUND: 1.0% 20,250 MidCap SPDR Trust Series 1 1,764,383 ------------ Total Mutual Fund (Cost $1,618,959) 1,764,383 ------------ Total Long-Term Investments (Cost $149,245,107) 167,296,926 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 3.5% REPURCHASE AGREEMENT: 3.5% $ 5,959,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $5,959,561 to be received upon repurchase (Collateralized by $4,990,000 U.S. Treasury Bond, 6.000%, Market Value $6,081,877, due 02/15/26) $ 5,959,000 ------------ Total Short-Term Investments (Cost $5,959,000) 5,959,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $155,204,107)* 101.5% $173,255,926 OTHER ASSETS AND LIABILITIES-NET (1.5) (2,603,483) ----- ------------ NET ASSETS 100.0% $170,652,443 ===== ============ @ Non-income producing security @@ Foreign Issuer A Related Party * Cost for federal income tax purposes is $155,372,382. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 19,142,908 Gross Unrealized Depreciation (1,259,364) ------------ Net Unrealized Appreciation $ 17,883,544 ============ See Accompanying Notes to Financial Statements 109 ING SmallCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 96.8% ADVERTISING: 0.6% 42,600 @ Getty Images, Inc. $ 1,721,040 ------------ 1,721,040 ------------ AEROSPACE/DEFENSE: 1.0% 34,300 Engineered Support Systems, Inc. 1,351,763 57,000 @ Veridian Corp. 1,479,150 ------------ 2,830,913 ------------ APPAREL: 0.5% 83,400 @ Quiksilver, Inc. 1,411,962 ------------ 1,411,962 ------------ BANKS: 4.5% 160,200 @ Southwest Bancorp of Texas, Inc. 5,276,988 72,500 UCBH Holdings, Inc. 1,881,375 122,500 Westamerica Bancorporation 5,442,675 ------------ 12,601,038 ------------ BIOTECHNOLOGY: 2.9% 133,600 @ Digene Corp. 3,460,240 56,300 @ Integra LifeSciences Holdings Corp. 1,588,786 79,000 @ Martek Biosciences Corp. 2,973,560 ------------ 8,022,586 ------------ COMMERCIAL SERVICES: 7.5% 28,100 @ Corinthian Colleges, Inc. 1,321,824 72,000 @ Corporate Executive Board Co. 3,038,400 57,700 @ Education Management Corp. 2,743,058 65,700 @ FTI Consulting, Inc. 2,411,847 125,800 @ Kroll, Inc. 2,919,818 205,000 @ Pharmaceutical Product Development, Inc. 5,750,250 41,500 Strayer Education, Inc. 2,769,295 ------------ 20,954,492 ------------ COMPUTERS: 7.7% 95,800 @ CACI Intl., Inc. 3,166,190 247,700 @ Cognizant Technology Solutions Corp. 5,139,775 122,700 @ Hutchinson Technology, Inc. 3,704,313 88,600 @ Micros Systems, Inc. 2,628,762 47,700 @ NetScreen Technologies, Inc. 1,068,003 47,600 Reynolds & Reynolds Co. 1,408,960 71,800 @ Sandisk Corp. 2,608,494 135,300 @ Western Digital Corp. 1,693,956 ------------ 21,418,453 ------------ DISTRIBUTION/WHOLESALE; 1.0% 82,200 @ SCP Pool Corp. 2,647,662 ------------ 2,647,662 ------------ DIVERSIFIED FINANCIAL SERVICES: 1.8% 68,900 @@ Doral Financial Corp. 2,913,092 72,826 @ Portfolio Recovery Associates, Inc. 2,181,867 ------------ 5,094,959 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 0.9% 65,600 @ Wilson Greatbatch Technologies, Inc. 2,414,080 ------------ 2,414,080 ------------ ELECTRONICS: 1.7% 57,300 @ Benchmark Electronics, Inc. 1,629,612 104,200 @ Flir Systems, Inc. 2,971,784 ------------ 4,601,396 ------------ ENERGY-ALTERNATE SOURCES: 1.3% 184,700 @ Headwaters, Inc. 3,507,453 ------------ 3,507,453 ------------ ENTERTAINMENT: 1.7% 105,900 @ GTECH Holdings Corp. 3,721,326 66,200 @ Penn National Gaming, Inc. 1,108,188 ------------ 4,829,514 ------------ ENVIRONMENTAL CONTROL: 1.0% 32,700 @ Stericycle, Inc. 1,293,612 81,200 @ Tetra Tech, Inc. 1,376,340 ------------ 2,669,952 ------------ FOOD: 4.5% 77,200 @ American Italian Pasta Co. 3,382,904 39,900 Flowers Foods, Inc. 1,197,000 158,600 @ Performance Food Group Co. 5,741,320 77,300 @ United Natural Foods, Inc. 2,141,210 ------------ 12,462,434 ------------ HEALTHCARE-PRODUCTS: 6.4% 63,800 @ Advanced Neuromodulation Systems, Inc. 3,060,486 56,200 @ Inamed Corp. 2,896,548 5,800 @ Kensey Nash Corp. 123,830 168,901 @ Kyphon, Inc. 2,170,378 143,700 @ Steris Corp. 3,240,435 211,200 @ Thoratec Corp. 2,899,776 99,900 @ Zoll Medical Corp. 3,312,684 ------------ 17,704,137 ------------ HEALTHCARE-SERVICES: 4.4% 150,400 @ Amsurg Corp. 4,236,768 93,800 @ Coventry Health Care, Inc. 4,095,308 84,600 @ Curative Health Services, Inc. 1,203,858 65,400 @ Mid Atlantic Medical Services 3,132,660 ------------ 12,668,594 ------------ HOUSEHOLD PRODUCTS/WARES: 0.5% 62,600 @ Yankee Candle Co., Inc. 1,336,510 ------------ 1,336,510 ------------ INSURANCE: 2.8% 95,245 HCC Insurance Holdings, Inc. 2,728,769 67,700 @ Philadelphia Consolidated Holding Co. 2,769,607 81,400 @ ProAssurance Corp. 2,279,200 ------------ 7,777,576 ------------ INTERNET: 2.9% 86,900 @ Avocent Corp. 2,568,764 130,343 @ Digital Insight Corp. 2,215,831 181,100 @ Digital River, Inc. 3,560,426 ------------ 8,345,021 ------------ See Accompanying Notes to Financial Statements 110 ING SmallCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- LODGING: 1.0% 117,900 @ Station Casinos, Inc. $ 2,652,750 ------------ 2,652,750 ------------ MACHINERY-DIVERSIFIED: 1.9% 113,800 @ Cognex Corp. 2,601,468 35,900 @ Zebra Technologies Corp. 2,620,305 ------------ 5,221,773 ------------ MISCELLANEOUS MANUFACTURING: 1.5% 32,100 Donaldson Co., Inc. 1,346,595 68,400 @ ESCO Technologies, Inc. 2,865,960 ------------ 4,212,555 ------------ OIL & GAS: 3.5% 44,100 @ Evergreen Resources, Inc. 2,348,766 38,200 Patina Oil & Gas Corp. 1,512,338 195,400 @ Southwestern Energy Co. 2,934,908 128,800 @ Unit Corp. 2,833,600 ------------ 9,629,612 ------------ OIL & GAS SERVICES: 1.0% 244,700 @ Key Energy Services, Inc. 2,907,036 ------------ 2,907,036 ------------ PHARMACEUTICALS: 3.7% 101,300 Alpharma, Inc. 2,129,326 48,600 @ Celgene Corp. 1,529,928 101,500 @ Endo Pharmaceuticals Holdings, Inc. 1,600,654 141,100 @ Medicines Co. 3,301,740 39,800 @ Pharmaceutical Resources, Inc. 1,633,392 ------------ 10,195,040 ------------ RETAIL: 9.3% 62,600 Applebees Intl., Inc. 1,921,194 162,000 CBRL Group, Inc. 5,844,960 51,000 @ Cheesecake Factory 1,730,430 153,400 @ Chico's FAS, Inc. 3,282,760 59,900 @ Dick's Sporting Goods, Inc. 1,736,501 87,600 @ HOT Topic, Inc. 2,336,292 115,700 @ MSC Industrial Direct Co. 2,197,143 112,675 @ Pacific Sunwear of California 2,530,681 36,200 @ PF Chang's China Bistro, Inc. 1,593,524 110,300 @ Sonic Corp. 2,855,667 ------------ 26,029,152 ------------ SAVINGS & LOANS: 0.5% 54,100 Dime Community Bancshares 1,373,599 ------------ 1,373,599 ------------ SEMICONDUCTORS: 5.1% 168,400 @ Artisan Components, Inc. 3,709,852 148,100 @ Integrated Circuit Systems, Inc. 3,863,929 102,300 @ Omnivision Technologies, Inc. 3,671,547 106,500 @ Power Integrations, Inc. 2,839,184 ------------ 14,084,512 ------------ SOFTWARE: 6.6% 145,400 @ Avid Technology, Inc. 4,905,796 184,000 @ EPIQ Systems, Inc. 3,245,760 74,800 Global Payments, Inc. 2,543,200 34,900 @ IMPAC Medical Systems, Inc. 812,821 39,000 @ National Instruments Corp. 1,417,650 349,400 @ Packeteer, Inc. 5,408,712 ------------ 18,333,939 ------------ TELECOMMUNICATIONS: 4.1% 67,400 @ Adtran, Inc. 3,256,094 132,350 @ Boston Communications Group 2,153,335 384,500 @ Foundry Networks, Inc. 5,917,455 ------------ 11,326,884 ------------ TOYS/GAMES/HOBBIES: 1.2% 117,100 @ Leapfrog Enterprises, Inc. 3,387,703 ------------ 3,387,703 ------------ TRANSPORTATION: 1.9% 111,500 @ Knight Transportation, Inc. 2,827,640 16,000 Roadway Corp. 592,000 71,400 @ Yellow Corp. 1,876,392 ------------ 5,296,032 ------------ Total Common Stock (Cost $229,293,463) 269,670,359 ------------ MUTUAL FUNDS: 2.8% EQUITY FUND: 2.8% 62,600 iShares Russell 2000 Growth Index Fund 2,954,094 56,300 iShares Russell 2000 Index Fund 4,956,089 ------------ 7,910,183 ------------ Total Mutual Funds (Cost $7,129,273) 7,910,183 ------------ Total Long-Term Investments (Cost $236,422,736) 277,580,542 ------------ See Accompanying Notes to Financial Statements 111 ING SmallCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 1.0% REPURCHASE AGREEMENT: 1.0% $ 2,911,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $2,911,274 to be received upon repurchase (Collateralized by $2,380,000 U.S. Treasury Bonds, 6.125%, Market Value $2,972,908, due 08/15/29) $ 2,911,000 ------------ Total Short-Term Investments (Cost $2,911,000) 2,911,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $239,333,736)* 100.7% $280,491,542 OTHER ASSETS AND LIABILITIES-NET (0.7) (1,857,045) ----- ------------ NET ASSETS 100.0% $278,634,497 ===== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $241,694,662. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 42,292,130 Gross Unrealized Depreciation (3,495,250) ------------ Net Unrealized Appreciation $ 38,796,880 ============ See Accompanying Notes to Financial Statements 112 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 99.6% ADVERTISING: 0.2% 3,400 Interpublic Group of Cos., Inc. $ 46,750 1,600 Omnicom Group 111,696 ------------ 158,446 ------------ AEROSPACE/DEFENSE: 1.6% 7,500 Boeing Co. 230,025 1,700 General Dynamics Corp. 113,594 500 Goodrich Corp. 9,135 9,550 Lockheed Martin Corp. 443,311 1,546 Northrop Grumman Corp. 135,970 3,450 Raytheon Co. 110,538 1,650 Rockwell Collins, Inc. 37,917 3,950 United Technologies Corp. 269,588 ------------ 1,350,078 ------------ AGRICULTURE: 1.0% 17,700 Altria Group, Inc. 731,010 2,350 Monsanto Co. 47,118 1,500 UST, Inc. 52,965 ------------ 831,093 ------------ AIRLINES: 0.1% 6,600 Southwest Airlines Co. 106,062 ------------ 106,062 ------------ APPAREL: 0.4% 1,800 @ Jones Apparel Group, Inc. 52,848 1,600 Liz Claiborne, Inc. 54,224 2,250 Nike, Inc. 125,978 1,200 @ Reebok Intl. Ltd. 38,040 950 VF Corp. 36,167 ------------ 307,257 ------------ AUTO MANUFACTURERS: 0.6% 38,000 Ford Motor Co. 399,000 1,600 Paccar, Inc. 106,032 ------------ 505,032 ------------ AUTO PARTS & EQUIPMENT: 0.2% 1,000 Cooper Tire & Rubber Co. 15,890 1,850 Dana Corp. 16,483 4,500 Delphi Corp. 39,690 700 Johnson Controls, Inc. 58,275 ------------ 130,338 ------------ BANKS: 6.9% 3,100 AmSouth Bancorp 69,192 16,300 Bank of America Corp. 1,209,460 2,700 Bank of New York Co., Inc. 78,165 10,050 Bank One Corp. 375,468 4,100 BB&T Corp. 140,179 1,977 Charter One Financial, Inc. 60,219 1,500 Comerica, Inc. 69,405 1,000 First Tennessee National Corp. 46,760 8,850 FleetBoston Financial Corp. 261,694 1,900 Huntington Bancshares, Inc. 38,969 3,650 Keycorp 96,360 2,150 Marshall & Ilsley Corp. 64,500 3,700 Mellon Financial Corp. 100,529 13,100 National City Corp. 443,042 500 North Fork Bancorporation, Inc. 16,535 2,500 PNC Financial Services Group, Inc. 123,125 1,950 Regions Financial Corp. 68,328 3,000 SouthTrust Corp. 86,190 2,750 State Street Corp. 105,353 2,400 SunTrust Banks, Inc. 142,320 1,675 Union Planters Corp. 53,901 24,700 US Bancorp 585,390 17,100 Wachovia Corp. 687,078 14,450 Wells Fargo & Co. 697,935 750 Zions Bancorporation 38,265 ------------ 5,658,362 ------------ BEVERAGES: 2.7% 7,600 Anheuser-Busch Cos., Inc. 399,988 650 Brown-Forman Corp. 51,259 21,000 Coca-Cola Co. 956,970 6,300 Coca-Cola Enterprises, Inc. 118,125 100 Coors (Adolph) 5,508 3,400 Pepsi Bottling Group, Inc. 69,326 14,850 PepsiCo, Inc. 656,370 ------------ 2,257,546 ------------ BIOTECHNOLOGY: 1.0% 10,764 @ Amgen, Inc. 696,538 600 @ Biogen, Inc. 25,464 1,650 @ Chiron Corp. 72,748 1,100 @ Genzyme Corp. 52,239 ------------ 846,989 ------------ BUILDING MATERIALS: 0.2% 750 @ American Standard Cos., Inc. 55,492 1,700 Masco Corp. 41,820 900 Vulcan Materials Co. 32,976 ------------ 130,288 ------------ CHEMICALS: 1.5% 1,900 Air Products & Chemicals, Inc. 82,821 8,000 Dow Chemical Co. 254,400 8,750 Du Pont EI de Nemours & Co. 368,725 900 Eastman Chemical Co. 29,421 1,450 Ecolab, Inc. 77,938 600 Engelhard Corp. 15,090 350 Great Lakes Chemical Corp. 8,061 1,100 International Flavors & Fragrances, Inc. 34,529 1,500 PPG Industries, Inc. 72,945 1,500 Praxair, Inc. 89,985 3,500 Rohm & Haas Co. 113,505 1,700 Sherwin-Williams Co. 46,546 900 Sigma-Aldrich Corp. 47,079 ------------ 1,241,045 ------------ COMMERCIAL SERVICES: 0.6% 1,600 @ Apollo Group, Inc. 93,472 4,400 @ Concord EFS, Inc. 66,528 2,100 @ Convergys Corp. 37,548 250 Deluxe Corp. 11,743 1,700 Equifax, Inc. 43,044 1,450 H&R Block, Inc. 59,363 2,500 McKesson Corp. 75,800 See Accompanying Notes to Financial Statements 113 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMERCIAL SERVICES (CONTINUED): 3,200 Paychex, Inc. $ 97,664 1,450 @ Quintiles Transnational Corp. 20,518 500 @ Robert Half Intl., Inc. 8,475 400 RR Donnelley & Sons Co. 9,980 ------------ 524,135 ------------ COMPUTERS: 5.1% 3,750 @ Apple Computer, Inc. 67,387 1,550 @ Computer Sciences Corp. 61,535 38,250 @ Dell Computer Corp. 1,196,842 18,650 @ EMC Corp. 201,793 25,637 Hewlett-Packard Co. 499,921 17,900 International Business Machines Corp. 1,575,916 2,800 @ Lexmark Intl., Inc. 208,320 18,700 Seagate Technology, Inc. 1,496 38,800 @ Sun Microsystems, Inc. 168,004 2,700 @ Sungard Data Systems, Inc. 62,100 3,800 @ Unisys Corp. 42,902 5,900 @ Veritas Software Corp. 163,725 ------------ 4,249,941 ------------ COSMETICS/PERSONAL CARE: 3.2% 400 Alberto-Culver Co. 20,440 800 Avon Products, Inc. 48,752 4,700 Colgate-Palmolive Co. 280,214 14,550 Gillette Co. 489,026 4,400 Kimberly-Clark Corp. 228,492 17,450 Procter & Gamble Co. 1,602,259 ------------ 2,669,183 ------------ DIVERSIFIED FINANCIAL SERVICES: 8.9% 11,400 American Express Co. 474,924 1,700 Bear Stearns Cos., Inc. 131,359 3,100 Capital One Financial Corp. 149,327 4,700 Charles Schwab Corp. 45,590 44,000 Citigroup, Inc. 1,804,880 2,750 Countrywide Financial Corp. 202,537 11,750 Fannie Mae 869,500 900 Franklin Resources, Inc. 33,633 12,650 Freddie Mac 756,597 4,050 Goldman Sachs Group, Inc. 330,075 17,050 JP Morgan Chase & Co. 560,263 5,050 Lehman Brothers Holdings, Inc. 361,731 10,775 MBNA Corp. 216,039 17,050 Merrill Lynch & Co., Inc. 738,265 9,150 Morgan Stanley 418,613 3,650 @ Providian Financial Corp. 32,996 1,300 SLM Corp. 156,000 1,350 T Rowe Price Group, Inc. 49,572 ------------ 7,331,901 ------------ ELECTRIC: 2.6% 1,350 Ameren Corp. 61,425 3,300 American Electric Power Co., Inc. 95,832 3,500 Centerpoint Energy, Inc. 33,425 3,600 Cinergy Corp. 136,584 3,800 CMS Energy Corp. 30,096 1,750 Consolidated Edison, Inc. 75,232 1,400 Constellation Energy Group, Inc. 46,410 2,750 Dominion Resources, Inc. 173,250 1,450 DTE Energy Co. 62,828 7,750 Duke Energy Corp. 150,195 2,700 @ Edison Intl. 43,956 1,850 Entergy Corp. 95,626 4,650 Exelon Corp. 266,445 2,500 FirstEnergy Corp. 92,025 1,550 FPL Group, Inc. 103,028 2,000 NiSource, Inc. 39,220 3,500 @ PG&E Corp. 59,500 2,450 PPL Corp. 99,078 2,000 Progress Energy, Inc. 94,100 1,850 Public Service Enterprise Group, Inc. 79,050 6,100 Southern Co. 192,028 2,800 TXU Corp. 56,672 3,500 Xcel Energy, Inc. 53,865 ------------ 2,139,870 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 0.3% 3,450 @ American Power Conversion 53,510 3,650 Emerson Electric Co. 190,895 1,550 Molex, Inc. 42,408 ------------ 286,813 ------------ ELECTRONICS: 0.2% 1,650 Applera Corp. - Applied Biosystems Group 32,126 1,650 @ Jabil Circuit, Inc. 34,634 450 Parker Hannifin Corp. 18,194 3,850 @ Sanmina-SCI Corp. 22,022 2,300 Symbol Technologies, Inc. 30,820 800 @ Thermo Electron Corp. 16,880 1,400 @ Waters Corp. 39,704 ------------ 194,380 ------------ ENGINEERING & CONSTRUCTION: 0.0% 1,000 Fluor Corp. 35,490 ------------ 35,490 ------------ ENTERTAINMENT: 0.1% 750 @ International Game Technology 66,030 ------------ 66,030 ------------ ENVIRONMENTAL CONTROL: 0.2% 3,200 @ Allied Waste Industries, Inc. 31,616 5,050 Waste Management, Inc. 128,624 ------------ 160,240 ------------ FOOD: 2.0% 3,100 Albertson's, Inc. 64,697 5,710 Archer-Daniels-Midland Co. 68,348 4,050 Campbell Soup Co. 101,048 4,450 ConAgra Foods, Inc. 108,001 3,100 General Mills, Inc. 145,018 1,350 Hershey Foods Corp. 95,985 7,300 HJ Heinz Co. 241,411 6,100 Kellogg Co. 214,720 6,350 @ Kroger Co. 101,918 1,300 McCormick & Co., Inc. 34,970 6,600 Sara Lee Corp. 120,252 1,100 Supervalu, Inc. 21,835 5,650 Sysco Corp. 174,811 1,950 Winn-Dixie Stores, Inc. 27,573 2,000 WM Wrigley Jr Co. 113,000 ------------ 1,633,587 ------------ See Accompanying Notes to Financial Statements 114 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- FOREST PRODUCTS & PAPER: 0.2% 500 Boise Cascade Corp. $ 12,285 4,150 International Paper Co. 152,180 750 Weyerhaeuser Co. 37,785 ------------ 202,250 ------------ GAS: 0.2% 1,250 KeySpan Corp. 44,025 550 Nicor, Inc. 19,585 550 Peoples Energy Corp. 23,452 1,800 Sempra Energy 49,086 ------------ 136,148 ------------ HAND/MACHINE TOOLS: 0.1% 1,750 Black & Decker Corp. 75,793 500 Snap-On, Inc. 15,205 1,150 Stanley Works 32,154 ------------ 123,152 ------------ HEALTHCARE-PRODUCTS: 3.4% 600 Bausch & Lomb, Inc. 22,764 2,100 Becton Dickinson & Co. 84,000 2,800 Biomet, Inc. 77,000 3,550 @ Boston Scientific Corp. 184,955 900 CR Bard, Inc. 63,135 6,300 @ Guidant Corp. 266,364 25,200 Johnson & Johnson 1,369,620 10,400 Medtronic, Inc. 506,792 1,550 @ St. Jude Medical, Inc. 86,955 1,650 Stryker Corp. 111,111 1,650 @ Zimmer Holdings, Inc. 74,019 ------------ 2,846,715 ------------ HEALTHCARE-SERVICES: 1.2% 2,200 A Aetna, Inc. 126,324 2,650 @ Anthem, Inc. 194,378 750 @ Humana, Inc. 9,742 250 @ Manor Care, Inc. 5,922 4,450 UnitedHealth Group, Inc. 426,933 3,150 @ WellPoint Health Networks 268,821 ------------ 1,032,120 ------------ HOME BUILDERS: 0.2% 1,100 Centex Corp. 85,393 500 KB Home 31,250 200 Pulte Homes, Inc. 13,118 ------------ 129,761 ------------ HOME FURNISHINGS: 0.1% 2,050 Leggett & Platt, Inc. 45,244 550 Whirlpool Corp. 31,295 ------------ 76,539 ------------ HOUSEHOLD PRODUCTS/WARES: 0.2% 400 Avery Dennison Corp. 22,192 1,950 Clorox Co. 87,087 1,350 Fortune Brands, Inc. 70,740 ------------ 180,019 ------------ HOUSEWARES: 0.1% 2,200 Newell Rubbermaid, Inc. 62,700 ------------ 62,700 ------------ INSURANCE: 5.5% 3,600 @@ ACE Ltd. 131,400 10,600 Aflac, Inc. 348,846 15,350 Allstate Corp. 552,446 950 AMBAC Financial Group, Inc. 63,374 22,050 American Intl. Group 1,276,254 2,650 AON Corp. 67,999 1,500 Chubb Corp. 96,045 1,450 Cigna Corp. 81,345 600 Cincinnati Financial Corp. 22,272 2,150 Hartford Financial Services Group, Inc. 100,276 1,450 Jefferson-Pilot Corp. 61,176 2,350 John Hancock Financial Services, Inc. 71,088 1,600 Loews Corp. 76,960 4,600 Marsh & McLennan Cos., Inc. 230,598 1,250 MBIA, Inc. 62,562 6,200 Metlife, Inc. 173,414 1,000 MGIC Investment Corp. 54,020 6,750 Principal Financial Group 214,380 3,250 Progressive Corp. 234,000 4,650 Prudential Financial, Inc. 155,868 3,000 Safeco Corp. 108,420 1,250 Torchmark Corp. 48,275 8,605 Travelers Property Casualty Corp. 139,143 3,300 UnumProvident Corp. 42,570 1,100 @@ XL Capital Ltd. 95,755 ------------ 4,508,486 ------------ INTERNET: 0.7% 2,700 @ eBay, Inc. 274,617 3,200 @ Symantec Corp. 144,704 4,950 @ Yahoo!, Inc. 147,758 ------------ 567,079 ------------ IRON/STEEL: 0.0% 300 Nucor Corp. 14,292 400 United States Steel Corp. 6,300 ------------ 20,592 ------------ LEISURE TIME: 0.2% 700 Brunswick Corp. 15,365 2,850 Harley-Davidson, Inc. 120,156 ------------ 135,521 ------------ LODGING: 0.1% 950 @ Harrah's Entertainment, Inc. 38,085 1,650 Hilton Hotels Corp. 22,869 800 Marriott Intl., Inc. 31,280 ------------ 92,234 ------------ MACHINERY-CONSTRUCTION & MINING: 0.2% 3,000 Caterpillar, Inc. 156,450 ------------ 156,450 ------------ MACHINERY-DIVERSIFIED: 0.4% 5,050 Deere & Co. 220,534 1,800 Dover Corp. 54,558 2,800 Rockwell Automation, Inc. 66,220 ------------ 341,312 ------------ See Accompanying Notes to Financial Statements 115 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- MEDIA: 3.5% 37,750 @ AOL Time Warner, Inc. $ 574,555 5,250 @ Clear Channel Communications, Inc. 213,675 19,650 @ Comcast Corp. 591,662 2,300 Gannett Co., Inc. 181,700 650 Knight-Ridder, Inc. 45,786 1,800 McGraw-Hill Cos., Inc. 113,778 600 Meredith Corp. 26,382 2,650 Tribune Co. 132,182 14,950 @ Viacom, Inc. 680,524 17,800 Walt Disney Co. 349,770 ------------ 2,910,014 ------------ METAL FABRICATE/HARDWARE: 0.0% 1,200 Worthington Industries 17,916 ------------ 17,916 ------------ MINING: 0.3% 3,100 Alcoa, Inc. 76,291 1,650 Freeport-McMoRan Copper & Gold, Inc. 36,217 3,350 Newmont Mining Corp. 99,361 950 @ Phelps Dodge Corp. 34,627 ------------ 246,496 ------------ MISCELLANEOUS MANUFACTURING: 5.8% 3,400 3M Co. 429,998 750 Cooper Industries Ltd. 29,918 150 Crane Co. 3,132 1,300 Danaher Corp. 86,996 6,350 Eastman Kodak Co. 194,564 700 Eaton Corp. 58,751 110,450 General Electric Co. 3,169,915 7,450 Honeywell Intl., Inc. 195,190 2,650 Illinois Tool Works, Inc. 164,432 1,400 @@ Ingersoll-Rand Co. 61,320 800 ITT Industries, Inc. 50,128 1,050 Textron, Inc. 36,592 17,000 @@ Tyco Intl., Ltd. 300,900 ------------ 4,781,836 ------------ OFFICE/BUSINESS EQUIPMENT: 0.2% 2,100 Pitney Bowes, Inc. 80,661 8,250 @ Xerox Corp. 90,171 ------------ 170,832 ------------ OIL & GAS: 5.0% 750 Amerada Hess Corp. 36,750 3,550 Anadarko Petroleum Corp. 174,944 1,395 Apache Corp. 91,958 1,700 Burlington Resources, Inc. 90,593 9,100 ChevronTexaco Corp. 645,554 5,978 ConocoPhillips 322,633 1,950 Devon Energy Corp. 101,400 900 EOG Resources, Inc. 38,790 56,550 Exxon Mobil Corp. 2,058,420 6,300 Marathon Oil Corp. 162,099 1,200 @,@@ Nabors Industries Ltd. 54,096 600 @ Noble Corp. 21,396 4,800 Occidental Petroleum Corp. 161,952 400 @ Rowan Cos., Inc. 9,576 700 Sunoco, Inc. 25,788 1,100 @ Transocean, Inc. 25,707 4,000 Unocal Corp. 120,360 ------------ 4,142,016 ------------ OIL & GAS SERVICES: 0.2% 3,750 Halliburton Co. 89,513 2,000 Schlumberger Ltd. 97,240 ------------ 186,753 ------------ PACKAGING & CONTAINERS: 0.2% 800 Ball Corp. 39,616 500 Bemis Co. 22,890 2,300 @ Pactiv Corp. 44,965 750 @ Sealed Air Corp. 32,918 ------------ 140,389 ------------ PHARMACEUTICALS: 7.5% 13,250 Abbott Laboratories 590,287 400 AmerisourceBergen Corp. 25,076 6,700 Bristol-Myers Squibb Co. 171,520 3,950 Cardinal Health, Inc. 227,955 9,700 Eli Lilly & Co. 579,769 5,300 @ Forest Laboratories, Inc. 267,650 2,600 @ King Pharmaceuticals, Inc. 37,206 2,350 @ Medimmune, Inc. 83,308 24,350 Merck & Co., Inc. 1,353,373 67,640 Pfizer, Inc. 2,098,193 12,150 Schering-Plough Corp. 224,167 1,500 @ Watson Pharmaceuticals, Inc. 55,530 11,650 Wyeth 510,853 ------------ 6,224,887 ------------ PIPELINES: 0.1% 1,250 Kinder Morgan, Inc. 63,812 3,100 Williams Cos., Inc. 24,521 ------------ 88,333 ------------ REITS: 0.2% 1,400 Equity Office Properties Trust 37,674 2,500 Equity Residential 66,200 1,600 Simon Property Group, Inc. 60,192 ------------ 164,066 ------------ RETAIL: 6.3% 3,400 @ Autonation, Inc. 47,328 350 @ Autozone, Inc. 29,288 2,750 @ Bed Bath & Beyond, Inc. 115,060 1,200 @ Big Lots, Inc. 16,332 4,000 @ Costco Wholesale Corp. 148,200 3,900 CVS Corp. 101,790 2,050 Darden Restaurants, Inc. 40,610 1,500 Dillard's, Inc. 20,040 6,900 Dollar General Corp. 129,030 1,550 Family Dollar Stores 56,498 4,150 @ Federated Department Stores 134,875 13,350 Gap, Inc. 226,950 19,700 Home Depot, Inc. 640,053 2,150 JC Penney Co., Inc. 37,238 1,150 @ Kohl's Corp. 60,203 4,550 Limited Brands 69,433 6,750 Lowe's Cos., Inc. 285,255 1,300 May Department Stores Co. 28,197 10,850 McDonald's Corp. 203,220 See Accompanying Notes to Financial Statements 116 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- RETAIL (CONTINUED): 5,300 @ Office Depot, Inc. $ 71,020 1,300 RadioShack Corp. 31,330 10,250 @ Staples, Inc. 198,748 3,200 @ Starbucks Corp. 78,851 4,600 TJX Cos., Inc. 83,720 8,950 Walgreen Co. 275,571 37,500 Wal-Mart Stores, Inc. 1,972,875 1,000 Wendy's Intl., Inc. 30,110 2,700 @ Yum! Brands, Inc. 75,492 ------------ 5,207,317 ------------ SAVINGS & LOANS: 0.8% 1,350 Golden West Financial Corp. 105,016 13,100 Washington Mutual, Inc. 534,218 ------------ 639,234 ------------ SEMICONDUCTORS: 2.3% 3,100 @ Altera Corp. 59,768 3,100 @ Analog Devices, Inc. 119,505 5,650 @ Applied Materials, Inc. 87,914 1,000 @ Broadcom Corp. 24,480 56,150 Intel Corp. 1,170,166 2,600 Linear Technology Corp. 94,536 3,350 @ LSI Logic Corp. 21,440 2,800 Maxim Integrated Products 109,788 1,250 @ Novellus Systems, Inc. 43,313 1,900 @ Nvidia Corp. 49,723 850 @ QLogic Corp. 42,576 2,750 @ Xilinx, Inc. 82,143 ------------ 1,905,352 ------------ SOFTWARE: 5.9% 2,300 Adobe Systems, Inc. 81,167 550 Autodesk, Inc. 8,201 5,300 Automatic Data Processing 184,970 2,000 @ BMC Software, Inc. 33,920 2,600 @ Citrix Systems, Inc. 56,758 4,800 Computer Associates Intl., Inc. 104,016 7,150 @ Compuware Corp. 43,400 1,250 @ Electronic Arts, Inc. 85,700 6,400 First Data Corp. 265,088 1,650 @ Fiserv, Inc. 54,599 2,250 IMS Health, Inc. 40,140 1,700 @ Intuit, Inc. 78,353 1,000 @ Mercury Interactive Corp. 39,310 106,350 Microsoft Corp. 2,617,273 82,500 @ Oracle Corp. 1,073,325 1,150 @ Peoplesoft, Inc. 18,814 7,500 @ Siebel Systems, Inc. 70,425 ------------ 4,855,459 ------------ TELECOMMUNICATIONS: 6.3% 2,600 Alltel Corp. 124,488 1,350 @ Andrew Corp. 13,419 14,860 AT&T Corp. 289,621 20,650 @ AT&T Wireless Services, Inc. 160,451 21,100 BellSouth Corp. 559,361 1,500 CenturyTel, Inc. 50,505 4,250 @ CIENA Corp. 24,437 79,200 @ Cisco Systems, Inc. 1,289,376 2,200 @ Citizens Communications Co. 27,104 2,850 @ Comverse Technology, Inc. 43,349 19,400 @ JDS Uniphase Corp. 75,078 14,900 @ Lucent Technologies, Inc. 32,929 7,800 Motorola, Inc. 66,456 19,850 @ Nextel Communications, Inc. 297,552 7,000 Qualcomm, Inc. 235,060 24,950 SBC Communications, Inc. 635,227 1,950 Scientific-Atlanta, Inc. 38,396 7,450 Sprint Corp.-FON Group 101,022 3,100 @ Tellabs, Inc. 24,614 29,150 Verizon Communications, Inc. 1,103,328 ------------ 5,191,773 ------------ TEXTILES: 0.1% 1,450 Cintas Corp. 53,679 ------------ 53,679 ------------ TOYS/GAMES/HOBBIES: 0.3% 2,000 Hasbro, Inc. 32,020 9,150 Mattel, Inc. 196,816 ------------ 228,836 ------------ TRANSPORTATION: 2.0% 3,100 Burlington Northern Santa Fe Corp. 91,481 4,350 FedEx Corp. 278,313 3,400 Norfolk Southern Corp. 74,528 2,100 Union Pacific Corp. 128,079 17,200 United Parcel Service, Inc. 1,073,796 ------------ 1,646,197 ------------ TRUCKING & LEASING: 0.0% 600 Ryder System, Inc. 15,936 ------------ 15,936 ------------ Total Common Stock (Cost $80,736,922) 82,242,505 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $80,736,922)* 99.6% $ 82,242,505 OTHER ASSETS AND LIABILITIES-NET 0.4 347,915 ----- ------------ NET ASSETS 100.0% $ 82,590,420 ===== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt A Related Party * Cost for federal income tax purposes is $85,785,685. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 5,249,435 Gross Unrealized Depreciation (8,792,615) ------------ Net Unrealized Appreciation $ (3,543,180) ============ See Accompanying Notes to Financial Statements 117 ING Financial Services Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 95.8% BANKS: 32.9% 62,800 Alabama National Bancorp $ 3,014,400 135,200 Bank of America Corp. 10,031,840 199,300 Bank of New York Co., Inc. 5,769,735 249,300 Banknorth Group, Inc. 6,387,066 284,748 Charter One Financial, Inc. 8,673,424 54,300 Comerica, Inc. 2,512,461 175,361 Commerce Bancshares, Inc. 7,096,860 131,400 Compass Bancshares, Inc. 4,842,090 74,000 Fifth Third Bancorp 4,255,000 210,994 FleetBoston Financial Corp. 6,239,093 112,387 Interchange Financial Services 2,140,972 153,900 Keycorp 4,062,960 232,700 Mellon Financial Corp. 6,322,459 141,300 North Fork Bancorporation, Inc. 4,672,791 316,600 Prosperity Bancshares, Inc. 5,853,934 102,800 UCBH Holdings, Inc. 2,667,660 292,500 US Bancorp 6,932,250 212,600 Wells Fargo & Co. 10,268,580 ------------ 101,743,575 ------------ DIVERSIFIED FINANCIAL SERVICES: 30.9% 124,100 @ Affiliated Managers Group 6,825,500 207,940 Alliance Capital Management Holding LP 7,277,900 95,000 American Express Co. 3,957,700 201,000 CIT Group, Inc. 4,821,990 411,200 Citigroup, Inc. 16,867,424 90,600 Fannie Mae 6,704,400 160,000 Freddie Mac 9,569,600 100,500 Goldman Sachs Group, Inc. 8,190,750 118,200 Janus Capital Group, Inc. 1,838,010 160,500 JP Morgan Chase & Co. 5,274,030 154,200 Lehman Brothers Holdings, Inc. 11,045,346 120,600 Merrill Lynch & Co., Inc. 5,221,980 168,700 Morgan Stanley 7,718,025 ------------ 95,312,655 ------------ HOME BUILDERS: 3.3% 385,800 DR Horton, Inc. 10,142,682 ------------ 10,142,682 ------------ INSURANCE: 27.1% 211,000 @@ ACE Ltd. 7,701,500 121,200 Aflac, Inc. 3,988,692 276,040 American Intl. Group 15,977,195 107,100 Delphi Financial Group 4,918,032 191,300 Hartford Financial Services Group, Inc. 8,922,232 104,700 Marsh & McLennan Cos., Inc. 5,248,611 202,700 Metlife, Inc. 5,669,519 268,700 PMI Group, Inc. 8,238,342 98,000 Prudential Financial, Inc. 3,284,960 184,600 Radian Group, Inc. 7,433,842 42,100 @@ Scottish Annuity & Life Holdings Ltd. 802,426 410,149 Travelers Property Casualty Corp. 6,691,518 57,200 @@ XL Capital Ltd. 4,979,260 ------------ 83,856,129 ------------ SAVINGS & LOANS: 1.6% 123,325 Washington Mutual, Inc. 5,029,194 ------------ 5,029,194 ------------ Total Common Stock (Cost $277,340,548) 296,084,235 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 5.3% REPURCHASE AGREEMENT: 5.3% $16,339,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $16,340,539 to be received upon repurchase (Collateralized by $13,675,000 U.S. Treasury Bonds, 6.000%, Market Value $16,667,268, due 02/15/26) $ 16,339,000 ------------ Total Short-Term Investments (Cost $16,339,000) 16,339,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $293,679,548)* 101.1% $312,423,235 OTHER ASSETS AND LIABILITIES-NET (1.1) (3,448,574) ----- ------------ NET ASSETS 100.0% $308,974,661 ===== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $293,844,313. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 40,659,571 Gross Unrealized Depreciation (22,080,649) ------------ Net Unrealized Appreciation $ 18,578,922 ============ See Accompanying Notes to Financial Statements 118 ING Large Company Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 97.0% AEROSPACE/DEFENSE: 2.0% 41,000 General Dynamics Corp. $ 2,739,620 ------------ 2,739,620 ------------ AGRICULTURE: 3.8% 125,715 Altria Group, Inc. 5,192,030 ------------ 5,192,030 ------------ APPAREL: 1.4% 35,000 Nike, Inc. 1,959,650 ------------ 1,959,650 ------------ AUTO MANUFACTURERS: 2.0% 259,400 Ford Motor Co. 2,723,700 ------------ 2,723,700 ------------ BANKS: 5.6% 50,200 Bank of America Corp. 3,724,840 82,500 Wells Fargo & Co. 3,984,750 ------------ 7,709,590 ------------ BUILDING MATERIALS: 1.6% 90,100 Masco Corp. 2,216,460 ------------ 2,216,460 ------------ CHEMICALS: 3.7% 100,700 Dow Chemical Co. 3,202,260 32,900 Praxair, Inc. 1,973,671 ------------ 5,175,931 ------------ COMPUTERS: 2.1% 146,074 Hewlett-Packard Co. 2,848,443 ------------ 2,848,443 ------------ DIVERSIFIED FINANCIAL SERVICES: 15.1% 67,200 Fannie Mae 4,972,800 84,900 Freddie Mac 5,077,869 114,800 JP Morgan Chase & Co. 3,772,328 82,500 Merrill Lynch & Co., Inc. 3,572,250 75,500 Morgan Stanley 3,454,125 ------------ 20,849,372 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 1.9% 49,300 Emerson Electric Co. 2,578,390 ------------ 2,578,390 ------------ ELECTRONICS: 3.3% 229,000 @@ Koninklijke Philips Electronics NV 4,502,140 ------------ 4,502,140 ------------ FOOD: 5.3% 73,700 @@ Nestle SA ADR 3,876,620 57,700 @@ Unilever NV 3,375,450 ------------ 7,252,070 ------------ FOREST PRODUCTS & PAPER: 1.9% 72,100 International Paper Co. 2,643,907 ------------ 2,643,907 ------------ HEALTHCARE-PRODUCTS: 2.1% 72,000 Beckman Coulter, Inc. 2,926,800 ------------ 2,926,800 ------------ HEALTHCARE-SERVICES: 2.5% 204,600 @ Tenet Healthcare Corp. 3,414,774 ------------ 3,414,774 ------------ INSURANCE: 6.9% 69,800 American Intl. Group 4,040,024 83,000 John Hancock Financial Services, Inc. 2,510,750 107,700 Metlife, Inc. 3,012,369 ------------ 9,563,143 ------------ MEDIA: 1.4% 24,600 Gannett Co., Inc. 1,943,400 ------------ 1,943,400 ------------ MISCELLANEOUS MANUFACTURING: 3.4% 178,500 Honeywell Intl., Inc. 4,676,700 ------------ 4,676,700 ------------ OIL & GAS: 13.7% 72,900 Anadarko Petroleum Corp. 3,592,512 109,900 @@ BP PLC ADR 4,603,711 61,500 ChevronTexaco Corp. 4,362,810 104,500 Exxon Mobil Corp. 3,803,800 56,300 @@ Royal Dutch Petroleum Co. 2,564,465 ------------ 18,927,298 ------------ PHARMACEUTICALS: 4.0% 122,700 Bristol-Myers Squibb Co. 3,141,120 43,700 Merck & Co., Inc. 2,428,846 ------------ 5,569,966 ------------ RETAIL: 3.2% 82,300 May Department Stores Co. 1,785,087 136,900 McDonald's Corp. 2,564,137 ------------ 4,349,224 ------------ SAVINGS & LOANS: 2.9% 98,200 Washington Mutual, Inc. 4,004,596 ------------ 4,004,596 ------------ TELECOMMUNICATIONS: 4.7% 118,400 SBC Communications, Inc. 3,014,464 91,600 Verizon Communications, Inc. 3,467,060 ------------ 6,481,524 ------------ TRANSPORTATION: 2.5% 53,100 FedEx Corp. 3,397,338 ------------ 3,397,338 ------------ Total Common Stock (Cost $135,939,259) 133,646,066 ------------ See Accompanying Notes to Financial Statements 119 ING Large Company Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 3.0% REPURCHASE AGREEMENT: 3.0% $ 4,169,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $4,169,393 to be received upon repurchase (Collateralized by $3,405,000 U.S. Treasury Bonds, 6.125%, Market Value $4,253,257, due 08/15/29) $ 4,169,000 ------------ Total Short-Term Investments (Cost $4,169,000) 4,169,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $140,108,259)* 100.0% $137,815,066 OTHER ASSETS AND LIABILITIES-NET 0.0 16,586 ----- ------------ NET ASSETS 100.0% $137,831,652 ===== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 6,106,187 Gross Unrealized Depreciation (8,399,380) ------------ Net Unrealized Depreciation $ (2,293,193) ============ See Accompanying Notes to Financial Statements 120 ING MagnaCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 98.9% AEROSPACE/DEFENSE: 2.6% 89,900 General Dynamics Corp. $ 6,007,118 ------------ 6,007,118 ------------ AGRICULTURE: 3.8% 211,100 Altria Group, Inc. 8,718,430 ------------ 8,718,430 ------------ APPAREL: 1.4% 58,800 Nike, Inc. 3,292,212 ------------ 3,292,212 ------------ AUTO MANUFACTURERS: 2.0% 435,700 Ford Motor Co. 4,574,850 ------------ 4,574,850 ------------ BANKS: 5.6% 84,400 Bank of America Corp. 6,262,480 138,700 Wells Fargo & Co. 6,699,210 ------------ 12,961,690 ------------ BUILDING MATERIALS: 1.6% 151,500 Masco Corp. 3,726,900 ------------ 3,726,900 ------------ CHEMICALS: 3.9% 169,100 Dow Chemical Co. 5,377,380 61,100 Praxair, Inc. 3,665,389 ------------ 9,042,769 ------------ COMPUTERS: 3.1% 370,282 Hewlett-Packard Co. 7,220,499 ------------ 7,220,499 ------------ DIVERSIFIED FINANCIAL SERVICES: 15.0% 112,800 Fannie Mae 8,347,200 142,700 Freddie Mac 8,534,887 187,700 JP Morgan Chase & Co. 6,167,822 127,900 Merrill Lynch & Co., Inc. 5,538,070 132,700 Morgan Stanley 6,071,025 ------------ 34,659,004 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 2.5% 110,000 Emerson Electric Co. 5,753,000 ------------ 5,753,000 ------------ FOOD: 4.7% 119,600 @@ Nestle SA ADR 6,290,960 79,600 @@ Unilever NV 4,656,600 ------------ 10,947,560 ------------ FOREST PRODUCTS & PAPER: 1.9% 121,200 @ International Paper Co. 4,444,404 ------------ 4,444,404 ------------ HEALTHCARE-PRODUCTS: 2.3% 211,700 Baxter Intl., Inc. 5,364,478 ------------ 5,364,478 ------------ HEALTHCARE-SERVICES: 2.2% 298,700 Tenet Healthcare Corp. 4,985,303 ------------ 4,985,303 ------------ INSURANCE: 7.2% 121,300 American Intl. Group 7,020,844 181,000 Metlife, Inc. 5,062,570 132,300 Prudential Financial, Inc. 4,434,696 ------------ 16,518,110 ------------ MEDIA: 1.6% 45,400 Gannett Co., Inc. 3,586,600 ------------ 3,586,600 ------------ MISCELLANEOUS MANUFACTURING: 3.9% 339,400 Honeywell Intl., Inc. 8,892,280 ------------ 8,892,280 ------------ OIL & GAS: 13.0% 129,000 Anadarko Petroleum Corp. 6,357,120 89,600 ChevronTexaco Corp. 6,356,224 108,000 ConocoPhillips 5,828,760 219,600 Exxon Mobil Corp. 7,993,440 90,000 @ Valero Energy Corp. 3,375,000 ------------ 29,910,544 ------------ PHARMACEUTICALS: 4.2% 219,900 Bristol-Myers Squibb Co. 5,629,440 73,400 Merck & Co., Inc. 4,079,572 ------------ 9,709,012 ------------ RETAIL: 3.4% 142,400 May Department Stores Co. 3,088,656 259,400 McDonald's Corp. 4,858,562 ------------ 7,947,218 ------------ SAVINGS & LOANS: 3.0% 168,500 Washington Mutual, Inc. 6,871,430 ------------ 6,871,430 ------------ SEMICONDUCTORS: 2.7% 300,000 Intel Corp. 6,252,000 ------------ 6,252,000 ------------ TELECOMMUNICATIONS: 4.9% 199,000 SBC Communications, Inc. 5,066,540 163,000 Verizon Communications, Inc. 6,169,550 ------------ 11,236,090 ------------ TRANSPORTATION: 2.4% 87,000 FedEx Corp. 5,566,260 ------------ 5,566,260 ------------ Total Common Stock (Cost $228,197,344) 228,187,761 ------------ See Accompanying Notes to Financial Statements 121 ING MagnaCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 1.9% REPURCHASE AGREEMENT: 1.9% $ 4,312,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $4,312,406 to be received upon repurchase (Collateralized by $2,960,000 U.S. Treasury Bond, 8.125%, Market Value $4,402,926, due 08/15/21) $ 4,312,000 ------------ Total Short-Term Investments (Cost $4,312,000) 4,312,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $232,509,344)* 100.8% $232,499,761 OTHER ASSETS AND LIABILITIES-NET (0.8) (1,745,973) ----- ------------ NET ASSETS 100.0% $230,753,788 ===== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is $232,815,864. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 13,158,509 Gross Unrealized Depreciation (13,474,612) ------------ Net Unrealized Depreciation $ (316,103) ============ See Accompanying Notes to Financial Statements 122 ING MidCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 95.3% AGRICULTURE: 8.0% 51,140 Loews Corp. - Carolina Group $ 1,286,682 25,550 R.J. Reynolds Tobacco Holdings, Inc. 871,000 28,340 UST, Inc. 1,000,685 ------------ 3,158,367 ------------ AIRLINES: 3.3% 97,780 @ AMR Corp. 619,925 47,300 Delta Air Lines, Inc. 631,928 ------------ 1,251,853 ------------ APPAREL: 1.3% 58,380 @,@@ Tommy Hilfiger Corp. 496,230 ------------ 496,230 ------------ AUTO PARTS & EQUIPMENT: 5.3% 72,600 Delphi Corp. 640,332 126,240 Goodyear Tire & Rubber Co. 823,085 105,000 Visteon Corp. 645,750 ------------ 2,109,167 ------------ BUILDING MATERIALS: 0.8% 12,690 York Intl. Corp. 328,544 ------------ 328,544 ------------ CHEMICALS: 4.1% 33,030 Great Lakes Chemical Corp. 760,681 30,970 Sherwin-Williams Co. 847,959 ------------ 1,608,640 ------------ COMMERCIAL SERVICES: 1.9% 185,000 @ Service Corp. Intl. 769,600 ------------ 769,600 ------------ COMPUTERS: 7.7% 252,000 @ Gateway, Inc. 841,680 39,850 @ NCR Corp. 999,040 106,490 @ Unisys Corp. 1,202,272 ------------ 3,042,992 ------------ DIVERSIFIED FINANCIAL SERVICES: 3.7% 61,500 CIT Group, Inc. 1,475,385 ------------ 1,475,385 ------------ ELECTRIC: 8.4% 43,680 Alliant Energy Corp. 872,726 46,550 @ Edison Intl. 757,834 162,000 @ Mirant Corp. 560,520 42,770 @ PG&E Corp. 727,090 70,740 @ Sierra Pacific Resources 381,996 ------------ 3,300,166 ------------ ELECTRONICS: 2.5% 249,000 @ Solectron Corp. 996,000 ------------ 996,000 ------------ FOOD: 8.2% 113,100 @ Del Monte Foods Co. 1,031,472 61,500 @ Smithfield Foods, Inc. 1,290,885 97,400 Tyson Foods, Inc. 925,300 ------------ 3,247,657 ------------ HEALTHCARE-SERVICES: 0.1% 105,000 @ Healthsouth Corp. 31,500 ------------ 31,500 ------------ HOME FURNISHINGS: 2.0% 32,820 Maytag Corp. 802,777 ------------ 802,777 ------------ HOUSEHOLD PRODUCTS/WARES: 2.6% 37,180 @ American Greetings 659,201 24,110 Tupperware Corp. 382,867 ------------ 1,042,068 ------------ INSURANCE: 10.6% 20,050 @ Allmerica Financial Corp. 351,076 6,060 American National Insurance 518,978 32,380 @ CNA Financial Corp. 786,186 35,030 Mony Group, Inc. 932,148 32,100 Nationwide Financial Services 1,035,546 64,770 Phoenix Cos., Inc. 544,716 ------------ 4,168,650 ------------ IRON/STEEL: 2.2% 54,450 United States Steel Corp. 857,588 ------------ 857,588 ------------ OFFICE/BUSINESS EQUIPMENT: 2.4% 84,960 @ Xerox Corp. 928,613 ------------ 928,613 ------------ PIPELINES: 2.9% 66,700 Aquila, Inc. 184,759 112,400 EL Paso Corp. 977,880 ------------ 1,162,639 ------------ RETAIL: 5.7% 57,000 Dillard's, Inc. 761,520 15,000 May Department Stores Co. 325,350 101,190 @ Toys R US, Inc. 1,177,852 ------------ 2,264,722 ------------ SEMICONDUCTORS: 1.9% 67,400 @ Micron Technology, Inc. 762,968 ------------ 762,968 ------------ TELECOMMUNICATIONS: 8.4% 211,460 @ Avaya, Inc. 1,399,865 360,110 @ Lucent Technologies, Inc. 795,843 143,430 @ Tellabs, Inc. 1,138,834 ------------ 3,334,542 ------------ TOYS/GAMES/HOBBIES: 1.3% 31,180 Hasbro, Inc. 499,192 ------------ 499,192 ------------ Total Common Stock (Cost $45,138,971) 37,639,860 ------------ See Accompanying Notes to Financial Statements 123 ING MidCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 4.5% REPURCHASE AGREEMENT: 4.5% $ 1,767,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $1,767,166 to be received upon repurchase (Collateralized by $1,480,000 U.S. Treasury Bonds, 6.000%, Market Value $1,803,843, due 02/15/26) $ 1,767,000 ------------ Total Short-Term Investments (Cost $1,767,000) 1,767,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $46,905,971)* 99.8% $ 39,406,860 OTHER ASSETS AND LIABILITIES-NET 0.2 70,011 ----- ------------ NET ASSETS 100.0% $ 39,476,871 ===== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is the same as for fi- nancial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 3,053,847 Gross Unrealized Depreciation (10,552,958) ------------ Net Unrealized Depreciation $ (7,499,111) ============ See Accompanying Notes to Financial Statements 124 ING SmallCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 99.0% APPAREL: 7.1% 40,000 @ Nautica Enterprises, Inc. $ 422,000 60,000 Stride Rite Corp. 540,000 81,830 @,@@ Tommy Hilfiger Corp. 695,555 89,300 @ Vans, Inc. 623,314 ------------ 2,280,869 ------------ AUTO PARTS & EQUIPMENT: 6.6% 27,600 Cooper Tire & Rubber Co. 438,564 176,399 Goodyear Tire & Rubber Co. 1,150,121 83,800 Visteon Corp. 515,370 ------------ 2,104,055 ------------ BUILDING MATERIALS: 1.5% 18,650 York Intl. Corp. 482,848 ------------ 482,848 ------------ CHEMICALS: 8.9% 22,570 @ Cytec Industries, Inc. 747,067 25,600 Great Lakes Chemical Corp. 589,568 9,490 Lubrizol Corp. 302,731 118,390 PolyOne Corp. 589,582 56,240 Wellman, Inc. 632,700 ------------ 2,861,648 ------------ COMMERCIAL SERVICES: 5.7% 34,630 Kelly Services, Inc. 858,477 233,510 @ Service Corp. Intl. 971,402 ------------ 1,829,879 ------------ COMPUTERS: 2.5% 234,700 @ Gateway, Inc. 783,898 ------------ 783,898 ------------ ELECTRIC: 1.1% 66,940 @ Sierra Pacific Resources 361,476 ------------ 361,476 ------------ ELECTRICAL EQUIPMENT: 3.8% 59,850 Belden, Inc. 813,960 32,700 @ Rayovac Corp. 411,693 ------------ 1,225,653 ------------ ELECTRONICS: 4.9% 104,560 @ Kemet Corp. 1,056,056 87,400 @ Sanmina-SCI Corp. 499,928 ------------ 1,555,984 ------------ FOOD: 4.2% 56,830 @ Del Monte Foods Co. 518,290 18,120 Sensient Technologies Corp. 410,237 19,800 @ Smithfield Foods, Inc. 415,602 ------------ 1,344,129 ------------ HAND/MACHINE TOOLS: 1.5% 38,420 Starrett (L.S.) Co. 491,008 ------------ 491,008 ------------ HEALTHCARE-SERVICES: 4.1% 28,400 @ Orthodontic Centers of America 225,780 27,940 @ Pacificare Health Systems 1,080,132 ------------ 1,305,912 ------------ HOME BUILDERS: 4.0% 119,190 @ Fleetwood Enterprises, Inc. 908,228 81,300 @ National RV Holdings, Inc. 386,175 ------------ 1,294,403 ------------ HOUSEHOLD PRODUCTS/WARES: 4.2% 48,320 @ American Greetings 856,714 31,460 Tupperware Corp. 499,585 ------------ 1,356,299 ------------ HOUSEWARES: 1.1% 10,450 National Presto Industries, Inc. 337,849 ------------ 337,849 ------------ INSURANCE: 5.6% 15,000 @ Allmerica Financial Corp. 262,650 3,560 American National Insurance 304,878 8,420 Landamerica Financial Group, Inc. 397,003 13,500 Mony Group, Inc. 359,235 54,010 Phoenix Cos., Inc. 454,224 ------------ 1,777,990 ------------ IRON/STEEL: 6.0% 117,480 Ryerson Tull, Inc. 1,039,698 56,540 United States Steel Corp. 890,505 ------------ 1,930,203 ------------ LEISURE TIME: 2.4% 78,250 @ K2, Inc. 753,548 ------------ 753,548 ------------ MACHINERY-DIVERSIFIED: 2.1% 18,060 Tecumseh Products Co. 666,595 ------------ 666,595 ------------ METAL FABRICATE/HARDWARE: 4.4% 23,100 Precision Castparts Corp. 675,675 124,620 @ Wolverine Tube, Inc. 735,258 ------------ 1,410,933 ------------ MINING: 1.4% 102,500 @ Stillwater Mining Co. 438,700 ------------ 438,700 ------------ MISCELLANEOUS MANUFACTURING: 2.5% 45,730 Trinity Industries, Inc. 791,129 ------------ 791,129 ------------ OIL & GAS SERVICES: 1.0% 708,470 @ Seitel, Inc. 311,727 ------------ 311,727 ------------ RETAIL: 1.7% 10,110 Blair Corp. 214,332 24,400 Dillard's, Inc. 325,984 ------------ 540,316 ------------ SOFTWARE: 0.8% 68,000 @ Midway Games, Inc. 240,040 ------------ 240,040 ------------ See Accompanying Notes to Financial Statements 125 ING SmallCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 6.9% 190,980 @ Avaya, Inc. $ 1,264,287 62,770 @ Comverse Technology, Inc. 954,731 ------------ 2,219,018 ------------ TOYS/GAMES/HOBBIES: 3.0% 59,290 Hasbro, Inc. 949,233 ------------ 949,233 ------------ Total Common Stock (Cost $35,044,019) 31,645,342 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 1.1% REPURCHASE AGREEMENT: 1.1% $ 349,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $349,033 to be received upon repurchase (Collateralized by $295,000 U.S. Treasury Bonds, 6.000%, Market Value $359,550, due 02/15/26) $ 349,000 ------------ Total Short-Term Investments (Cost $349,000) 349,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $35,393,019)* 100.1% $ 31,994,342 OTHER ASSETS AND LIABILITIES-NET (0.1) (17,352) ----- ------------ NET ASSETS 100.0% $ 31,976,990 ===== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $35,753,868. Net un- realized depreciation consists of: Gross Unrealized Appreciation $ 3,759,747 Gross Unrealized Depreciation (7,519,271) ------------ Net Unrealized Depreciation $ (3,759,526) ============ See Accompanying Notes to Financial Statements 126 ING Tax Efficient Equity Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 96.2% AIRLINES: 2.3% 47,100 Southwest Airlines Co. $ 756,897 ------------ 756,897 ------------ BANKS: 4.0% 9,600 Bank of America Corp. 712,320 12,500 Wells Fargo & Co. 603,750 ------------ 1,316,070 ------------ BEVERAGES: 1.6% 10,200 Anheuser-Busch Cos., Inc. 536,826 ------------ 536,826 ------------ CHEMICALS; 2.0% 11,000 Praxair, Inc. 659,890 ------------ 659,890 ------------ COMPUTERS: 4.4% 32,300 Hewlett-Packard Co. 629,850 9,100 International Business Machines Corp. 801,164 ------------ 1,431,014 ------------ DIVERSIFIED FINANCIAL SERVICES: 6.7% 21,733 Citigroup, Inc. 891,488 8,200 Fannie Mae 606,800 8,500 Goldman Sachs Group, Inc. 692,750 ------------ 2,191,038 ------------ HEALTHCARE-PRODUCTS: 1.9% 13,000 Medtronic, Inc. 633,490 ------------ 633,490 ------------ HEALTHCARE-SERVICES: 1.4% 14,100 @ Laboratory Corp. of America Holdings 453,315 ------------ 453,315 ------------ HOUSEHOLD PRODUCTS/WARES: 1.7% 12,500 Clorox Co. 558,250 ------------ 558,250 ------------ INSURANCE: 7.9% 9,700 American Intl. Group 561,436 9,400 Chubb Corp. 601,882 18,800 Lincoln National Corp. 654,240 47,095 Travelers Property Casualty Corp. 769,061 ------------ 2,586,619 ------------ MACHINERY-CONSTRUCTION & MINING: 2.0% 12,500 Caterpillar, Inc. 651,875 ------------ 651,875 ------------ MEDIA: 8.1% 25,000 @ Comcast Corp. 720,500 25,700 @ Univision Communications, Inc. 767,145 9,490 @ Viacom, Inc. 431,985 35,200 Walt Disney Co. 691,680 ------------ 2,611,310 ------------ MINING: 4.0% 25,000 Freeport-McMoRan Copper & Gold, Inc. 548,750 20,000 @ Phelps Dodge Corp. 729,000 ------------ 1,277,750 ------------ MISCELLANEOUS MANUFACTURING: 11.1% 4,500 3M Co. 569,115 16,500 Eastman Kodak Co. 505,560 24,000 General Electric Co. 688,800 15,200 Honeywell Intl., Inc. 398,240 15,200 @@ Ingersoll-Rand Co. 665,760 42,600 @@ Tyco Intl. Ltd. 754,020 ------------ 3,581,495 ------------ OIL & GAS SERVICES: 6.0% 22,600 Baker Hughes, Inc. 746,930 15,100 Schlumberger Ltd. 734,162 10,600 @ Weatherford Intl. Ltd. 480,710 ------------ 1,961,802 ------------ PHARMACEUTICALS: 10.1% 10,500 Abbott Laboratories 467,775 6,400 @ Barr Laboratories, Inc. 337,600 10,200 @,@@ Biovail Corp. 475,728 10,000 Eli Lilly & Co. 597,700 20,800 Pfizer, Inc. 645,216 17,100 Wyeth 749,835 ------------ 3,273,854 ------------ RETAIL: 4.1% 13,300 @ Costco Wholesale Corp. 492,765 25,700 Gap, Inc. 436,900 12,600 Home Depot, Inc. 409,374 ------------ 1,339,039 ------------ SEMICONDUCTORS: 5.5% 30,800 @ Applied Materials, Inc. 479,248 35,000 Intel Corp. 729,400 28,200 Texas Instruments, Inc. 578,100 ------------ 1,786,748 ------------ SOFTWARE: 3.8% 23,600 Microsoft Corp. 580,796 50,000 @ Oracle Corp. 650,500 ------------ 1,231,296 ------------ TELECOMMUNICATIONS: 5.9% 45,000 @ Cisco Systems, Inc. 732,600 37,500 @@ Nokia OYJ ADR 676,500 15,000 Qualcomm, Inc. 503,700 ------------ 1,912,800 ------------ TRANSPORTATION: 1.7% 9,000 Union Pacific Corp. 548,910 ------------ 548,910 ------------ Total Common Stock (Cost $31,733,177) 31,300,288 ------------ See Accompanying Notes to Financial Statements 127 ING Tax Efficient Equity Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 3.2% REPURCHASE AGREEMENT 3.2% $ 1,049,000 State Street Repurchase Agreement dated 05/30/03, 1.250%, due 06/02/03, $1,049,109 to be received upon repurchase (Collateralized by $855,000 FNMA, 6.875%, Market Value $1,072,757, due 09/15/10) $ 1,049,000 ------------ Total Short-Term Investments (Cost $1,049,000) 1,049,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $32,782,177)* 99.4% $ 32,349,288 OTHER ASSETS AND LIABILITIES-NET 0.6 191,554 ----- ------------ NET ASSETS 100.0% $ 32,540,842 ===== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is $33,526,914. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 1,777,773 Gross Unrealized Depreciation (2,955,399) ------------ Net Unrealized Depreciation $ (1,177,626) ============ See Accompanying Notes to Financial Statements 128 ING Convertible Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 5.6% AEROSPACE/DEFENSE: 0.4% 85,000 @ Titan Corp. $ 738,650 ------------ 738,650 ------------ FOOD: 0.7% 27,905 @ Dean Foods Co. 1,276,653 ------------ 1,276,653 ------------ HEALTHCARE-SERVICES: 1.0% 90,000 @ Community Health Systems, Inc. 1,874,700 ------------ 1,874,700 ------------ MISCELLANEOUS MANUFACTURING: 0.5% 36,000 General Electric Co. 1,033,200 ------------ 1,033,200 ------------ PHARMACEUTICALS: 0.4% 15,000 Cardinal Health, Inc. 865,650 ------------ 865,650 ------------ RETAIL: 0.9% 60,000 Wendy's International, Inc. 1,806,600 ------------ 1,806,600 ------------ SOFTWARE: 0.8% 10,000 @ Electronic Arts, Inc. 685,600 138,600 @ MSC.Software Corp. 941,094 ------------ 1,626,694 ------------ TELECOMMUNICATIONS: 0.9% 53,000 Qualcomm, Inc. 1,779,740 ------------ 1,779,740 ------------ Total Common Stock (Cost $10,913,959) 11,001,887 ------------ Principal Amount Value - -------------------------------------------------------------------------------- CONVERTIBLE BONDS: 70.1% ADVERTISING: 1.8% $ 992,000 # Interpublic Group of Cos., Inc., 4.500%, due 03/15/23 $ 1,442,120 2,000,000 Young & Rubicam, Inc., 3.000%, due 01/15/05 1,987,500 ------------ 3,429,620 ------------ AGRICULTURE: 0.9% 1,490,000 # Bunge Ltd. Finance Corp., 3.750%, due 11/15/22 1,709,775 ------------ 1,709,775 ------------ AIRLINES: 0.5% 992,000 # Alaska Air Group, Inc., 3.786%, due 03/21/23 1,046,560 ------------ 1,046,560 ------------ AUTO PARTS & EQUIPMENT: 1.4% 6,000,000 Lear Corp., 4.890%, due 02/20/22 2,790,000 ------------ 2,790,000 ------------ BIOTECHNOLOGY: 4.1% 3,300,000 Amgen, Inc., 1.250%, due 03/01/32 2,615,250 5,511,000 Millennium Pharmaceuticals, Inc., 5.500%, due 01/15/07 5,283,671 ------------ 7,898,921 ------------ COMPUTERS: 2.1% 2,004,000 #,@@ ASML Holding NV, 4.250%, due 11/30/04 2,006,605 1,000,000 @@ ASML Holding NV, 4.250%, due 11/30/04 1,001,300 990,000 # Electronics for Imaging, 1.500%, due 06/01/23 990,000 ------------ 3,997,905 ------------ DISTRIBUTION/WHOLESALE: 1.8% 4,000,000 Costco Wholesale Corp., 1.180%, due 08/19/17 3,420,000 ------------ 3,420,000 ------------ ELECTRIC: 5.8% 2,000,000 Calpine Corp., 4.000%, due 12/26/06 1,622,500 495,000 # Centerpoint Energy, Inc., 3.750%, due 05/15/23 561,825 1,980,000 Duke Energy Corp., 1.750%, due 05/15/23 2,069,100 4,000,000 Mirant Corp., 2.500%, due 06/15/21 2,900,000 3,960,000 # PPL Energy Supply LLC, 2.625%, due 05/15/23 4,123,350 ------------ 11,276,775 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 0.6% 990,000 # Wilson Greatbatch Technologies, Inc., 2.250%, due 06/15/13 1,154,588 ------------ 1,154,588 ------------ FOOD: 3.9% 4,470,000 # General Mills, Inc., 2.000%, due 10/28/22 3,263,100 4,000,000 S,@@ Koninklijke Ahold NV, 3.000%, due 09/30/03 2,054,098 1,000,000 @@ Koninklijke Numico BV, 4.250%, due 06/26/05 1,040,539 1,000,000 @@ Numico NV, 1.500%, due 09/22/04 1,189,271 ------------ 7,547,008 ------------ HEALTHCARE-SERVICES: 4.2% 3,000,000 Laboratory Corp. of America Holdings, 2.000%, due 09/11/21 2,156,250 2,000,000 Quest Diagnostics, 1.750%, due 11/30/21 2,115,000 6,000,000 Universal Health Services, Inc., 0.426%, due 06/23/20 3,832,500 ------------ 8,103,750 ------------ INSURANCE: 0.9% 1,970,000 # AmerUs Group Co., 2.000%, due 03/06/32 1,738,525 ------------ 1,738,525 ------------ See Accompanying Notes to Financial Statements 129 ING Convertible Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- LODGING: 2.5% $15,000,000 @@ Four Seasons Hotels, Inc., 4.500%, due 09/23/29 $ 4,875,000 ------------ 4,875,000 ------------ MACHINERY-DIVERSIFIED: 0.6% 1,000,000 Briggs & Stratton, 5.000%, due 05/15/06 1,136,250 ------------ 1,136,250 ------------ MEDIA: 3.1% 2,000,000 America Online, Inc., 3.000%, due 12/06/19 1,215,000 3,500,000 EchoStar Communications Corp., 4.875%, due 01/01/07 3,574,375 495,000 # Sinclair Broadcast Group, Inc., 4.875%, due 07/15/18 517,894 495,000 Sirius Satellite Radio, Inc., 3.500%, due 06/01/08 650,925 ------------ 5,958,194 ------------ METAL FABRICATE/HARDWARE: 0.3% 919,000 Shaw Group, Inc., 2.270%, due 05/01/21 590,458 ------------ 590,458 ------------ MINING: 1.5% 1,500,000 @@ Inco Ltd., 3.250%, due 03/29/21 1,021,875 1,985,000 #,@@ Inco Ltd., 1.000%, due 03/14/23 1,826,200 ------------ 2,848,075 ------------ MISCELLANEOUS MANUFACTURING: 1.1% 1,985,000 #,@@ Tyco International Group SA, 2.750%, due 01/15/18 2,131,394 ------------ 2,131,394 ------------ OIL & GAS: 7.6% 3,498,000 Devon Energy Corp., 4.900%, due 08/15/08 3,576,705 2,500,000 Kerr-McGee Corp., 5.250%, due 02/15/10 2,750,000 2,165,000 Nabors Industries, Inc., 2.530%, due 02/05/21 1,434,313 2,100,000 Parker Drilling Co., 5.500%, due 08/01/04 2,047,500 1,985,000 # Pride Intl., Inc., 3.250%, due 05/01/33 2,257,938 3,000,000 @@ Transocean, Inc., 1.500%, due 05/15/21 2,932,500 ------------ 14,998,956 ------------ OIL & GAS SERVICES: 1.0% 1,975,000 Cooper Cameron Corp., 1.750%, due 05/17/21 2,014,500 ------------ 2,014,500 ------------ PHARMACEUTICALS: 5.0% 3,000,000 Alza Corp., 3.000%, due 07/28/20 2,287,500 2,000,000 # Celgene Corp., 1.750%, due 06/01/08 2,060,000 2,000,000 Cephalon, Inc., 2.500%, due 12/15/06 1,922,500 1,000,000 Cephalon, Inc., 5.250%, due 05/01/06 1,041,250 1,985,000 # Watson Pharmaceuticals, Inc., 1.750%, due 03/15/23 2,317,488 ------------ 9,628,738 ------------ RETAIL: 2.1% 6,000,000 Duane Reade, Inc., 2.148%, due 04/16/22 3,075,000 990,000 # Triarc Cos., 5.000%, due 05/15/23 1,054,350 ------------ 4,129,350 ------------ SEMICONDUCTORS: 7.0% 3,000,000 Advanced Micro Devices, Inc., 4.750%, due 02/01/22 2,313,750 2,000,000 Analog Devices, Inc., 4.750%, due 10/01/05 2,045,000 2,475,000 #,@@ ASM International NV, 5.250%, due 05/15/10 2,666,812 3,000,000 @@ Chartered Semiconductor Manufacturing Ltd., 2.500%, due 04/02/06 3,078,750 1,000,000 # Cypress Semiconductor Corp., 1.250%, due 06/15/08 1,016,250 1,985,000 # Micron Technology, Inc., 2.500%, due 02/01/10 2,391,925 ------------ 13,512,487 ------------ SOFTWARE: 3.2% 3,500,000 BEA Systems, Inc., 4.000%, due 12/15/06 3,355,625 2,500,000 First Data Corp., 2.000%, due 03/01/08 2,856,250 ------------ 6,211,875 ------------ TELECOMMUNICATIONS: 7.1% 1,980,000 Lucent Technologies, Inc., 2.750%, due 06/15/23 1,980,000 2,000,000 Nextel Communications, Inc., 6.000%, due 06/01/11 2,100,000 3,000,000 # Nextel Partners, Inc., 1.500%, due 11/15/08 3,052,500 2,000,000 Tekelec, 3.250%, due 11/02/04 1,925,000 3,980,000 US Cellular Corp., 6.000%, due 06/15/15 1,805,925 1,985,000 # Utstarcom, Inc., 0.875%, due 03/01/08 2,863,363 ------------ 13,726,788 ------------ Total Convertible Bonds (Cost $127,437,480) 135,875,492 ------------ See Accompanying Notes to Financial Statements 130 ING Convertible Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- CORPORATE BONDS: 1.6% ENGINEERING & CONSTRUCTION: 1.1% 1,980,000 # Massey Energy Co., 4.750%, due 05/15/23 $ 2,093,850 ------------ 2,093,850 ------------ INSURANCE: 0.5% 1,000,000 American Intl. Group, 0.500%, due 05/15/07 957,500 ------------ 957,500 ------------ Total Corporate Bonds (Cost $2,913,033) 3,051,350 ------------ MUTUAL FUNDS: 3.0% EQUITY FUND: 3.0% 60,000 SPDR Trust Series 1 5,817,000 ------------ 5,817,000 ------------ Total Mutual Funds (Cost $5,309,940) 5,817,000 ------------ Shares Value - -------------------------------------------------------------------------------- PREFERRED STOCK: 17.5% AUTO MANUFACTURERS: 2.4% 55,000 @ Ford Motor Co Capital Trust II $ 2,462,350 85,000 General Motors Corp. 2,113,950 ------------ 4,576,300 ------------ DIVERSIFIED FINANCIAL SERVICES: 1.0% 88,300 @ Gabelli Asset Management, Inc. 1,951,430 ------------ 1,951,430 ------------ ENVIRONMENTAL CONTROL: 1.1% 34,700 @ Allied Waste Industries, Inc. 2,047,300 ------------ 2,047,300 ------------ FOOD: 0.7% 23,164 @ Suiza Capital Trust II 1,331,930 ------------ 1,331,930 ------------ FOREST PRODUCTS & PAPER: 0.6% 25,000 International Paper Capital 1,237,500 ------------ 1,237,500 ------------ HEALTHCARE-SERVICES: 1.2% 25,000 @ Anthem, Inc. 2,232,500 ------------ 2,232,500 ------------ INSURANCE: 5.9% 79,000 Hartford Financial Services Group, Inc. 4,105,584 20,000 Prudential Financial, Inc. 1,118,000 62,000 Reinsurance Group of America 3,357,300 118,000 Travelers Property Casualty Corp. 2,944,100 ------------ 11,524,984 ------------ MEDIA: 1.1% 19,850 # News Corp. Finance Trust II 2,123,950 ------------ 2,123,950 ------------ OIL & GAS: 0.2% 4,960 # Chesapeake Energy Corp. 323,640 ------------ 323,640 ------------ OIL & GAS SERVICES: 1.5% 57,005 @@ Weatherford Intl. Ltd. 2,992,762 ------------ 2,992,762 ------------ SAVINGS & LOANS: 1.0% 33,000 Washington Mutual, Inc. 1,930,500 ------------ 1,930,500 ------------ TELECOMMUNICATIONS: 0.5% 10,000 @ Lucent Technologies, Inc. 1,038,800 1 @,X WinStar Communications, Inc., Series A -- 51,931 @,X WinStar Communications, Inc., Series D -- ------------ 1,038,800 ------------ TRANSPORTATION: 0.3% 990 # Kansas City Southern 523,586 ------------ 523,586 ------------ Total Preferred Stock (Cost $33,346,008) 33,835,182 ------------ Total Long-Term Investments (Cost $179,920,420) 189,580,911 ------------ Pricipal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 0.9% REPURCHASE AGREEMENT: 0.9% $ 1,761,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $1,761,166 to be received upon repurchase (Collateralized by $1,605,000 U.S. Treasury Bond, 5.250%, Market Value $1,799,606, due 02/15/26) $ 1,761,000 ------------ Total Short-Term Investments (Cost $1,761,000) 1,761,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $181,681,420)* 98.7% $191,341,911 OTHER ASSETS AND LIABILITIES-NET 1.3% 2,472,134 ----- ------------ NET ASSETS 100.0% $193,814,045 ===== ============ @ Non-income producing security @@ Foreign Issuer # Securities with purchase pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Fund's Board of Trustees. X Market Value determined by ING Valuation Committee appointed by the Fund's Board of Directors. S Segregated securities for when-issued or delayed delivery securities held at May 31, 2003. * Cost for federal income tax purposes is $181,801,809. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 16,580,703 Gross Unrealized Depreciation (7,040,601) ------------ Net Unrealized Appreciation $ 9,540,102 ============ See Accompanying Notes to Financial Statements 131 ING Equity and Bond Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 53.8% AEROSPACE/DEFENSE: 0.6% 6,500 General Dynamics Corp. $ 434,330 ------------ 434,330 ------------ BANKS: 2.2% 10,700 Bank of America Corp. 793,940 16,700 Wells Fargo & Co. 806,610 ------------ 1,600,550 ------------ COMMERCIAL SERVICES: 0.6% 26,700 @ Cendant Corp. 448,560 ------------ 448,560 ------------ COMPUTERS: 1.8% 41,800 @ EMC Corp. 452,276 43,984 Hewlett-Packard Co. 857,688 ------------ 1,309,964 ------------ COSMETICS/PERSONAL CARE: 0.9% 12,700 Kimberly-Clark Corp. 659,511 ------------ 659,511 ------------ DIVERSIFIED FINANCIAL SERVICES: 4.3% 35,100 Citigroup, Inc. 1,439,802 5,300 Goldman Sachs Group, Inc. 431,950 13,200 JP Morgan Chase & Co. 433,752 16,800 Morgan Stanley 768,600 ------------ 3,074,104 ------------ ELECTRIC: 0.9% 96,500 @ Reliant Resources, Inc. 646,550 ------------ 646,550 ------------ ELECTRICAL COMPONENT & EQUIPMENT: 0.9% 12,700 Emerson Electric Co. 664,210 ------------ 664,210 ------------ FOOD: 0.5% 19,000 Sara Lee Corp. 346,180 ------------ 346,180 ------------ FOREST PRODUCTS & PAPER: 0.7% 12,600 Bowater, Inc. 493,794 ------------ 493,794 ------------ HEALTHCARE-SERVICES: 1.3% 11,000 @ WellPoint Health Networks 938,740 ------------ 938,740 ------------ INSURANCE: 7.7% 8,000 American Intl. Group 463,040 10,100 Chubb Corp. 646,703 16,900 Cigna Corp. 948,090 20,800 Hartford Financial Services Group, Inc. 970,112 19,500 Loews Corp. 937,950 16,000 St. Paul Cos. 585,280 60,450 Travelers Property Casualty Corp. 987,149 ------------ 5,538,324 ------------ MEDIA: 3.2% 38,400 @ AOL Time Warner, Inc. 584,448 22,300 @ Comcast Corp. 671,453 13,300 @ Viacom, Inc. 605,416 21,200 Walt Disney Co. 416,580 ------------ 2,277,897 ------------ MINING: 2.3% 47,900 Alcoa, Inc. 1,178,819 23,600 Freeport-McMoRan Copper & Gold, Inc. 518,020 ------------ 1,696,839 ------------ MISCELLANEOUS MANUFACTURING: 1.7% 29,500 Honeywell Intl., Inc. 772,900 24,100 @@ Tyco International Ltd. 426,570 ------------ 1,199,470 ------------ OIL & GAS: 6.9% 8,400 Amerada Hess Corp. 411,600 16,700 Anadarko Petroleum Corp. 822,976 12,668 Apache Corp. 835,075 7,900 ChevronTexaco Corp. 560,426 12,800 ConocoPhillips 690,816 11,300 Kerr-McGee Corp. 537,654 14,700 @@ Royal Dutch Petroleum Co. 669,585 20,400 @ Transocean, Inc. 476,748 ------------ 5,004,880 ------------ OIL & GAS SERVICES: 0.7% 22,600 Halliburton Co. 539,462 ------------ 539,462 ------------ PHARMACEUTICALS: 3.8% 7,500 @ Barr Laboratories, Inc. 395,625 24,600 @ King Pharmaceuticals, Inc. 352,026 37,275 Pfizer, Inc. 1,156,271 18,400 Wyeth 806,840 ------------ 2,710,762 ------------ PIPELINES: 0.6% 52,700 EL Paso Corp. 458,490 ------------ 458,490 ------------ RETAIL: 4.5% 24,200 CVS Corp. 631,620 20,100 @ Federated Department Stores 653,250 19,000 Home Depot, Inc. 617,310 48,000 McDonald's Corp. 899,040 14,600 Sears Roebuck and Co. 437,708 ------------ 3,238,928 ------------ SAVINGS & LOANS: 1.1% 20,000 Washington Mutual, Inc. 815,600 ------------ 815,600 ------------ SEMICONDUCTORS: 0.7% 69,300 @ Advanced Micro Devices, Inc. 504,504 ------------ 504,504 ------------ See Accompanying Notes to Financial Statements 132 ING Equity and Bond Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 5.9% 56,900 @ 3Com Corp. $ 278,810 65,000 @ AT&T Wireless Services, Inc. 505,050 175,200 @ Lucent Technologies, Inc. 387,192 25,100 SBC Communications, Inc. 639,046 170,000 @ Tellabs, Inc. 1,349,800 29,848 Verizon Communications, Inc. 1,129,747 ------------ 4,289,645 ------------ Total Common Stock (Cost $42,184,668) 38,891,294 ------------ Principal Amount Value - -------------------------------------------------------------------------------- CONVERTIBLE BONDS: 0.0% TELECOMMUNICATIONS: 0.0% $ 2,000,000 #,X,@ SA Telecommunications, Inc., 10.000%, due 08/15/06 $ -- ------------ -- ------------ Total Convertible Bonds (Cost $2,000,000) -- ------------ CORPORATE BONDS: 20.9% AGRICULTURE: 0.1% 40,000 # Bunge Ltd. Finance Corp., 5.875%, due 05/15/13 41,219 ------------ 41,219 ------------ CHEMICALS: 0.8% 500,000 Dow Chemical Co., 5.750%, due 12/15/08 551,146 ------------ 551,146 ------------ DIVERSIFIED FINANCIAL SERVICES: 3.1% 500,000 Boeing Capital Corp., 7.100%, due 09/27/05 552,290 550,000 General Motors Acceptance Corp., 6.125%, due 09/15/06 577,143 900,000 # Goldman Sachs Group LP, 6.625%, due 12/01/04 968,760 120,000 #,@@ PF Export Receivables Master Trust, 3.748%, due 06/01/13 122,315 ------------ 2,220,508 ------------ ELECTRIC: 3.1% 450,000 @@ Empresa Nacional de Electricidad SA/Chile, 8.500%, due 04/01/09 473,439 450,000 Exelon Corp., 6.750%, due 05/01/11 528,105 90,000 Nisource Finance Corp., 6.150%, due 03/01/13 96,653 500,000 Progress Energy, Inc., 6.750%, due 03/01/06 556,030 500,000 @@ Tenaga Nasional BHD, 7.625%, due 04/01/11 590,479 ------------ 2,244,706 ------------ FOOD: 0.9% 450,000 ConAgra Foods, Inc., 9.750%, due 03/01/21 648,143 ------------ 648,143 ------------ INSURANCE: 0.1% 90,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 98,672 ------------ 98,672 ------------ IRON/STEEL: 0.1% 50,000 Armco, Inc., 9.000%, due 09/15/07 45,250 ------------ 45,250 ------------ MEDIA: 1.8% 40,000 AMFM, Inc., 8.000%, due 11/01/08 47,307 500,000 AOL Time Warner, Inc., 5.625%, due 05/01/05 529,746 400,000 Comcast Corp., 10.625%, due 07/15/12 523,400 100,000 Mediacom Broadband LLC, 11.000%, due 07/15/13 110,500 70,000 Time Warner, Inc., 6.950%, due 01/15/28 75,628 ------------ 1,286,581 ------------ MULTI-NATIONAL: 0.1% 100,000 @@ Corp. Andina de Fomento CAF, 5.200%, due 05/21/13 101,867 ------------ 101,867 ------------ OIL & GAS: 1.7% 400,000 Conoco, Inc., 5.900%, due 04/15/04 415,094 90,000 # Enterprise Products Partners LP, 6.875%, due 03/01/33 102,986 120,000 @@ Husky Oil Co., 8.900%, due 08/15/28 135,300 500,000 Pemex Project Funding Master Trust, 7.375%, due 12/15/14 553,750 ------------ 1,207,130 ------------ PIPELINES: 0.8% 130,000 CenterPoint Energy Resources Corp., 8.125%, due 07/15/05 140,852 400,000 Kinder Morgan, Inc., 6.500%, due 09/01/12 461,053 ------------ 601,905 ------------ SOVEREIGN: 5.0% 1,000,000 @@ Canadian Government Bond, 4.500%, due 09/01/07 754,170 615,705 @@ Federal Republic of Brazil, 8.000%, due 04/15/14 548,047 1,000,000 @@ German Government Bond, 4.500%, due 08/17/07 1,255,706 500,000 @@ Mexican Government Bond, 6.375%, due 01/16/13 539,250 500,000 @@ Turkish Government Bond 11.000%, due 01/14/13 513,750 ------------ 3,610,923 ------------ See Accompanying Notes to Financial Statements 133 ING Equity and Bond Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 3.3% $ 500,000 AT&T Wireless Services, Inc., 8.125%, due 05/01/12 $ 608,293 500,000 Citizens Communications Co., 7.450%, due 01/15/04 516,561 500,000 @@ France Telecom, 10.000%, due 03/01/31 689,305 500,000 Sprint Capital Corp., 8.375%, due 03/15/12 584,838 500,000 @ X WinStar Communications, Inc., 12.750%, due 04/15/10 100 ------------ 2,399,097 ------------ Total Corporate Bonds (Cost $13,886,081) 15,057,147 ------------ U.S. TREASURY OBLIGATIONS: 3.5% U.S. TREASURY BOND: 1.9% 1,225,000 S 5.375%, due 02/15/31 1,423,680 ------------ 1,423,680 ------------ U.S. TREASURY NOTES: 1.6% 505,000 S 1.625%, due 04/30/05 508,294 150,000 2.625%, due 05/15/08 152,496 500,000 S 3.625%, due 05/15/13 511,602 ------------ 1,172,392 ------------ Total U.S. Treasury Obligations (Cost $2,532,735) 2,596,072 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS: 15.1% FEDERAL HOME LOAN BANK: 0.7% 500,000 4.500%, due 11/15/12 535,419 ------------ 535,419 ------------ FEDERAL HOME LOAN MORTGAGE ASSOCIATION: 2.7% 459,925 5.500%, due 01/01/14 478,810 225,091 6.000%, due 04/01/14 234,212 635,558 6.500%, due 12/01/31 661,377 531,920 7.000%, due 06/01/29 558,417 ------------ 1,932,816 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION: 8.9% 500,000 5.000%, due 12/31/99 511,094 1,162,998 6.000%, due 01/01/32 1,208,907 584,088 6.000%, due 02/01/32 607,167 1,700,000 6.000%, due 12/31/99 1,761,095 682,775 6.500%, due 06/01/14 717,870 103,257 6.500%, due 08/01/15 108,502 373,661 6.500%, due 12/01/31 389,549 830,789 7.000%, due 03/01/15 885,339 131,488 7.500%, due 09/01/30 139,827 79,227 8.000%, due 08/01/30 85,726 ------------ 6,415,076 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 2.8% 1,498,412 6.500%, due 06/15/29 1,573,324 229,147 7.500%, due 11/15/29 243,852 177,250 8.000%, due 07/15/30 191,671 ------------ 2,008,847 ------------ Total U.S. Government Agency Obligations (Cost $10,330,789) 10,892,158 ------------ OTHER ASSET-BACKED SECURITIES: 0.9% DIVERSIFIED FINANCIAL SERVICES: 0.1% 60,000 #, @@ PF Export Receivables Master Trust 60,600 ------------ 60,600 ------------ HOME EQUITY ABS: 0.8% 534,951 Emergent Home Equity Loan Trust 577,068 ------------ 577,068 ------------ Total Other Asset Backed Securities (Cost $576,043) 637,668 ------------ Shares Value - -------------------------------------------------------------------------------- MUTUAL FUNDS: 1.5% MUTUAL FUND: 1.5% 128,416 B ING High Yield Bond Fund 1,087,687 ------------ Total Mutual Funds (Cost $1,080,920) 1,087,687 ------------ PREFERRED STOCK: 1.6% DIVERSIFIED FINANCIAL SERVICES: 1.6% 33,800 Alliance Capital Management Holding LP 1,183,000 ------------ 1,183,000 ------------ TELECOMMUNICATIONS: 0.0% 10 @ XO Communications, Inc. -- ------------ -- ------------ Total Preferred Stock (Cost $1,115,320) 1,183,000 ------------ Number of Warrants Value - -------------------------------------------------------------------------------- WARRANTS: 0.0% BUILDING MATERIALS: 0.0% 400 # @ X Dayton Superior Corp. 4 Food/Beverage: 0.0% 370 @ X North Atlantic Trading Co. -- Telecommunications: 0.0% 500 @ X Iridium World Communications, Inc. 5 ------------ Total Warrants (Cost $57,953) 9 ------------ Total Long-Term Investments (Cost $73,764,509) $ 70,345,035 ------------ See Accompanying Notes to Financial Statements 134 ING Equity and Bond Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Pricipal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 5.3% Repurchase Agreements: 5.3% $ 3,847,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $3,847,362 to be received upon repurchase (Collateralized by $ 3,225,000 U.S. Treasury Bond, 6.000%, Market Value $3,930,672, due 02/15/26) $ 3,847,000 ------------ Total Short-Term Investments (Cost $3,847,000) 3,847,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $77,611,509)* 102.6% $ 74,192,035 OTHER ASSETS AND LIABILITIES-NET (2.6)% (1,909,679) ----- ------------ NET ASSETS 100.0% $ 72,282,356 ===== ============ @ Non-income producing security @@ Foreign Issuer B Represents investments in an affiliated fund. # Securities with purchase pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Fund's Board of Trustees. S Segregated securities for when-issued or delayed delivery securities held at May 31, 2003. X Market Value determined by ING Valuation Committee appointed by the Fund's Board of Directors. * Cost for federal income tax purposes is $77,635,027. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 4,818,824 Gross Unrealized Depreciation (8,261,817) ------------ Net Unrealized Depreciation $ (3,442,993) ============ See Accompanying Notes to Financial Statements 135 ING Real Estate Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 5.1% HOME BUILDERS: 1.0% 9,600 Lennar Corp. $ 643,680 22,000 @ Toll Brothers, Inc. 638,660 ------------ 1,282,340 ------------ LODGING: 4.1% 232,800 Hilton Hotels Corp. 3,226,608 66,100 Starwood Hotels & Resorts Worldwide, Inc. 1,915,578 ------------ 5,142,186 ------------ Total Common Stock (Cost $5,962,013) 6,424,526 ------------ REAL ESTATE INVESTMENT TRUSTS: 91.7% APARTMENTS: 16.7% 23,500 Archstone-Smith Trust 558,360 168,300 Camden Property Trust 5,846,742 162,700 Equity Residential 4,308,296 107,500 Gables Residential Trust 3,170,175 104,300 Home Properties of NY, Inc. 3,744,370 210,100 United Dominion Realty Trust, Inc. 3,592,710 ------------ 21,220,653 ------------ DIVERSIFIED FINANCIAL SERVICES: 13.7% 76,200 Colonial Properties Trust 2,667,000 155,100 iStar Financial, Inc. 5,118,300 151,161 Keystone Property Trust 3,204,072 193,900 Liberty Property Trust 6,451,053 ------------ 17,440,425 ------------ HEALTH CARE: 4.5% 88,500 Health Care REIT, Inc. 2,633,760 213,600 Ventas, Inc. 3,022,440 ------------ 5,656,200 ------------ HOTELS: 0.8% 107,400 @ Host Marriott Corp. 966,600 ------------ 966,600 ------------ OFFICE PROPERTY: 27.4% 221,500 Arden Realty, Inc. 5,725,775 78,500 Boston Properties, Inc. 3,290,720 108,100 Brandywine Realty Trust 2,564,132 135,700 CarrAmerica Realty Corp. 3,769,746 119,700 Corporate Office Properties Trust 1,900,836 174,679 Equity Office Properties Trust 4,700,612 169,900 Mack-Cali Realty Corp. 5,839,463 174,200 Prentiss Properties Trust 5,027,412 182,200 Trizec Properties, Inc. 1,991,446 ------------ 34,810,142 ------------ REGIONAL MALLS: 13.4% 83,700 CBL & Associates Properties, Inc. 3,629,232 43,000 General Growth Properties, Inc. 2,521,950 168,500 Macerich Co. 5,813,250 133,828 Simon Property Group, Inc. 5,034,609 ------------ 16,999,041 ------------ SHOPPING CENTERS: 8.5% 159,000 Developers Diversified Realty Corp. 4,488,570 160,500 Heritage Property Investment Trust 4,429,800 55,500 Regency Centers Corp. 1,885,890 ------------ 10,804,260 ------------ WAREHOUSE: 6.7% 150,400 Duke Realty Corp. 4,268,352 159,600 Prologis 4,291,644 ------------ 8,559,996 ------------ Total Real Estate Investment Trusts (Cost $98,600,164) 116,457,317 ------------ Total Long-Term Investments (Cost $104,562,177) 122,881,843 ------------ rincipal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 2.9% REPURCHASE AGREEMENT: 2.9% $ 3,723,531 State Street Repurchase Agreement, 1.250%, due 06/02/03, $3,723,919 to be received upon repurchase (Collateralized by $3,610,000 FNMA, 4.625%, Market Value $3,801,214, due 08/13/04) $ 3,723,531 ------------ Total Short-Term Investments (Cost $3,723,531) 3,723,531 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $108,285,708)* 99.7% $126,605,374 OTHER ASSETS AND LIABILITIES-NET 0.3 327,762 ----- ------------ NET ASSETS 100.0% $126,933,136 ===== ============ @ Non-income producing security * Approximate cost for federal income tax purposes is $108,191,252. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 18,782,423 Gross Unrealized Depreciation (368,299) ------------ Net Unrealized Appreciation $ 18,414,124 ============ See Accompanying Notes to Financial Statements 136 SHAREHOLDER MEETING INFORMATION (Unaudited) - -------------------------------------------------------------------------------- A special meeting of shareholders of the ING Retail Funds (formerly Pilgrim Retail Funds) and Variable Products held May 29, 2003, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. A brief description of each matter voted upon as well as the results are outlined below: 1. To approve a Sub-Advisory Agreement for each of the ING LargeCap Growth Fund and ING VP LargeCap Growth Portfolio, between ING Investments, LLC and Wellington Management Company, LLP with no change in the Adviser or the overall management fee paid by each Fund. 2. To transact such other business, not currently contemplated, that may properly come before the Special Meeting or any adjournment(s) thereof in the discretion of the proxies or their substitutes.
SHARES VOTED SHARES AGAINST OR SHARES BROKER TOTAL PROPOSAL VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED -------- --------- -------- --------- -------- ------------ ING LargeCap Growth Fund 1 7,092,546 90,270 98,647 -- 7,281,463 ING LargeCap Growth Fund 2 6,494,145 644,779 142,539 -- 7,281,463
See Accompanying Notes to Financial Statements 137 TAX INFORMATION (Unaudited) - -------------------------------------------------------------------------------- Dividends paid during the year ended May 31, 2003 were as follows: FUND NAME TYPE PER SHARE AMOUNT - --------- ---- ---------------- Financial Services Class A NII $ 0.0907 All Classes STCG $ 0.0376 All Classes LTCG $ 1.0774 Large Company Value Class A NII $ 0.0333 Class Q NII $ 0.0418 MagnaCap Class A NII $ 0.0279 Class Q NII $ 0.0450 MidCap Value Class A NII $ 0.0362 Class B NII $ 0.0081 Class C NII $ 0.0074 Class I NII $ 0.0742 Class Q NII $ 0.0629 All Classes STCG $ 0.1081 SmallCap Value Class A NII $ 0.0386 Class B NII $ 0.0003 Class C NII $ 0.0082 Class I NII $ 0.0794 All Classes STCG $ 0.0853 Convertible Class A NII $ 0.3123 Class B NII $ 0.2222 Class C NII $ 0.2327 Class Q NII $ 0.3412 Equity and Bond Class A NII $ 0.2460 Class B NII $ 0.1767 Class C NII $ 0.1948 Class Q NII $ 0.2515 Class T NII $ 0.2078 Real Estate Class A NII $ 0.1992 Class B NII $ 0.1650 Class C NII $ 0.0814 Class I NII $ 0.2028 - ---------- NII -- Net investment income STCG -- Short-term capital gain LTCG -- Long-term capital gain Of the ordinary distributions made during the fiscal periods ended May 31, 2003, the following percentages qualify for the dividends received deductions available to corporate shareholders; 100.00%, 100.00%, 100.00%, 18.27%, 14.04%, 58.48% and 57.24% for the ING Financial Services Fund, ING Large Company Value Fund, ING MagnaCap Value Fund, ING MidCap Value Fund, ING SmallCap Value Fund, ING Convertible Fund, and ING Equity and Bond Fund, respectively. For the fiscal periods ended May 31, 2003, the following are percentages of ordinary dividends paid by the Funds that are designated as qualifying dividend income subject to reduced income tax rates for individuals; 13.30%, and 12.75% for the ING Convertible Fund, and ING Equity and Bond Fund, respectively. The above figure may differ from those cited elsewhere in this report due to differences in the calculation of income and gains under Generally Accepted Accounting Principles (book purposes) and Internal Revenue Service (tax purposes). Shareholder are strongly advised to consult their own tax advisers with respect to the tax consequences of their Investments in the Funds. In January 2003, shareholders, excluding corporate shareholders, received an IRS 1099 DIV regarding the federal tax status of the dividends and distributions received by them in calendar 2002. See Accompanying Notes to Financial Statements 138 TRUSTEE AND OFFICER INFORMATION (Unaudited) - -------------------------------------------------------------------------------- The business and affairs of the Trusts are managed under the direction of the Trusts' Board of Trustees. A Trustee who is not an interested person of the Trusts, as defined in the 1940 Act, is an independent trustee ("Independent Trustee"). The Trustees and Officers of the Trust are listed below. The Statement of Additional Information includes additional information about trustees of the Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- INDEPENDENT TRUSTEES Paul S. Doherty(2) Trustee October Mr. Doherty is 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 1999 - President and Partner, (February 2002 - Scottsdale, Arizona 85258 Present Doherty, Wallace, Present). Born: 1934 Pillsbury and Murphy, P.C., Attorneys (1996 - Present); Director, Tambrands, Inc. (1993 - 1998); and Trustee of each of the funds managed by Northstar Investment Management Corporation (1993 - 1999). J. Michael Earley(3) Trustee February President and Chief 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2002 - Executive Officer, (1997 - Present). Scottsdale, Arizona 85258 Present Bankers Trust Company, Born: 1945 N.A. (1992 - Present). R. Barbara Gitenstein(2) Trustee February President, College of 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2002 - New Jersey (1999 - (1997 - Present). Scottsdale, Arizona 85258 Present Present). Formerly, Born: 1948 Executive Vice President and Provost, Drake University (1992 - 1998). Walter H. May(2) Trustee October Retired. Formerly, 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 1999 - Managing Director and (February 2002 - Scottsdale, Arizona 85258 Present Director of Marketing, Present) and Best Prep Born: 1936 Piper Jaffray, Inc.; Charity (1991 - Trustee of each of the Present). funds managed by Northstar Investment Management Corporation (1996 - 1999). Jock Patton(2) Trustee August Private Investor (June 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 1995 - 1997 - Present). (February 2002 - Scottsdale, Arizona 85258 Present Formerly, Director and Present); Director, Born: 1945 Chief Executive Officer, Hypercom, Inc. (January Rainbow Multimedia 1999 - Present); JDA Group, Inc. (January Software Group, Inc. 1999 - December 2001); (January 1999 - Director of Stuart Present); Buick of Entertainment, Inc.; Scottsdale, Inc.; Director of Artisoft, Inc. National Airlines, Inc.; (1994 - 1998). BG Associates, Inc.; BK Entertainment, Inc.; and Arizona Rotorcraft, Inc.
139 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- David W.C. Putnam(3) Trustee October President and Director, 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 1999 - F.L. Putnam Securities (February 2002 - Scottsdale, Arizona 85258 Present Company, Inc. and its Present), Anchor Born: 1939 affiliates; President, International Bond Secretary and Trustee, (December 2000 - The Principled Equity Present); Progressive Marke Fund. Formerly, Capital Accumulation Trustee, Trust Realty Trust (August 1998 - Trust (December Corp.; Present); Principled Anchor Investment Equity Market Fund Trust; Bow 2000 - (November 1996 - Present); Ridge Mining Present), Mercy Company and each of Endowment the F.L. Putnam funds Foundation (1995 - managed by Northstar Present); Director, F.L. Investment Foundation Putnam Investment Management Management Company Corporation (1994 - (December 2001 - 1999). Present); Asian American Bank and Trust Company (June 1992 - Present); and Notre Dame Health Care Center (1991 - Present) F.L. Putnam Securities Company, Inc. (June 1978 - Present); and an Honorary Trustee, Mercy Hospital (1973 - Present). Blaine E. Rieke(3) Trustee February General Partner, 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - Huntington Partners (February 2002 - Scottsdale, Arizona 85258 Present (January 1997 - Present) and Morgan Born: 1933 Present). Chairman of Chase Trust Co. the Board and Trustee (January 1998 - of each of the funds Present). managed by ING Investment Management Co. LLC (November 1998 - February 2001). Roger B. Vincent(3) Trustee February President, Springwell 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - (1994 - Present); and Scottsdale, Arizona 85258 Present Present). Formerly, Director, AmeriGas Born: 1945 Director, Tatham Propane, Inc. (1998 - Offshore, Inc. (1996 - Present). 2000). Richard A. Wedemeyer(2) Trustee February Retired. Mr. 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - Wedemeyer was (February 2002 - Scottsdale, Arizona 85258 Present formerly Vice President Present) and Born: 1936 - Finance and Touchstone Consulting Administration, Group (1997 - Present). Channel Corporation (June 1996 - April 2002). Formerly, Vice President, Operations and Administration, Jim Henson Productions. (1979 - 1997); Trustee, First Choice Funds (1997 - 2001); and of each of the funds managed by ING Investment Management Co. LLC (1998 - 2001).
140 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- TRUSTEES WHO ARE "INTERESTED PERSONS" Thomas J. McInerney(4) Trustee February Chief Executive Officer, 160 Director, Hemisphere, 7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial Inc. (May 2003 - Scottsdale, Arizona 85258 Present Services (September Present); Trustee, GCG Born: 1956 2001 - Present); Trust (February 2002 - General Manager and Present); Equitable Life Chief Executive Officer, Insurance Co., Golden ING U.S. Worksite American Life Financial Services Insurance Co., Life (December 2000 - Insurance Company of Present); Member, ING Georgia, Midwestern Americas Executive United Life Insurance Committee (2001 - Co., ReliaStar Life Present); President, Insurance Co., Security Chief Executive Officer Life of Denver, Security and Director of Connecticut Life Northern Life Insurance Insurance Co., Company (March 2001 - Southland Life October 2002), ING Insurance Co., USG Aeltus Holding Annuity and Life Company, Inc. (2000 - Company, and United Present), ING Retail Life and Annuity Holding Company Insurance Co. Inc (1998 - Present), ING (March 2001 - Present); Life Insurance and Director, Ameribest Life Annuity Company Insurance Co., (March (September 1997 - 2001 to January 2003); November 2002) and Director, First ING Retirement Columbine Life Holdings, Inc. (1997 - Insurance Co. (March Present). Formerly, 2001 to December General Manager and 2002); Member of the Chief Executive Officer, Board, National ING Worksite Division Commission on (December 2000 - Retirement Policy, October 2001), Governor's Council on President, ING-SCI, Inc. Economic (August 1997 - Competitiveness and December 2000); Technology of President, Aetna Connecticut, Financial Services Connecticut Business (August 1997 - and Industry December 2000). Association, Bushnell; Connecticut Forum; Metro Hartford Chamber of Commerce; and is Chairman, Concerned Citizens for Effective Government.
141 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- John G. Turner(5) Trustee October Chairman, Hillcrest 106 Trustee, GCG; Director, 7337 E. Doubletree Ranch Rd. 1999 - Capital Partners (May Hormel Foods Scottsdale, Arizona 85258 Present 2002-Present); Corporation (March Born: 1939 President, Turner 2000 - Present); Shopko Investment Company Stores, Inc. (August (January 2002 - 1999 - Present); and Present). Mr. Turner M.A. Mortenson was formerly Vice Company (March 2002 - Chairman of ING Present). Americas (2000 - 2002); Chairman and Chief Executive Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company (1993 - 2000); Chairman of ReliaStar United Services Life Insurance Company (1995 - 1998); Chairman of ReliaStar Life Insurance Company of New York (1995 - 2001); Chairman of Northern Life Insurance Company (1992 - 2001); Chairman and Trustee of the Northstar affiliated investment companies (1993 - 2001) and Director, Northstar Investment Management Corporation and its affiliates (1993 - 1999).
- ---------- (1) Trustees serve until their successors are duly elected and qualified. (2) Valuation Committee member. (3) Audit Committee member. (4) Mr. McInerney is an "interested person," as defined by the 1940 Act, because of his affiliation with ING U.S. Worksite Financial Services, an affiliate of ING Investments, LLC. (5) Mr. Turner is an "interested person," as defined by the 1940 Act, because of his affiliation with ING Americas, an affiliate of ING Investments, LLC. 142 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ------- ------------------- -------------- --------------- OFFICERS: James M. Hennessy President and Chief February 2001 - President and Chief Executive 7337 E. Doubletree Ranch Rd., Executive Officer Present Officer of ING Capital Corporation, Scottsdale, Arizona 85258 Chief Operating June 2000 - Present LLC, ING Funds Services, LLC, ING Born: 1949 Officer Advisors, Inc., ING Investments, LLC, Lexington Funds Distributor, Senior Executive June 2000 - February Inc., Express America T.C. Inc. and Vice President 2001 EAMC Liquidation Corp. (since December 2001); Executive Vice Secretary April 1995 - February President and Chief Operating 2001 Officer of ING Funds Distributor, LLC (since June 2000). Formerly, Executive Vice President and Chief Operating Officer of ING Quantitative Management, Inc. (October 2001 to September 2002); Senior Executive Vice President (June 2000 to December 2000) and Secretary (April 1995 to December 2000) of ING Capital Corporation, LLC, ING Funds Services, LLC, ING Investments, LLC, ING Advisors, Inc., Express America T.C. Inc., and EAMC Liquidation Corp.; and Executive Vice President, ING Capital Corporation, LLC and its affiliates (May 1998 to June 2000) and Senior Vice President, ING Capital Corporation, LLC and its affiliates (April 1995 to April 1998). Stanley D. Vyner Executive Vice March 2003- Present Executive Vice President, ING 7337 E. Doubletree Ranch Rd., President (For the ING Funds) Advisors, Inc. and ING Investments, Scottsdale, Arizona 85258 LLC (July 2000 - Present) and Chief Born: 1950 July 1996 - March Investment Officer of the 2002 (For the International Portfolios, ING international Investments, LLC (July 1996 - portfolios of the Present.) Formerly, President and Pilgrim Funds) Chief Executive Officer, ING Investments, LLC (August 1996 - August 2002). Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief 7337 E. Doubletree Ranch Rd., President and Present Financial Officer and Treasurer of Scottsdale, Arizona 85258 Assistant Secretary ING Funds Services, LLC, ING Funds Born: 1958 Distributor, LLC, ING Advisors, Inc., Chief Financial Officer June 1998 - Present ING Investments, LLC (December 2001 to present), Lexington Funds Senior Vice President June 1998 - February Distributor, Inc., Express America 2002 T.C. Inc. and EAMC Liquidation Corp. (since December 2001). Formerly, Executive Vice President, Chief Financial Officer and Treasurer of ING Quantitative Management, Inc. (December 2001 to October 2002); Senior Vice President, ING Funds Services, LLC, ING Investments, LLC, and ING Funds Distributor, LLC (June 1998 to December 2001) and Chief Financial Officer of Endeavor Group (April 1997 to June 1998).
143 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ------- ------------------- -------------- --------------- OFFICERS: Robert S. Naka Senior Vice President November 1999 - Senior Vice President and Assistant 7337 E. Doubletree Ranch Rd., Present Secretary of ING Funds Services, Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC, Born: 1963 Assistant Secretary July 1996 - Present ING Advisors, Inc., ING Investments, LLC (October 2001 to present) and Lexington Funds Distributor, Inc. (since December 2001). Formerly, Senior Vice President and Assistant Secretary for ING Quantitative Management, Inc. (October 2001 to October 2002); Vice President, ING Investments, LLC (April 1997 to October 1999) , ING Funds Services, LLC (February 1997 to August 1999) and Assistant Vice President, ING Funds Services, LLC (August 1995 to February 1997). Robyn L. Ichilov Vice President November 1997 - Vice President of ING Funds 7337 E. Doubletree Ranch Rd., Present Services, LLC (since October 2001) Scottsdale, Arizona 85258 and ING Investments, LLC (since Born: 1967 August 1997); Accounting Manager, ING Investments, LLC (since November 1995). Kimberly A. Anderson Vice President and February 2001 - Vice President and Assistant 7337 E. Doubletree Ranch Rd., Secretary Present Secretary of ING Funds Services, Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC, Born: 1964 Assistant November 1999 - ING Advisors, Inc., ING Vice President and February 2001 Investments, LLC (since October Assistant Secretary 2001) and Lexington Funds Distributor, Inc. (since December 2001). Formerly, Vice President for ING Quantitative Management, Inc. (October 2001 to October 2002); Assistant Vice President of ING Funds Services, LLC (November 1999 to January 2001) and has held various other positions with ING Funds Services, LLC for more than the last five years Lauren D. Bensinger Vice President February 2003 - Vice President and Chief 7337 E. Doubletree Ranch Rd., Present Compliance Officer, ING Funds Scottsdale, Arizona 85258 Distributor, LLC (July 1995 to Born: 1954 Present); Vice President (February 1996 to Present) and Chief Compliance Officer (October 2001 to Present), ING Investments, LLC; Vice President and Chief Compliance Officer, ING Advisors, Inc. (July 2000 to Present); Formerly, Vice President and Chief Compliance Officer ING Quantitative Management, Inc. (July 2000 to September 2002) and Vice President ING Fund Services, LLC (July 1995 to Present). Todd Modic Assistant August 2001 - Present Vice-President of Financial 7337 E. Doubletree Ranch Rd., Vice President Reporting-Fund Accounting of ING Scottsdale, Arizona 85258 Funds Services, LLC (September Born: 1967 2002 to present). Director of Financial Reporting of ING Investments, LLC (March 2001 to September 2002). Formerly, Director of Financial Reporting, Axient Communications, Inc. (May 2000 to January 2001) and Director of Finance, Rural/Metro Corporation (March 1995 to May 2000).
144 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ------- ------------------- -------------- --------------- OFFICERS: Maria M. Anderson Assistant August 2001 - Present Assistant Vice President of ING 7337 E. Doubletree Ranch Rd., Vice President Funds Services, LLC (since October Scottsdale, Arizona 85258 2001). Formerly, Manager of Fund Born: 1958 Accounting and Fund Compliance, ING Investments, LLC (September 1999 to November 2001); Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 to August 1999); and Financial Reporting Analyst, Stein Roe Mutual Funds (August 1997 to July 1998). Susan P. Kinens Assistant February 2003 - Assistant Vice President and 7337 E. Doubletree Ranch Rd. Vice President and Present (For the ING Assistant Secretary, ING Funds Scottsdale, Arizona 85258 Assistant Secretary Funds) Services, LLC (December 2002 - Born: 1976 Present); and has held various other positions with ING Funds Services, LLC for the last five years.
- ---------- (1) The officers hold office until the next meeting of the Trustees and until their successors shall have been elected and qualified. 145 ING Funds Distributor, LLC offers the funds listed below. Investors may obtain a copy of a prospectus of any ING Fund by calling ING Funds Distributor, LLC at (800) 992-0180. Please read the prospectus carefully before investing or sending money. INTERNATIONAL EQUITY DOMESTIC EQUITY VALUE FUNDS ING Emerging Countries Fund ING Financial Services Fund ING Foreign Fund ING Large Company Value Fund ING International Fund ING MagnaCap Fund ING International Growth Fund ING Tax Efficient Equity Fund ING International SmallCap Growth Fund ING Value Opportunity Fund ING International Value Fund ING SmallCap Value Fund ING Precious Metals Fund ING MidCap Value Fund ING Russia Fund DOMESTIC EQUITY AND INCOME FUNDS INTERNATIONAL GLOBAL EQUITY ING Equity and Bond Fund ING Global Technology Fund ING Convertible Fund ING Global Real Estate Fund ING Balanced Fund ING Worldwide Growth Fund ING Growth and Income Fund DOMESTIC EQUITY FUNDS FIXED INCOME FUNDS ING Growth Fund ING Bond Fund ING Growth + Value Fund ING Classic Money Market Fund* ING Growth Opportunities Fund ING Government Fund ING LargeCap Growth Fund ING GNMA Income Fund ING MidCap Opportunities Fund ING High Yield Opportunity Fund ING Small Company Fund ING High Yield Bond Fund ING SmallCap Opportunities Fund ING Intermediate Bond Fund ING Technology Fund ING Lexington Money Market Trust* ING National Tax Exempt Bond Fund DOMESTIC EQUITY INDEX FUNDS ING Money Market Fund* ING Index Plus LargeCap Fund ING Aeltus Money Market Fund* ING Index Plus MidCap Fund ING Strategic Bond Fund ING Index Plus SmallCap Fund ING Disciplined LargeCap STRATEGIC ALLOCATION FUNDS ING Strategic Allocation Growth Fund ING Strategic Allocation Balanced Fund ING Strategic Allocation Income Fund LOAN PARTICIPATION FUNDS ING Prime Rate Trust ING Senior Income Fund
* An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. INVESTMENT MANAGER ING Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 ADMINISTRATOR ING Funds Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 DISTRIBUTOR ING Funds Distributor, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 1-800-992-0180 TRANSFER AGENT DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141-6368 CUSTODIAN Bank of New York 100 Colonial Center Parkway, Suite 300 Lake Mary, FL 32746 LEGAL COUNSEL Dechert 1775 Eye Street, N.W. Washington, D.C. 20006 INDEPENDENT AUDITORS KPMG LLP 99 High Street Boston, MA 02110-2371 Prospectus containing more complete information regarding the Funds, including charges and expenses, may be obtained by calling ING Funds Distributor, LLC, at 1-800-992-0180. Please read the prospectus carefully before you invest or send money. [LION LOGO] DEABCAR0503-0729 ING FUNDS ANNUAL REPORT May 31, 2003 DOMESTIC EQUITY GROWTH FUNDS ING Growth + Value Fund CLASSES I AND Q ING Growth Opportunities Fund ING LargeCap Growth Fund ING MidCap Opportunities Fund ING SmallCap Opportunities Fund ING Disciplined LargeCap Fund DOMESTIC EQUITY VALUE FUNDS ING Large Company Value Fund ING MagnaCap Fund ING MidCap Value Fund ING SmallCap Value Fund DOMESTIC EQUITY AND INCOME FUNDS ING Convertible Fund ING Equity and Bond Fund ING Real Estate Fund [PHOTO] [LION LOGO] ING FUNDS TABLE OF CONTENTS - -------------------------------------------------------------------------------- President's Letter ........................... 1 Portfolio Managers' Reports: Domestic Equity Growth Funds ............... 2 Domestic Equity Value Funds ................ 14 Domestic Equity and Income Funds ........... 24 Index Descriptions ........................... 28 Independent Auditors' Report ................. 29 Statements of Assets and Liabilities ......... 30 Statements of Operations ..................... 38 Statements of Changes in Net Assets .......... 42 Financial Highlights ......................... 50 Notes to Financial Statements ................ 63 Portfolios of Investments .................... 85 Trustee and Officer Information .............. 119 PRESIDENT'S LETTER - -------------------------------------------------------------------------------- [PHOTO] JAMES M. HENNESSY Dear Shareholder, It would be an understatement to refer to this past year as a challenging one for investors. There have been many events on the geopolitical front and numerous economic challenges that have tested investor resilience. We are now in a period of one of the longest economic downturns in U.S. history. Although few of us will take much comfort in the fact that we have coped with a particularly challenging time, perhaps we should. We at ING Funds remain optimistic about the future, preferring to see the positives that have emerged in the wake of recent difficulties. For instance, the quick actions on the part of the financial industry and government regulators that followed a string of recent corporate scandals may have helped regain investor trust and the tough new accounting standards now in place should help permanently improve our industry. Although I do not wish to be premature in my enthusiasm, I do believe that the gradual market upturn of recent months supports ING Funds' long-held philosophy that it is important to remain focused on long-term investment goals and maintain reasonable expectations. In recent months, we at ING Funds have made some changes to some of our fund management teams. We have also entered into new relationships with respected sub-advisers and are launching several new mutual funds. We have implemented improvements to our website that make it more accessible to investors and financial advisors alike. We remain committed to providing quality service and innovative products to help meet the needs of our investors, and we are excited and optimistic about the future. On behalf of ING Funds, I thank you for your continued support and confidence and look forward to serving you in the future. Sincerely, /s/ James M. Hennessy James M. Hennessy President ING Funds July 15, 2003 1 ING GROWTH + VALUE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: Louis Navellier, Navellier Fund Management, Inc., the Sub-Advisor* GOAL: ING Growth + Value Fund (the "Fund") seeks capital appreciation by investing in a diversified portfolio of equity securities, including common and preferred stock. MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31, 2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad measures of market performance) declined 7.73% and 8.06%, respectively. The market's decline was evident in measures of mid-cap growth and small-cap growth stocks as well. Two indices of such performance, the Russell Midcap Growth Index fell 5.84%, and the Russell 2000 Growth Index dropped 9.59%. The reporting period was marked by continued disappointment in the economic numbers but strength in consumer spending, buoyed by record refinancing. During the final months of the fiscal year, investors were focused on geopolitical uncertainties, especially the potential for armed conflict in Iraq. Once the coalition forces did, in fact, enter Iraq, the market began trading up off its March 11 low. Through the first week of April, the overall market gained an additional 4%. Recent market leadership has centered on the technology group, with value stocks trailing the overall market by a small margin. We have seen some institutional investors purchasing tech stocks, hoping the sector would provide the most leveraged upside returns if a widespread economic recovery ensues. To date, fundamentals have not, in our opinion, justified this type of anticipatory buying. As value investors, we are willing to forgo a small amount of short-term upside return whenever we see this kind of speculative buying, When the markets settle, we expect investors will once again focus on the fundamentals of individual companies. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares provided a total return of -20.79% compared to the Russell 3000 Index for which the total return was -7.73%. PORTFOLIO SPECIFICS: In the semiannual report, we stated that the Fund underperformed the index in the first half primarily due to stock selection in the consumer discretionary and technology sectors. In the six months since, the Fund returned 1.81% and the index 9.34%. During this period, the source of the underperformance was again mainly stock selection, this time in the healthcare and technology sectors, partly offset by favorable stock selection in industrials. Sector selection also detracted from performance. In the most noteworthy cases, we were overweight in technology, which has performed relatively poorly, and were underweight in the financial sector, which was a better-than-average performer in the index. Over the last six months, sector weights underwent significant change. Principally, we cut our underweight in financials by one-third, halved the overweight in technology and reduced our heavy overweight in consumer discretionary stocks to a small amount. MARKET OUTLOOK: Value stocks have recently been trailing their growth counterparts. While we believe this is a short-term reactionary move, equities across the spectrum are very reasonably priced today. This, in combination with low interest rates and fairly indifferent/low consumer sentiment, makes for one of the best investment opportunities we have seen in at least five years. Adding in such factors as stock market fear, post-war reconstruction uncertainty, record low interest rates, and a business environment that has been extremely conservative, we believe the upside potential for our equity market far exceeds the downside risk. * Effective June 16, 2003 ING Investments, LLC assumed direct management of the Fund. Since that date the Fund has been managed by a team of investment professionals led by Matthew S. Price and David C. Campbell. 2 Portfolio Managers' Report ING GROWTH + VALUE FUND - -------------------------------------------------------------------------------- 6/5/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ING Growth + Value Fund Class Q $10,000 $ 5,775 $ 4,103 $ 3,250 Russell 2000 Growth Index $10,000 $10,569 $10,516 $ 9,655 Russell 3000 Growth Index $10,000 $ 9,028 $ 7,902 $ 7,291 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------- SINCE INCEPTION 1 YEAR 6/5/00 ------ ------ Class Q -20.79% -31.33% Russell 2000 Index -8.18% -1.16%(1) Russell 3000 Index -7.73% -9.99%(1) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Growth + Value Fund against the Russell 2000 Index and the Russell 3000 Index. The Indices have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 6/1/00. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller and mid-sized companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the mix of growth and value securities in which the Fund invests. See accompanying index descriptions on page 28. 3 ING GROWTH OPPORTUNITIES FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC.* GOAL: The Growth Opportunities Fund seeks long-term growth of capital through investment in a portfolio consisting primarily of common stocks of U.S. companies that the managers feel have above-average prospects for growth. MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31, 2003. For the period, the Russell 3000 and the S&P 500 index (two broad measures of market performance) declined 7.73% and 8.06%, respectively. The market's decline was evident in measures of mid cap growth and small cap growth stocks as well. The Russell Midcap Growth index fell 5.84%, and the Russell 2000 Growth index dropped 9.59%. The results for the six months ending May 31, 2003 were more encouraging. The Russell 3000 Index advanced 4.92% during the six-month period and the S&P 500 moved up 3.87%. Indeed, the returns for the latest three months -- ended May 31, 2003 -- were even better. In the three-month period, the Russell 3000 index moved up 15.90% and the S&P 500 advanced 15.05%. We think that a major part of this advance can be attributed to a resurgence in those stocks that were most beaten-up over the last several years. We expect, though, that as this speculation broadens out, the advance may become more sustainable, albeit somewhat less explosive. MARKET OUTLOOK: After several years of declines, the stock market appeared to be in a recovery mode from mid-March through the end of May, 2003. This seemed in part to reflect some improvement in corporate profit trends; in addition the market's advance may well have reflected investors' increasing optimism about the economy's growth later this year and into 2004. There are reasons to believe that the conditions are favorable for both the economy and for common stocks. The combination of low interest rates (with the possibility of even further Federal Reserve loosening) and stimulative tax cuts could well spur an acceleration of the economy. And inflation certainly is not an imminent concern, notwithstanding the toll that energy prices are taking on the economy. The Fund's investment discipline is not dependent on the forecast for the economy. The Fund will build a diversified portfolio of mostly smaller common stocks selected for their growth prospects, reasonable valuation, and evidence of relative strength. PERFORMANCE: For the year ended May 31, 2003, the ING Growth Opportunities Fund's Class I shares had a total return of -15.64% compared to the S&P 500 index for which the total return was -8.06%. PORTFOLIO SPECIFICS: In the semi annual report we stated that the Fund under-performed the index in the first half year and this was primarily due to exposure to more cyclically sensitive Technology stocks such as semiconductors. In the six months since the date of the semi-annual report, the Fund returned 1.00% and the index 3.96%. During this period, the source of the underperformance was mainly sector selection. We over weighted the Technology sector, which was a laggard for most of the period and were underweight in the Utilities and Financial sectors, which were relatively strong. Over the last six months, sector weights underwent significant change with both the substantial over weight in Technology and under weight in Financials more than halved. * A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 4 Portfolio Managers' Report ING GROWTH OPPORTUNITIES FUND - --------------------------------------------------------------------------------
03/31/97 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ING Growth Opportunities Fund Class I $1,000,000 $1,101,700 $1,351,700 $1,782,500 $2,859,900 $1,779,000 $1,275,500 $1,076,000 Russell 3000 Index $1,000,000 $1,124,215 $1,469,157 $1,778,067 $1,964,281 $1,756,970 $1,513,693 $1,391,622 S&P 500 Index $1,000,000 $1,120,924 $1,454,662 $1,719,251 $1,922,589 $1,735,679 $1,519,271 $1,401,816 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ----------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 5 YEAR 03/31/97 6/1/00 ------ ------ -------- ------ Class I -15.64% -4.46% 1.19% -- Class Q -15.88% -- -- -28.98% Russell 3000 Index(1) -7.73% -0.74% 5.63%(2) -9.99% S&P 500 Index -8.06% -1.08% 5.51%(2) -10.85%
Based on a $1,000,000 initial investment, the graph and table above illustrate the total return of ING Growth Opportunities Fund against the Russell 3000 Index and the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Fund may invest in securities of large, mid- and small-capitalization companies, and the Russell 3000 Index tracks a larger number of companies than the S&P 500 Index with a large range of market capitalizations. (2) Since inception performance for the index is shown from 4/1/97. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller and mid-size companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the growth securities in which the Fund invests. See accompanying index descriptions on page 28. 5 ING LARGECAP GROWTH FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail, CFA, Senior Vice President, ING Investments, LLC.* GOAL: The ING LargeCap Growth Fund (the "Fund") seeks long-term capital appreciation by investing in equity securities of large U.S. companies. MARKET OVERVIEW: The S&P 500 Index posted a loss of 8.06% over the 12 months ended May 31, 2003. Declines occurred in the first half of the period due to accounting concerns, conflict with Iraq, and concerns regarding the strength of the U.S. economic rebound. However, the market retraced a significant portion of those losses this year after the successful resolution of the war and mounting evidence of improving corporate earnings. Within the market, leadership has swung sharply back and forth between defensive stocks and former growth stocks. The sharp rallies of the fourth quarter of 2002 and from April 2003 have favored the smallest stocks within the index, especially those trading at low dollar prices. For the whole period financials, health care and information technology stocks were the strongest performers. The utilities and consumer discretionary sectors suffered the worst performance during the period. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided a total return of -13.11% compared to the Russell 1000 Growth Index for which the total return was -7.85%. PORTFOLIO SPECIFICS: In the semi annual report we stated that underperformance in the first half year was primarily due to the underperformance of cyclically sensitive Technology stocks such as semiconductors. In the six-months since the date of the semi-annual report, the Fund returned 2.80% and the index 3.83%. During the period stock selection was neutral over all with relative gains in the Technology and Health Care sectors more or less balancing relative losses in Financials and Energy. Sector selection detracted slightly from performance on balance: we held on average an over weight in Technology, which was a laggard for most of the period, and an over weight in Energy which was generally strong, (although, as noted, the results of our stock selections were in the opposite direction). Over the last six months, sector weights did not undergo significant change. The largest pair of changes was the reduction of our over weight in Telecommunications stocks and an increase in Consumer Discretionary stocks, both by about 3 1/2%. MARKET OUTLOOK: While we expect the recovery to continue at a more moderate pace as compared to prior cycles, our optimism has improved at the margin. The economic cycle is greatly influenced by psychology and the inventory cycle. Although the consumer has been supported by a housing refinance boom during the down cycle, business spending has been weak. Once corporate psychology improves to the point that pent up projects are released, the positive feedback loop of psychology and the inventory cycle can be put into play. Inventories remain at very low levels, so there is reason to believe that the boost to the economy from inventory growth could be substantial. Meanwhile, government authorities are doing everything possible to set a recovery in motion. The combined monetary and fiscal stimulus of the Fed rate cuts, mortgage refinancings, and the most recent tax cut will continue to inject tremendous additional liquidity into the financial system. In summary, the economic outlook has improved. Reduced geo-political uncertainty and aggressive economic policy conditions have lowered investors' risk aversion and improved capital market sentiment. This condition has reduced the financial distress of consumers, corporations and emerging markets government borrowers alike, setting the stage for improved growth in the quarters ahead. This enhanced economic backdrop should bode well for corporate profit growth and investor sentiment. * Effective June 2, 2003, Wellington Management Company, LLP became the Sub-Advisor. Andrew J. Shilling, Senior Vice Presidentand Partner is the portfolio manager. 6 Portfolio Managers' Report ING LARGECAP GROWTH FUND - -------------------------------------------------------------------------------- 1/8/02 5/31/02 5/31/03 ---------- ---------- ---------- ING LargeCap Growth Fund Class I $1,000,000 $ 804,700 $ 699,600 Russell 1000 Growth Index $1,000,000 $ 872,982 $ 804,453 S&P 500 Index $1,000,000 $ 935,019 $ 859,615
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ---------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 5 YEAR 1/08/02 7/21/97 ------ ------ ------- ------- Class I -13.11% -- -22.66% -- Class Q -13.36% -0.60% -- 3.62% Russell 1000 Growth Index -7.85% -4.16% -14.24%(1) -1.42%(2) S&P 500 Index -8.06% -1.08% -10.13%(1) 1.61%(2)
Based on a $1,000,000 initial investment, the graph and table above illustrate the total return of ING LargeCap Growth Fund against the Russell 1000 Growth Index and the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 1/1/02. (2) Since inception performance for the index is shown from 8/1/97. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. From time to time, the stock market may not favor the large company growth-oriented securities in which the Fund invests. See accompanying index descriptions on page 28. 7 ING MIDCAP OPPORTUNITIES FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC.* GOAL: The ING MidCap Opportunities Fund (the "Fund") seeks long-term capital appreciation by investing primarily in the common stock of mid-sized U.S. companies. MARKET OVERVIEW: The U.S. equity markets declined during the year ending May 31, 2003. For the period, the Russell MidCap Growth index declined 5.84%. Mid-sized stocks were not alone in their decline. The Russell 2000 Growth index fell 9.59%, the S&P 500 was down 8.06% and the Dow Jones Industrials dropped 8.90%. The NASDAQ Composite, down 1.23%, held up a little better following its steep drop in the two preceding years. The results for the six months ending May 31, 2003 were more encouraging. The Russell MidCap Growth index advanced 10.00% during the six-month period. Indeed, the returns for the latest three months -- ended May 31, 2003 -- were even better. In the three-month period, the Russell MidCap Growth index moved up 19.27%. We think that a major part of this advance can be attributed to a resurgence in those stocks that were most beaten-up over the last several years. We expect, though, that as this speculation broadens out, the advance may become more sustainable, albeit somewhat less explosive. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided a total return of -8.50% compared to the Russell Mid Cap Growth Index for which the total return was -5.84% and the S&P MidCap 400 Index for which the total return was -9.14%. PORTFOLIO SPECIFICS: In the semi annual report we stated that the Fund outperformed the index in the first half year and this was primarily due to stock selection in the transportation, telecommunications and financial sectors. In the six months since the date of the semi-annual report, the Fund returned 4.01% and the index 10.00%. During this period, the source of the underperformance was mainly stock selection in the Healthcare and Industrials sectors. We estimate that these accounted for approximately half of the underperformance. Sector selection also detracted from performance. We held on average an over weight in Technology which was a laggard for most of the period and were underweight in the Healthcare sector which was relatively strong. Over the last six months, sector weights underwent significant change with the substantial over weight in Technology taken to an underweight and the under weight in Healthcare stocks reduced considerably. MARKET OUTLOOK: After several years of declines, the stock market appeared to be in a recovery mode from mid-March through the end of May 2003. This seemed in part to reflect some improvement in corporate profit trends; in addition the market's advance may well have reflected investors' increasing optimism about the economy's growth later this year and into 2004. There are reasons to believe that the conditions are favorable for both the economy and for common stocks. The combination of low interest rates (with the possibility of even further Federal Reserve loosening) and stimulative tax cuts could well spur an acceleration of the economy. And inflation certainly is not an imminent concern, notwithstanding the toll that energy prices are taking on the economy. The Fund's investment discipline is not dependent on the forecast for the economy. The Fund will build a diversified portfolio of mostly smaller common stocks selected for their growth prospects, reasonable valuation, and evidence of relative strength. * A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 8 Portfolio Manager's Report ING MIDCAP OPPORTUNITIES FUND - --------------------------------------------------------------------------------
8/20/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ---------- ---------- ---------- ---------- ---------- ---------- ING MidCap Opportunities Fund Class I $1,000,000 $1,553,000 $2,625,900 $2,018,900 $1,548,500 $1,416,800 S&P MidCap 400 Index $1,000,000 $1,421,786 $1,726,818 $1,915,392 $1,961,178 $1,781,995 Russell MidCap Growth Index $1,000,000 $1,452,073 $2,086,903 $1,580,120 $1,309,076 $1,232,612
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ----------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 8/20/98 4/4/00 ------ ------- ------ Class I -8.50% 7.56% -- Class Q -8.69% -- -19.70% Russell MidCap Growth Index(1) -5.84% 4.50%(2) -19.94%(3) S&P MidCap 400 Index -9.14% 12.93%(2) -0.52%(3) Based on a $1,000,000 initial investment, the graph and table above illustrate the total return of ING MidCap Opportunities Fund against the S&P MidCap 400 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Fund normally invests in mid-cap companies that the portfolio managers feel have above average prospects for growth. The Russell MidCap Growth Index tracks the performance of mid-cap growth companies. (2) Since inception performance for the index is shown from 9/1/98. (3) Since inception performance for the index is shown from 4/1/00. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of mid-size companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the mid-cap growth securities in which the Fund invests. See accompanying index descriptions on page 28. 9 ING SMALLCAP OPPORTUNITIES FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC.* GOAL: The Small Cap Opportunities Fund (the "Fund") seeks capital appreciation through investing primarily in common stocks of smaller, lesser-known U.S. companies. MARKET OVERVIEW: The U.S. equity markets declined during the year ending May 31, 2003. For the period, the Russell 2000 Growth index declined 9.59%. This small cap growth index fared slightly worse than other broad market measures: The Russell Midcap Growth index fell 5.84%, the S&P 500 was down 8.06% and the Dow Jones Industrials dropped 8.90%. The NASDAQ Composite, down 1.23%, held up a little better following its steep drop in the two preceding years. The results for the six months ending May 31, 2003 were more encouraging. The Russell 2000 Growth index advanced 9.00% during the six-month period. Indeed, the returns for the latest three months -- ended May 31, 2003 -- were even better. In the three-month period, the Russell 2000 Growth index moved up 23.64%, leading all the major market indexes. We think that a major part of this advance can be attributed to a resurgence in those stocks that were most beaten-up over the last several years. We expect, though, that as this speculation broadens out, the advance may become more sustainable, albeit somewhat less explosive PERFORMANCE: For the year ended May 31, 2003, the ING SmallCap Opportunities Fund's Class I shares had a total return of -24.10% compared to the Russell 2000 index for which the total return was -8.18%. PORTFOLIO SPECIFICS: In the semi annual report we stated that underperformance in the first half year was primarily due to exposure to consumer related stocks. In the six-months since the date of the semi-annual report, the Fund returned - -2.76% and the index 9.00%. During this period, the source of the underperformance was mainly stock selection in the Health Care and Technology sectors. We estimate that these accounted for approximately half and a quarter of the underperformance respectively. Sector selection also detracted from performance. We held on average an over weight in Technology, which was a laggard for most of the period and were underweight in the Financial sector which was relatively strong. Over the last six months, sector weights underwent significant change with the strong over weight in Technology reduced considerably and the under weight in Financial stocks halved. MARKET OUTLOOK: After several years of declines, the stock market appeared to be in a recovery mode from mid-March through the end of May 2003. This seemed in part to reflect some improvement in corporate profit trends; in addition the market's advance may well have reflected investors' increasing optimism about the economy's growth later this year and into 2004. There are reasons to believe that the conditions are favorable for both the economy and for common stocks. The combination of low interest rates (with the possibility of even further Federal Reserve loosening) and stimulative tax cuts could well spur an acceleration of the economy. And inflation certainly is not an imminent concern, notwithstanding the toll that energy prices are taking on the economy. The Fund's investment discipline is not dependent on the forecast for the economy. The Fund will build a diversified portfolio of mostly smaller common stocks selected for their growth prospects, reasonable valuation, and evidence of relative strength. * A team of investment professionals led by Matthew Price, CFA and David Campbell, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 10 Portfolio Manager's Report ING SMALLCAP OPPORTUNITIES FUND - --------------------------------------------------------------------------------
4/1/99 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ---------- ---------- ---------- ---------- ---------- ---------- ING SmallCap Opportunities Fund Class I $1,000,000 $ 980,500 $2,041,500 $1,741,100 $1,117,900 $ 848,500 Russell 2000 Index $1,000,000 $1,105,529 $1,215,122 $1,284,246 $1,277,778 $1,173,209 Russell 2000 Growth Index $1,000,000 $1,090,030 $1,304,660 $1,099,367 $ 925,449 $ 836,669 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 -------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 4/1/99 4/4/00 ------ ------ ------ Class I -24.10% -3.86% -- Class Q -24.30% -- -27.23% Russell 2000 Growth Index(1) -9.59% -4.19% -18.36%(2) Russell 2000 Index -8.18% 3.91% -4.84%(2)
Based on a $1,000,000 initial investment, the graph and table above illustrate the total return of ING SmallCap Opportunities Fund against the Russell 2000 Growth Index and the Russell 2000 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Fund normally invests in small-cap companies that the portfolio manager believes have above average prospects for growth. The Russell 2000 Growth Index tracks the performance of small-cap growth companies. (2) Since inception performance for the index is shown from 4/1/00. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the small size growth companies in which the Fund invests. See accompanying index descriptions on page 28. 11 ING DISCIPLINED LARGECAP FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Hugh T.M. Whelan, CFA, Aeltus Investment Management, Inc., the Sub-Advisor. GOAL: The ING Disciplined LargeCap Fund (formerly, ING Research Enhanced Index Fund) (the "Fund") seeks capital appreciation by investing at least 80% of its net assets in stocks included in the S&P 500. MARKET OVERVIEW: The S&P 500 Index posted a loss of 8.06% over the 12 months ended May 31, 2003. Declines occurred in the first half of the period due to accounting concerns, conflict with Iraq, and concerns regarding the strength of the U.S. economic rebound. However, the market retraced a significant portion of those losses this year after the successful resolution of the war and mounting evidence of improving corporate earnings. Within the market, leadership has swung sharply back and forth between defensive stocks and former growth stocks. The sharp rallies of the fourth quarter of 2002 and from April 2003 have favored the smallest stocks within the index, especially those trading at low dollar prices. For the whole period financials, health care and information technology stocks were the strongest performers. The utilities and consumer discretionary sectors suffered the worst performance during the period. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided a total return of -9.39%, compared to -8.06% for the S&P 500 Index. PORTFOLIO SPECIFICS: Our return attribution analysis indicates that the bulk of the underperformance was due to stock selection, especially in April - May of 2003. The models we use to determine our overweights and underweights measure three things: business momentum/earnings quality, valuation, and market recognition. In looking at what was effective and what was not, we were hurt primarily by our market recognition variables, including price momentum, analyst estimate revision, and short interest during the rally in 2003. This was due to the fact that market's recent focus on small, low priced stocks represents a sharp change in market leadership and is unsupported by our measures of positive analyst estimate revisions. Only some of our valuation factors, like price to free cash flow, cash as a percentage of market value, and forward P/E were effective during the period. While the Fund benefited from its underweights in less fundamentally attractive stocks in 2002, this year our underweights have detracted from performance as the stocks with the poorest fundamentals according to our measures have had the best performance on balance. The largest individual detractors from performance were our overweights of Home Depot and Cisco, and our underweight in AIG. Positive contributors to performance were our underweights in Altria Group, Baxter International, and Electronic Data Systems. The Fund's sector allocation did not have a significant impact on performance, as is typically the case because we maintain sector exposures that are very close to those of our benchmark. MARKET OUTLOOK: Our bottom-up quantitative ranking process is leading us currently to modest overweights in industrials and financials and small underweights in the healthcare and consumer discretionary sectors. Our fully invested approach will continue to focus on the goal of adding performance through strong individual stock selection -- not through sector or style rotation -- while maintaining overall portfolio characteristics that are representative of the S&P 500 Index. We believe that if the current rally continues, our model will identify the strongest performing stocks based on our research which shows that stocks with attractive valuations, strong underlying business momentum, and clear market recognition usually outperform stocks, which have the worst scores in these areas over the long run. 12 Portfolio Manager's Report ING DISCIPLINED LARGECAP FUND - --------------------------------------------------------------------------------
12/30/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ---------- ---------- ---------- ---------- ---------- ---------- ING Disciplined LargeCap Fund Class I $1,000,000 $1,074,000 $1,143,400 $1,006,600 $ 862,800 $ 781,800 S&P 500 Index $1,000,000 $1,064,741 $1,176,250 $1,052,108 $ 906,429 $ 833,331
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------ SINCE INCEPTION 1 YEAR 12/30/98 ------ -------- Class I -9.39% -5.42% S&P 500 Index -8.06% -4.04%(1) Based on a $1,000,000 initial investment, the graph and table above illustrate the total return of ING Disciplined LargeCap Fund against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 01/01/99. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Derivatives are subject to the risk of changes in the market price of the security and the risk of loss due to changes in interest rates. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Fund. From time to time, the stock market may not favor the large company growth oriented securities in which the Fund invests. See accompanying index descriptions on page 28. 13 ING LARGE COMPANY VALUE FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by William F. Coughlin, CFA, ING Investments, LLC.* GOAL: The Large Company Value Fund's (the "Fund") principal objective is long-term capital appreciation through investment in a diversified portfolio consisting primarily of common stocks of large companies. Income is a secondary objective. MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31, 2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad measures of market performance) declined 7.73% and 8.06%, respectively. The market's decline was evident in measures of mid-cap growth and small-cap growth stocks as well. The Russell MidCap Growth Index fell 5.84%, and the Russell 2000 Growth Index dropped 9.59%. The reporting period was marked by continued disappointment in the economic numbers but strength in consumer spending, buoyed by record refinancing. During the final months of the fiscal year, investors were focused on geopolitical uncertainties, especially the potential for armed conflict in Iraq conflict. Once the coalition forces did, in fact, enter Iraq, the market began trading up off its March 11 low. Through the first week of April, the overall market gained an additional 4%. Recent market leadership has centered on the technology group, with value stocks trailing the overall market by a small margin. We have seen some institutional investors purchasing tech stocks, hoping the sector would provide the most leveraged upside returns if a widespread economic recovery ensues. To date, fundamentals have not, in our opinion, justified this type of anticipatory buying. As value investors, we are willing to forgo a small amount of short-term upside return whenever we see this kind of speculative buying, When the markets settle, we expect investors will once again focus on the fundamentals of individual companies. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares provided a total return of -15.15% compared to the S&P/Barra Value index for which the total return was -8.70%. PORTFOLIO SPECIFICS: In the semiannual report we stated that the Fund underperformed the index in the first half year, and this was primarily due to exposure to electric utilities. In the six months since the last semiannual report, the Fund returned 1.98% and the index 5.61%. During this period, the source of the underperformance was mainly sector selection. In the most noteworthy cases, we were overweight technology when it was performing poorly, and were underweighted in utilities, which was the best performing sector in the index. This was partly offset by our overweight in the strong health care sector. By contrast, the aggregate effect of stock selection was much smaller, although some of the components were individually significant. Stock selection in the financials and consumer discretionary sectors had an adverse effect on performance, while stock selection in technology and telecommunications was positive. Over the last six months, sector weights underwent significant change. We cut our underweight in financials by two-thirds, halved the overweight in health care and converted the overweight in technology to an underweight. MARKET OUTLOOK: Value stocks have recently been trailing their growth counterparts. While we believe this is a short-term reactionary move, equities across the spectrum are very reasonably priced today. This, in combination with low interest rates and fairly indifferent/low consumer sentiment, makes for one of the best investment opportunities we have seen in at least five years. Adding in such factors as stock market fear, post-war reconstruction uncertainty, record low interest rates, and a business environment that has been extremely conservative, we believe the upside potential for our equity market far exceeds the downside risk. * A team of investment professionals led by William F. Coughlin, CFA, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. Portfolio Manager's Report ING LARGE COMPANY VALUE FUND - -------------------------------------------------------------------------------- 10/4/01 5/31/02 5/31/03 ------- ------- ------- ING Large Company Value Fund Class Q $10,000 $10,280 $ 8,723 S&P Barra Value Index $10,000 $10,433 $ 9,526 S&P 500 Index $10,000 $10,349 $ 9,515 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------- SINCE INCEPTION 1 YEAR 10/4/01 ------ ------- Class Q -15.15% -7.90% S&P Barra Value Index(1) -8.70% 8.38%(2) S&P 500 Index -8.06% -2.94%(2) Based on a $10,000 initial investment, the graph and table above illustrate the total return of the ING Large Company Value Fund against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Fund normally invests in companies that the portfolio manager considers to be undervalued compared to the overall stock market. The S&P Barra Value Index tracks the performance of companies with low price-to-book ratios. (2) Since inception performance for the index is shown from 10/1/01. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller and mid-sized companies may entail greater price volatility than investing in stocks of larger companies. The Fund may also invest in foreign securities. International investing does pose special risks, including currency fluctuations, economic and political risks not found in investments that are solely domestic. From time to time, the stock market may not favor the large company value securities in which the Fund invests. See accompanying index descriptions on page 28. 15 ING MAGNACAP FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by William F. Coughlin, CFA, ING Investments, LLC.* GOAL: The ING MagnaCap Fund (the "Fund") seeks growth of capital, with dividend income as a secondary consideration. MARKET OVERVIEW: The U.S. equity market declined during the year ending May 31, 2003. For the period, the Russell 3000 Index and the S&P 500 Index (two broad measures of market performance) declined 7.73% and 8.06%, respectively. The market's decline was evident in measures of mid-cap growth and small-cap growth stocks as well. The Russell MidCap Growth Index fell 5.84%, and the Russell 2000 Growth Index dropped 9.59%. The reporting period was marked by continued disappointment in the economic numbers but strength in consumer spending was buoyed by record refinancing. During the final months of the fiscal year, investors were focused on geopolitical uncertainties, especially the potential for armed conflict in Iraq. Once the coalition forces did, in fact, enter Iraq, the market began trading up off its March 11 low. Through the first week of April, the overall market gained an additional 4%. Recent market leadership has centered on the technology group, with value stocks trailing the overall market by a small margin. We have seen some institutional investors purchasing tech stocks, hoping the sector would provide the most leveraged upside returns if a widespread economic recovery ensues. To date, fundamentals have not, in our opinion, justified this type of anticipatory buying. As value investors, we are willing to forgo a small amount of short-term upside return whenever we see this kind of speculative buying. When the markets settle, we expect investors will once again focus on the fundamentals of individual companies. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares provided a total return of -12.27% compared to the S&P 500 Index for which the total return was -8.06%. PORTFOLIO SPECIFICS: In the semi-annual report we stated that the Fund underperformed the index in the first half year, and this was primarily due to exposure to electric utilities. In the six months since the last semi-annual report, the Fund returned 2.92% and the index 3.96%. During this period, the source of the underperformance was mainly sector selection, although the components were individually small. In the largest case, we underweighted utilities, which was the best performing sector in the index. By contrast, the aggregate effect of stock selection was minor, although some of the components were individually significant. Stock selection in financials and the consumer sectors had an adverse effect on performance, while stock selection in healthcare and industrials was positive. Over the last six months, portfolio sector weights underwent significant change. The primary change was to move to an overweight in financials and reduced the underweight in the consumer sectors. This was financed by increased underweights in technology and healthcare. MARKET OUTLOOK: Value stocks have recently been trailing their growth counterparts. While we believe this is a short-term reactionary move, equities across the spectrum are very reasonably priced today. This, in combination with low interest rates and fairly indifferent/low consumer sentiment, makes for one of the best investment opportunities we have seen in at least five years. Adding in such factors as stock market fear, post-war reconstruction uncertainty, record low interest rates, and a business environment that has been extremely conservative, we believe the upside potential for our equity market far exceeds the downside risk. * A team of investment professionals led by William F. Coughlin, CFA, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 16 Portfolio Manager's Report ING MAGNACAP FUND - -------------------------------------------------------------------------------- 11/19/99 5/31/00 5/31/01 5/31/02 5/31/03 -------- ------- ------- ------- ------- ING MagnaCap Fund Class Q $10,000 $ 9,975 $ 9,482 $ 8,469 $ 7,413 S&P 500 Index $10,000 $10,290 $ 9,204 $ 7,930 $ 7,290 S&P Barra Value Index $10,000 $10,363 $11,101 $ 9,391 $ 8,574 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------------------------ SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 3/5/03 11/19/99 ------ ------ -------- Class I -- 16.82% -- Class Q -12.27% -- -8.13% S&P Barra Value Index(1) -8.70% 15.05%(2) -4.30%(3) S&P 500 Index -8.06% 17.82%(2) -8.63%(3) Based upon a $10,000 initial investment, the graph and table above illustrate the total return of ING MagnaCap Fund against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Fund invests in value securities that meet the Fund's disciplined investment criteria. The S&P Barra Value Index tracks the performance of companies with low price-to-book ratios. (2) Since inception performance for the index is shown from 3/1/03. (3) Since inception performance for the index is shown from 12/1/99. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. International investing does pose special risks including currency fluctuation, economical and political risks not found in domestic investments. See accompanying index descriptions on page 28. 17 Portfolio Manager's Report ING MIDCAP VALUE FUND - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: The Mid Cap Investment Committee of Brandes Investment Partners L.P. the Fund's sub-adviser. GOAL: The Fund seeks long-term capital appreciation by investing at least 80% of its assets in equity securities of U.S. issuers with equity market capitalizations greater than $1 billion but no greater than $5 billion at the time of purchase. MARKET OVERVIEW: For the year ended May 31, 2003, the S&P 500 Index declined 8.06%. Similarly, the Russell MidCap Value Index, which aims to measure the performance of medium-sized U.S. stocks, shed 5.73%. Early in the period, U.S. equity prices retreated amid continued concerns regarding corporate accounting improprieties and mixed economic reports. To bolster the sluggish economy, the U.S. Federal Reserve Board cut interest rates a half percent in November. In early 2003, stock prices continued to languish, as consumer confidence reached its lowest level in nearly 10 years and the unemployment rate stayed at 6%. Uncertainty surrounding U.S. military action in Iraq also weighed on sentiment. Stocks rebounded substantially in April and May, however, as evidence of improving corporate profits, improving consumer sentiment, and the end of large-scale combat in Iraq paralleled strong returns. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided a total return of -16.35% compared to the Russell MidCap Value Index for which the total return was -5.73%. PORTFOLIO SPECIFICS: During the year, declines for holdings in the auto components industry had the most significant influence on the Fund's returns. Goodyear Tire & Rubber (2.1% of the Fund) and Visteon (1.6%) were among positions registering declines. Holdings in the airlines and insurance industries, such as AMR (airlines -- 1.6%) and Allmerica Financial (insurance -- 0.9%), also tended to decline. While a majority of the Fund's holdings declined during the period, advances for positions in industries such as food products and semiconductors & equipment contributed positively to performance. Other top performers included holdings such as PG&E (electric utilities -- 1.9%) and Lucent Technologies (communications equipment -- 2.0%). During the period, we sold Reebok International (textiles, apparel & luxury goods -- 0.0%) as its market price advanced to our estimate of its intrinsic value. In addition, we sold positions such as Comverse Technology (wireless telecom services -- 0.0%) and Massey Energy (metals & mining -- 0.0%) to pursue other investment opportunities. Positions added during the year included firms such as CIT Group (diversified financial services -- 3.8%) and El Paso (electric utilities -- 2.5%). We purchased each new position at price levels that we believe offer significant potential for long-term appreciation. We also added to select existing positions at price levels that we consider attractive. As of May 31, 2003, the Fund's most significant weightings lie in the insurance and electric utilities industries. Keep in mind that weightings are not the product of industry-level forecasts or opinions, but merely stem from our company-by-company search for compelling investment opportunities. MARKET OUTLOOK: As value investors, we offer no predictions regarding the short-term direction of the overall market. A key teaching from Ben Graham -- widely considered the father of the value investing approach -- is that, in the short term, the stock market is a voting machine, with a stock's price reflecting only the stock's popularity with investors on any given day. In the long term, however, the market is more of a weighing machine, aligning a stock's price to reflect the fair value of the underlying business. For value investors, this means that a stock's price and its fair value often "detach" from one another in the short term. Because of the manic-depressive nature of the overall market -- where sentiment can shift between sweeping, carefree optimism and overwhelming fear and uncertainty seemingly overnight -- prices of stocks tend to fluctuate much more than the intrinsic value of the companies they represent. This irrationality can materialize on the upside, lifting prices to dangerously lofty heights. It can also appear on the downside, dragging prices for select stocks to bargain levels. We target the latter situation, purchasing stocks that are trading at discounts to their fair values and then holding these stocks until the market recognizes their inherent worth. By confidently approaching the short-term vagaries of the market with rational, objective analysis, we believe we can identify compelling investment opportunities and deliver superior long-term results. 18 Portfolio Manager's Report ING MIDCAP VALUE FUND - -------------------------------------------------------------------------------- 3/4/02 5/31/02 5/31/03 ---------- ---------- ---------- ING MidCap Value Fund Class I $1,000,000 $1,009,800 $ 844,700 Russell MidCap Value Index $1,000,000 $1,048,830 $ 988,717 TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 3/4/02 4/17/02 ------ ------ ------- Class I -16.35% -12.72% -- Class Q -16.62% -- -16.71% Russell MidCap Value Index -5.73% -0.90%(1) -5.43%(2) Based upon a $1,000,000 initial investment, the graph and table above illustrate the total return of ING MidCap Value Fund against the Russell MidCap Value Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 3/1/02. (2) Since inception performance for the index is shown from 5/1/02. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in equity securities. In exchange for higher growth potential, investing in stocks of mid-size companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the mid-cap value securities in which the Fund invests. See accompanying index descriptions on page 28. 19 ING SMALLCAP VALUE FUND Portfolio Manager's Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: The SmallCap Investment Committee of Brandes Investment Partners L.P. the Fund's sub-adviser. GOAL: The Fund seeks long-term capital appreciation by investing at least 80% of its assets in equity securities of U.S. issuers with equity market capitalizations of $1.5 billion or less at the time of purchase. MARKET OVERVIEW: For the year ended May 31, 2003, the S&P 500 Index declined 8.06%. Similarly, the Russell 200 Value Index, which aims to measure the performance of smaller U.S. stocks, shed 8.78%. Early in the period, U.S. equity prices retreated amid continued concerns regarding corporate accounting improprieties and mixed economic reports. To bolster the sluggish economy, the U.S. Federal Reserve Board cut interest rates a half percent in November. In early 2003, stock prices continued to languish, as consumer confidence reached its lowest level in nearly 10 years and the unemployment rate stayed at 6%. Uncertainty surrounding U.S. military action in Iraq also weighed on sentiment. Stocks rebounded substantially in April and May, however, as evidence of improving corporate profits, improving consumer sentiment, and the end of large-scale combat in Iraq paralleled strong returns. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided a total return of -9.49% compared to the Russell 200 Value Index for which the total return was -8.78%. PORTFOLIO SPECIFICS: During the year, declines for holdings in the metals & mining industry had the most significant influence on the Fund's returns. Stillwater Mining (1.4% of the Fund) and Wolverine Tube (2.3%) were among positions registering declines. Holdings in the textiles, apparel & luxury goods and electrical equipment industries, such as Tommy Hilfiger (textiles, apparel & luxury goods -- 2.2%) and Belden (electrical equipment -- 2.5%), also tended to decline. While a majority of the Fund's holdings declined during the period, advances for positions in industries such as communications equipment and wireless telecom services contributed positively to performance. Other top performers included holdings such as Avaya (communications equipment -- 4.0%) and Fleetwood Enterprises (household durables -- 2.8%). During the period, we sold positions such as American Physicians Capital (insurance) and Syms (specialty retail) as their market prices advanced to our estimates of their intrinsic values. In addition, we sold select holdings to pursue other investment opportunities. Positions added during the year included firms such as Goodyear Tire & Rubber (auto components -- 3.6%) and Gateway (computers & peripherals -- 2.5%). We purchased each new position at price levels that we believe offer significant potential for long-term appreciation. We also added to select existing positions at price levels that we consider attractive. As of May 31, 2003, the Fund's most significant weighting lies in the metals & mining industry. Keep in mind that weightings are not the product of industry-level forecasts or opinions, but merely stem from our company-by-company search for compelling investment opportunities. MARKET OUTLOOK: As value investors, we offer no predictions regarding the short-term direction of the overall market. A key teaching from Ben Graham -- widely considered the father of the value investing approach -- is that, in the short term, the stock market is a voting machine, with a stock's price reflecting only the stock's popularity with investors on any given day. In the long term, however, the market is more of a weighing machine, aligning a stock's price to reflect the fair value of the underlying business. For value investors, this means that a stock's price and its fair value often "detach" from one another in the short term. Because of the manic-depressive nature of the overall market -- where sentiment can shift between sweeping, carefree optimism and overwhelming fear and uncertainty seemingly overnight, prices of stocks tend to fluctuate much more than the intrinsic value of the companies they represent. This irrationality can materialize on the upside, lifting prices to dangerously lofty heights. It can also appear on the downside, dragging prices for select stocks to bargain levels. We target the latter situation, purchasing stocks that are trading at discounts to their fair values and then holding these stocks until the market recognizes their inherent worth. By confidently approaching the short-term vagaries of the market with rational, objective analysis, we believe we can identify compelling investment opportunities and deliver strong long-term results. 20 Portfolio Manager's Report ING SMALLCAP VALUE FUND - -------------------------------------------------------------------------------- 3/6/02 5/31/02 5/31/03 ---------- ---------- ---------- ING SmallCap Value Fund Class I $1,000,000 $1,032,000 $ 934,100 Russell 200 Value Index $1,000,000 $1,002,333 $ 914,341 TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ------------------------------------------------ SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 3/7/02 4/30/02 ------ ------ ------- Class I -9.49% -5.35% -- Class Q -9.47% -- -11.61% Russell 200 Value Index -8.78% -6.91%(1) -7.45%(2) Based upon a $1,000,000 initial investment, the graph and table above illustrate the total return of ING SmallCap Value Fund against the Russell 200 Value Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 3/1/02. (2) Since inception performance for the index is shown from 5/1/02. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in equity securities. In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility than investing in stocks of larger companies. From time to time, the stock market may not favor the small cap value securities in which the Fund invests. See accompanying index descriptions on page 28. 21 ING CONVERTIBLE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by Anuradha Sahai, Vice President, ING Investments, LLC.* GOAL: The ING Convertible Fund (the "Fund") seeks to maximize long-term total return by investing at least 80% in convertible securities consisting of capital appreciation and current income. MARKET OVERVIEW: The convertible indices, the S&P 500, and the NASDAQ Composite benchmark witnessed significant volatility during the one-year period ending May 31, 2003. The economic malaise that started turning around towards the latter half of this period was the underlying driver of the ups and downs witnessed. Additional factors contributing to the volatility were revelations of massive corporate accounting frauds, SEC investigations leading to reduced Wall Street credibility and the Iraqi situation -- all in all leading to an action packed one-year period. The credit markets were also very volatile with corporate bond spreads widening and then remarkably tightening towards the end of this period. The turnaround occurred following the October low with equities rallying and credit spreads tightening on improving economic numbers and an additional interest rate cut by the Fed. As an asset class, convertibles outperformed stocks over the one-year period. Initially, with the decrease in equity valuations, their bond-like feature helped convertibles outperform equities. The strong recent up trend in equities along with credit spread tightening helped the convertible market outperform in the latter part of this period too. Liquidity in the market remains good in contrast to some fixed income markets. Hedge funds reportedly have plenty of buying power and there continues to be a large appetite for convertible new issuance. The traditional ability to hedge incremental holdings of convertible securities by shorting the underlying common stock continues to allow both dealers and hedge funds to position convertibles more easily than they can accommodate straight corporate debt. New issuance picked up in the last couple of months with May witnessing 48 new deals raising just over $14 billion. A number of large deals have come to market largely resulting from issuers' reluctance to go to the equity market as stock valuations came down and due to their inability to raise capital in the straight debt market at attractive rates. With demand for paper high as a result of increased inflows and companies able to raise cheap capital in the convertible market, issuance continues to remain high. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares returned 8.11% compared to 11.20% for the First Boston Convertible Index. PORTFOLIO SPECIFICS: The Fund performance improved from its repositioning to a more market weighted stance. Short-term defensive posturing with respect to equity sensitivity augmented performance. Risk management measures helped the fund weather the significant volatility the markets witnessed and improve risk-adjusted returns. The Fund benefited from favorable security selection in technology, media, industrials and consumer staples sectors and had a beneficial under weight sensitivity to the consumer discretionary sector. This was somewhat offset by underperformance in the transportation and utilities sectors. Underperformance versus the benchmark was largely due to the under weighting of the fund in riskier names that outperformed towards the latter half of this period. MARKET OUTLOOK: We believe the recent surge in the equity markets, led by over optimism in the strength of the economy, may be unsustainable in the near term. Economic indicators are improving, albeit gradually. Despite the indications that the Fed may ease further, we think the profitability outlook for firms will only slowly improve. Businesses simply do not have much pricing power and indeed this aspect is one of the reasons why inflation should remain under control during the economic recovery. In these volatile times, we believe that convertible securities are attractive relative to comparable alternative asset classes. We continue to look for companies across the spectrum that will benefit from a gradually recovering economy as we expect the market will likely reward companies that typically benefit in the recovery part of the cycle. A bottom up approach, which relies on fundamental analysis and careful security selection within our broader top down sector positioning strategy, continues to be the foundation for our investment decisions. * A team of investment professionals led by Anuradha Sahai, Vice President, ING Investments, LLC assumed responsibility for the Fund on April 21, 2003. 22 Portfolio Managers' Report ING CONVERTIBLE FUND - --------------------------------------------------------------------------------
8/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ------- ------- ------- ------- ING Convertible Fund Class Q $10,000 $11,761 $13,476 $16,485 $20,321 $27,740 $24,619 $21,906 $23,683 First Boston Convertible Index $10,000 $11,194 $11,980 $13,841 $15,267 $19,433 $18,421 $16,937 $18,833
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ---------------------------------------- SINCE INCEPTION 1 YEAR 5 YEAR 8/31/95 ------ ------ ------- Class Q 8.11% 7.52% 11.77% First Boston Convertible Index 11.20% 6.35% 8.51%(1) Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Convertible Fund against the First Boston Convertible Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for index is shown from 9/1/95. PRINCIPAL RISK FACTOR(S): The credit standing of the issuer and other factors may affect the investment value of a convertible security. The market value of convertible debt securities tends to vary inversely with the level of interest rates. Lower rated securities may be less liquid than higher quality investments. The Fund also has exposure to financial, market and interest rate risks. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio and in some cases, the lower market prices for those instruments. The Fund may also invest in small and medium sized companies, which may be more susceptible to greater price volatility than larger companies. See accompanying index descriptions on page 28. 23 ING EQUITY AND BOND FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: A team of investment professionals led by James A. Vail, CFA, manages the equity portion of the Fund, with a team led by James B. Kauffman manages the fixed income portion of the Fund. Both are ING Investments, LLC. GOAL: The ING Equity and Bond Fund (the "Fund") seeks a balance of long-term capital appreciation and current income by investing in both equities and bonds. MARKET REVIEW: EQUITIES: The last twelve months witnessed a volatile equity market as measured by the S&P 500, and despite recent strength, the Index has yet to reach its June 2002 level of 1050. Beginning in June 2002, the market was buffeted by concerns over the integrity of the U.S. economic and financial systems as reports of fraud, accounting irregularities and fears of an economic slow down took center stage. During the third quarter of 2002, the S&P 500 dropped 24% to 800, subsequently recovered to 962 but retested the 800 level again in October. We saw a recovery in the fourth quarter of 2002 but the market settled into a narrow trading range before Iraqi War fears again drove the Index back to the 800 level. Since then, the successful completion of the Iraqi campaign, and evidence that the aggressive Federal Reserve loosening appears to be leading to an economic rebound contributred to a dramatic market ralley in May. Since the bottom in March, the S&P 500 is up 23%. While in the short term this may be over extended, we believe we are on the verge of a recovery witnessed by recent strength in consumer confidence and business surveys suggesting the worst may be over. Additionally, the recent tax cut should spur activity in the third quarter leading to a better economy for the last quarter of 2003 and into 2004. The market has historically anticipated changes in the economy and we believe the strength in May may be signaling better times ahead. BONDS: 2002 witnessed some of the greatest volatility and sudden credit turbulence in recent memory. As the year progressed, scores of erstwhile investment grade names -- many of which were in the top fifty corporate issuers by size -- plummeted to junk. Moreover, the credit default swap markets provided hedge funds the means to exploit the illiquidity in widely held or tarnished names. Disappointing earnings and a relentless equity market tailspin prompted institutional investors to seek refuge in U.S. Treasuries, mortgage-backed securities, and higher quality emerging market debt. Geo-political uncertainties exacerbated the flight to quality and pushed U.S. Treasuries to a forty-year low during the year. Low rates, in turn, incited a riot of mortgage refinancing. By the beginning of the fourth quarter U.S. domestic investment grade credit risk premia stood at historic levels. The magnitude of the Fed's November's rate cut surprised the markets, and risk taking returned. Hedge funds scrambled to cover shorts in the credit default swaps market while traditional bond investors sold Treasuries to add spread product in both high yield and investment grade sectors. Despite the turmoil in specific sectors, bonds out-performed equities for the third year in a row as the Lehman Brothers Aggregate Bond Index posted a positive 10.26% in 2002. With the advent of the first quarter of 2003, capital markets became increasingly focused on the pending war with Iraq. Early January witnessed the continuation of the late 2002 rallies; however, as the likelihood of hostilities increased, investors bid up short-dated Treasuries at the expense of stocks. The prices of gold and energy shot up dramatically. In May of 2003 the Federal Reserve sent an unequivocal message to the markets with the release of its new policy statement: "the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup in inflation from its already low level." Subsequent comments from Fed officials reiterated their concern about the slow recovery and the steps they are willing to take to forestall deflationary expectations. With the prospect of an extended period of accommodative monetary policy, the Treasury market promptly rallied to forty-five year lows. Asian central banks and our own domestic mortgage buyers also added Treasuries: the former to defend the dollar versus their local currency, and the later to offset the evaporating duration of their holdings. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class Q shares returned - -0.61% compared to -8.70% for the S&P Barra Value Index, 11.58% for the Lehman Brothers Aggregate Bond Index and 0.04% for the Composite Index (60% S&P 500 Index / 40% Lehman Brothers Aggregate Bond Index). PORTFOLIO SPECIFICS: EQUITIES: The Equity portfolio lagged the S&P Barra Value Index reflecting it's overweight in utilities and consumer staples for the last twelve months but benefited from its over weight in the information sector, industrials and telecommuication services. Utilities were specifically hurt by financial fears based on lingering Enron effects and the need to pursue equity offering to shore up weak balance sheets. BONDS: The Fund benefited from strict credit disciplines during 2002 -- a period of unprecedented financial fraud and deteriorating earnings. Security selection and sector allocation, by and large, produced positive alpha. The addition of high yield, emerging market, and euro-denominated bonds in the fourth quarter of the calendar year aided performance into 2003. MARKET OUTLOOK: EQUITIES: While the market has done well in the near term and may need to consolidate recent gains, we believe the intermediate to longer term direction may be higher. The combined forces of lower interest rates, tax cuts, a weaker U.S. dollar and its positive impact on domestic exports should lay the foundation for an improving U.S. economy as we progress through 2003 and into 2004. Recall that 2004 is a presidential election year and historically markets do well into this event. The Equity Portfolio will continue to search for undervalued situations where near to intermediate catalysts could unleash that perceived value. BONDS: Weak aggregate demand has followed the capital expenditure binge years of the late 1990's. Ultimately the stimulative effects of negative real rates, a weakening dollar, and tax cuts will likely boost the domestic economy out of its lethargy. And we do not agree with the school of thought that draws parallels between our current slow growth predicament and the decade long recession in Japan. In the U. S. fiscal and monetary policy has been largely proactive, and overleveraged companies have been allowed to fail. The big question for bond investors is how long rates will stay low and when will the economy gain traction. Given that excess capacity is high for this stage of a "recovery" and that pricing power is weak, the outlook is murky; but we do not anticipate a deflationary spiral. In response to these historically low interest rates we are slightly short in duration and have moved to an underweight in mortgages. 24 Portfolio Managers' Report ING EQUITY AND BOND FUND - --------------------------------------------------------------------------------
8/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ------- ------- ------- ------- ------- ------- ------- ------- ------- ING Equity and Bond Fund Class Q $10,000 $11,233 $12,245 $15,530 $18,159 $18,183 $18,239 $17,231 $17,126 S&P Barra Value Index $10,000 $12,020 $15,082 $19,443 $21,987 $22,557 $24,165 $20,441 $18,664 Lehman Brothers Aggregate Bond Index $10,000 $10,262 $11,115 $12,328 $12,865 $13,136 $14,859 $16,063 $17,923 Lipper Balanced Fund Index $10,000 $11,346 $13,700 $16,806 $19,282 $20,701 $20,434 $19,361 $19,369 Composite Index (60% S&P 500 Index / 40% Lehman Brothers Aggregate Bond Index $10,000 $11,476 $13,443 $16,148 $17,850 $18,855 $19,251 $18,307 $15,250 AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ---------------------------------------- SINCE INCEPTION 1 YEAR 5 YEAR 8/31/95 ------ ------ ------- Class Q -0.61% 1.98% 7.19% S&P Barra Value Index -8.70% -0.81% 8.38%(1) Lehman Brothers Aggregate Bond Index 11.58% 7.77% 7.82%(1) Lipper Balanced Fund Index -1.67% 2.20% 14.76%(1) Composite Index (60% S&P 500 Index/40% Lehman Brothers Aggregate Bond Index) 0.04% 2.88% 8.90%(1)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING Equity and Income Fund against the S&P Barra Value Index, Lehman Brothers Aggregate Bond Index, Lipper Balanced Fund Index and Composite Index (60% S&P 500 Index, 40% Lehman Brothers Aggregate Bond Index). The Indices have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Fund. Performance table and graph do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for the index is shown from 9/1/95. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in equity securities. Credit, interest rate and other risks that accompany debt investments. The Fund may invest up to 20% of its total assets in foreign securities. International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio and in some cases, the lower market prices for those instruments. High yield securities and securities of smaller companies may be less liquid than other investments. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Fund. See accompanying index descriptions on page 28. 25 ING REAL ESTATE FUND Portfolio Managers' Report - -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT: T. Ritson Ferguson, CFA, Managing Director and Chief Investment Officer, Kenneth D. Campbell, Managing Director, Clarion CRA Securities, L.P. the Sub-Adviser. GOAL: The ING Real Estate Fund (the "Fund") seeks total return through investment in common and preferred stocks of U.S. real estate investment trusts (REITs) and real estate companies. MARKET OVERVIEW: Real estate securities continued their relative outperformance versus broad equities for the year ended May 31, 2003 as real estate securities recorded total return of +3.08% during this time period versus -8.06% for the S&P 500 and -8.18% for small cap equities as measured by the Russell 2000 index. This continues an outperformance streak which has persisted over the past three years as real estate securities are +13.95% per annum for the three years ended May 31, 2003 versus -10.86% per annum for the S&P 500 and -1.16% per annum for small cap stocks (Russell 2000). Investors' appetite for yield and stability in cash flows continue to generate strong funds flow into the sector as real estate mutual funds flow in 2003 year-to-date exceeds $1 billion according to AMG data. The sub-adviser expects continued healthy funds flow in the near to intermediate term via both open end and closed end real estate mutual funds. Much of the total return over the past year has been achieved during the past three months as REITs have benefited from a combination of factors, the most important of which are the sense that the economy may be entering a recovery phase, which would be good for job growth and thus commercial real estate demand, combined with an attractive current income component in an investment landscape starved for yield. PERFORMANCE: For the year ended May 31, 2003, the Fund's Class I shares provided a total return of 4.13% compared to the Wilshire Real Estate Securities Index which returned 3.10% for the same period. PORTFOLIO SPECIFICS: Property type selection was the major contributor to relative outperformance over the past year as the retail property types (malls and shopping centers) have significantly outperformed the other major property groups (office and apartments). The Fund's overweights in shopping centers (+23.8% for the year) and malls (+21.7%) combined with underweights in the underperforming office (-1.2%) and apartments (-2.8%) have both contributed to relative outperformance. Also contributing has been a sharp underweight in the beleaguered hotel sector (-20.3% for the year) which is still attempting to regain its footing following several years of weak demand induced by a weak economy and exacerbated by international events. MARKET OUTLOOK: We remain constructive on the outlook for returns to an actively managed real estate stock portfolio. By our estimates, the average REIT is trading at a 1.2% discount to the private market value of the company's real estate. Also, REITs are still trading at about 10 times forward 4-quarter earnings which is still well below the average REIT pricing multiple of 12 times forward earnings. Funds flows to real estate stock funds remain strong indicating investors still are attracted to the attractive yield and total return potential of REITs. The size of the public real estate company universe continues to grow. Initial Public Offerings for Maguire Properties (the largest office space owner in Downtown Los Angeles) and American Financial Realty (an acquirer of corporate-owned properties, primarily single-tenant bank branches and multi-tenant office buildings whose Chairman is Lewis Ranieri, a pioneer of mortgage backed securities) are expected in late June. With the prospect of continued positive funds flow, reasonable valuations, and attractive dividend yields, the investment thesis for real estate securities we believe remains favorable. 26 Portfolio Managers' Report ING REAL ESTATE FUND - --------------------------------------------------------------------------------
12/31/96 5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ING Real Estate Fund Class I $1,000,000 $1,016,200 $1,196,200 $1,107,900 $1,118,900 $1,330,100 $1,582,800 $1,648,200 Wilshire Real Estate Security Index $1,000,000 $1,014,800 $1,140,400 $1,074,600 $1,067,400 $1,304,300 $1,532,400 $1,579,900
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED MAY 31, 2003 ---------------------------------------- SINCE INCEPTION OF CLASS I 1 YEAR 5 YEAR 12/31/96 ------ ------ -------- Class I 4.13% 6.62% 8.11% Wilshire Real Estate Security Index 3.10% 6.74% 7.39%(1) Based upon a $1,000,000 initial investment, the graph and table above illustrate the total return of ING Real Estate Fund against the Wilshire Real Estate Security Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception for the index is shown from 01/01/97. PRINCIPAL RISK FACTOR(S): Price volatility and other risks that accompany an investment in real estate equities and volatility due to non-diversification of investments. Subject to risks similar to those associated with the direct ownership of real estate. The Fund primarily invests in common and preferred stocks of U.S. real estate investment trusts (REITs) and real estate companies. Risk of concentration -- because the Fund's investments are concentrated in the real estate industry, the value of the Fund may be subject to greater volatility than a fund with a portfolio that is less concentrated. These companies are sensitive to factors such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and credit worthiness of the issuer. REITs may also be affected by tax and regulatory requirements. The Fund may invest in small- and mid-sized companies, which may be more susceptible to price swings than larger companies. Securities of smaller companies trade in lower volume and may be less liquid than securities of large, more established companies. See accompanying index descriptions on page 28. 27 INDEX DESCRIPTIONS - -------------------------------------------------------------------------------- The DOW JONES INDUSTRIAL AVERAGE is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. The FIRST BOSTON CONVERTIBLE INDEX is an index representing the universe of convertible securities. The LEHMAN BROTHERS AGGREGATE BOND INDEX is a widely recognized index of publicly issued fixed rate U.S. government, investment grade mortgage-backed and corporate debt securities. The MERRILL LYNCH HIGH YIELD MASTER II INDEX is an unmanaged market value-weighted index of all domestic and Yankee high yield bonds, including deferred interest bonds and payment-in-kind securities. Issues included in the index have maturities of one year or more and have credit rating lower than BBB-/Baa3 but are not in default. The NASDAQ 100 FINANCIAL INDEX is a capitalization-weighted index of the 100 largest financial companies, as well as foreign issues, including American Depositary Receipts, traded on the Nasdaq National Market System and SmallCap Market. The NASDAQ 100 INDEX is a modified capitalization-weighted index of the 100 largest and most active non-financial domestic and international issues listed on the Nasdaq. The NASDAQ COMPOSITE INDEX is a broad-based capitalization-weighted index of all Nasdaq National Market & SmallCap stocks. The RUSSELL 1000 GROWTH INDEX is an index that measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The RUSSELL 200 VALUE INDEX measures the performance of those Russell 200 companies with lower price-to-book ratios and lower forecasted growth values. The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The RUSSELL 2000 INDEX consists of the smallest 2,000 companies in the Russell 3000 Index. The RUSSELL 3000 INDEX measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The RUSSELL MIDCAP GROWTH INDEX consists of securities with capitalizations between $450 million and $3.8 billion with greater than average growth orientation. The RUSSELL MIDCAP INDEX measures the performance of the 800 smallest companies in the Russell 1000 Index. The RUSSELL MIDCAP VALUE INDEX is an index that measures the performance of Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 FINANCIALS INDEX is a capitalization-weighted index of all stocks designed to measure the performance of the financial sector of the S&P Index. The S&P 500 INDEX is a capitalization-weighted index of 500 stocks chosen for market size, liquidity, and industry group representation. The S&P BARRA GROWTH INDEX is a capitalization-weighted index of all the stocks in the S&P 500 Index that have high price-to-book ratios. The S&P BARRA VALUE INDEX is a capitalization-weighted index of all the stocks in the S&P 500 Index that have low price-to-book ratios. The S&P MIDCAP 400 INDEX is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. The WILSHIRE REAL ESTATE SECURITY INDEX measures the performance of publicly traded real estate securities, such as Real Estate Investment Trusts (REITs) and Real Estate Operating Companies (REOCs). The index is capitalization-weighted. All indices are unmanaged. An investor cannot invest directly in an index. 28 INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The Class I and Q shareholders and the Boards of Directors and Trustees of ING Equity Trust, ING Investment Funds, Inc., and ING Mayflower Trust: We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of ING Growth + Value Fund, ING Growth Opportunities Fund, ING LargeCap Growth Fund, ING MidCap Opportunities Fund, ING SmallCap Opportunities Fund, ING Disciplined LargeCap Fund (formerly ING Research Enhanced Index Fund), ING Large Company Value Fund, ING MagnaCap Fund, ING MidCap Value Fund, ING SmallCap Value Fund, ING Convertible Fund, ING Equity and Bond Fund, and ING Real Estate Fund as of May 31, 2003, and the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein for the ING Real Estate Fund, ING Large Company Value Fund, ING MagnaCap Fund, ING MidCap Value Fund, and ING SmallCap Value Fund, the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein ending on or after December 31, 2000 for the ING Growth Opportunities Fund, ING MidCap Opportunities Fund, and ING SmallCap Opportunities Fund, and the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein ending on or after May 31, 2001 for the ING Growth + Value Fund and ING Disciplined LargeCap Fund and the statements of operations, statements of changes in net assets, and financial highlights for all years and periods as indicated herein ending on or after June 30, 1999 for the ING LargeCap Growth Fund, ING Convertible Fund, and ING Equity and Bond Fund. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. For all periods ending prior to January 1, 2000 the financial highlights of the ING Growth Opportunities Fund, ING MidCap Opportunities Fund, and ING SmallCap Opportunities Fund were audited by other auditors whose report thereon dated February 17, 2000 expressed an unqualified opinion on those financial highlights. For all periods ending prior to November 1, 2000, the financial highlights, of the ING Growth + Value Fund and the ING Disciplined LargeCap Fund were audited by other auditors whose report thereon dated December 5, 2000 expressed an unqualified opinion on those financial highlights. For all periods ending prior to April 1, 1999, the financial highlights of the ING LargeCap Growth Fund, ING Convertible Fund and ING Equity and Income Fund were audited by other auditors whose report thereon dated May 7, 1999 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2003 by correspondence with the custodian and brokers, or by other appropriate audit procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above, excluding those financial statements and financial highlights which were indicated above as having been audited by others, present fairly, in all material respects, the financial position of each of the aforementioned funds, as of May 31, 2003, the results of their operations, the changes in their net assets, and their financial highlights for the periods specified in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Boston, Massachusetts July 11, 2003 29 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING GROWTH + GROWTH LARGECAP VALUE OPPORTUNITIES GROWTH FUND FUND FUND -------------- -------------- -------------- ASSETS: Investments in securities at value* $ 199,816,760 $ 177,115,733 $ 172,895,754 Short-term investments at amortized cost 4,794,000 2,618,000 1,282,000 Cash 390 503 563 Receivables: Investment securities sold 4,011,832 -- -- Fund shares sold 175,257 25,267 71,903 Dividends and interest 43,436 102,359 57,941 Prepaid expenses 31,562 38,672 36,008 -------------- -------------- -------------- Total assets 208,873,237 179,900,534 174,344,169 -------------- -------------- -------------- LIABILITIES: Payable for investment securities purchased 814,532 1,001,030 -- Payable for fund shares redeemed 857,364 1,457,964 338,631 Payable to affiliates 466,682 337,671 254,047 Payable for trustee fees 7,039 6,124 8,968 Other accrued expenses and liabilities 343,027 268,602 377,993 -------------- -------------- -------------- Total liabilities 2,488,644 3,071,391 979,639 -------------- -------------- -------------- NET ASSETS $ 206,384,593 $ 176,829,143 $ 173,364,530 ============== ============== ============== NET ASSETS WERE COMPRISED OF: Paid-in capital $ 720,789,830 $ 622,948,756 $ 567,594,251 Undistributed net investment income -- -- -- Accumulated net realized loss on investments (540,538,181) (469,328,851) (426,892,932) Net unrealized appreciation of investments 26,132,944 23,209,238 32,663,211 -------------- -------------- -------------- NET ASSETS $ 206,384,593 $ 176,829,143 $ 173,364,530 ============== ============== ============== * Cost of investments in securities $ 173,683,816 $ 153,906,495 $ 140,232,543
See Accompanying Notes to Financial Statements 30 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
ING ING ING GROWTH + GROWTH LARGECAP VALUE OPPORTUNITIES GROWTH FUND FUND FUND ------------- ------------ ------------ CLASS A: Net Assets $ 51,218,411 $ 49,944,101 $ 40,940,814 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 6,502,888 4,474,864 2,856,870 Net asset value and redemption price per share $ 7.88 $ 11.16 $ 14.33 Maximum offering price per share (5.75%)(1) $ 8.36 $ 11.84 $ 15.20 CLASS B: Net Assets $ 105,172,828 $ 50,620,167 $ 72,574,856 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 14,063,729 4,873,454 5,186,003 Net asset value and redemption price per share(2) $ 7.48 $ 10.39 $ 13.99 Maximum offering price per share $ 7.48 $ 10.39 $ 13.99 CLASS C: Net Assets $ 49,782,705 $ 24,014,717 $ 31,515,588 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 6,660,625 2,307,923 2,258,786 Net asset value and redemption price per share(2) $ 7.47 $ 10.41 $ 13.95 Maximum offering price per share $ 7.47 $ 10.41 $ 13.95 CLASS I: Net Assets n/a $ 44,704,146 $ 22,155,643 Shares authorized n/a unlimited unlimited Par value n/a $ 0.01 $ 0.00 Shares outstanding n/a 3,874,545 1,505,795 Net asset value and redemption price per share n/a $ 11.54 $ 14.71 Maximum offering price per share n/a $ 11.54 $ 14.71 CLASS Q: Net Assets $ 210,649 $ 2,658 $ 6,177,629 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.00 Shares outstanding 26,984 240 421,358 Net asset value and redemption price per share $ 7.81 $ 11.07 $ 14.66 Maximum offering price per share $ 7.81 $ 11.07 $ 14.66 CLASS T: Net Assets n/a $ 7,543,354 n/a Shares authorized n/a unlimited n/a Par value n/a $ 0.01 n/a Shares outstanding n/a 719,377 n/a Net asset value and redemption price per share(2) n/a $ 10.49 n/a Maximum offering price per share n/a $ 10.49 n/a
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements 31 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING MIDCAP SMALLCAP DISCIPLINED OPPORTUNITIES OPPORTUNITIES LARGECAP FUND FUND FUND -------------- -------------- ------------- ASSETS: Investments in securities at value* $ 167,296,926 $ 277,580,542 $ 82,242,505 Short-term investments at amortized cost 5,959,000 2,911,000 -- Cash 944 315 28,482 Receivables: Investment securities sold -- -- 931,942 Fund shares sold 46,262 200,168 410,096 Dividends and interest 36,956 18,754 128,854 Other -- 74,677 -- Prepaid expenses 31,047 52,055 29,819 -------------- -------------- ------------- Total assets 173,371,135 280,837,511 83,771,698 -------------- -------------- ------------- LIABILITIES: Payable for investment securities purchased 1,877,472 195,650 764,497 Payable for fund shares redeemed 309,512 1,190,446 128,804 Payable to affiliates 358,871 546,709 124,697 Payable for trustee fees 6,697 6,058 2,842 Other accrued expenses and liabilities 166,140 264,151 160,438 -------------- -------------- ------------- Total liabilities 2,718,692 2,203,014 1,181,278 -------------- -------------- ------------- NET ASSETS $ 170,652,443 $ 278,634,497 $ 82,590,420 ============== ============== ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 336,384,095 $ 630,562,076 $ 140,555,354 Undistributed net investment income -- -- -- Accumulated net realized loss on investments (183,783,471) (393,085,385) (59,470,517) Net unrealized appreciation (depreciation) of investments 18,051,819 41,157,806 1,505,583 -------------- -------------- ------------- NET ASSETS $ 170,652,443 $ 278,634,497 $ 82,590,420 ============== ============== ============= * Cost of investments in securities $ 149,245,107 $ 236,422,736 $ 80,736,922
See Accompanying Notes to Financial Statements 32 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
ING ING ING MIDCAP SMALLCAP DISCIPLINED OPPORTUNITIES OPPORTUNITIES LARGECAP FUND FUND FUND ------------ ------------ ------------ CLASS A: Net Assets $ 44,009,739 $118,569,934 $ 7,204,515 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 Shares outstanding 4,347,267 6,528,066 946,862 Net asset value and redemption price per share $ 10.12 $ 18.16 $ 7.61 Maximum offering price per share (5.75%)(1) $ 10.74 $ 19.27 $ 8.07 CLASS B: Net Assets $ 43,182,807 $ 85,464,506 $ 34,357,914 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 Shares outstanding 4,408,128 5,067,344 4,659,172 Net asset value and redemption price per share(2) $ 9.80 $ 16.87 $ 7.37 Maximum offering price per share $ 9.80 $ 16.87 $ 7.37 CLASS C: Net Assets $ 67,730,055 $ 63,406,199 $ 21,478,271 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 Shares outstanding 6,948,484 3,767,039 2,912,637 Net asset value and redemption price per share(2) $ 9.75 $ 16.83 $ 7.37 Maximum offering price per share $ 9.75 $ 16.83 $ 7.37 CLASS I: Net Assets $ 10,843,973 $ 8,510,032 $ 19,549,720 Shares authorized unlimited unlimited unlimited Par value $ 0.01 $ 0.01 $ 0.01 Shares outstanding 1,049,680 465,819 2,532,248 Net asset value and redemption price per share $ 10.33 $ 18.27 $ 7.72 Maximum offering price per share $ 10.33 $ 18.27 $ 7.72 CLASS Q: Net Assets $ 4,885,869 $ 905,921 n/a Shares authorized unlimited unlimited n/a Par value $ 0.01 $ 0.01 n/a Shares outstanding 479,635 49,718 n/a Net asset value and redemption price per share $ 10.19 $ 18.22 n/a Maximum offering price per share $ 10.19 $ 18.22 n/a CLASS T: Net Assets n/a $ 1,777,905 n/a Shares authorized n/a unlimited n/a Par value n/a $ 0.01 n/a Shares outstanding n/a 104,293 n/a Net asset value and redemption price per share(2) n/a $ 17.05 n/a Maximum offering price per share n/a $ 17.05 n/a
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements 33 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING LARGE COMPANY ING MIDCAP SMALLCAP VALUE MAGNACAP VALUE VALUE FUND FUND FUND FUND ------------- ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 133,646,066 $ 228,187,761 $ 37,639,860 $ 31,645,342 Short-term investments at amortized cost 4,169,000 4,312,000 1,767,000 349,000 Cash 673 155 588 109 Receivables: Investment securities sold -- -- 799,868 -- Fund shares sold 34,081 1,901,885 222,690 87,703 Dividends and interest 332,338 521,471 51,149 32,583 Prepaid expenses 29,095 37,270 35,632 32,242 Reimbursement due from manager -- -- 7,380 4,870 ------------- ------------- ------------- ------------- Total assets 138,211,253 234,960,542 40,524,167 32,151,849 ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased -- -- 883,984 -- Payable for fund shares redeemed 55,285 3,652,140 47,341 71,368 Payable to affiliates 123,123 253,747 55,820 46,028 Payable for trustee fees 64,875 8,819 1,913 1,118 Other accrued expenses and liabilities 136,318 292,048 58,238 56,345 ------------- ------------- ------------- ------------- Total liabilities 379,601 4,206,754 1,047,296 174,859 ------------- ------------- ------------- ------------- NET ASSETS $ 137,831,652 $ 230,753,788 $ 39,476,871 $ 31,976,990 ============= ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 181,344,848 $ 305,810,446 $ 49,590,357 $ 36,213,792 Undistributed net investment income (accumulated net investment loss) 772,491 695,252 (29,333) (29,333) Accumulated net realized loss on investments (41,992,494) (75,742,327) (2,585,042) (808,792) Net unrealized depreciation of investments (2,293,193) (9,583) (7,499,111) (3,398,677) ------------- ------------- ------------- ------------- NET ASSETS $ 137,831,652 $ 230,753,788 $ 39,476,871 $ 31,976,990 ============= ============= ============= ============= * Cost of investments in securities $ 135,939,259 $ 228,197,344 $ 45,138,971 $ 35,044,019
See Accompanying Notes to Financial Statements 34 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
ING ING ING LARGE COMPANY ING MIDCAP SMALLCAP VALUE MAGNACAP VALUE VALUE FUND FUND FUND FUND ------------- ------------- ------------- ------------- CLASS A: Net Assets $ 133,145,915 $ 156,902,117 $ 15,025,992 $ 12,280,182 Shares authorized unlimited 80,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 10,769,173 17,794,228 1,797,146 1,301,395 Net asset value and redemption price per share $ 12.36 $ 8.82 $ 8.36 $ 9.44 Maximum offering price per share (5.75%)(1) $ 13.11 $ 9.36 $ 8.87 $ 10.02 CLASS B: Net Assets $ 3,538,332 $ 50,677,491 $ 12,204,760 $ 8,232,893 Shares authorized unlimited 80,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 290,720 5,977,938 1,463,482 876,675 Net asset value and redemption price per share(2) $ 12.17 $ 8.48 $ 8.34 $ 9.39 Maximum offering price per share $ 12.17 $ 8.48 $ 8.34 $ 9.39 CLASS C: Net Assets $ 1,133,146 $ 8,291,408 $ 12,034,420 $ 11,240,831 Shares authorized unlimited 20,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 93,405 977,255 1,443,372 1,197,927 Net asset value and redemption price per share(2) $ 12.13 $ 8.48 $ 8.34 $ 9.38 Maximum offering price per share $ 12.13 $ 8.48 $ 8.34 $ 9.38 CLASS I: Net Assets n/a $ 6,853 $ 197,428 $ 222,463 Shares authorized n/a 50,000,000 unlimited unlimited Par value n/a $ 0.00 $ 0.001 $ 0.001 Shares outstanding n/a 777 23,527 23,556 Net asset value and redemption price per share n/a $ 8.82 $ 8.39 $ 9.44 Maximum offering price per share n/a $ 8.82 $ 8.39 $ 9.44 CLASS M: Net Assets n/a $ 7,444,943 n/a n/a Shares authorized n/a 5,000,000 n/a n/a Par value n/a $ 0.00 n/a n/a Shares outstanding n/a 857,721 n/a n/a Net asset value and redemption price per share(3) n/a $ 8.68 n/a n/a Maximum offering price per share n/a $ 8.99 n/a n/a CLASS Q: Net Assets $ 14,259 $ 7,430,976 $ 14,271 $ 621 Shares authorized unlimited 20,000,000 unlimited unlimited Par value $ 0.001 $ 0.00 $ 0.001 $ 0.001 Shares outstanding 1,154 842,392 1,707 65 Net asset value and redemption price per share $ 12.36 $ 8.82 $ 8.36 $ 9.53 Maximum offering price per share $ 12.36 $ 8.82 $ 8.36 $ 9.53
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.50 of net asset value. On purchases of $50,000 or more, the offering price is reduced. See Accompanying Notes to Financial Statements 35 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING EQUITY AND REAL CONVERTIBLE BOND ESTATE FUND FUND FUND ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 189,580,911 $ 70,345,035 $ 122,881,843 Short-term investments at amortized cost 1,761,000 3,847,000 3,723,531 Cash 636 588 -- Foreign currencies at value** 1,375,627 16,388 -- Receivables: Investment securities sold 8,162,816 1,965,047 9,566,587 Fund shares sold 850,447 3,475 577,263 Dividends and interest 941,490 431,235 168,774 Prepaid expenses 30,328 35,209 73,189 Reimbursement due from manager -- 9,946 33,544 ------------- ------------- ------------- Total assets 202,703,255 76,653,923 137,024,731 ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased 7,981,513 4,177,131 8,972,920 Payable for fund shares redeemed 396,718 14,989 916,012 Payable to affiliates 291,896 93,255 85,403 Payable for trustee fees 6,681 2,360 4,313 Other accrued expenses and liabilities 212,402 83,832 112,947 ------------- ------------- ------------- Total liabilities 8,889,210 4,371,567 10,091,595 ------------- ------------- ------------- NET ASSETS $ 193,814,045 $ 72,282,356 $ 126,933,136 ------------- ------------- ------------- NET ASSETS WERE COMPRISED OF: Paid-in capital $ 281,613,140 $ 89,675,208 $ 109,309,007 Undistributed net investment income (accumulated net investment loss) 1,969,917 489,189 1,409,425 Accumulated net realized loss on investments (99,435,025) (14,473,208) (2,371,039) Net unrealized appreciation (depreciation) of investments and foreign securities 9,666,013 (3,408,833) 18,585,743 ------------- ------------- ------------- NET ASSETS $ 193,814,045 $ 72,282,356 $ 126,933,136 ============= ============= ============= * Cost of investment in securities $ 179,920,420 $ 73,764,509 $ 104,562,177 ** Cost of foreign currencies $ 1,373,697 $ 15,128
See Accompanying Notes to Financial Statements 36 STATEMENTS OF ASSETS AND LIABILITIES as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
ING ING ING EQUITY AND REAL CONVERTIBLE BOND ESTATE FUND FUND FUND -------------- -------------- -------------- CLASS A: Net Assets $ 51,008,431 $ 32,178,931 $ 981,708 Shares authorized unlimited unlimited unlimited Par Value $ 0.00 $ 0.00 $ 0.00 Shares outstanding 3,147,772 2,747,082 88,758 Net asset value and redemption price per share $ 16.20 $ 11.71 $ 11.06 Maximum offering price per share (5.75%)(1) $ 17.19 $ 12.42 $ 11.73 CLASS B: Net Assets $ 72,363,716 $ 22,348,364 $ 149,053 Shares authorized unlimited unlimited unlimited Par Value $ 0.00 $ 0.00 $ 0.00 Shares outstanding 4,068,410 1,771,673 13,434 Net asset value and redemption price per share $ 17.79 $ 12.61 $ 11.10 Maximum offering price per share $ 17.79 $ 12.61 $ 11.10 CLASS C: Net Assets $ 66,412,379 $ 14,239,832 $ 157,483 Shares authorized unlimited unlimited unlimited Par Value $ 0.00 $ 0.00 $ 0.00 Shares outstanding 3,996,625 1,270,582 13,852 Net asset value and redemption price per share $ 16.62 $ 11.21 $ 11.37 Maximum offering price per share $ 16.62 $ 11.21 $ 11.37 CLASS Q: Net Assets $ 4,029,519 $ 222,355 n/a Shares authorized unlimited unlimited n/a Par Value $ 0.00 $ 0.00 n/a Shares outstanding 256,076 19,120 n/a Net asset value and redemption price per share $ 15.74 $ 11.63 n/a Maximum offering price per share $ 15.74 $ 11.63 n/a CLASS I: Net Assets n/a n/a $ 125,644,892 Shares authorized n/a n/a unlimited Par Value n/a n/a $ 0.00 Shares outstanding n/a n/a 10,971,426 Net asset value and redemption price per share n/a n/a $ 11.45 Maximum offering price per share n/a n/a $ 11.45 CLASS T: Net Assets n/a $ 3,292,874 n/a Shares authorized n/a unlimited n/a Par Value n/a $ 0.00 n/a Shares outstanding n/a 261,871 n/a Net asset value and redemption price per share n/a $ 12.57 n/a Maximum offering price per share(2) n/a $ 12.57 n/a
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchase of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.50 of net asset value. On purchase of $50,000 or more, the offering price is reduced. See Accompanying Notes to Financial Statements 37 STATEMENTS OF OPERATIONS for the year ended May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING GROWTH + GROWTH LARGECAP VALUE OPPORTUNITIES GROWTH FUND FUND FUND ------------ ------------ ------------ INVESTMENT INCOME: Dividends, net of foreign taxes* $ 993,338 $ 736,359 $ 1,139,917 Interest 131,450 38,744 62,570 ------------ ------------ ------------ Total investment income 1,124,788 775,103 1,202,487 ------------ ------------ ------------ EXPENSES: Investment management fees 2,446,841 1,865,117 1,411,271 Distribution and service fees: Class A 183,274 181,023 156,226 Class B 1,214,839 561,674 783,154 Class C 618,262 277,053 351,769 Class Q 707 9 24,503 Class T -- 80,140 -- Transfer agent fees: Class A 63,087 70,722 134,260 Class B 125,501 65,603 235,602 Class C 63,719 32,227 105,756 Class I -- 417 21,065 Class Q 258 -- 10,071 Class T -- 10,479 -- Administrative service fees 528,208 451,608 188,169 Shareholder reporting expense 370,476 242,036 273,368 Registration fees 68,095 72,593 72,137 Professional fees 57,917 71,743 47,781 Custody and accounting expense 80,566 64,052 68,192 Trustee fees 13,360 12,516 13,738 Miscellaneous expense 26,947 26,063 16,049 Insurance expense 6,441 5,030 4,849 ------------ ------------ ------------ Total expenses 5,868,498 4,090,105 3,917,960 Less: Net waived and reimbursed fees -- -- 303,212 ------------ ------------ ------------ Net expenses 5,868,498 4,090,105 3,614,748 ------------ ------------ ------------ Net investment loss (4,743,710) (3,315,002) (2,412,261) ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS: Net realized gain (loss) on: Investments (96,541,901) (55,971,035) (67,621,730) Options -- -- 215,589 ------------ ------------ ------------ (96,541,901) (55,971,035) (67,406,141) Net change in unrealized appreciation of investments and options 21,655,719 7,993,868 27,230,077 ------------ ------------ ------------ Net realized and unrealized loss on investments and options (74,886,182) (47,977,167) (40,176,064) ------------ ------------ ------------ DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(79,629,892) $(51,292,169) $(42,588,325) ============ ============ ============ *Foreign taxes $ 3,692 $ 4,232 $ 1,956
See Accompanying Notes to Financial Statements 38 STATEMENTS OF OPERATIONS for the year ended May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING MIDCAP SMALLCAP DISCIPLINED OPPORTUNITIES OPPORTUNITIES LARGECAP FUND FUND FUND ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes* $ 537,557 $ 176,584 $ 1,604,373 Interest 119,238 77,461 9,790 Other -- -- 83 ------------- ------------- ------------- Total investment income 656,795 254,045 1,614,246 ------------- ------------- ------------- EXPENSES: Investment management fees 1,844,018 3,072,328 621,856 Distribution and service fees: Class A 138,698 376,048 23,793 Class B 469,009 967,874 374,229 Class C 703,533 731,979 251,645 Class Q 11,576 4,038 -- Class T -- 23,584 -- Transfer agent fees: Class A 55,341 177,597 9,105 Class B 56,208 137,021 42,883 Class C 85,374 103,606 28,806 Class I 104 296 527 Class Q 56 70 -- Class T -- 3,508 -- Administrative service fees 368,961 662,980 127,997 Shareholder reporting expense 148,438 344,937 78,576 Registration fees 105,376 113,584 61,115 Professional fees 34,863 75,228 26,272 Custody and accounting expense 62,614 102,884 63,992 Trustee fees 10,532 18,681 5,762 Miscellaneous expense 16,922 35,455 9,489 Insurance expense 4,348 7,862 2,024 ------------- ------------- ------------- Total expenses 4,115,971 6,959,560 1,728,071 Less: Net waived and reimbursed fees 600,861 -- -- ------------- ------------- ------------- Net expenses 3,515,110 6,959,560 1,728,071 ------------- ------------- ------------- Net investment income (loss) (2,858,315) (6,705,515) (113,825) ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES: Net realized gain (loss) on: Investments (35,686,206) (136,228,953) (18,654,392) Future agreements -- -- (96,660) ------------- ------------- ------------- (35,686,206) (136,228,953) (18,751,052) Net change in unrealized appreciation (depreciation) of investments 3,498,927 23,893,365 4,799,759 ------------- ------------- ------------- Net realized and unrealized loss on investments and futures (32,187,279) (112,335,588) (13,951,293) ------------- ------------- ------------- DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (35,045,594) $(119,041,103) $ (14,065,118) ============= ============= ============= *Foreign taxes $ 8,003 $ 965 $ 55
See Accompanying Notes to Financial Statements 39 STATEMENTS OF OPERATIONS for the year ended May 31, 2003 - --------------------------------------------------------------------------------
ING ING ING LARGE COMPANY ING MIDCAP SMALLCAP VALUE MAGNACAP VALUE VALUE FUND FUND FUND FUND ------------ ------------ ------------ ------------ INVESTMENT INCOME: Dividends, net of foreign taxes* $ 2,987,094 $ 5,007,199 $ 557,715 $ 355,978 Interest 70,920 104,405 9,400 11,952 ------------ ------------ ------------ ------------ Total investment income 3,058,014 5,111,604 567,115 367,930 ------------ ------------ ------------ ------------ EXPENSES: Investment management fees 966,292 1,827,489 340,332 304,618 Distribution and service fees: Class A 328,932 475,206 37,535 33,225 Class B 35,515 541,655 100,823 75,550 Class C 12,641 73,185 88,066 94,019 Class M -- 59,689 -- -- Class Q 35 17,188 29 3 Transfer agent fees: Class A 196,705 277,212 30,593 26,781 Class B 5,311 94,591 20,866 15,427 Class C 1,884 12,842 18,332 19,409 Class I -- -- 18 85 Class M -- 13,896 -- -- Class Q 18 206 -- -- Administrative service fees 136,403 22,309 34,033 30,462 Shareholder reporting expense 53,852 234,332 15,007 14,499 Registration fees 64,489 62,844 68,063 48,641 Professional fees 44,948 50,617 10,934 7,799 Custody and accounting expense 43,987 53,915 20,924 20,368 Trustee fees 9,301 18,032 2,150 1,820 Offering expense -- -- 86,958 86,959 Miscellaneous expense 4,474 10,171 1,055 3,811 Insurance expense 2,597 5,268 677 517 ------------ ------------ ------------ ------------ Total expenses 1,907,384 3,850,647 876,395 783,993 Less: Net waived and reimbursed fees -- -- 141,380 125,566 ------------ ------------ ------------ ------------ Net expenses 1,907,384 3,850,647 735,015 658,427 ------------ ------------ ------------ ------------ Net investment income (loss) 1,150,630 1,260,957 (167,900) (290,497) ------------ ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (33,175,923) (73,313,713) (2,585,042) (808,791) Net change in unrealized depreciation of investments 3,324,155 28,047,677 (7,038,519) (3,280,630) ------------ ------------ ------------ ------------ Net realized and unrealized loss on investments (29,851,768) (45,266,036) (9,623,561) (4,089,421) ------------ ------------ ------------ ------------ DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(28,701,138) $(44,005,079) $ (9,791,461) $ (4,379,918) ============ ============ ============ ============ * Foreign taxes $ 30,752 $ 29,242 $ -- $ --
See Accompanying Notes to Financial Statements 40 STATEMENTS OF OPERATIONS for the year ended May 31, 2003 - --------------------------------------------------------------------------------
ING ING EQUITY AND CONVERTIBLE BOND ING FUND FUND REAL ESTATE FUND ------------ ------------ --------------------------- YEAR YEAR SEVEN MONTHS YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, OCTOBER 31, 2003 2003 2003 2002 ------------ ------------ ------------ ------------ INVESTMENT INCOME: Dividends, net of foreign taxes* $ 2,305,647 $ 1,295,580 $ 3,280,063 $ 4,787,321 Interest 5,712,891 2,352,750 27,098 48,361 Other 31 86,683 -- -- ------------ ------------ ------------ ------------ Total investment income 8,018,569 3,735,013 3,307,161 4,835,682 ------------ ------------ ------------ ------------ EXPENSES: Investment management fees 1,445,588 663,570 440,210 641,719 Distribution and service fees: Class A 171,004 161,939 263 -- Class B 721,206 239,747 480 -- Class C 664,962 145,777 56 -- Class Q 13,211 465 -- -- Class T -- 26,019 -- -- Transfer agent fees: Class A 102,116 89,148 238 -- Class B 150,921 46,084 86 -- Class C 139,199 28,029 13 -- Class I -- -- 70,738 33,037 Class Q 3,639 339 -- -- Class T -- 6,670 -- -- Administrative service fees 192,745 88,476 62,885 137,461 Shareholder reporting expense 160,206 91,690 17,775 16,703 Registration fees 60,799 62,970 8,791 12,941 Professional fees 53,865 67,093 31,167 29,769 Custody and accounting expense 36,256 45,128 21,064 13,813 Trustee fees 9,377 4,320 3,150 6,811 Offering expense -- -- 81,575 5,375 Miscellaneous expense 19,655 5,607 10,576 1,689 Insurance expense 4,084 1,827 -- -- ------------ ------------ ------------ ------------ Total expenses 3,948,833 1,774,898 749,067 899,318 Less: Net waived and reimbursed fees -- 92,274 118,117 79 ------------ ------------ ------------ ------------ Net expenses 3,948,833 1,682,624 630,950 899,239 ------------ ------------ ------------ ------------ Net investment income (loss) 4,069,736 2,052,389 2,676,211 3,936,443 ------------ ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on: Investments (1,592,033) (10,772,241) 3,228,787 2,174,768 Foreign currencies 42,333 1,427 -- -- ------------ ------------ ------------ ------------ Net realized gain (loss) on imvestments and foreign currencies (1,549,700) (10,770,814) 3,228,787 2,174,768 ------------ ------------ ------------ ------------ Net change in unrealized appreciation (depreciation) on: Investments 8,106,791 4,911,541 11,405,743 (193,441) Foreign currencies 5,522 1,260 -- -- ------------ ------------ ------------ ------------ Net change in unrealized appreciation (depreciation) on investments and foreign currencies 8,112,313 4,912,801 11,405,743 (193,441) ------------ ------------ ------------ ------------ Net realized and unrealized loss on investments and foreign currencies 6,562,613 (5,858,013) 14,634,530 1,981,327 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 10,632,349 $ (3,805,624) $ 17,310,741 $ 5,917,770 ============ ============ ============ ============ *Foreign taxes $ -- $ 4,563 $ -- $ --
See Accompanying Notes to Financial Statements 41 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING GROWTH + VALUE FUND ------------------------------ YEAR YEAR ENDED ENDED MAY 31, MAY 31, 2003 2002 ------------- ------------- FROM OPERATIONS: Net investment loss $ (4,743,710) $ (8,512,418) Net realized loss on investments (96,541,901) (135,053,076) Net change in unrealized appreciation (depreciation) of investments 21,655,719 (36,957,292) ------------- ------------- Net decrease in net assets resulting from operations (79,629,892) (180,522,786) ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 22,504,824 118,982,140 Cost of shares redeemed (111,119,568) (233,711,496) ------------- ------------- Net decrease in net assets resulting from capital share transactions (88,614,744) (114,729,356) ------------- ------------- Net decrease in net assets (168,244,636) (295,252,142) ------------- ------------- NET ASSETS: Beginning of year 374,629,229 669,881,371 ------------- ------------- End of year $ 206,384,593 $ 374,629,229 ============= ============= Undistributed net investment income at end of year $ -- $ -- ============= =============
See Accompanying Notes to Financial Statements 42 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING GROWTH OPPORTUNITIES FUND ING LARGECAP GROWTH FUND ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (3,315,002) $ (7,224,856) $ (2,412,261) $ (5,792,622) Net realized loss on investments and options (55,971,035) (148,410,703) (67,406,141) (178,879,014) Net change in unrealized appreciation of investments 7,993,868 8,273,970 27,230,077 22,043,801 ------------- ------------- ------------- ------------- Net decrease in net assets resulting from operations (51,292,169) (147,361,589) (42,588,325) (162,627,835) ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- -- -- (23,490) Class Q -- -- -- (16,054) ------------- ------------- ------------- ------------- Total distributions -- -- -- (39,544) ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 14,322,951 57,584,228 37,811,932 162,524,986 Dividends reinvested -- -- -- 30,939 ------------- ------------- ------------- ------------- 14,322,951 57,584,228 37,811,932 162,555,925 Cost of shares redeemed (79,882,586) (147,726,009) (101,232,282) (236,666,205) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from capital share transactions (65,559,635) (90,141,781) (63,420,350) (74,110,280) ------------- ------------- ------------- ------------- Net decrease in net assets (116,851,804) (237,503,370) (106,008,675) (236,777,659) ------------- ------------- ------------- ------------- NET ASSETS: Beginning of year 293,680,947 531,184,317 279,373,205 516,150,864 ------------- ------------- ------------- ------------- End of year $ 176,829,143 $ 293,680,947 $ 173,364,530 $ 279,373,205 ============= ============= ============= ============= Undistributed net investment income at end of year $ -- $ -- $ -- $ -- ============= ============= ============= =============
See Accompanying Notes to Financial Statements 43 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING MIDCAP OPPORTUNITIES FUND ING SMALLCAP OPPORTUNITIES FUND ------------------------------ ------------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (2,858,315) $ (1,564,711) $ (6,705,515) $ (7,943,203) Net realized loss on investments (35,686,206) (22,181,991) (136,228,953) (116,051,246) Net change in unrealized depreciation of investments 3,498,927 (13,180,504) 23,893,365 (59,155,762) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from operations (35,045,594) (36,927,206) (119,041,103) (183,150,211) ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net realized gains: Class A -- -- -- (4,420,476) Class B -- -- -- (5,306,452) Class C -- -- -- (2,073,539) Class I -- -- -- (6) Class Q -- -- -- (74,783) Class T -- -- -- (332,277) ------------- ------------- ------------- ------------- Total distributions -- -- -- (12,207,533) ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 19,074,655 23,229,928 64,613,733 169,513,918 Net proceeds from shares issued in merger -- 217,968,703 -- 191,995,534 Dividends reinvested -- -- -- 8,872,522 ------------- ------------- ------------- ------------- 19,074,655 241,198,631 64,613,733 370,381,974 Cost of shares redeemed (98,427,376) (45,911,969) (144,373,057) (162,003,224) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (79,352,721) 195,286,662 (79,759,324) 208,378,750 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets (114,398,315) 158,359,456 (198,800,427) 13,021,006 ------------- ------------- ------------- ------------- NET ASSETS: Beginning of year 285,050,758 126,691,302 477,434,924 464,413,918 ------------- ------------- ------------- ------------- End of year $ 170,652,443 $ 285,050,758 $ 278,634,497 $ 477,434,924 ============= ============= ============= ============= Undistributed net investment income at end of year $ -- $ -- $ -- $ -- ============= ============= ============= =============
See Accompanying Notes to Financial Statements 44 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING DISCIPLINED LARGECAP FUND ------------------------------ YEAR YEAR ENDED ENDED MAY 31, MAY 31, 2003 2002 ------------- ------------- FROM OPERATIONS: Net investment income (loss) $ (113,825) $ (532,669) Net realized gain (loss) on investments and futures (18,751,052) (29,106,092) Net change in unrealized appreciation (depreciation) of investments 4,799,759 4,441,583 ------------- ------------- Net increase (decrease) in net assets resulting from operations (14,065,118) (25,197,178) ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- -- Class B -- -- Net realized gains: Class A -- -- Class B -- -- ------------- ------------- Total distributions -- -- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 10,784,368 13,127,048 Dividends reinvested -- -- ------------- ------------- 10,784,368 13,127,048 Cost of shares redeemed (35,260,799) (48,152,451) ------------- ------------- Net decrease in net assets resulting from capital share transactions (24,476,431) (35,025,403) ------------- ------------- Net decrease in net assets (38,541,549) (60,222,581) ------------- ------------- NET ASSETS: Beginning of year 121,131,969 181,354,550 ------------- ------------- End of year $ 82,590,420 $ 121,131,969 ============= ============= Undistributed net investment income at end of year $ -- $ -- ============= =============
See Accompanying Notes to Financial Statements 45 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING LARGE COMPANY VALUE FUND ING MAGNACAP FUND ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment income $ 1,150,630 $ 624,008 $ 1,260,957 $ 1,362,303 Net realized gain (loss) on investments (33,175,923) 3,709,737 (73,313,713) 9,984,802 Net change in unrealized depreciation of investments 3,324,155 (32,312,425) 28,047,677 (58,176,380) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from operations (28,701,138) (27,978,680) (44,005,079) (46,829,275) ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (383,585) (48,577) (541,544) (1,450,626) Class C -- -- -- -- Class M -- -- -- (25,317) Class Q (51) -- (37,713) (90,550) Net realized gains Class A -- (3,414,346) -- (36,928,549) Class B -- (76,886) -- (15,231,540) Class C -- (40,009) -- (1,660,037) Class M -- -- -- (2,235,251) Class Q -- (375) -- (1,561,541) Tax return of capital Class A -- (542,803) -- -- Class B -- (12,223) -- -- Class C -- (6,360) -- -- Class Q -- (60) -- -- ------------- ------------- ------------- ------------- Total distributions (383,636) (4,141,639) (579,257) (59,183,411) ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 12,076,101 23,772,105 19,818,980 42,905,807 Dividends reinvested 316,244 3,625,709 509,567 47,870,369 ------------- ------------- ------------- ------------- 12,392,345 27,397,814 20,328,547 90,776,176 Cost of shares redeemed (25,597,217) (36,480,872) (66,540,583) (92,733,007) ------------- ------------- ------------- ------------- Net decrease in net assets resulting from capital share transactions (13,204,872) (9,083,058) (46,212,036) (1,956,831) ------------- ------------- ------------- ------------- Net decrease in net assets (42,289,646) (41,203,377) (90,796,372) (107,969,517) ------------- ------------- ------------- ------------- NET ASSETS: Beginning of year 180,121,298 221,324,675 321,550,160 429,519,677 ------------- ------------- ------------- ------------- End of year $ 137,831,652 $ 180,121,298 $ 230,753,788 $ 321,550,160 ============= ============= ============= ============= Undistributed net investment income at end of year $ 772,491 $ -- $ 695,252 $ -- ============= ============= ============= =============
See Accompanying Notes to Financial Statements 46 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING MIDCAP VALUE FUND ING SMALLCAP VALUE FUND ---------------------------- ---------------------------- YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(1) 2003 2002(1) ------------ ------------ ------------ ------------ FROM OPERATIONS: Net investment loss $ (167,900) $ (18,723) $ (290,497) $ (33,829) Net realized gain (loss) on investments (2,585,042) 477,240 (808,791) 286,427 Net change in unrealized depreciation of investments (7,038,519) (460,592) (3,280,630) (118,047) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations (9,791,461) (2,075) (4,379,918) 134,551 ------------ ------------ ------------ ------------ FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (66,920) -- (53,921) -- Class B (10,431) -- (269) -- Class C (8,620) -- (8,732) -- Class I (1,546) -- (2,331) -- Class Q (105) -- -- -- Net realized gains: Class A (197,711) -- (119,158) -- Class B (153,548) -- (76,523) -- Class C (125,926) -- (90,831) -- Class I (2,253) -- (2,504) -- Class Q (180) -- (6) -- ------------ ------------ ------------ ------------ Total distributions (567,240) -- (354,275) -- ------------ ------------ ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 20,390,316 48,636,078 16,776,369 36,135,334 Dividends reinvested 452,894 -- 266,141 -- ------------ ------------ ------------ ------------ 20,843,210 48,636,078 17,042,510 36,135,334 Cost of shares redeemed (17,802,172) (1,839,469) (15,157,416) (1,443,796) ------------ ------------ ------------ ------------ Net increase in net assets resulting from capital share transactions 3,041,038 46,796,609 1,885,094 34,691,538 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets (7,317,663) 46,794,534 (2,849,099) 34,826,089 ------------ ------------ ------------ ------------ NET ASSETS: Beginning of period 46,794,534 -- 34,826,089 -- ------------ ------------ ------------ ------------ End of period $ 39,476,871 $ 46,794,534 $ 31,976,990 $ 34,826,089 ============ ============ ============ ============ Undistributed net investment income (accumulated net investment loss) at end of period $ (29,333) $ 45,818 $ (29,333) $ 22,825 ============ ============ ============ ============
- ---------- (1) Fund commenced operations on February 1, 2002. See Accompanying Notes to Financial Statements 47 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING CONVERTIBLE FUND ------------------------------ YEAR YEAR ENDED ENDED MAY 31, MAY 31, 2003 2002 ------------- ------------- FROM OPERATIONS: Net investment income (loss) $ 4,069,736 $ 4,316,249 Net realized loss on investments (1,549,700) (94,733,125) Net change in unrealized appreciation (depreciation) of investments 8,112,313 47,508,825 ------------- ------------- Net decrease in net assets resulting from operations 10,632,349 (42,908,051) ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (1,038,306) (1,989,161) Class B (1,007,242) (1,691,488) Class C (1,039,451) (1,695,959) Class Q (129,825) (462,156) Net realized gains Class A -- (434,317) Class B -- (598,881) Class C -- (546,683) Class Q -- (78,772) ------------- ------------- Total distributions (3,214,824) (7,497,417) ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 19,562,889 49,293,522 Dividends reinvested 2,040,333 4,837,275 ------------- ------------- 21,603,222 54,130,797 Cost of shares redeemed (74,420,958) (136,764,084) ------------- ------------- Net decrease in net assets resulting from capital share transactions (52,817,736) (82,633,287) ------------- ------------- Net decrease in net assets (45,400,211) (133,038,755) ------------- ------------- NET ASSETS: Beginning of year 239,214,256 372,253,011 ------------- ------------- End of year $ 193,814,045 $ 239,214,256 ============= ============= Undistributed net investment income at end of year $ 1,969,917 $ 1,072,672 ============= =============
See Accompanying Notes to Financial Statements 48 STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
ING EQUITY AND BOND FUND ING REAL ESTATE FUND ------------------------------ ----------------------------------------------- YEAR YEAR SEVEN MONTHS YEAR YEAR ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, OCTOBER 31, OCTOBER 31, 2003 2002 2003 2002 2001 (000) ------------- ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment income $ 2,052,389 $ 3,351,411 $ 2,676,211 $ 3,936,443 $ 3,587 Net realized gain (loss) on investments (10,770,814) (1,232,233) 3,228,787 2,174,768 1,844 Net change in unrealized appreciation (depreciation) of investments 4,912,801 (9,585,022) 11,405,743 (193,441) (466) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (3,805,624) (7,465,844) 17,310,741 5,917,770 4,965 ------------- ------------- ------------- ------------- ------------- FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (1,077,960) (2,123,367) (3,557) -- -- Class B (368,267) (917,202) (1,521) -- -- Class C (273,453) (647,607) (74) -- -- Class I -- -- (2,053,561) (3,936,443) (3,587) Class Q (4,292) (13,963) -- -- -- Class T (62,879) (182,065) -- -- -- Net realized gains Class A -- (236,326) -- -- -- Class B -- (137,507) -- -- -- Class C -- (85,407) -- -- -- Class Q -- (1,525) -- -- -- Class T -- (23,977) -- -- -- In excess of net investment income Class I -- -- -- (1,294,844) (577) ------------- ------------- ------------- ------------- ------------- Total distributions (1,786,851) (4,368,946) (2,058,713) (5,231,287) (4,164) ------------- ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 13,090,514 36,437,605 23,221,408 31,057,798 13,726 Dividends reinvested 1,413,761 3,439,849 1,220,646 3,749,980 3,110 ------------- ------------- ------------- ------------- ------------- 14,504,275 39,877,454 24,442,054 34,807,778 16,836 Cost of shares redeemed (48,110,001) (44,643,957) (10,091,863) (14,351,398) (5,896) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (33,605,726) (4,766,503) 14,350,191 20,456,380 10,940 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets (39,198,201) (16,601,293) 29,602,219 21,142,863 11,741 ------------- ------------- ------------- ------------- ------------- NET ASSETS: Beginning of period 111,480,557 128,081,850 97,330,917 76,188,054 64,447 ------------- ------------- ------------- ------------- ------------- End of period $ 72,282,356 $ 111,480,557 $ 126,933,136 $ 97,330,917 $ 76,188 ============= ============= ============= ============= ============= Undistributed net investment income at end of period $ 489,189 $ 222,224 $ 1,409,425 $ 214,000 $ 161 ============= ============= ============= ============= =============
See Accompanying Notes to Financial Statements 49 ING GROWTH + VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS Q -------------------------------------------- YEAR YEAR SEVEN MONTHS JUNE 5, ENDED ENDED ENDED 2000(1) TO MAY 31, MAY 31, MAY 31, OCT. 31, 2003 2002 2001(4) 2001 ------ ------ ------- ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.86 13.88 24.90 26.73 Income (loss) from investment operations: Net investment loss $ (0.14) (0.11) (0.18) (0.05) Net realized and unrealized loss on investments $ (1.91) (3.91) (8.62) (1.78) Total from investment operations $ (2.05) (4.02) (8.80) (1.83) Less distributions from: Net realized gains on investments $ -- -- 2.16 -- Tax return of capital $ -- -- 0.06 -- Total distributions $ -- -- 2.22 -- Net asset value, end of period $ 7.81 9.86 13.88 24.90 TOTAL RETURN(2) % (20.79) (28.96) (38.00) (6.85) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 211 396 454 1,346 Ratios to average net assets: Expenses(3) % 1.82 1.71 1.69 1.53 Net investment loss(3) % (1.35) (0.93) (1.43) (1.19) Portfolio turnover rate % 294 255 95 163
- ---------- (1) Commencement of operations of the class. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Fund changed its fiscal year end to May 31. See Accompanying Notes to Financial Statements 50 ING GROWTH OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ---------------------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ---------------------------------- 2003 2002 2001(5) 2000 1999 1998 ------ ------ ------- ------ ------ ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.68 19.10 26.05 33.76 26.28 21.36 Income (loss) from investment operations: Net investment income (loss) $ (0.12) (0.19) (0.08) (0.15) (0.17) (0.05) Net realized and unrealized gain (loss) on investments $ (2.02) (5.23) (6.87) (6.07) 20.49 5.18 Total from investment operations $ (2.14) (5.42) (6.95) (6.22) 20.32 5.13 Less distributions from: Net realized gains on investments $ -- -- -- 1.49 12.84 0.21 Total distributions $ -- -- -- 1.49 12.84 0.21 Net asset value, end of period $ 11.54 13.68 19.10 26.05 33.76 26.28 TOTAL RETURN(2) % (15.64) (28.38) (26.68) (18.74) 93.86 24.06 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 44,704 56,719 79,174 108,005 132,953 83,233 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.43 1.37 1.31 1.16 1.00 1.00 Gross expenses prior to expense reimbursement(3)(4) % 1.43 1.37 1.31 1.16 1.00 1.00 Net investment income (loss) after expense reimbursement(3) % (1.04) (1.21) (0.92) (0.56) (0.61) (0.13) Portfolio turnover rate % 355 473 217 326 286 98 CLASS Q ------------------------------------------------ YEAR YEAR FIVE MONTHS JUNE 1, ENDED ENDED ENDED 2000(1) TO MAY 31, MAY 31, MAY 31, DEC. 31, 2003 2002 2001(5) 2000 ------ ------ ------- ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.16 18.70 25.48 32.58 Income (loss) from investment operations: Net investment loss $ (0.12) (0.34)* (0.10) (0.15) Net realized and unrealized loss on investments $ (1.97) (5.20) (6.68) (5.46) Total from investment operations $ (2.09) (5.54) (6.78) (5.61) Less distributions from: Net realized gains on investments $ -- -- -- 1.49 Total distributions $ -- -- -- 1.49 Net asset value, end of period $ 11.07 13.16 18.70 25.48 TOTAL RETURN(2) % (15.88) (29.63) (26.61) (17.55) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 3 10 7,947 10,274 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.68 1.62 1.56 1.41 Gross expenses prior to expense reimbursement(3) % 1.68 1.62 1.56 1.41 Net investment loss after expense reimbursement(3)(4) % (1.31) (1.49) (1.17) (0.81) Portfolio turnover rate % 355 473 217 326
- ---------- (1) Commencement of operations of Class Q. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) Expenses calculated net of taxes and advisor reimbursement. (5) The Fund changed its fiscal year end to May 31. * Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 51 ING LARGECAP GROWTH FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------- YEAR JANUARY 8, ENDED 2002(6) TO MAY 31, MAY 31, 2003 2002 ------ ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 16.93 21.04 Income (loss) from investment operations: Net investment loss $ (0.06) (0.02) Net realized and unrealized loss on investments $ (2.16) (4.09) Total from investment operations $ (2.22) (4.11) Net asset value, end of period $ 14.71 16.93 TOTAL RETURN(2): % (13.11) (19.53) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 22,156 26,106 Ratios to average net assets: Net expenses after expense reimbursement/ (recoupment)(3)(4) % 1.05 0.96 Gross expenses prior to expense reimbursement/(recoupment)(3) % 1.21 0.96 Net investment loss after expense reimbursement/(recoupment)(3)(4) % (0.42) (0.43) Portfolio turnover rate % 291 536 CLASS Q ------------------------------------------------------------------------- ELEVEN THREE YEAR YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(5) 2000 1999(1) 1999 ------ ------ ------- ------ ------- ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 16.92 24.81 43.71 28.43 25.24 15.66 Income (loss) from investment operations: Net investment loss $ (0.15) (0.44) (0.17) (0.20) (0.03) (0.02) Net realized and unrealized gain (loss) on investments $ (2.11) (7.44) (18.26) 15.86 3.22 9.87 Total from investment operations $ (2.26) (7.88) (18.43) 15.66 3.19 9.85 Less distributions from: Net investment income $ -- 0.01 -- -- -- -- Net realized gains on investments $ -- -- 0.47 0.38 -- 0.27 Total distributions $ -- 0.01 0.47 0.38 -- 0.27 Net asset value, end of period $ 14.66 16.92 24.81 43.71 28.43 25.24 TOTAL RETURN(2): % (13.36) (31.77) (42.50) 55.57 12.64 63.76 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 6,178 16,840 12,534 24,838 6,044 4,908 Ratios to average net assets: Net expenses after expense reimbursement/(recoupment)(3)(4) % 1.31 1.21 1.19 1.26 1.23 1.26 Gross expenses prior to expense reimbursement/(recoupment)(3) % 1.47 1.21 1.19 1.26 1.25 1.91 Net investment loss after expense reimbursement/(recoupment)(3)(4) % (0.66) (0.76) (0.50) (0.77) (0.36) (0.28) Portfolio turnover rate % 291 536 331 139 27 253
- ---------- (1) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Investments, LLC within three years. (5) The Fund changed its fiscal year end to May 31. (6) Commencement of operations of Class I. See Accompanying Notes to Financial Statements 52 ING MIDCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I -------------------------------------------------------------------------- YEAR YEAR FIVE MONTHS YEAR ENDED AUGUST 20, ENDED ENDED ENDED DECEMBER 31, 1998(1) TO MAY 31, MAY 31, MAY 31, ------------------- DECEMBER 31, 2003 2002 2001(6) 2000 1999 1998 ------ ------ ------- ------ ------ ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 11.29 14.73 19.26 21.34 12.99 10.00 Income (loss) from investment operations: Net investment loss $ (0.11) (0.11)* (0.06) (0.13) (0.15) (0.02) Net realized and unrealized gain (loss) on investments $ (0.85) (3.33) (4.47) 0.23 12.09 3.01 Total from investment operations $ (0.96) (3.44) (4.53) 0.10 11.94 2.99 Less distributions from: Net realized gains on investments $ -- -- -- 2.18 3.59 -- Total distributions $ -- -- -- 2.18 3.59 -- Net asset value, end of period $ 10.33 11.29 14.73 19.26 21.34 12.99 TOTAL RETURN(3): % (8.50) (23.35) (23.52) 0.08 103.19 29.90 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 10,844 39,874 52,007 68,006 67,954 33,441 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.09 1.26 1.52 1.36 1.41 1.50 Gross expenses prior to expense reimbursement(4) % 1.41 1.50 1.52 1.36 1.41 2.01 Net investment loss after expense reimbursement(4)(5) % (0.71) (0.95) (0.97) (0.66) (1.04) (0.70) Portfolio turnover rate % 345 399 182 188 201 61 CLASS Q ---------------------------------------------- YEAR YEAR FIVE MONTHS APRIL 14, ENDED ENDED ENDED 2000(2) TO MAY 31, MAY 31, MAY 31, DECEMBER 31, 2003 2002 2001(6) 2000 ------ ------ ------- ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 11.16 14.63 19.16 22.57 Income (loss) from investment operations: Net investment loss $ (0.09) (0.17)* (0.08) (0.06) Net realized and unrealized loss on investments $ (0.88) (3.30) (4.45) (1.17) Total from investment operations $ (0.97) (3.47) (4.53) (1.23) Less distributions from: Net realized gains on investments $ -- -- -- 2.18 Total distributions $ -- -- -- 2.18 Net asset value, end of period $ 10.19 11.16 14.63 19.16 TOTAL RETURN(3): % (8.69) (23.72) (23.64) (5.86) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 4,886 6,563 3,071 3,264 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.33 1.63 1.82 1.61 Gross expenses prior to expense reimbursement(4) % 1.66 1.69 1.82 1.61 Net investment loss after expense reimbursement(4)(5) % (0.98) (1.35) (1.28) (0.91) Portfolio turnover rate % 345 399 182 188
- ---------- (1) Commencement of operations of the Fund. (2) Commencement of operations of Class Q. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Investments, LLC with three years. (6) The Fund changed its fiscal year end to May 31. * Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 53 ING SMALLCAP OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I -------------------------------------------------------------- YEAR YEAR FIVE MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MAY 31, MAY 31, MAY 31, ----------------------- 2003 2002 2001(6) 2000 1999(1) ------ ------ ------- ------ ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 24.07 39.02 47.47 59.54 31.78 Income (loss) from investment operations: Net investment loss $ (0.23) (0.36)** (0.14) (1.00) (0.08) Net realized and unrealized gain (loss) on investments $ (5.57) (13.60) (8.31) (2.17) 35.40 Total from investment operations $ (5.80) (13.96) (8.45) (3.17) 35.32 Less distributions from: Net realized gains on investments $ -- 0.99 -- 8.90 7.56 Total distributions $ -- 0.99 -- 8.90 7.56 Net asset value, end of period $ 18.27 24.07 39.02 47.47 59.54 TOTAL RETURN(3) % (24.10) (36.17) (17.80) (5.21) 126.05 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 8,510 10,700 --* --* --* Ratios to average net assets: Net expenses after expense reimbursement(4) % 1.46 1.41 1.31 1.15 0.47(5) Gross expenses prior to expense reimbursement(4) % 1.46 1.41 1.31 1.15 0.47 Net investment loss after expense reimbursement(4) % (1.37) (1.34) (1.03) (0.75) (0.35)(5) Portfolio turnover rate % 357 423 104 134 223 CLASS Q ------------------------------------------------ YEAR YEAR FIVE MONTHS APRIL 4, ENDED ENDED ENDED 2000(2) TO MAY 31, MAY 31, MAY 31, DECEMBER 31, 2003 2002 2001(6) 2000 ------ ------ ------- ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 24.07 38.81 47.20 60.86 Income (loss) from investment operations: Net investment loss $ (0.53) (0.51)** (0.20) (0.27) Net realized and unrealized loss on investments $ (5.32) (13.24) (8.19) (4.49) Total from investment operations $ (5.85) (13.75) (8.39) (4.76) Less distributions from: Net realized gains on investments $ -- 0.99 -- 8.90 Total distributions $ -- 0.99 -- 8.90 Net asset value, end of period $ 18.22 24.07 38.81 47.20 TOTAL RETURN(3) % (24.30) (35.83) (17.78) (8.29) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 906 3,651 2,832 2,545 Ratios to average net assets: Net expenses after expense reimbursement(4) % 1.70 1.66 1.56 1.40 Gross expenses prior to expense reimbursement(4) % 1.70 1.66 1.56 1.40 Net investment loss after expense reimbursement(4) % (1.62) (1.62) (1.28) (1.10) Portfolio turnover rate % 357 423 104 134
- ---------- (1) Commencement of operations of Class I is April 1, 1999. (2) Commencement of operations of Class Q. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) Expenses calculated net of taxes and advisor reimbursement. (6) The Fund changed its fiscal year end to May 31. * Amount represents less than $1,000. ** Per share data calculated using weighted average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 54 ING DISCIPLINED LARGECAP FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ------------------------------------------------------------ YEAR YEAR SEVEN MONTHS DECEMBER 31, ENDED ENDED ENDED YEAR ENDED 1998(1) TO MAY 31, MAY 31, MAY 31, OCT. 31, OCTOBER 31, 2003 2002 2001(5) 2000 1999 ------ ------ ------- ------ ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.52 9.94 11.25 11.17 10.00 Income (loss) from investment operations: Net investment income $ 0.05 0.04 0.02 0.04 0.06 Net realized and unrealized gain (loss) on investments $ (0.85) (1.46) (1.33) 0.19 1.11 Total from investment operations $ (0.80) (1.42) (1.31) 0.23 1.17 Less distributions from: Net realized gains on investments $ -- -- -- 0.15 -- Total distributions $ -- -- -- 0.15 -- Net asset value, end of period $ 7.72 8.52 9.94 11.25 11.17 TOTAL RETURN(2) % (9.39) (14.28) (11.64) 2.00 11.70 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 19,550 21,578 25,172 28,473 27,927 Ratios to average net assets: Net expenses after expense reimbursement(3) % 1.12 1.00 1.04 1.07 0.98(4) Gross expenses prior to expense reimbursement(3) % 1.12 1.00 1.04 1.07 1.23 Net investment income after expense reimbursement(3) % 0.70 0.46 0.27 0.34 0.62(4) Portfolio turnover rate % 106 149 26 57 26
- ---------- (1) Commencement of operations of the Fund. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) Expenses calculated net of taxes and advisor reimbursement. (5) The Fund changed its fiscal year end to May 31. See Accompanying Notes to Financial Statements 55 ING LARGE COMPANY VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period. CLASS Q ------------------ YEAR OCTOBER 4, ENDED 2001(1) TO MAY 31, MAY 31, 2003 2002 ------ ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.62 14.53 Income from investment operations: Net investment income $ 0.11 0.07 Net realized and unrealized gain (loss) on investments $ (2.33) 0.35 Total from investment operations $ (2.23) 0.42 Less distributions from: Net investment income $ 0.04 -- Net realized gain on investments $ -- 0.29 Tax return of capital $ -- 0.04 Total distributions $ 0.04 0.33 Net asset value, end of period $ 12.36 14.62 TOTAL RETURN(2): % (15.15) 2.80 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 14 20 Ratios to average net assets: Expenses(3) % 1.35 1.16 Net investment income(3) % 0.89 0.67 Portfolio turnover rate % 103 88 - ---------- (1) Commencement of operations of Class Q. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. See Accompanying Notes to Financial Statements 56 ING MAGNACAP FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I CLASS Q ---------- -------------------------------------------------- MARCH 5, YEAR YEAR ELEVEN MONTHS NOVEMBER 19, 2003(1) TO ENDED ENDED ENDED 1999(5) TO MAY 31, MAY 31, MAY 31, MAY 31, JUNE 30, 2003 2003 2002 2001(4) 2000 ------ ------ ------ ------- ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 7.55 10.11 13.55 15.84 16.26 Income (loss) from investment operations: Net investment income $ 0.01 0.08 0.09 0.07 0.05 Net realized and unrealized loss on investments $ 1.26 (1.32) (1.52) (0.38) (0.47) Total from investment operations $ 1.27 (1.24) (1.43) (0.31) (0.42) Less distributions from: Net investment income $ -- 0.05 0.11 0.10 -- Net realized gains on investments $ -- -- 1.90 1.88 -- Total distributions $ -- 0.05 2.01 1.98 -- Net asset value, end of period $ 8.82 8.82 10.11 13.55 15.84 TOTAL RETURN(2): % 16.82 (12.27) (10.75) (2.60) (2.58) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 7 7,431 8,495 11,184 9,928 Ratios to average net assets: Expenses(3) % 0.92 1.22 1.12 1.11 1.24 Net investment income(3) % 2.06 0.95 0.81 0.53 0.46 Portfolio turnover rate % 110 110 75 92 26
- ---------- (1) Commencement of operations of Class I. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Fund changed its fiscal year end to May 31. (5) Commencement of operations of Class Q. See Accompanying Notes to Financial Statements 57 ING MIDCAP VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I CLASS Q -------------------- --------------------- YEAR MARCH 4, YEAR APRIL 17, ENDED 2002(1) TO ENDED 2002(2) TO MAY, 31 MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------ ------ ------ ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.30 10.20 10.28 10.52 Income (loss) from investment operations: Net investment income (loss) $ 0.01 0.01 0.00* 0.00* Net realized and unrealized gain (loss) on investments $ (1.74) 0.09 (1.75) (0.24) Total from investment operations $ (1.73) 0.10 (1.75) (0.24) Less distributions from: Net investment income $ 0.07 -- 0.06 -- Net realized gains on investments $ 0.11 -- 0.11 -- Total distributions $ 0.18 -- 0.17 -- Net asset value, end of period $ 8.39 10.30 8.36 10.28 TOTAL RETURN(3): % (16.35) 0.98 (16.62) (2.28) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 197 71 14 11 Ratios to average net assets: Net expenses after reimbursement (4)(5) % 1.28 1.24 1.54 1.52 Gross expenses prior to expense reimbursement(4) % 1.70 2.60 1.96 2.28 Net investment income after expense reimbursement(4)(5) % 0.46 0.38 0.14 0.43 Portfolio turnover rate % 72 13 72 13
- ---------- (1) Commencement of operations of Class I. (2) Commencement of operations of Class Q. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not anualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses subject to possible reimbursement to ING Investments, LLC within three years. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 58 ING SMALLCAP VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period
CLASS I CLASS Q -------------------- -------------------- YEAR MARCH 7, YEAR APRIL 30, ENDED 2002(1) TO ENDED 2002(2) TO MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------ ------ ------ ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.63 10.32 10.63 11.01 Income (loss) from investment operations: Net investment income (loss) $ (0.05) 0.00* 0.33 0.00* Net realized and unrealized gain (loss) on investments $ (0.97) 0.31 (1.34) (0.38) Total from investment operations $ (1.02) 0.31 (1.01) (0.38) Less distributions from: Net investment income $ 0.08 -- -- -- Net realized gains on investments $ 0.09 -- 0.09 -- Total distributions $ 0.17 -- 0.09 -- Net asset value, end of period $ 9.44 10.63 9.53 10.63 TOTAL RETURN(3): % (9.49) 3.00 (9.47) (3.45) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 222 26 1 8 Ratios to average net assets: Net expenses after reimbursement (4)(5) % 1.32 1.23 1.35 1.42 Gross expenses prior to expense reimbursement(4) % 1.73 2.78 1.73 2.42 Net investment income (loss) after expense reimbursement(4)(5) % (0.13) 0.17 (0.32) 0.00 Portfolio turnover rate % 54 12 54 12
- ---------- (1) Commencement of operations of Class I. (2) Commencement of operations of Class Q. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not anualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses subject to possible reimbursement to ING Investments, LLC within three years. * Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 59 ING CONVERTIBLE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS Q --------------------------------------------------------------------- ELEVEN THREE YEAR YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(5) 2000 1999(1) 1999 ------ ------ ------- ------ ------- ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.91 17.37 26.85 22.51 21.22 18.47 Income (loss) from investment operations: Net investment income $ 0.41 0.36 0.59 0.44 0.09 0.43 Net realized and unrealized gain (loss) on investments $ 0.76 (2.28) (4.84) 7.82 1.31 3.09 Total from investment operations $ 1.17 (1.92) (4.25) 8.26 1.40 3.52 Less distributions from: Net investment income $ 0.34 0.45 0.53 0.35 0.11 0.46 Net realized gains on investments $ -- 0.09 4.70 3.57 -- 0.31 Total distributions $ 0.34 0.54 5.23 3.92 0.11 0.77 Net asset value, end of period $ 15.74 14.91 17.37 26.85 22.51 21.22 TOTAL RETURN(2): % 8.11 (11.12) (17.50) 40.36 6.62 19.66 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 4,030 8,626 29,629 56,165 17,537 8,741 Ratios to average net assets: Net expenses after expense reimbursement/(recoupment)(3)(4) % 1.36 1.19 1.15 1.25 1.23 1.23 Gross expenses prior to expense reimbursement/ (recoupment)(3) % 1.36 1.19 1.14 1.25 1.23 1.35 Net investment income after expense reimbursement/(recoupment)(3)(4) % 2.78 2.23 2.47 1.88 2.04 2.37 Portfolio turnover rate % 97 100 145 129 28 138
- ---------- (1) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Investments, LLC within three years. (5) The Fund changed its fiscal year end to May 31. See Accompanying Notes to Financial Statements 60 ING EQUITY AND BOND FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS Q ---------------------------------------------------------- ELEVEN THREE YEAR YEAR MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, JUNE 30, JUNE 30, MARCH 31, 2003 2002 2001(5) 2000 1999(1) 1999 ------ ------ ------- ------ ------- ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 11.98 13.23 14.94 19.04 18.85 18.48 Income (loss) from investment operations: Net investment income $ 0.28 0.42 0.44 0.54 0.11 0.44 Net realized and unrealized gain (loss) on investments $ (0.38) (1.15) (0.54) (0.57) 0.16 2.50 Total from investment operations $ (0.10) (0.73) (0.10) (0.03) 0.27 2.94 Less distributions from: Net investment income $ 0.25 0.47 0.47 0.40 0.08 0.50 Net realized gains on investments $ -- 0.05 1.14 3.67 -- 2.07 Total distributions $ 0.25 0.52 1.61 4.07 0.08 2.57 Net asset value, end of period $ 11.63 11.98 13.23 14.94 19.04 18.85 TOTAL RETURN(2): % (0.61) (5.53) (0.70) (0.60) 1.44 17.49 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 222 191 373 230 190 176 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.50 1.40 1.25 1.30 1.25 1.25 Gross expenses prior to expense reimbursement(3) % 1.61 1.40 1.46 1.51 1.51 1.63 Net investment income after expense reimbursement(3)(4) % 2.70 3.31 3.61 3.36 2.30 2.41 Portfolio turnover rate % 129 145 76 173 63 165
- ---------- (1) Effective May 24, 1999, ING Investments, LLC became the Investment Manager of the Fund; concurrently, Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Investments, LLC within three years. (5) The Fund changed its fiscal year end to May 31. See Accompanying Notes to Financial Statements 61 ING REAL ESTATE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ----------------------------------------------------------------------- PERIOD ENDED YEAR ENDED OCTOBER 31, MAY 31,(1) --------------------------------------------------------- 2003 2002 2001 2000 1999 1998 ------ ------ ------ ------ ------ ------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.98 9.77 9.57 8.24 9.10 11.49 Income from investment operations: Net investment income $ 0.20 0.60 0.50 0.69 0.49 0.35 Net realized and unrealized gain (loss) on investments $ 1.47 0.23 0.27 1.21 (0.80) (1.85) Total from investment operations $ 1.67 0.83 0.77 1.90 (0.31) (1.50) Less distributions from: Net investment income $ 0.20 (0.62) (0.57) (0.57) (0.55) (0.40) Capital Gains -- -- -- -- -- (0.49) Total distributions $ 0.20 90.62) (0.57) (0.57) (0.55) (0.89) Net asset value, end of period $ 11.45 9.98 9.77 9.57 8.24 9.10 TOTAL RETURN(2) % 16.95 8.06 7.88 23.78 (3.70) (14.16) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period ($000) $ 125,645 97,331 76,188 64,447 55,968 55,617 Ratio to average net assets: Net expenses after expense reimbursement(3)(4) % 1.00 0.98 1.00 1.00 1.00 1.00 Gross expenses prior to expense reimbursement(3) % 1.19 0.98 1.03 1.05 1.11 1.17 Net investment income after expense reimbursement(3)(4) % 4.26 4.29 4.84 5.71 5.37 3.29 Portfolio turnover rate % 62 106 77 93 67 74
- ---------- (1) On November 4, 2002, pursuant to an Agreement and Plan of Reorganization dated August 20, 2002, all of the assets and liabilities of the CRA Realty Shares Portfolio were transferred to the newly created ING Real Estate Fund in exchange for shares of the ING Real Estate Fund. The financial highlight information presented for periods prior to November 4, 2002 reflects the activity of the CRA Realty Shares Portfolio. The ING Real Estate Fund has adopted a fiscal year end of May 31. (2) Total return is calculated assuming reinvestment of dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses subject to possible reimbursement to ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 62 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- NOTE 1 -- ORGANIZATION ORGANIZATION. The ING Funds contained within this book are comprised of ING Equity Trust ("IET"), ING Investment Funds, Inc. ("IIF") and ING Mayflower Trust ("IMT"), all of which are open-end investment management companies registered under the Investment Company Act of 1940, as amended. IET is a Massachusetts business trust organized in 1998 with nineteen separate series (Portfolios). Thirteen of the Portfolios in this report are: ING Growth Opportunities Fund ("Growth Opportunities"), ING LargeCap Growth Fund ("LargeCap Growth"), ING MidCap Opportunities Fund ("MidCap Opportunities"), ING SmallCap Opportunities Fund ("SmallCap Opportunities"), ING Disciplined LargeCap Fund ("Disciplined LargeCap", formerly ING Research Enhanced Index), ING Large Company Value Fund ("Large Company Value"), ING MidCap Value Fund ("MidCap Value"), ING SmallCap Value Fund ("SmallCap Value"), ING Convertible Fund ("Convertible"), ING Equity and Bond Fund ("Equity and Bond", formerly ING Equity and Income Fund) and ING Real Estate Fund ("Real Estate", formerly CRA Realty Shares Portfolio). IIF is a Maryland Corporation organized in 1969 with one Portfolio, ING MagnaCap Fund ("MagnaCap"). IMT is a Massachusetts business trust organized in 1993 with two separate series (Portfolios). One of the Portfolios in this report is ING Growth + Value Fund ("Growth + Value"). The investment objective of each Fund is described in each Fund's prospectus. Each Fund offers at least two of the following classes of shares: Class A, Class B, Class C, Class I, Class M, Class Q and Class T. The separate classes of shares differ principally in the applicable sales charges (if any), distribution fees, shareholder servicing fees and transfer agency fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Fund and earn income from the portfolio pro rata based on the average daily net assets of each class, without distinction between share classes. Dividends are determined separately for each class based on income and expenses allocable to each class. Realized gains are allocated to each class pro rata based on the net assets of each class on the date of distribution. No class preferential dividend rights exist. Differences in per share dividend rates generally results from the relative weighting of pro rata income and realized gain allocations and from differences in separate class expenses, including distribution, and shareholder servicing fees. Class B shares, along with their pro rata reinvested dividend shares, automatically convert to Class A shares approximately eight years after purchase. REORGANIZATION. On December 17, 2001, the Boards of Directors/Trustees of each of various ING Funds approved plans of reorganization which were intended to decrease the number of corporate entities under which the ING Funds are organized (the "Reorganization") and to align the open-end funds with similar open-end funds that share the same prospectus. The Reorganization only resulted in a change in corporate form of some of the ING Funds, with no change in the substance or investment aspects of the ING Funds. The Reorganization was consummated to align the ING Funds' corporate structures and expedite the Funds' required filings with the Securities and Exchange Commission. Shareholders of Growth + Value and MagnaCap did not approve the Reorganization; therefore those Funds remain part of ING Mayflower Trust and ING Investment Funds, Inc., respectively. As a result of the Reorganization, the following ING Funds reorganized into series of ING Equity Trust: Convertible, Equity and Bond, Growth Opportunities, LargeCap Growth, Large Company Value Fund, Disciplined LargeCap and SmallCap Opportunities (collectively, the "Reorganizing Funds"). In this regard, the Board approved the creation of a new series of ING Equity Trust to serve as "shells" (the "Shell Funds") into which the Reorganized Funds were reorganized. The plans of reorganization provided for, among other things, the transfer of the assets and liabilities of the Reorganizing Funds to the Shell Funds. Prior to September 23, 2002, the effective date of the Reorganization, the Shell Funds had only nominal assets. For accounting purposes, each Reorganizing Fund is considered the surviving entity, and the financial statements shown for periods prior to September 23, 2002 are the financial statements of the Reorganized Fund. MidCap Opportunities, MidCap Value Fund and SmallCap Value were originally organized as series of ING Equity Trust, and were not involved in the Reorganization. 63 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Prior to the Reorganization, Convertible, Equity and Bond, and LargeCap Growth were series of ING Mutual Funds ("IMF"). IMF is a Delaware business trust registered as an open-end management investment company organized in 1992. Prior to the Reorganization, Growth Opportunities was the sole series of ING Growth Opportunities Fund, a Massachusetts business trust registered as an open-end management investment company organized in 1986. Prior to the Reorganization, SmallCap Opportunities was the sole series of ING SmallCap Opportunities Fund, a Massachusetts business trust registered as an open-end management investment company organized in 1986. Prior to the Reorganization, Large Company Value was the sole series of ING Large Company Value Fund, Inc., a Maryland corporation registered as an open-end, diversified management investment company organized in April 1991. Prior to the Reorganization, Disciplined LargeCap was a series of IMT. As discussed above, IMT is a Massachusetts business trust registered as an open-end management investment company organized in 1993. On November 4, 2002, pursuant to an Agreement and Plan of Reorganization dated August 20, 2002, all of the assets and liabilities of the CRA Realty Shares Portfolio (the "Acquired Fund") were transferred to a newly created series of the ING Equity Trust, the ING Real Estate Fund (the "Acquiring Fund") in exchange for shares of the Acquiring Fund. These shares were then distributed to shareholders of the Acquired Fund and the Acquired Fund was terminated. This reorganization was accounted for as tax-free reorganization under the Internal Revenue Code. Accordingly, no gain or loss was recognized by the shareholders of the Acquired Fund upon the exchange of their Acquired Fund Shares for shares of the Acquiring Fund. Prior to November 4, 2002, Real Estate was organized as a series of The Advisors' Inner Circle Fund, a Massachusetts business trust registered as an open-end management investment company, established July 18, 1991. Effective October 1, 2002, ING Funds Distributor, Inc. changed its name to ING Funds Distributor, LLC and is a wholly owned subsidiary of ING Groep N.V. ("ING"). ING is a global financial institution active in the fields of insurance, banking and asset management in more than 65 countries. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Funds in the preparation of their financial statements. Such policies are in conformity with accounting principles generally accepted in the United States of America for investment companies. A. SECURITY VALUATION. Investments in equity securities traded on a national securities exchange are valued at the last reported sale price. Portfolio securities reported by NASDAQ will be valued at NASDAQ official closing price. Securities traded on an exchange or NASDAQ for which there has been no sale and securities traded in the over-the-counter-market are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by each Fund's custodian. Debt securities are valued at bid prices obtained from independent services or from one or more dealers making markets in the securities. U.S. Government obligations are valued by using market quotations or independent pricing services which uses prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Securities for which market quotations are not readily available are valued at their respective fair values as determined in good faith and in accordance with policies set by the Board. Among elements of analysis, the Board has authorized the use of one or more research services to assist with the determination of the fair value of foreign securities in light of significant events. Research services use statistical analyses and quantitative models to help determine fair value as of the time a Fund calculates its net asset value. Investments in 64 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- mutual funds are valued at the closing Net Asset Value (NAV) per share. Investments in securities maturing in less than 60 days at the date of acquisition are valued at amortized cost, which, when combined with accrued interest, approximates market value. B. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Securities transactions are accounted for on the trade date. Realized gains and losses are reported on the basis of identified cost of securities sold. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date, or for certain foreign securities, when the information becomes available to the funds. Premium amortization and discount accretion are determined by the effective yield method. C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Market value of investment securities, other assets and liabilities -- at the exchange rates prevailing at the end of the day. (2) Purchases and sales of investment securities, income and expenses -- at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Funds do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities which are subject to foreign withholding tax upon disposition, liabilities are recorded on the statement of assets and liabilities for the estimated tax withholding based on the securities current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and the U.S. Government. These risks include but are not limited to revaluation of currencies and future adverse political and economic developments which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and the U.S. Government. D. FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS. Certain funds may enter into foreign currency exchange transactions to convert to and from different foreign currencies and to and from the U.S. dollar in connection with the planned purchases or sales of securities. The Funds either enter into these transactions on a spot basis at the spot rate prevailing in the foreign currency exchange market or use forward foreign currency contracts to purchase or sell foreign currencies. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation. Risks may arise upon entering into forward contracts from the potential inability of counterparties to meet the terms of their forward contracts and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. Each Fund may enter into futures contracts involving foreign currency, interest rates, securities and security indices, for hedging purposes only. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of foreign currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Fund is required to 65 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Fund agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margins and are recorded as unrealized gains or losses by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. There were no open futures contracts at May 31, 2003. E. DISTRIBUTIONS TO SHAREHOLDERS. The Funds record distributions to their shareholders on ex-dividend date. Each Fund pays dividends, if any, as follows: ANNUALLY SEMI-ANNUALLY QUARTERLY -------- ------------- --------- Growth + Value MagnaCap Convertible Growth Large Company Equity and Bond Opportunities Value Real Estate LargeCap Growth Midcap Opportunities SmallCap Opportunities Disciplined LargeCap MidCap Value SmallCap Value Each Fund distributes capital gains, to the extent available, annually. F. FEDERAL INCOME TAXES. It is the policy of the Funds to comply with the requirements of the Subchapter M of Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of their net investment income and any net realized capital gains to their shareholders. Therefore, a federal income tax or excise tax provision is not required. In addition, by distributing during each calendar year substantially all of its net investment income and net realized capital gains, each Fund intends not to be subject to any federal excise tax. The Board intends to offset any net capital gains with any available capital loss carryforward until each carryforward has been fully utilized or expires. In addition, no capital gain distribution shall be made until the capital loss carryforward has been fully utilized or expires. G. USE OF ESTIMATES. Management of the Funds has made certain estimates and assumptions relating to the reporting of assets, liabilities, income, and expenses to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. H. REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System or with member banks of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase the agreement at a mutually agreed upon time and price. The resale price is in excess of the purchase price and reflects an agreed upon interest rate for the period of time the agreement is outstanding. The period of the repurchase agreements is usually short, from overnight to one week, while the underlying securities generally have longer maturities. Each Fund will always receive as collateral securities acceptable to it whose market value is equal to at least 100% of the carrying amount of the repurchase agreements, plus accrued interest, being invested by the Fund. The underlying collateral is valued daily on a mark to market basis to assure that the value, including accrued interest is at least equal to the repurchase price. If the seller defaults, a Fund might incur a loss or delay in the realization of proceeds if the value of the collateral securing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. I. OPTIONS CONTRACTS. All Funds may purchase put and call options and may write (sell) put options and covered call options. The Funds may engage in option transactions as a hedge against adverse movements in the value of portfolio holdings or to increase market exposure. Option contracts are valued daily and unrealized gains or losses are recorded based upon the last sales price on the principal exchange on which the options are traded. The Funds will realize a gain or loss upon the expiration or closing of the option contract. When an option is exercised, the proceeds on sales of the underlying security for a written call option, the purchase cost of the security for a written put option, or the cost of the security for 66 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- a purchased put or call option is adjusted by the amount of premium received or paid. Realized and unrealized gains or losses on option contracts are reflected in the accompanying financial statements. The risk in writing a call option is that the Funds give up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Funds may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Funds pay a premium whether or not the option is exercised. Risks may also arise from an illiquid secondary market or from the inability of counterparties to meet the terms of the contract. J. SECURITIES LENDING. Each Fund had the option to temporarily loan up to 33 1/3% of its total assets to brokers, dealers or other financial institutions in exchange for a negotiated lender's fee. The borrower is required to fully collateralize the loans with cash, letters of credit or U.S. Government securities. Generally, in the event of counterparty default, the Funds have the right to use collateral to offset losses incurred. There would be potential loss to the Funds in the event the Funds are delayed or prevented from exercising their right to dispose of the collateral. The Funds bear the risk of loss with respect to the investment of collateral. Engaging in securities lending could have a leverage effect, which may intensify the credit, market and other risks associated with investing in a Fund. There were no securities on loan as of May 31, 2003. K. OFFERING COSTS. Offering costs are capitalized and amortized on a straight line basis over a period of twelve months. NOTE 3 -- INVESTMENT TRANSACTIONS For the year ended May 31, 2003, the cost of purchases and proceeds from the sales of securities, excluding short-term securities, were as follows: PURCHASES SALES --------- ----- Growth+ Value $ 706,782,738 $ 801,760,722 Growth Opportunities 699,915,562 766,500,161 LargeCap Growth 541,244,697 603,507,472 MidCap Opportunities 625,749,686 708,520,580 SmallCap Opportunities 1,108,186,765 1,178,620,201 Disciplined LargeCap 94,105,244 118,416,204 Large Company Value 141,233,597 137,577,889 MagnaCap 254,774,488 271,259,925 MidCap Value 28,104,223 24,546,472 SmallCap Value 22,037,663 16,248,323 Convertible 178,599,186 210,029,061 Equity and Bond 109,856,591 131,868,826 Real Estate 81,446,336 65,054,934 67 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES The Funds entered into an Investment Management Agreement with ING Investments, LLC (the "Manager", the "Investment Manager" or the "Adviser") a wholly-owned subsidiary of ING. The investment management agreements compensate the Manager with a fee, computed daily and payable monthly, based on the average daily net assets of each Fund, at the following annual rates:
AS A PERCENT OF AVERAGE NET ASSETS ---------------------------------------------------------------------- Growth+ Value 1.00% Growth Opportunities 0.95% LargeCap Growth 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in excess of $1 billion MidCap Opportunities 1.00% SmallCap Opportunities 1.00% Disciplined LargeCap 0.70% Large Company Value 0.75% on first $100 million; 0.60% on next $50 million; 0.50% on next $100 million; and 0.40% in excess of $250 million MagnaCap 1.00% on first $30 million; 0.75% on next $220 million; 0.625% on next $250 million; and 0.50% in excess of $500 million MidCap Value 1.00% SmallCap Value 1.00% Convertible 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in excess of $1 billion Equity and Bond 0.75% on first $500 million; 0.675% on next $500 million; and 0.65% in excess of $1 billion Real Estate 0.70%
Navellier Fund Management, Inc. ("Navellier"), a registered investment advisor, serves as Sub-Adviser to the Growth + Value Fund pursuant to a subadvisory agreement between the Manager and Navellier. Aeltus Investment Management, Inc. ("Aeltus"), a registered investment advisor, serves as Sub-Adviser to the Disciplined LargeCap Fund pursuant to a subadvisory agreement between the Manager and Aeltus. Prior to August 1, 2001, J.P. Morgan Investment Management, Inc. served as Sub-Adviser to the Fund. Brandes Investment Partners, LP ("Brandes"), a registered investment advisor, serves as Sub-Adviser to the MidCap Value and SmallCap Value Funds pursuant to a subadvisory agreement between the Manager and Brandes. Clarion CRA Securities, L.P. ("CRA"), a registered investment advisor, became the Sub-Adviser to the Real Estate Fund pursuant a subadvisory agreement, dated November 4, 2002, between the Manager and CRA. Prior to November 4, 2002, CRA served as the investment advisor to Real Estate. ING Funds Services, LLC (the "Administrator" or "IFS"), serves as administrator to each Fund except MagnaCap. The Funds pay the Administrator a fee calculated at an annual rate of 0.10% of each Funds' average daily net assets. MagnaCap has entered into a service agreement with IFS whereby IFS will act as Shareholder Service Agent for the Fund. The agreement provides that IFS will be compensated for incoming and outgoing shareholder telephone calls and letters, and all reasonable out-of-pocket expenses incurred in connection with the performance of such services. Prior to March 1, 2002, IFS acted as Shareholder Service Agent for LargeCap Growth, Convertible and Equity and Income. Growth + Value, Growth Opportunities, MidCap Opportunities, SmallCap Opportunities and Disciplined LargeCap also pay IFS an annual shareholder account servicing fee of $5.00, payable semi-annually, for each account of beneficial owners of shares. 68 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 5 -- DISTRIBUTION AND SERVICE FEES Each share class of the Funds (except as noted below) has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING Funds Distributor, LLC (the "Distributor") is reimbursed or compensated (depending on the class of shares) by the Funds for expenses incurred in the distribution of each Fund's shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled to a payment each month to reimburse or compensate expenses incurred in the distribution and promotion of each Fund's shares, including expenses incurred in printing prospectuses and reports used for sales purposes, expenses incurred in preparing and printing sales literature and other such distribution related expenses, including any distribution or shareholder servicing fees ("Service Fees") paid to securities dealers who have executed a distribution agreement with the Distributor. Under the 12b-1 Plans, each class of shares of the Fund pays the Distributor a combined Distribution and Service Fee based on average daily net assets at the following rates:
CLASS A CLASS B CLASS C CLASS I CLASS M CLASS Q CLASS T ------- ------- ------- ------- ------- ------- ------- Growth + Value 0.30% 1.00% 1.00% N/A N/A 0.25% N/A Growth Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95% LargeCap Growth 0.35 1.00 1.00 N/A N/A 0.25 N/A MidCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 N/A SmallCap Opportunities 0.30 1.00 1.00 N/A N/A 0.25 0.95 Disciplined LargeCap 0.30 1.00 1.00 N/A N/A 0.25 N/A Large Company Value 0.25 1.00 1.00 N/A N/A 0.25 N/A MagnaCap 0.30 1.00 1.00 N/A 0.75% 0.25 N/A MidCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A SmallCap Value 0.25 1.00 1.00 N/A N/A 0.25 N/A Convertible 0.35 1.00 1.00 N/A N/A 0.25 N/A Equity and Bond 0.35 1.00 1.00 N/A N/A 0.25 0.75 Real Estate 0.25 1.00 1.00 N/A N/A 0.25 N/A
Beginning March 1, 2001, the Distributor agreed to waive 0.10% of the Distribution fee for the Tax Efficient Equity Fund for Class A only. For the year ended May 31, 2003, the Distributor has retained $93,181 as sales charges from the proceeds of Class A Shares sold, $50,441 and $71,478 from the proceeds of Class A Shares and Class C Shares redeemed, respectively and $135 from the proceeds of Class M Shares sold. 69 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES At May 31, 2003, the Funds had the following amounts recorded in payable to affiliates on the accompanying Statements of Assets and Liabilities (see Notes 4, 5 and 7):
ACCRUED ACCRUED INVESTMENT ACCRUED DISTRIBUTION MANAGEMENT ADMINISTRATIVE AND SERVICE FEES AND SERVICE FEES FEES TOTAL ---- ---------------- ---- ----- Growth + Value $ 170,969 $ 154,582 $ 141,131 $ 466,682 Growth Opportunities 139,093 118,490 80,088 337,671 LargeCap Growth 137,621 14,711 101,715 254,047 MidCap Opportunities 172,245 83,444 103,182 358,871 SmallCap Opportunities 226,575 168,697 151,437 546,709 Disciplined LargeCap 48,362 27,566 48,769 124,697 Large Company Value 80,631 11,315 31,177 123,123 MagnaCap 154,656 5,330 93,761 253,747 MidCap Value 30,872 3,087 21,861 55,820 SmallCap Value 25,523 2,552 17,953 46,028 Convertible 145,204 16,044 130,648 291,896 Equity and Bond 45,292 6,039 41,924 93,255 Real Estate 74,460 10,649 294 85,403
At May 31, 2003, State Street Bank and Trust Company and Norwest Bank owned 5.74% and 21.96% respectively, of the Growth Opportunities Fund. State Street Bank and Trust Company also owned 5.21% of the SmallCap Opportunities Fund. ING National Trust, a wholly-owned indirect subsidiary of ING Groep N.V., held 12.13% and 4.09% of LargeCap Growth Fund and Large Company Value Fund, respectively. Realiastar owned 5.50% of the MidCap Opportunities Fund, and 23.76% of the Disciplined LargeCap Fund. At May 31, 2003, certain non-affiliated individuals and entities owned separately the following percentage of the Real Estate Fund: 20.56%, 6.42%, 5.40%, 5.27% and 5.13%. Investment activities of these shareholders could have a material impact on the Funds. Included in realized losses of the MagnaCap Fund is $289,895 in reimbursements for investment losses made by the Investment Adviser. NOTE 7 -- EXPENSE LIMITATIONS For the following Funds, the Manager has voluntarily agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the levels listed below:
CLASS A CLASS B CLASS C CLASS I CLASS Q CLASS T ------- ------- ------- ------- ------- ------- LargeCap Growth(1) 1.60% 2.25% 2.25% N/A 1.50% N/A MidCap Opportunities(2) 1.50 2.20 2.20 1.20% 1.35 N/A Large Company Value 2.75 3.50 3.50 N/A 2.75 N/A MidCap Value 1.75 2.50 2.50 1.50 1.75 N/A SmallCap Value 1.75 2.50 2.50 1.50 1.75 N/A Convertible(1) 1.60 2.25 2.25 N/A 1.50 N/A Equity and Bond(1)(3) 1.60 2.25 2.25 N/A 1.50 2.00% Real Estate 1.45 2.20 2.20 1.00 1.25 N/A
- ---------- (1) Prior to November 1, 2001, the expense limitation rate for Class Q was 1.25%. (2) Prior to January 1, 2002, there was no expense limitation for the Fund. (3) Prior to November 1, 2001, the expense limitation rate for Class T was 1.75%. 70 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Each Fund will at a later date reimburse the Manager for expenses waived during the previous 36 months, but only if, after such reimbursement, the Fund's expense ratio does not exceed the percentage described above. Waived and reimbursed fees and any recoupment by the Manager of such waived and reimbursed fees are reflected on the accompanying Statements of Operations for each Fund. Outstanding reimbursement balances due to the Funds, if any, under their respective expense limitation agreements are reflected in Reimbursement Due from Manager on the accompanying Statements of Assets and Liabilities. As of May 31, 2003, the cumulative amounts of reimbursed fees that are subject to possible recoupment by the Manager are as follows: LargeCap Growth $293,050 MidCap Opportunities 834,643 MidCap Value 248,002 SmallCap Value 227,214 Equity and Bond 354,988 Real Estate 118,117 NOTE 8 -- LINE OF CREDIT All of the Funds included in this report, in addition to certain other funds managed by the Adviser, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement") with State Street Bank and Trust Company for an aggregate amount of $125,000,000. The proceeds may be used only to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the Funds; and (3) enable the Funds to meet other emergency expenses as defined in the Credit Agreement. The Funds to which the line of credit is available pay a commitment fee equal to 0.10% per annum on the daily unused portion of the committed line amount payable quarterly in arrears. At May 31, 2003, the Funds did not have any loans outstanding under the line of credit. NOTE 9 -- CAPITAL SHARES Transactions in capital shares and dollars were as follows:
CLASS A SHARES CLASS B SHARES ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ING GROWTH + VALUE (NUMBER OF SHARES) Shares sold 1,525,553 7,573,521 775,059 1,829,213 Shares redeemed (4,091,241) (10,051,567) (6,243,894) (6,707,089) ------------- ------------- ------------- ------------- Net decrease in shares outstanding (2,565,688) (2,478,046) (5,468,835) (4,877,876) ============= ============= ============= ============= ING GROWTH + VALUE ($) Shares sold $ 12,691,301 $ 83,819,458 $ 5,705,478 $ 20,197,659 Shares redeemed (32,447,566) (111,034,969) (47,161,811) (71,726,807) ------------- ------------- ------------- ------------- Net decrease $ (19,756,265) $ (27,215,511) $ (41,456,333) $ (51,529,148) ============= ============= ============= ============= CLASS C SHARES CLASS Q SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING GROWTH + VALUE (NUMBER OF SHARES) Shares sold 555,346 1,324,639 2,650 27,404 Shares redeemed (4,193,623) (4,731,745) (15,845) (19,970) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (3,638,277) (3,407,106) (13,195) 7,434 ============ ============ ============ ============ ING GROWTH + VALUE ($) Shares sold $ 4,087,044 $ 14,652,114 $ 21,001 $ 312,909 Shares redeemed (31,396,649) (50,714,645) (113,542) (235,075) ------------ ------------ ------------ ------------ Net increase (decrease) $(27,309,605) $(36,062,531) $ (92,541) $ 77,834 ============ ============ ============ ============
71 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING GROWTH OPPORTUNITIES (NUMBER OF SHARES) Shares sold 978,264 2,688,274 237,656 599,172 180,590 580,309 Shares redeemed (3,247,365) (4,465,341) (2,452,695) (2,729,664) (1,551,613) (2,210,476) ------------ ------------ ------------ ------------ ------------ ------------ Net decrease in shares outstanding (2,269,101) (1,777,067) (2,215,039) (2,130,492) (1,371,023) (1,630,167) ============ ============ ============ ============ ============ ============ ING GROWTH OPPORTUNITIES ($) Shares sold $ 10,243,050 $ 40,004,026 $ 2,305,753 $ 8,476,731 $ 1,773,541 $ 8,201,102 Shares redeemed (34,151,206) (64,658,384) (24,220,971) (37,036,999) (15,424,361) (29,810,181) ------------ ------------ ------------ ------------ ------------ ------------ Net decrease $(23,908,156) $(24,654,358) $(21,915,218) $(28,560,268) $(13,650,820) $(21,609,079) ============ ============ ============ ============ ============ ============ CLASS T SHARES CLASS I SHARES CLASS Q SHARES --------------------------- --------------------------- --------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ----------- ----------- ----------- ----------- ----------- ----------- ING GROWTH OPPORTUNITIES (NUMBER OF SHARES) Shares sold -- 1,728 53 792 -- 55,711 Shares redeemed (327,604) (627,535) (271,522) (1,013) (517) (479,835) ----------- ----------- ----------- ----------- ----------- ----------- Net decrease in shares outstanding (327,604) (625,807) (271,469) (221) (517) (424,124) =========== =========== =========== =========== =========== =========== ING GROWTH OPPORTUNITIES ($) Shares sold $ -- $ 21,321 $ 607 $ 13,222 $ -- $ 867,826 Shares redeemed (3,256,317) (8,967,880) (2,824,023) (14,464) (5,708) (7,238,101) ----------- ----------- ----------- ----------- ----------- ----------- Net decrease $(3,256,317) $(8,946,559) $(2,823,416) $ (1,242) $ (5,708) $(6,370,275) =========== =========== =========== =========== =========== =========== CLASS A SHARES CLASS B SHARES ------------------------------ ------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ING LARGECAP GROWTH (NUMBER OF SHARES) Shares sold 1,731,633 2,658,138 408,627 855,661 Shares issued as reinvestment of dividends -- 939 -- 124 Shares redeemed (2,830,849) (5,335,128) (2,383,990) (2,997,437) ------------- ------------- ------------- ------------- Net decrease in shares outstanding (1,099,216) (2,676,051) (1,975,363) (2,141,652) ============= ============= ============= ============= ING LARGECAP GROWTH ($) Shares sold $ 23,912,505 $ 52,212,562 $ 5,315,977 $ 16,971,200 Shares issued as reinvestment of dividends -- 18,730 -- 3,107 Shares redeemed (38,399,684) (103,167,640) (31,662,290) (56,761,530) ------------- ------------- ------------- ------------- Net decrease $ (14,487,179) $ (50,936,348) $ (26,346,313) $ (39,787,223) ============= ============= ============= =============
72 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS C SHARES CLASS I SHARES CLASS Q SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002(1) 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING LARGECAP GROWTH (NUMBER OF SHARES) Shares sold 224,913 639,475 289,678 1,838,570 133,122 2,029,559 Shares issued as reinvestment of dividends -- 51 -- -- -- 404 Shares redeemed (1,291,661) (2,184,382) (325,759) (296,694) (706,874) (1,540,016) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,066,748) (1,544,856) (36,081) 1,541,876 (573,752) 489,947 ============ ============ ============ ============ ============ ============ ING LARGECAP GROWTH ($) Shares sold $ 2,920,608 $ 12,898,628 $ 3,894,597 $ 36,212,393 $ 1,768,245 $ 44,230,203 Shares issued as reinvestment of dividends -- 901 -- -- -- 8,201 Shares redeemed (17,091,851) (41,155,563) (4,467,218) (5,342,391) (9,611,239) (30,239,081) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(14,171,243) $(28,256,034) $ (572,621) $ 30,870,002 $ (7,842,994) $ 13,999,323 ============ ============ ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on January 8, 2002.
CLASS A SHARES CLASS B SHARES ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING MIDCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold 992,635 1,348,381 266,036 360,114 Shares issued in merger -- 5,001,056 -- 4,822,131 Shares redeemed (2,775,471) (1,883,562) (2,287,890) (741,630) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,782,836) 4,465,875 (2,021,854) 4,440,615 ============ ============ ============ ============ ING MIDCAP OPPORTUNITIES ($) Shares sold $ 9,131,612 $ 15,945,265 $ 2,389,023 $ 4,209,707 Shares issued in merger -- 57,460,972 -- 54,010,417 Shares redeemed (25,266,178) (21,781,921) (20,376,679) (8,323,034) ------------ ------------ ------------ ------------ Net increase (decrease) $(16,134,566) $ 51,624,316 $(17,987,656) $ 49,897,090 ============ ============ ============ ============ CLASS C SHARES CLASS I SHARES CLASS Q SHARES ---------------------------- ---------------------------- ---------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING MIDCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold 186,646 171,335 204,879 431 441,646 91,512 Shares issued in merger -- 8,539,378 -- -- -- 981,467 Shares redeemed (2,602,475) (673,551) (2,687,084) -- (550,075) (694,816) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (2,415,829) 8,037,162 (2,482,205) 431 (108,429) 378,163 ============ ============ ============ ============ ============ ============ ING MIDCAP OPPORTUNITIES ($) Shares sold $ 1,634,606 $ 1,957,505 $ 1,868,172 $ 5,008 $ 4,051,242 $ 1,112,443 Shares issued in merger -- 95,170,477 -- -- -- 11,326,837 Shares redeemed (23,006,547) (7,569,185) (24,766,277) -- (5,011,695) (8,237,829) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(21,371,941) $ 89,558,797 $(22,898,105) $ 5,008 $ (960,453) $ 4,201,451 ============ ============ ============ ============ ============ ============
73 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES ----------------------------- ----------------------------- ----------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ------------- ------------- ING SMALLCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold 2,959,197 4,108,446 297,293 636,080 182,010 508,063 Shares issued in merger -- 2,414,351 -- 1,849,518 -- 3,423,776 Shares issued as reinvestment of dividends -- 125,361 -- 137,050 -- 46,233 Shares redeemed (4,076,167) (3,119,480) (2,120,010) (1,386,958) (1,741,349) (805,214) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (1,116,970) 3,528,678 (1,822,717) 1,235,690 (1,559,339) 3,172,858 ============= ============= ============= ============= ============= ============= ING SMALLCAP OPPORTUNITIES ($) Shares sold $ 53,600,429 $ 120,715,302 $ 4,862,420 $ 17,982,622 $ 2,953,005 $ 14,450,521 Shares issued in merger -- 61,806,247 -- 44,285,046 -- 81,805,796 Shares issued as reinvestment of dividends -- 3,576,353 -- 3,669,830 -- 1,235,346 Shares redeemed (73,261,386) (90,422,365) (35,339,503) (37,810,172) (29,151,596) (21,787,806) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (19,660,957) $ 95,675,537 $ (30,477,083) $ 28,127,326 $ (26,198,591) $ 75,703,857 ============= ============= ============= ============= ============= ============= CLASS T SHARES CLASS I SHARES CLASS Q SHARES ----------------------------- ----------------------------- ----------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ------------- ------------- ING SMALLCAP OPPORTUNITIES (NUMBER OF SHARES) Shares sold -- 334 167,562 518,042 18,182 21,261 Shares issued in merger -- -- -- -- -- 159,919 Shares issued as reinvestment of dividends -- 11,694 -- -- -- 2,615 Shares redeemed (110,464) (238,967) (146,229) (73,562) (120,129) (105,090) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (110,464) (226,939) 21,333 444,480 (101,947) 78,705 ============= ============= ============= ============= ============= ============= ING SMALLCAP OPPORTUNITIES ($) Shares sold $ -- $ 8,901 $ 2,851,630 $ 15,648,216 $ 346,249 $ 708,356 Shares issued in merger -- -- -- -- -- 4,098,445 Shares issued as reinvestment of dividends -- 316,205 -- 5 -- 74,783 Shares redeemed (1,899,687) (6,826,551) (2,570,785) (1,925,564) (2,150,100) (3,230,766) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (1,899,687) $ (6,501,445) $ 280,845 $ 13,722,657 $ (1,803,851) $ 1,650,818 ============= ============= ============= ============= ============= ============= CLASS A SHARES CLASS B SHARES --------------------------- --------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING DISCIPLINED LARGECAP (NUMBER OF SHARES) Shares sold 1,293,110 332,209 179,270 653,975 Shares redeemed (1,518,287) (451,951) (1,981,016) (2,101,755) ------------ ------------ ------------ ------------ Net decrease in shares outstanding (225,177) (119,742) (1,801,746) (1,447,780) ============ ============ ============ ============ ING DISCIPLINED LARGECAP ($) Shares sold $ 8,987,874 $ 2,956,464 $ 1,245,114 $ 5,692,149 Shares redeemed (10,542,573) (4,015,022) (13,755,648) (18,419,336) ------------ ------------ ------------ ------------ Net decrease $ (1,554,699) $ (1,058,558) $(12,510,534) $(12,727,187) ============ ============ ============ ============
74 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS C SHARES CLASS I SHARES CLASS Q SHARES --------------------------- --------------------------- -------------- YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2002 ------------ ------------ ------------ ------------ ------------ ING DISCIPLINED LARGECAP (NUMBER OF SHARES) Shares sold 77,832 478,885 466 3 30,192 Shares redeemed (1,596,429) (2,874,370) (10) -- (76,493) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,518,597) (2,395,485) 456 3 (46,301) ============ ============ ============ ============ ============ ING DISCIPLINED LARGECAP ($) Shares sold $ 548,074 $ 4,203,945 $ 3,306 $ 25 $ 274,465 Shares redeemed (10,962,505) (25,015,303) (73) -- (702,790) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(10,414,431) $(20,811,358) $ 3,233 $ 25 $ (428,325) ============ ============ ============ ============ ============ CLASS A SHARES CLASS B SHARES --------------------------- --------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING LARGE COMPANY VALUE (NUMBER OF SHARES) Shares sold 869,928 1,373,253 126,112 121,663 Shares issued as reinvestment of dividends 27,501 233,778 -- 5,594 Shares redeemed (2,008,682) (2,149,663) (150,332) (99,057) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,111,253) (542,632) (24,220) 28,200 ============ ============ ============ ============ ING LARGE COMPANY VALUE ($) Shares sold $ 10,249,499 $ 20,940,770 $ 1,444,075 $ 1,825,895 Shares issued as reinvestment of dividends 316,244 3,503,302 -- 83,179 Shares redeemed (23,130,520) (32,730,767) (1,711,384) (1,527,433) ------------ ------------ ------------ ------------ Net increase (decrease) $(12,564,777) $ (8,286,695) $ (267,309) $ 381,641 ============ ============ ============ ============ CLASS C SHARES CLASS Q SHARES --------------------------- --------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING LARGE COMPANY VALUE (NUMBER OF SHARES) Shares sold 32,926 64,684 -- 1,337 Shares issued as reinvestment of dividends -- 2,645 -- -- Shares redeemed (70,915) (139,077) (183) -- ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (37,989) (71,748) (183) 1,337 ============ ============ ============ ============ ING LARGE COMPANY VALUE ($) Shares sold $ 382,527 $ 986,051 $ -- $ 19,389 Shares issued as reinvesment of dividends -- 39,228 -- -- Shares redeemed (753,542) (2,222,672) (1,771) -- ------------ ------------ ------------ ------------ Net increase (decrease) $ (371,015) $ (1,197,393) $ (1,771) $ 19,389 ============ ============ ============ ============
75 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES --------------------------- --------------------------- --------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING MAGNACAP (NUMBER OF SHARES) Shares sold 1,637,596 2,200,329 342,031 1,165,942 455,850 491,490 Shares issued as reinvestment of dividends 58,790 3,100,059 52 1,123,166 20 119,279 Shares redeemed (4,837,146) (4,883,156) (2,535,432) (2,663,961) (471,682) (446,035) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (3,140,760) 417,232 (2,193,349) (374,853) (15,812) 164,734 ============ ============ ============ ============ ============ ============ ING MAGNACAP ($) Shares sold $ 13,316,165 $ 24,358,517 $ 2,679,550 $ 12,626,363 $ 3,661,386 $ 5,208,521 Shares issued as reinvestment of dividends 471,273 31,776,032 407 11,153,042 174 1,185,640 Shares redeemed (39,584,790) (54,127,863) (20,001,817) (28,380,740) (3,860,761) (4,684,503) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $(25,797,352) $ 2,006,686 $(17,321,860) $ (4,601,335) $ (199,201) $ 1,709,658 ============ ============ ============ ============ ============ ============ CLASS M SHARES CLASS Q SHARES CLASS I SHARES ------------------------- ------------------------- -------------- YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 ----------- ----------- ----------- ----------- ----------- ING MAGNACAP (NUMBER OF SHARES) Shares sold 19,464 38,778 -- 25,363 777 Shares issued as reinvestment of dividends -- 207,863 4,708 161,336 -- Shares redeemed (374,176) (339,171) (2,564) (172,009) -- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in shares outstanding (354,712) (92,530) 2,144 14,690 777 =========== =========== =========== =========== =========== ING MAGNACAP ($) Shares sold $ 155,322 $ 418,837 $ -- $ 293,569 $ 6,557 Shares issued as reinvestment of dividends -- 2,103,577 37,713 1,652,078 -- Shares redeemed (3,054,885) (3,695,461) (38,330) (1,844,440) -- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) $(2,899,563) $(1,173,047) $ (617) $ 101,207 $ 6,557 =========== =========== =========== =========== ===========
76 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES --------------------------- --------------------------- YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(1) 2003 2002(2) ------------ ------------ ------------ ------------ ING MIDCAP VALUE (NUMBER OF SHARES) Shares sold 1,049,073 2,605,647 818,080 1,153,304 Shares issued as reinvestment of dividends 34,385 -- 18,033 -- Shares redeemed (1,749,286) (142,673) (507,980) (17,955) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (665,828) 2,462,974 328,133 1,135,349 ============ ============ ============ ============ ING MIDCAP VALUE ($) Shares sold $ 7,733,617 $ 26,775,675 $ 6,257,727 $ 11,840,128 Shares issued as reinvestment of dividends 232,444 -- 121,903 -- Shares redeemed (11,804,691) (1,470,743) (3,593,419) (184,720) ------------ ------------ ------------ ------------ Net increase (decrease) $ (3,838,630) $ 25,304,932 $ 2,786,211 $ 11,655,408 ============ ============ ============ ============ CLASS C SHARES CLASS I SHARES CLASS Q SHARES ---------------------------- -------------------------- ------------------------- YEAR PERIOD YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(2) 2003 2002(3) 2003 2002(4) ----------- ----------- ----------- ----------- ----------- ----------- ING MIDCAP VALUE Shares sold 822,471 965,747 21,374 6,888 550 1,115 Shares issued as reinvestment of dividends 13,972 -- 562 -- 42 -- Shares redeemed (341,110) (17,708) (5,297) -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Net increase in shares outstanding 495,333 948,039 16,639 6,888 592 1,115 =========== =========== =========== =========== =========== =========== ING MIDCAP VALUE ($) Shares sold $ 6,239,930 $ 9,937,739 $ 154,508 $ 70,941 $ 4,534 $ 11,595 Shares issued as reinvestment of dividends 94,463 -- 3,799 -- 285 -- Shares redeemed (2,367,968) (184,006) (36,094) -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Net increase $ 3,966,425 $ 9,753,733 $ 122,213 $ 70,941 $ 4,819 $ 11,595 =========== =========== =========== =========== =========== ===========
- ---------- (1) Commenced offering of shares on February 1, 2002. (2) Commenced offering of shares on February 4, 2002. (3) Commenced offering of shares on March 4, 2002. (4) Commenced offering of shares on April 17, 2002. 77 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES --------------------------- --------------------------- YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(1) 2003 2002(2) ------------ ------------ ------------ ------------ ING SMALL CAP VALUE (NUMBER OF SHARES) Shares sold 746,668 1,818,913 490,662 783,600 Shares issued as reinvestment of dividends 16,962 -- 6,823 -- Shares redeemed (1,197,761) (83,387) (364,790) (39,620) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (434,131) 1,735,526 132,695 743,980 ============ ============ ============ ============ ING SMALL CAP VALUE ($) Shares sold $ 6,815,426 $ 19,106,892 $ 4,485,147 $ 8,286,464 Shares issued as reinvestment of dividends 145,698 -- 58,605 -- Shares redeemed (10,467,147) (875,665) (3,120,196) (426,160) ------------ ------------ ------------ ------------ Net increase (decrease) $ (3,506,023) $ 18,231,227 $ 1,423,556 $ 7,860,304 ============ ============ ============ ============ CLASS C SHARES CLASS I SHARES CLASS Q SHARES ------------------------- ------------------------- ------------------------- YEAR PERIOD YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002(3) 2003 2002(4) 2003 2002(5) ----------- ----------- ----------- ----------- ----------- ----------- ING SMALL CAP VALUE (NUMBER OF SHARES) Shares sold 566,589 812,089 30,646 2,469 -- 760 Shares issued as reinvestment of dividends 6,643 -- 564 -- -- -- Shares redeemed (174,091) (13,303) (10,123) -- (695) -- ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in shares outstanding 399,141 798,786 21,087 2,469 (695) 760 =========== =========== =========== =========== =========== =========== ING SMALL CAP VALUE ($) Shares sold $ 5,189,793 $ 8,706,900 $ 286,003 $ 26,848 $ -- $ 8,230 Shares issued as reinvestment of dividends 57,003 -- 4,835 -- -- -- Shares redeemed (1,484,104) (141,971) (78,363) -- (7,606) -- ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) $ 3,762,692 $ 8,564,929 $ 212,475 $ 26,848 $ (7,606) $ 8,230 =========== =========== =========== =========== =========== ===========
- ---------- (1) Commenced offering of shares on February 1, 2002. (2) Commenced offering of shares on February 4, 2002. (3) Commenced offering of shares on February 7, 2002. (4) Commenced offering of shares on March 7, 2002. (5) Commenced offering of shares on April 30, 2002. 78 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES --------------------------- --------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING CONVERTIBLE (NUMBER OF SHARES) Shares sold 538,399 1,958,879 421,161 614,464 Shares issued as reinvestment of dividends 51,808 110,965 41,633 88,673 Shares redeemed (1,397,320) (3,641,803) (1,662,300) (1,844,627) ------------ ------------ ------------ ------------ Net decrease in shares outstanding (807,113) (1,571,959) (1,199,506) (1,141,490) ============ ============ ============ ============ ING CONVERTIBLE ($) Shares sold $ 8,104,116 $ 30,523,457 $ 6,866,145 $ 10,852,858 Shares issued as reinvestment of dividends 762,272 1,758,845 674,288 1,536,619 Shares redeemed (20,483,502) (57,093,216) (26,789,834) (31,743,142) ------------ ------------ ------------ ------------ Net decrease $(11,617,114) $(24,810,914) $(19,249,401) $(19,353,665) ============ ============ ============ ============ CLASS C SHARES CLASS Q SHARES --------------------------- --------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING CONVERTIBLE (NUMBER OF SHARES) Shares sold 283,725 450,714 17,167 30,682 Shares issued as reinvestment of dividends 32,094 64,090 8,275 32,307 Shares redeemed (1,478,629) (1,812,332) (347,993) (1,190,010) ------------ ------------ ------------ ------------ Net decrease in shares outstanding (1,162,810) (1,297,528) (322,551) (1,127,021) ============ ============ ============ ============ ING CONVERTIBLE ($) Shares sold $ 4,341,342 $ 7,434,361 $ 251,286 $ 482,846 Shares issued as reinvestment of dividends 485,833 1,039,698 117,940 502,113 Shares redeemed (22,218,447) (29,432,206) (4,929,175) (18,495,520) ------------ ------------ ------------ ------------ Net decrease $(17,391,272) $(20,958,147) $ (4,559,949) $(17,510,561) ============ ============ ============ ============ CLASS A SHARES CLASS B SHARES --------------------------- --------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ING EQUITY AND BOND (NUMBER OF SHARES) Shares sold 804,559 2,044,167 235,194 568,337 Shares issued as reinvestment of dividends 87,922 169,074 20,392 53,496 Shares redeemed (2,874,377) (2,107,628) (926,352) (688,620) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,981,896) 105,613 (670,766) (66,787) ============ ============ ============ ============ ING EQUITY AND BOND ($) Shares sold $ 8,696,083 $ 25,609,560 $ 2,763,564 $ 7,552,484 Shares issued as reinvestment of dividends 945,153 2,077,020 237,706 706,119 Shares redeemed (31,480,050) (26,287,880) (10,795,160) (9,177,528) ------------ ------------ ------------ ------------ Net increase (decrease) $(21,838,814) $ 1,398,700 $ (7,793,890) $ (918,925) ============ ============ ============ ============
79 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - --------------------------------------------------------------------------------
CLASS C SHARES CLASS Q SHARES CLASS T SHARES --------------------------- --------------------------- --------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, 2003 2002 2003 2002 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ ING EQUITY AND BOND (NUMBER OF SHARES) Shares sold 151,062 262,677 5,355 9,956 666 325 Shares issued as reinvestment of dividends 16,285 38,349 404 1,271 5,021 14,320 Shares redeemed (453,636) (518,494) (2,579) (23,460) (96,290) (204,914) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (286,289) (217,468) 3,180 (12,233) (90,603) (190,269) ============ ============ ============ ============ ============ ============ ING EQUITY AND BOND ($) Shares sold $ 1,566,442 $ 3,148,057 $ 56,544 $ 123,222 $ 7,881 $ 4,282 Shares issued as reinvestment of dividends 168,388 452,175 4,292 15,488 58,222 189,047 Shares redeemed (4,682,884) (6,149,939) (27,501) (288,266) (1,124,406) (2,740,344) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ (2,948,054) $ (2,549,707) $ 33,335 $ (149,556) $ (1,058,303) $ (2,547,015) ============ ============ ============ ============ ============ ============ CLASS A CLASS B CLASS C CLASS I ------------ ------------ ------------ ------------------------------------------ PERIOD PERIOD PERIOD PERIOD YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED MAY 31, MAY 31, MAY 31, MAY 31, OCT. 31, OCT. 31, 2003(1) 2003(3) 2003(4) 2003(2) 2002(5)(6) 2001(5)(6) ------------ ------------ ------------ ------------ ------------ ------------ ING REAL ESTATE (NUMBER OF SHARES) Shares sold 94,587 16,002 13,845 2,062,228 2,943 1,355 Shares issued as reinvestment of dividends 341 28 7 115,070 343 303 Shares redeemed (6,170) (2,596) -- (962,686) (1,331) (589) ------------ ------------ ------------ ------------ ------------ ------------ Net increase in shares outstanding 88,758 13,434 13,852 1,214,612 1,955 1,069 ============ ============ ============ ============ ============ ============ ING REAL ESTATE ($) Shares sold $ 1,008,855 $ 165,222 $ 156,401 $ 21,890,930 $ 31,057 $ 13,726 Shares issued as reinvestment of dividends 3,536 294 74 1,216,742 3,751 3,110 Shares redeemed (64,742) (26,513) -- (10,000,608) (14,352) (5,896) ------------ ------------ ------------ ------------ ------------ ------------ Net increase $ 947,649 $ 139,003 $ 156,475 $ 13,107,064 $ 20,456 $ 10,940 ============ ============ ============ ============ ============ ============
- ---------- (1) Commenced offering of shares on December 20, 2002. (2) Changed its fiscal year to May 31. (3) Commenced offering of shares on November 20, 2002. (4) Commenced offering of shares on January 17, 2003. (5) Reflects history of a predecessor mutual fund (see Note 1) (6) Dollar amounts in thousands. 80 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 10 -- WHEN ISSUED SECURITIES The Equity and Income Fund, at times, may purchase FNMA/GNMA certificates on a delayed delivery, forward or when-issued basis with payment and delivery often taking place a month or more after the initiation of the transaction. It is the Fund's policy to record when-issued FNMA/GNMA certificates (and the corresponding obligation to pay for the securities) at the time the purchase commitment becomes fixed -- generally on the trade date. It is also the Fund's policy to segregate assets to cover its commitments for when-issued securities on trade date. NOTE 11 -- REORGANIZATIONS On May 17, 2002 certain Funds, as listed below (each an: "Acquiring Fund"), acquired the assets and certain liabilities of other Funds, also listed below (each an "Acquired Fund"), in a tax-free reorganization in exchange for shares of the Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired Fund's shareholders. The number and value of shares issued by the Acquiring Fund are presented in Note 9 -- Capital Shares. Net assets and unrealized appreciation/(depreciation) as of the reorganization dates were as follows:
ACQUIRED FUND ACQUIRING ACQUIRED TOTAL NET ASSETS OF TOTAL NET ASSETS OF UNREALIZED FUND FUND ACQUIRED FUND ACQUIRING FUND APPRECIATION ---- ---- ------------- -------------- ------------ MidCap Pilgrim MidCap $217,968,703 $ 84,663,797 $20,262,576 Opportunities Growth Fund Fund SmallCap Pilgrim SmallCap 191,995,534 319,795,499 16,636,048 Opportunities Growth Fund Fund
The net assets of MidCap Opportunities Fund and SmallCap Opportunities after the acquisition were approximately $302,632,500 and $511,791,033 respectively. NOTE 12 - FEDERAL INCOME TAXES Dividends paid by the Funds from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. The tax composition of dividends and distributions to shareholders for year or period ended May 31, 2003 were as follows:
ORDINARY TAX-EXEMPT LONG-TERM RETURN INCOME INCOME CAPITAL GAINS OF CAPITAL ------ ------ ------------- ---------- Growth + Value $ -- $ -- $ -- $ -- Growth Opportunities -- -- -- -- LargeCap Growth -- -- -- -- MidCap Opportunities -- -- -- -- SmallCap Opportunities -- -- -- -- Disciplined LargeCap -- -- -- -- Large Company Value 383,636 -- -- -- MagnaCap 579,257 -- -- -- MidCap Value 567,240 -- -- -- SmallCap Value 354,275 -- -- -- Convertible 3,214,824 -- -- -- Equity and Bond 1,786,851 -- -- -- Real Estate 2,058,713 -- -- --
81 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- The tax composition of dividends and distributions to shareholders for year ended May 31, 2002 were as follows: ORDINARY TAX-EXEMPT LONG-TERM RETURN INCOME INCOME CAPITAL GAINS OF CAPITAL ------ ------ ------------- ---------- Growth + Value $ -- $ -- $ -- $ -- Growth Opportunities -- -- -- -- LargeCap Growth 39,544 -- -- -- MidCap Opportunities -- -- -- -- SmallCap Opportunities -- -- 12,207,533 -- Disciplined LargeCap -- -- -- -- Large Company Value 667,555 -- 2,912,638 561,447 MagnaCap 1,362,303 -- 57,821,108 -- MidCap Value -- -- -- -- SmallCap Value -- -- -- -- Convertible 5,995,821 -- 1,501,596 -- Equity and Bond 4,225,295 -- 143,651 -- Real Estate(1)(2) 4,948,496 -- -- 282,791 The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. Key differences are the treatment of short-term capital gains, foreign currency transactions, wash sale deferrals and other differences. To the extend that these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassifications. To the extent distributions exceed net investment income and/or net realized capital gains for tax purposes, they are reported as distributions of paid-in capital. Accordingly, the following amounts represent current year permanent tax differences that have been reclassified as of May 31, 2003:
ACCUMULATED NET PAID-IN UNDISTRIBUTED NET REALIZED GAINS (LOSSES) CAPITAL INVESTMENT INCOME ON INVESTMENTS ------- ----------------- -------------- Growth + Value $ (4,743,710) $4,743,710 $ -- Growth Opportunities (3,315,110) 3,315,002 108 LargeCap Growth (2,412,261) 2,412,261 -- MidCap Opportunities (2,858,218) 2,858,315 (97) SmallCap Opportunities (6,705,515) 6,705,515 -- Disciplined LargeCap (116,588) 113,825 2,763 Large Company Value (5,497) 5,497 -- MagnaCap (13,552) 13,552 -- MidCap Value (182,749) 180,371 2,378 SmallCap Value (306,186) 303,592 2,594 Convertible -- 42,333 (42,333) Equity and Bond -- 1,427 (1,427) Real Estate(3) (1,663,184) 1,006,010 657,174
- ---------- (1) For the year ended October 31, 2002. (2) Composition of dividends and distributions presented herein and within the financial statements may differ from final amounts reported based on the Fund's tax year end of December 31, 2002. (3) For the tax year ended December 31, 2002. 82 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Capital loss carryforwards, which may be used to offset future realized capital gains for federal income tax purposes were as follows at May 31, 2003: AMOUNT EXPIRATION DATES ------ ---------------- Growth + Value $521,848,512 2009-2011 Growth Opportunities 463,537,631 2009-2011 LargeCap Growth 418,624,352 2008-2011 MidCap Opportunities 183,253,255 2007-2011 SmallCap Opportunities 372,918,566 2008-2011 Disciplined LargeCap 43,471,296 2008-2011 Large Company Value 13,580,973 2011 MagnaCap 10,576,002 2011 MidCap Value 2,489,425 2011 SmallCap Value 370,613 2011 Convertible 99,314,637 2010-2011 Equity and Bond 6,627,917 2010-2011 Real Estate(4) 4,405,808 2007-2008 A portion of the amount of these losses may be limited in the future for MidCap Opportunities and SmallCap Opportunities due to previous fund mergers. The following represents the tax basis components of distributable earnings as of May 31, 2003:
POST UNDISTRIBUTED CAPITAL OCTOBER UNDISTRIBUTED LONG-TERM UNREALIZED LOSS LOSSES ORDINARY INCOME CAPITAL GAINS APPRECIATION CARRYFORWARDS DEFERRED --------------- ------------- ------------ ------------- -------- Growth + Value $ -- $ -- $ 26,132,944 $ (521,848,512) (18,689,669) Growth Opportunities -- -- 23,075,483 (463,537,631) (5,657,465) LargeCap Growth -- -- 29,896,904 (418,624,352) (5,502,273) MidCap Opportunities -- -- 17,883,544 (183,253,255) (361,941) SmallCap Opportunities -- -- 38,796,880 (372,918,566) (17,805,896) Disciplined LargeCap -- -- (3,543,180) (43,471,296) (10,950,458) Large Company Value 772,491 -- (2,293,193) (13,580,973) (28,411,521) MagnaCap 695,252 -- (316,103) (10,576,002) (64,859,805) MidCap Value -- -- (7,499,111) (2,489,425) (95,617) SmallCap Value -- -- (3,759,526) (370,613) (77,331) Convertible 1,975,440 -- 9,540,102 (99,314,637) -- Equity and Bond 490,450 -- (3,433,610) (6,627,917) (7,821,774) Real Estate(4) -- -- 18,414,124 (4,405,808) --
- ---------- (4) For the tax year ended December 31, 2002. NOTE 13 -- ILLIQUID SECURITIES Pursuant to guidelines adopted by the Funds' Board of Directors, the following securities have been deemed to be illiquid. The Funds currently limit investment in illiquid securities to 15% of the Fund's net assets, at market value, at time of purchase.
INITIAL PERCENT ACQUISITION OF NET FUND SECURITY SHARES DATE COST VALUE ASSETS ---- -------- ------ ---- ---- ----- ------ Convertible Winstar Communications 51,932 11/06/98 $2,364,096 $ 0 0.00% Equity and Bond Dayton Superior 400 08/31/01 7,446 4 0.00% Iridium World Comm 500 08/31/01 50,507 5 0.00% North Atlantic Trading, Inc. 370 08/31/01 0 0 0.00% SA Telecommunications -- 08/06/96 2,000,000 0 0.00% ---------- --- ---- 4,422,049 9 0.00% ========== === ====
83 NOTES TO FINANCIAL STATEMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 14 -- SUBSEQUENT EVENTS On December 10, 2002, ING Biotechnology Fund was liquidated pursuant to a Plan of Liquidation and Dissolution of Series adopted by the Board of Trustees of ING Equity Trust on November 6, 2002. On January 7, 2003, the Board of Trustees of ING Funds approved a proposal to reorganize the ING Large Company Value Fund, "Disappearing Fund" into the ING MagnaCap Fund, "Surviving Fund" (the "2003 Reorganization"). The proposed reorganization is subject to approval by shareholders of the Disappearing Fund. If shareholder approval is obtained, it is expected that the 2003 Reorganization would take place late in 2003. Effective June 2, 2003, Wellington Management Company, LLP became the Sub-Advisor for the LargeCap Growth Fund. Andrew J. Shilling, Vice President and Partner is the portfolio manager. 84 ING Growth + Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 96.8% AGRICULTURE: 2.1% 188,600 Delta & Pine Land Co. $ 4,422,670 ------------ 4,422,670 ------------ AIRLINES: 1.2% 337,500 @ Airtran Holdings, Inc. 2,504,250 ------------ 2,504,250 ------------ APPAREL: 6.6% 100,500 @ Coach, Inc. 4,937,565 244,200 @ Quiksilver, Inc. 4,134,306 89,700 @ Timberland Co. 4,448,223 ------------ 13,520,094 ------------ BANKS: 3.5% 281,200 UCBH Holdings, Inc. 7,297,140 ------------ 7,297,140 ------------ BIOTECHNOLOGY: 3.6% 85,800 @ Genzyme Corp. 4,074,642 116,300 @ Integra LifeSciences Holdings Corp. 3,281,986 ------------ 7,356,628 ------------ COMMERCIAL SERVICES: 4.7% 62,600 @ Apollo Group, Inc. 3,657,092 109,400 @ Iron Mountain, Inc. 4,321,300 86,100 Rollins, Inc. 1,774,521 ------------ 9,752,913 ------------ COMPUTERS: 5.9% 123,600 @ NetScreen Technologies, Inc. 2,767,404 198,200 @ Storage Technology Corp. 5,351,400 323,600 @ Western Digital Corp. 4,051,472 ------------ 12,170,276 ------------ DIVERSIFIED FINANCIAL SERVICES: 2.0% 55,300 Countrywide Financial Corp. 4,072,845 ------------ 4,072,845 ------------ ELECTRONICS: 4.2% 141,800 @ Dionex Corp. 5,296,230 127,600 @ Trimble Navigation Ltd. 3,436,268 ------------ 8,732,498 ------------ ENTERTAINMENT: 3.3% 76,400 @ International Game Technology 6,726,256 ------------ 6,726,256 ------------ ENVIRONMENTAL CONTROL: 2.0% 247,600 @ Tetra Tech, Inc. 4,196,820 ------------ 4,196,820 ------------ HEALTHCARE-PRODUCTS: 2.0% 243,100 @ Visx, Inc. 4,217,785 ------------ 4,217,785 ------------ INSURANCE: 4.1% 166,300 First American Corp. 4,503,404 80,200 WR Berkley Corp. 3,949,850 ------------ 8,453,254 ------------ INTERNET: 8.1% 117,700 @ Amazon.Com, Inc. 4,230,138 170,300 @ United Online, Inc. 3,668,262 222,400 @ Verity, Inc. 4,625,920 419,000 @ WebMD Corp. 4,164,860 ------------ 16,689,180 ------------ OFFICE/BUSINESS EQUIPMENT: 2.1% 398,200 @ Xerox Corp. 4,352,326 ------------ 4,352,326 ------------ OIL & GAS: 3.7% 45,600 @ Evergreen Resources, Inc. 2,428,656 69,600 Patina Oil & Gas Corp. 2,755,464 59,700 Pogo Producing Co. 2,555,160 ------------ 7,739,280 ------------ OIL & GAS SERVICES: 2.5% 214,500 Halliburton Co. 5,120,115 ------------ 5,120,115 ------------ PHARMACEUTICALS: 13.0% 204,200 @ BioMarin Pharmaceuticals, Inc. 2,334,006 94,500 @ Hi-Tech Pharmacal Co., Inc. 3,196,084 186,400 @ Medicines Co. 4,361,760 117,200 @ Pharmaceutical Resources, Inc. 4,809,888 213,600 @ Sepracor, Inc. 4,859,400 144,300 @@ Teva Pharmaceutical Industries ADR 7,314,423 ------------ 26,875,561 ------------ PIPELINES: 1.5% 92,800 Questar Corp. 2,995,584 ------------ 2,995,584 ------------ RETAIL: 4.5% 201,700 @ Tractor Supply Co. 9,137,010 ------------ 9,137,010 ------------ SEMICONDUCTORS: 1.5% 135,000 @ DSP Group, Inc. 3,141,450 ------------ 3,141,450 ------------ SOFTWARE: 7.1% 146,700 @ Avid Technology, Inc. 4,949,658 190,100 @ Citrix Systems, Inc. 4,149,883 269,800 @ Progress Software Corp. 5,512,014 ------------ 14,611,555 ------------ TELECOMMUNICATIONS: 5.4% 301,100 @ Interdigital Communications Corp. 7,738,270 64,300 @@ Mobile Telesystems ADR 3,459,340 ------------ 11,197,610 ------------ TRANSPORTATION: 2.2% 141,500 @@ UTI Worldwide, Inc. 4,533,660 ------------ 4,533,660 ------------ Total Common Stock (Cost $173,683,816) 199,816,760 ------------ See Accompanying Notes to Financial Statements 85 ING Growth + Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Pricipal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 2.3% REPURCHASE AGREEMENT: 2.3% $ 4,794,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $4,794,451 to be received upon repurchase (Collateralized by $4,015,000 U.S. Treasury Bonds, 6.000%, Market Value $4,893,534, due 02/15/26) $ 4,794,000 ------------ Total Short-Term Investments (Cost $4,794,000) 4,794,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $178,477,816)* 99.1% $204,610,760 OTHER ASSETS AND LIABILITIES-NET 0.9 1,773,833 ----- ------------ NET ASSETS 100.0% $206,384,593 ===== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 27,002,307 Gross Unrealized Depreciation (869,363) ------------ Net Unrealized Appreciation $ 26,132,944 ============ See Accompanying Notes to Financial Statements 86 ING Growth Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 97.0% APPAREL: 1.5% 53,400 @ Coach, Inc. $ 2,623,542 ------------ 2,623,542 ------------ AUTO PARTS & EQUIPMENT: 1.0% 21,900 Johnson Controls, Inc. 1,823,175 ------------ 1,823,175 ------------ BANKS: 4.0% 47,200 Bank of America Corp. 3,502,240 72,800 Wells Fargo & Co. 3,516,240 ------------ 7,018,480 ------------ BIOTECHNOLOGY: 2.2% 28,600 @ Amgen, Inc. 1,850,706 78,100 @ Digene Corp. 2,022,790 ------------ 3,873,496 ------------ COMMERCIAL SERVICES: 2.9% 43,700 @ FTI Consulting, Inc. 1,604,227 35,300 @ Kroll, Inc. 819,313 97,700 @ Pharmaceutical Product Development, Inc. 2,740,485 ------------ 5,164,025 ------------ COMPUTERS: 11.1% 62,300 @ CACI Intl., Inc. 2,059,015 58,100 @ Dell Computer Corp. 1,817,949 345,400 @ EMC Corp. 3,737,228 110,300 Hewlett-Packard Co. 2,150,850 33,300 International Business Machines Corp. 2,931,732 215,700 @ Network Appliance, Inc. 3,673,371 131,014 @ Veritas Software Corp. 3,635,639 ------------ 20,005,784 ------------ DIVERSIFIED FINANCIAL SERVICES: 4.8% 88,900 Citigroup, Inc. 3,646,678 62,100 JP Morgan Chase & Co. 2,040,606 23,800 SLM Corp. 2,856,000 ------------ 8,543,284 ------------ ELECTRONICS: 1.6% 60,400 @ Gentex Corp. 1,880,856 46,400 @ Jabil Circuit, Inc. 973,936 ------------ 2,854,792 ------------ ENERGY-ALTERNATE SOURCES: 0.4% 33,600 @ Headwaters, Inc. 638,064 ------------ 638,064 ------------ ENGINEERING & CONSTRUCTION: 2.1% 50,000 Fluor Corp. 1,774,500 47,500 @ Jacobs Engineering Group, Inc. 1,854,400 ------------ 3,628,900 ------------ FOOD: 2.6% 39,600 @ Dean Foods Co. 1,811,700 25,800 @ Performance Food Group Co. 933,960 62,400 Sysco Corp. 1,930,656 ------------ 4,676,316 ------------ HEALTHCARE-PRODUCTS: 6.2% 18,800 @@ Alcon, Inc. 799,000 20,600 @ Boston Scientific Corp. 1,073,260 31,100 Johnson & Johnson 1,690,285 36,600 Medtronic, Inc. 1,783,518 51,515 @ St. Jude Medical, Inc. 2,889,992 16,400 @ Varian Medical Systems, Inc. 914,300 38,600 @ Zimmer Holdings, Inc. 1,731,596 ------------ 10,881,951 ------------ HEALTHCARE-SERVICES: 1.9% 25,500 A Aetna, Inc. 1,464,210 19,000 UnitedHealth Group, Inc. 1,822,860 ------------ 3,287,070 ------------ INSURANCE: 3.2% 99,700 Aflac, Inc. 3,281,127 18,200 American Intl. Group 1,053,416 27,000 WR Berkley Corp. 1,329,750 ------------ 5,664,293 ------------ INTERNET: 6.5% 61,900 @ Amazon.Com, Inc. 2,224,686 19,037 @ eBay, Inc. 1,936,253 89,000 @ USA Interactive 3,422,050 188,900 @ WebMD Corp. 1,877,666 68,440 @ Yahoo!, Inc. 2,042,934 ------------ 11,503,589 ------------ MACHINERY-DIVERSIFIED: 0.5% 37,800 @ Cognex Corp. 864,108 ------------ 864,108 ------------ MEDIA: 3.7% 98,400 @ Cablevision Systems Corp. 1,905,024 61,800 @ Comcast Corp. 1,781,076 33,500 @ EchoStar Communications Corp. 1,124,930 37,800 New York Times Co. 1,810,620 ------------ 6,621,650 ------------ MISCELLANEOUS MANUFACTURING: 1.9% 13,200 3M Co. 1,669,404 24,900 Danaher Corp. 1,666,308 ------------ 3,335,712 ------------ OIL & GAS: 8.7% 44,915 Apache Corp. 2,960,797 98,600 Exxon Mobil Corp. 3,589,040 82,655 @,@@ Nabors Industries Ltd. 3,726,087 87,200 @ Patterson-UTI Energy, Inc. 3,190,648 85,400 XTO Energy, Inc. 1,832,684 ------------ 15,299,256 ------------ PHARMACEUTICALS: 7.4% 54,600 @ AdvancePCS 1,813,266 64,900 @,@@ Biovail Corp. 3,026,936 30,700 @ Express Scripts, Inc. 2,009,008 49,500 @ Medimmune, Inc. 1,754,775 101,088 Omnicare, Inc. 2,744,539 55,300 Pfizer, Inc. 1,715,406 ------------ 13,063,930 ------------ See Accompanying Notes to Financial Statements 87 ING Growth Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- RETAIL: 10.2% 28,600 @ 99 Cents Only Stores $ 908,908 106,700 @ Abercrombie & Fitch Co. 3,046,285 56,200 CBRL Group, Inc. 2,027,696 78,400 @ Chico's FAS, Inc. 1,677,760 101,800 Gap, Inc. 1,730,600 23,300 @ HOT Topic, Inc. 621,411 39,250 @ Pacific Sunwear of California 881,555 118,500 @ Staples, Inc. 2,297,715 94,900 Tiffany & Co. 3,108,924 32,300 Wal-Mart Stores, Inc. 1,699,303 ------------ 18,000,157 ------------ SEMICONDUCTORS: 5.5% 203,900 @ Altera Corp. 3,931,192 50,600 Linear Technology Corp. 1,839,816 130,000 @ Xilinx, Inc. 3,883,100 ------------ 9,654,108 ------------ SOFTWARE: 2.6% 45,700 First Data Corp. 1,892,894 106,600 Microsoft Corp. 2,623,426 ------------ 4,516,320 ------------ TELECOMMUNICATIONS: 4.5% 123,300 @ Cisco Systems, Inc. 2,007,324 330,100 @ Corning, Inc. 2,413,031 66,800 @ Nextel Communications, Inc. 1,001,332 86,400 @ Utstarcom, Inc. 2,561,760 ------------ 7,983,447 ------------ Total Common Stock (Cost $148,823,817) 171,525,449 ------------ MUTUAL FUNDS: 3.1% EQUITY FUND: 3.1% 128,100 @ Nasdaq-100 Index Tracking Stock 3,816,099 18,300 SPDR Trust Series 1 1,774,185 ------------ 5,590,284 ------------ Total Mutual Funds (Cost $5,082,678) 5,590,284 ------------ Total Long-Term Investments (Cost $153,906,495) 177,115,733 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 1.5% REPURCHASE AGREEMENT: 1.5% $ 2,618,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $2,618,247 to be received upon repurchase (Collateralized by $2,195,000 U.S. Treasury Bonds, 6.000%, Market Value $2,675,295, due 02/15/26) $ 2,618,000 ------------ Total Short-Term Investments (Cost $2,618,000) 2,618,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $156,524,495)* 101.6% $179,733,733 OTHER ASSETS AND LIABILITIES-NET (1.6) (2,904,590) ----- ------------ NET ASSETS 100.0% $176,829,143 ===== ============ @ Non-income producing security @@ Foreign Issuer A Related Party * Cost for federal income tax purposes is $156,658,250. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 24,150,195 Gross Unrealized Depreciation (1,074,712) ------------ Net Unrealized Appreciation $ 23,075,483 ============ See Accompanying Notes to Financial Statements 88 ING LargeCap Growth Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 96.5% APPAREL: 1.0% 31,400 Nike, Inc. $ 1,758,086 ------------ 1,758,086 ------------ BIOTECHNOLOGY: 3.3% 88,300 @ Amgen, Inc. 5,713,893 ------------ 5,713,893 ------------ COMPUTERS: 11.9% 447,300 @ EMC Corp. 4,839,786 255,500 Hewlett-Packard Co. 4,982,250 93,300 International Business Machines Corp. 8,214,132 93,600 @ Veritas Software Corp. 2,597,400 ------------ 20,633,568 ------------ COSMETICS/PERSONAL CARE: 1.9% 54,500 Avon Products, Inc. 3,321,230 ------------ 3,321,230 ------------ DIVERSIFIED FINANCIAL SERVICES: 6.8% 43,100 Goldman Sachs Group, Inc. 3,512,650 116,100 JP Morgan Chase & Co. 3,815,046 37,300 SLM Corp. 4,476,000 ------------ 11,803,696 ------------ HEALTHCARE-PRODUCTS: 7.1% 17,600 @@ Alcon, Inc. 748,000 50,000 @ Boston Scientific Corp. 2,605,000 90,400 @ Guidant Corp. 3,822,112 65,500 @ St. Jude Medical, Inc. 3,674,550 33,300 @ Zimmer Holdings, Inc. 1,493,838 ------------ 12,343,500 ------------ HEALTHCARE-SERVICES: 1.9% 34,000 UnitedHealth Group, Inc. 3,261,960 ------------ 3,261,960 ------------ INSURANCE: 2.2% 64,500 American Intl. Group 3,733,260 ------------ 3,733,260 ------------ INTERNET: 10.8% 161,000 @ Amazon.Com, Inc. 5,786,340 61,300 @ eBay, Inc. 6,234,823 222,700 @ Yahoo!, Inc. 6,647,595 ------------ 18,668,758 ------------ LEISURE TIME: 0.4% 18,000 Harley-Davidson, Inc. 758,880 ------------ 758,880 ------------ MEDIA: 5.2% 210,270 @ Comcast Corp. 6,144,567 91,500 @ COX Communications, Inc. 2,834,670 ------------ 8,979,237 ------------ MISCELLANEOUS MANUFACTURING: 4.2% 70,100 General Electric Co. 2,011,870 302,300 @@ Tyco Intl. Ltd. 5,350,710 ------------ 7,362,580 ------------ OIL & GAS: 2.5% 65,030 Apache Corp. 4,286,777 ------------ 4,286,777 ------------ OIL & GAS SERVICES: 2.6% 190,800 Halliburton Co. 4,554,396 ------------ 4,554,396 ------------ PHARMACEUTICALS: 7.7% 34,700 Allergan, Inc. 2,502,217 18,800 @ Gilead Sciences, Inc. 991,888 93,800 @ Medimmune, Inc. 3,325,210 59,800 Merck & Co., Inc. 3,323,684 104,700 Pfizer, Inc. 3,247,794 ------------ 13,390,793 ------------ RETAIL: 6.7% 294,500 Gap, Inc. 5,006,500 34,300 @ Kohl's Corp. 1,795,605 115,900 @ Staples, Inc. 2,247,301 48,100 Wal-Mart Stores, Inc. 2,530,541 ------------ 11,579,947 ------------ SEMICONDUCTORS: 11.8% 81,100 @ Analog Devices, Inc. 3,126,405 94,600 Linear Technology Corp. 3,439,656 84,100 Maxim Integrated Products 3,297,561 133,000 @ Novellus Systems, Inc. 4,608,450 84,700 Texas Instruments, Inc. 1,736,350 139,700 @ Xilinx, Inc. 4,172,839 ------------ 20,381,261 ------------ SOFTWARE: 4.9% 165,200 @ Microsoft Corp. 4,065,572 337,000 @ Oracle Corp. 4,384,370 ------------ 8,449,942 ------------ TELECOMMUNICATIONS: 3.6% 267,800 @ Cisco Systems, Inc. 4,359,784 120,800 @ Nextel Communications, Inc. 1,810,792 ------------ 6,170,576 ------------ Total Common Stock (Cost $135,576,856) 167,152,340 ------------ MUTUAL FUNDS: 3.3% EQUITY FUND: 3.3% 42,400 @ Internet HOLDRs Trust 1,582,368 87,400 @ Nasdaq-100 Index Tracking Stock 2,603,646 52,000 Semiconductor HOLDRs Trust 1,557,400 ------------ 5,743,414 ------------ Total Mutual Funds (Cost $4,655,687) 5,743,414 ------------ Total Long-Term Investments (Cost $140,232,543) 172,895,754 ------------ See Accompanying Notes to Financial Statements 89 ING LargeCap Growth Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 0.7% REPURCHASE AGREEMENT: 0.7% $ 1,282,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $1,282,121 to be received upon repurchase (Collateralized by $1,075,000 U.S. Treasury Bonds, 6.000%, Market Value $1,310,224, due 02/15/26) $ 1,282,000 ------------ Total Short-Term Investments (Cost $1,282,000) 1,282,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $141,514,543)* 100.5% $174,177,754 OTHER ASSETS AND LIABILITIES-NET (0.5) (813,224) ----- ------------ NET ASSETS 100.0% $173,364,530 ===== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $144,280,850. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 32,871,935 Gross Unrealized Depreciation (2,975,031) ------------ Net Unrealized Appreciation $ 29,896,904 ============ See Accompanying Notes to Financial Statements 90 ING MidCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 97.0% APPAREL: 1.2% 41,800 @ Coach, Inc. $ 2,053,634 ------------ 2,053,634 ------------ AUTO PARTS & EQUIPMENT: 1.0% 20,300 Johnson Controls, Inc. 1,689,975 ------------ 1,689,975 ------------ BANKS: 0.5% 24,700 Bank of Hawaii Corp. 862,524 ------------ 862,524 ------------ BUILDING MATERIALS: 1.0% 22,700 @ American Standard Cos., Inc. 1,679,573 ------------ 1,679,573 ------------ COMMERCIAL SERVICES: 8.4% 70,900 @ Aramark Corp. 1,488,191 30,500 @ Career Education Corp. 1,873,005 21,800 @ Corporate Executive Board Co. 919,960 36,500 @ Education Management Corp. 1,735,210 46,400 @ FTI Consulting, Inc. 1,703,344 33,900 @ Kroll, Inc. 786,819 25,800 Paychex, Inc. 787,416 129,300 @ Pharmaceutical Product Development, Inc. 3,626,865 33,800 @ Weight Watchers Intl., Inc. 1,439,204 ------------ 14,360,014 ------------ COMPUTERS: 7.8% 34,700 @ Affiliated Computer Services, Inc. 1,607,998 59,800 @ CACI Intl., Inc. 1,976,390 23,100 @ Lexmark Intl., Inc. 1,718,640 225,800 @ Network Appliance, Inc. 3,845,374 28,900 Reynolds & Reynolds Co. 855,440 121,500 @ Veritas Software Corp. 3,371,625 ------------ 13,375,467 ------------ DIVERSIFIED FINANCIAL SERVICES: 1.1% 24,300 Bear Stearns Cos., Inc. 1,877,661 ------------ 1,877,661 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 1.0% 104,900 @ American Power Conversion 1,626,999 ------------ 1,626,999 ------------ ELECTRONICS: 2.9% 112,700 @ Gentex Corp. 3,509,478 66,700 @ Jabil Circuit, Inc. 1,400,033 ------------ 4,909,511 ------------ ENGINEERING & CONSTRUCTION: 2.0% 44,700 Fluor Corp. 1,586,403 45,700 @ Jacobs Engineering Group, Inc. 1,784,128 ------------ 3,370,531 ------------ ENVIRONMENTAL CONTROL: 0.5% 37,000 @ Republic Services, Inc. 884,670 ------------ 884,670 ------------ FOOD: 2.6% 58,000 @ Dean Foods Co. 2,653,500 48,700 @ Performance Food Group Co. 1,762,940 ------------ 4,416,440 ------------ HEALTHCARE-PRODUCTS: 6.0% 13,300 CR Bard, Inc. 932,995 47,800 @ St. Jude Medical, Inc. 2,681,580 73,900 @ Steris Corp. 1,666,445 60,200 @ Varian Medical Systems, Inc. 3,356,150 37,100 @ Zimmer Holdings, Inc. 1,664,306 ------------ 10,301,476 ------------ HEALTHCARE-SERVICES: 2.9% 23,300 A Aetna, Inc. 1,337,886 91,700 Health Management Associates, Inc. 1,710,205 21,600 @ WellPoint Health Networks 1,843,344 ------------ 4,891,435 ------------ HOME FURNISHINGS: 0.5% 12,100 Harman Intl. Industries, Inc. 897,820 ------------ 897,820 ------------ INSURANCE: 1.0% 35,900 WR Berkley Corp. 1,768,075 ------------ 1,768,075 ------------ INTERNET: 4.9% 110,000 @ USA Interactive 4,229,500 172,500 @ WebMD Corp. 1,714,650 80,200 @ Yahoo!, Inc. 2,393,970 ------------ 8,338,120 ------------ MACHINERY-DIVERSIFIED: 2.1% 36,700 @ Cognex Corp. 838,962 73,300 Rockwell Automation, Inc. 1,733,545 14,600 @ Zebra Technologies Corp. 1,065,639 ------------ 3,638,146 ------------ MEDIA: 4.6% 79,000 @ Cablevision Systems Corp. 1,529,440 83,200 @ EchoStar Communications Corp. 2,793,856 34,900 New York Times Co. 1,671,710 59,300 @ Univision Communications, Inc. 1,770,105 ------------ 7,765,111 ------------ MISCELLANEOUS MANUFACTURING: 0.9% 23,000 Danaher Corp. 1,539,160 ------------ 1,539,160 ------------ See Accompanying Notes to Financial Statements 91 ING MidCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- OIL & GAS: 7.1% 26,100 Apache Corp. $ 1,720,512 33,900 Devon Energy Corp. 1,762,800 76,700 @,@@ Nabors Industries Ltd. 3,457,635 94,100 @ Patterson-UTI Energy, Inc. 3,443,119 79,300 XTO Energy, Inc. 1,701,778 ------------ 12,085,844 ------------ OIL & GAS SERVICES: 1.3% 52,400 @ BJ Services Co. 2,133,204 ------------ 2,133,204 ------------ PACKAGING & CONTAINERS: 0.9% 81,100 @ Pactiv Corp. 1,585,505 ------------ 1,585,505 ------------ PHARMACEUTICALS: 9.7% 49,900 @ Advance PCS 1,657,179 23,500 Allergan, Inc. 1,694,585 62,500 @,@@ Biovail Corp. 2,915,000 62,610 @ Celgene Corp. 1,970,963 28,800 @ Express Scripts, Inc. 1,884,672 86,500 @ Medimmune, Inc. 3,066,425 29,700 Mylan Laboratories 857,736 93,800 Omnicare, Inc. 2,546,670 ------------ 16,593,230 ------------ RETAIL: 10.4% 53,200 @ 99 Cents Only Stores 1,690,696 96,700 @ Abercrombie & Fitch Co. 2,760,785 10,100 @ Autozone, Inc. 845,168 40,900 @ Bed Bath & Beyond, Inc. 1,711,256 51,000 CBRL Group, Inc. 1,840,080 69,600 @ Chico's FAS, Inc. 1,489,440 22,500 @ HOT Topic, Inc. 600,075 62,100 @ Sonic Corp. 1,607,769 123,400 @ Staples, Inc. 2,392,726 86,700 Tiffany & Co. 2,840,292 ------------ 17,778,287 ------------ SAVINGS & LOANS: 1.0% 63,867 New York Community Bancorp, Inc. 1,769,107 ------------ 1,769,107 ------------ SEMICONDUCTORS: 3.2% 196,500 @ Altera Corp. 3,788,520 47,800 Linear Technology Corp. 1,738,008 ------------ 5,526,528 ------------ SOFTWARE: 2.9% 43,300 @ D&B Corp. 1,682,205 59,500 Fair Isaac Corp. 3,317,125 ------------ 4,999,330 ------------ TELECOMMUNICATIONS: 3.7% 265,500 @ Corning, Inc. 1,940,805 92,900 @ Juniper Networks, Inc. 1,289,452 61,000 @ Nextel Communications, Inc. 914,390 72,600 @ Utstarcom, Inc. 2,152,590 ------------ 6,297,237 ------------ TOYS/GAMES/HOBBIES: 1.0% 74,800 Mattel, Inc. 1,608,948 ------------ 1,608,948 ------------ TRANSPORTATION: 2.9% 68,900 CH Robinson Worldwide, Inc. 2,561,013 67,200 Expeditors Intl. Washington, Inc. 2,347,968 ------------ 4,908,981 ------------ Total Common Stock (Cost $147,626,148) 165,532,543 ------------ MUTUAL FUND: 1.0% EQUITY FUND: 1.0% 20,250 MidCap SPDR Trust Series 1 1,764,383 ------------ Total Mutual Fund (Cost $1,618,959) 1,764,383 ------------ Total Long-Term Investments (Cost $149,245,107) 167,296,926 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 3.5% REPURCHASE AGREEMENT: 3.5% $ 5,959,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $5,959,561 to be received upon repurchase (Collateralized by $4,990,000 U.S. Treasury Bond, 6.000%, Market Value $6,081,877, due 02/15/26) $ 5,959,000 ------------ Total Short-Term Investments (Cost $5,959,000) 5,959,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $155,204,107)* 101.5% $173,255,926 OTHER ASSETS AND LIABILITIES-NET (1.5) (2,603,483) ----- ------------ NET ASSETS 100.0% $170,652,443 ===== ============ @ Non-income producing security @@ Foreign Issuer A Related Party * Cost for federal income tax purposes is $155,372,382. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 19,142,908 Gross Unrealized Depreciation (1,259,364) ------------ Net Unrealized Appreciation $ 17,883,544 ============ See Accompanying Notes to Financial Statements 92 ING SmallCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 96.8% ADVERTISING: 0.6% 42,600 @ Getty Images, Inc. $ 1,721,040 ------------ 1,721,040 ------------ AEROSPACE/DEFENSE: 1.0% 34,300 Engineered Support Systems, Inc. 1,351,763 57,000 @ Veridian Corp. 1,479,150 ------------ 2,830,913 ------------ APPAREL: 0.5% 83,400 @ Quiksilver, Inc. 1,411,962 ------------ 1,411,962 ------------ BANKS: 4.5% 160,200 @ Southwest Bancorp of Texas, Inc. 5,276,988 72,500 UCBH Holdings, Inc. 1,881,375 122,500 Westamerica Bancorporation 5,442,675 ------------ 12,601,038 ------------ BIOTECHNOLOGY: 2.9% 133,600 @ Digene Corp. 3,460,240 56,300 @ Integra LifeSciences Holdings Corp. 1,588,786 79,000 @ Martek Biosciences Corp. 2,973,560 ------------ 8,022,586 ------------ COMMERCIAL SERVICES: 7.5% 28,100 @ Corinthian Colleges, Inc. 1,321,824 72,000 @ Corporate Executive Board Co. 3,038,400 57,700 @ Education Management Corp. 2,743,058 65,700 @ FTI Consulting, Inc. 2,411,847 125,800 @ Kroll, Inc. 2,919,818 205,000 @ Pharmaceutical Product Development, Inc. 5,750,250 41,500 Strayer Education, Inc. 2,769,295 ------------ 20,954,492 ------------ COMPUTERS: 7.7% 95,800 @ CACI Intl., Inc. 3,166,190 247,700 @ Cognizant Technology Solutions Corp. 5,139,775 122,700 @ Hutchinson Technology, Inc. 3,704,313 88,600 @ Micros Systems, Inc. 2,628,762 47,700 @ NetScreen Technologies, Inc. 1,068,003 47,600 Reynolds & Reynolds Co. 1,408,960 71,800 @ Sandisk Corp. 2,608,494 135,300 @ Western Digital Corp. 1,693,956 ------------ 21,418,453 ------------ DISTRIBUTION/WHOLESALE; 1.0% 82,200 @ SCP Pool Corp. 2,647,662 ------------ 2,647,662 ------------ DIVERSIFIED FINANCIAL SERVICES: 1.8% 68,900 @@ Doral Financial Corp. 2,913,092 72,826 @ Portfolio Recovery Associates, Inc. 2,181,867 ------------ 5,094,959 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 0.9% 65,600 @ Wilson Greatbatch Technologies, Inc. 2,414,080 ------------ 2,414,080 ------------ ELECTRONICS: 1.7% 57,300 @ Benchmark Electronics, Inc. 1,629,612 104,200 @ Flir Systems, Inc. 2,971,784 ------------ 4,601,396 ------------ ENERGY-ALTERNATE SOURCES: 1.3% 184,700 @ Headwaters, Inc. 3,507,453 ------------ 3,507,453 ------------ ENTERTAINMENT: 1.7% 105,900 @ GTECH Holdings Corp. 3,721,326 66,200 @ Penn National Gaming, Inc. 1,108,188 ------------ 4,829,514 ------------ ENVIRONMENTAL CONTROL: 1.0% 32,700 @ Stericycle, Inc. 1,293,612 81,200 @ Tetra Tech, Inc. 1,376,340 ------------ 2,669,952 ------------ FOOD: 4.5% 77,200 @ American Italian Pasta Co. 3,382,904 39,900 Flowers Foods, Inc. 1,197,000 158,600 @ Performance Food Group Co. 5,741,320 77,300 @ United Natural Foods, Inc. 2,141,210 ------------ 12,462,434 ------------ HEALTHCARE-PRODUCTS: 6.4% 63,800 @ Advanced Neuromodulation Systems, Inc. 3,060,486 56,200 @ Inamed Corp. 2,896,548 5,800 @ Kensey Nash Corp. 123,830 168,901 @ Kyphon, Inc. 2,170,378 143,700 @ Steris Corp. 3,240,435 211,200 @ Thoratec Corp. 2,899,776 99,900 @ Zoll Medical Corp. 3,312,684 ------------ 17,704,137 ------------ HEALTHCARE-SERVICES: 4.4% 150,400 @ Amsurg Corp. 4,236,768 93,800 @ Coventry Health Care, Inc. 4,095,308 84,600 @ Curative Health Services, Inc. 1,203,858 65,400 @ Mid Atlantic Medical Services 3,132,660 ------------ 12,668,594 ------------ HOUSEHOLD PRODUCTS/WARES: 0.5% 62,600 @ Yankee Candle Co., Inc. 1,336,510 ------------ 1,336,510 ------------ INSURANCE: 2.8% 95,245 HCC Insurance Holdings, Inc. 2,728,769 67,700 @ Philadelphia Consolidated Holding Co. 2,769,607 81,400 @ ProAssurance Corp. 2,279,200 ------------ 7,777,576 ------------ INTERNET: 2.9% 86,900 @ Avocent Corp. 2,568,764 130,343 @ Digital Insight Corp. 2,215,831 181,100 @ Digital River, Inc. 3,560,426 ------------ 8,345,021 ------------ See Accompanying Notes to Financial Statements 93 ING SmallCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- LODGING: 1.0% 117,900 @ Station Casinos, Inc. $ 2,652,750 ------------ 2,652,750 ------------ MACHINERY-DIVERSIFIED: 1.9% 113,800 @ Cognex Corp. 2,601,468 35,900 @ Zebra Technologies Corp. 2,620,305 ------------ 5,221,773 ------------ MISCELLANEOUS MANUFACTURING: 1.5% 32,100 Donaldson Co., Inc. 1,346,595 68,400 @ ESCO Technologies, Inc. 2,865,960 ------------ 4,212,555 ------------ OIL & GAS: 3.5% 44,100 @ Evergreen Resources, Inc. 2,348,766 38,200 Patina Oil & Gas Corp. 1,512,338 195,400 @ Southwestern Energy Co. 2,934,908 128,800 @ Unit Corp. 2,833,600 ------------ 9,629,612 ------------ OIL & GAS SERVICES: 1.0% 244,700 @ Key Energy Services, Inc. 2,907,036 ------------ 2,907,036 ------------ PHARMACEUTICALS: 3.7% 101,300 Alpharma, Inc. 2,129,326 48,600 @ Celgene Corp. 1,529,928 101,500 @ Endo Pharmaceuticals Holdings, Inc. 1,600,654 141,100 @ Medicines Co. 3,301,740 39,800 @ Pharmaceutical Resources, Inc. 1,633,392 ------------ 10,195,040 ------------ RETAIL: 9.3% 62,600 Applebees Intl., Inc. 1,921,194 162,000 CBRL Group, Inc. 5,844,960 51,000 @ Cheesecake Factory 1,730,430 153,400 @ Chico's FAS, Inc. 3,282,760 59,900 @ Dick's Sporting Goods, Inc. 1,736,501 87,600 @ HOT Topic, Inc. 2,336,292 115,700 @ MSC Industrial Direct Co. 2,197,143 112,675 @ Pacific Sunwear of California 2,530,681 36,200 @ PF Chang's China Bistro, Inc. 1,593,524 110,300 @ Sonic Corp. 2,855,667 ------------ 26,029,152 ------------ SAVINGS & LOANS: 0.5% 54,100 Dime Community Bancshares 1,373,599 ------------ 1,373,599 ------------ SEMICONDUCTORS: 5.1% 168,400 @ Artisan Components, Inc. 3,709,852 148,100 @ Integrated Circuit Systems, Inc. 3,863,929 102,300 @ Omnivision Technologies, Inc. 3,671,547 106,500 @ Power Integrations, Inc. 2,839,184 ------------ 14,084,512 ------------ SOFTWARE: 6.6% 145,400 @ Avid Technology, Inc. 4,905,796 184,000 @ EPIQ Systems, Inc. 3,245,760 74,800 Global Payments, Inc. 2,543,200 34,900 @ IMPAC Medical Systems, Inc. 812,821 39,000 @ National Instruments Corp. 1,417,650 349,400 @ Packeteer, Inc. 5,408,712 ------------ 18,333,939 ------------ TELECOMMUNICATIONS: 4.1% 67,400 @ Adtran, Inc. 3,256,094 132,350 @ Boston Communications Group 2,153,335 384,500 @ Foundry Networks, Inc. 5,917,455 ------------ 11,326,884 ------------ TOYS/GAMES/HOBBIES: 1.2% 117,100 @ Leapfrog Enterprises, Inc. 3,387,703 ------------ 3,387,703 ------------ TRANSPORTATION: 1.9% 111,500 @ Knight Transportation, Inc. 2,827,640 16,000 Roadway Corp. 592,000 71,400 @ Yellow Corp. 1,876,392 ------------ 5,296,032 ------------ Total Common Stock (Cost $229,293,463) 269,670,359 ------------ MUTUAL FUNDS: 2.8% EQUITY FUND: 2.8% 62,600 iShares Russell 2000 Growth Index Fund 2,954,094 56,300 iShares Russell 2000 Index Fund 4,956,089 ------------ 7,910,183 ------------ Total Mutual Funds (Cost $7,129,273) 7,910,183 ------------ Total Long-Term Investments (Cost $236,422,736) 277,580,542 ------------ See Accompanying Notes to Financial Statements 94 ING SmallCap Opportunities Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 1.0% REPURCHASE AGREEMENT: 1.0% $ 2,911,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $2,911,274 to be received upon repurchase (Collateralized by $2,380,000 U.S. Treasury Bonds, 6.125%, Market Value $2,972,908, due 08/15/29) $ 2,911,000 ------------ Total Short-Term Investments (Cost $2,911,000) 2,911,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $239,333,736)* 100.7% $280,491,542 OTHER ASSETS AND LIABILITIES-NET (0.7) (1,857,045) ----- ------------ NET ASSETS 100.0% $278,634,497 ===== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $241,694,662. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 42,292,130 Gross Unrealized Depreciation (3,495,250) ------------ Net Unrealized Appreciation $ 38,796,880 ============ See Accompanying Notes to Financial Statements 95 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 99.6% ADVERTISING: 0.2% 3,400 Interpublic Group of Cos., Inc. $ 46,750 1,600 Omnicom Group 111,696 ------------ 158,446 ------------ AEROSPACE/DEFENSE: 1.6% 7,500 Boeing Co. 230,025 1,700 General Dynamics Corp. 113,594 500 Goodrich Corp. 9,135 9,550 Lockheed Martin Corp. 443,311 1,546 Northrop Grumman Corp. 135,970 3,450 Raytheon Co. 110,538 1,650 Rockwell Collins, Inc. 37,917 3,950 United Technologies Corp. 269,588 ------------ 1,350,078 ------------ AGRICULTURE: 1.0% 17,700 Altria Group, Inc. 731,010 2,350 Monsanto Co. 47,118 1,500 UST, Inc. 52,965 ------------ 831,093 ------------ AIRLINES: 0.1% 6,600 Southwest Airlines Co. 106,062 ------------ 106,062 ------------ APPAREL: 0.4% 1,800 @ Jones Apparel Group, Inc. 52,848 1,600 Liz Claiborne, Inc. 54,224 2,250 Nike, Inc. 125,978 1,200 @ Reebok Intl. Ltd. 38,040 950 VF Corp. 36,167 ------------ 307,257 ------------ AUTO MANUFACTURERS: 0.6% 38,000 Ford Motor Co. 399,000 1,600 Paccar, Inc. 106,032 ------------ 505,032 ------------ AUTO PARTS & EQUIPMENT: 0.2% 1,000 Cooper Tire & Rubber Co. 15,890 1,850 Dana Corp. 16,483 4,500 Delphi Corp. 39,690 700 Johnson Controls, Inc. 58,275 ------------ 130,338 ------------ BANKS: 6.9% 3,100 AmSouth Bancorp 69,192 16,300 Bank of America Corp. 1,209,460 2,700 Bank of New York Co., Inc. 78,165 10,050 Bank One Corp. 375,468 4,100 BB&T Corp. 140,179 1,977 Charter One Financial, Inc. 60,219 1,500 Comerica, Inc. 69,405 1,000 First Tennessee National Corp. 46,760 8,850 FleetBoston Financial Corp. 261,694 1,900 Huntington Bancshares, Inc. 38,969 3,650 Keycorp 96,360 2,150 Marshall & Ilsley Corp. 64,500 3,700 Mellon Financial Corp. 100,529 13,100 National City Corp. 443,042 500 North Fork Bancorporation, Inc. 16,535 2,500 PNC Financial Services Group, Inc. 123,125 1,950 Regions Financial Corp. 68,328 3,000 SouthTrust Corp. 86,190 2,750 State Street Corp. 105,353 2,400 SunTrust Banks, Inc. 142,320 1,675 Union Planters Corp. 53,901 24,700 US Bancorp 585,390 17,100 Wachovia Corp. 687,078 14,450 Wells Fargo & Co. 697,935 750 Zions Bancorporation 38,265 ------------ 5,658,362 ------------ BEVERAGES: 2.7% 7,600 Anheuser-Busch Cos., Inc. 399,988 650 Brown-Forman Corp. 51,259 21,000 Coca-Cola Co. 956,970 6,300 Coca-Cola Enterprises, Inc. 118,125 100 Coors (Adolph) 5,508 3,400 Pepsi Bottling Group, Inc. 69,326 14,850 PepsiCo, Inc. 656,370 ------------ 2,257,546 ------------ BIOTECHNOLOGY: 1.0% 10,764 @ Amgen, Inc. 696,538 600 @ Biogen, Inc. 25,464 1,650 @ Chiron Corp. 72,748 1,100 @ Genzyme Corp. 52,239 ------------ 846,989 ------------ BUILDING MATERIALS: 0.2% 750 @ American Standard Cos., Inc. 55,492 1,700 Masco Corp. 41,820 900 Vulcan Materials Co. 32,976 ------------ 130,288 ------------ CHEMICALS: 1.5% 1,900 Air Products & Chemicals, Inc. 82,821 8,000 Dow Chemical Co. 254,400 8,750 Du Pont EI de Nemours & Co. 368,725 900 Eastman Chemical Co. 29,421 1,450 Ecolab, Inc. 77,938 600 Engelhard Corp. 15,090 350 Great Lakes Chemical Corp. 8,061 1,100 International Flavors & Fragrances, Inc. 34,529 1,500 PPG Industries, Inc. 72,945 1,500 Praxair, Inc. 89,985 3,500 Rohm & Haas Co. 113,505 1,700 Sherwin-Williams Co. 46,546 900 Sigma-Aldrich Corp. 47,079 ------------ 1,241,045 ------------ COMMERCIAL SERVICES: 0.6% 1,600 @ Apollo Group, Inc. 93,472 4,400 @ Concord EFS, Inc. 66,528 2,100 @ Convergys Corp. 37,548 250 Deluxe Corp. 11,743 1,700 Equifax, Inc. 43,044 1,450 H&R Block, Inc. 59,363 2,500 McKesson Corp. 75,800 See Accompanying Notes to Financial Statements 96 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMERCIAL SERVICES (CONTINUED): 3,200 Paychex, Inc. $ 97,664 1,450 @ Quintiles Transnational Corp. 20,518 500 @ Robert Half Intl., Inc. 8,475 400 RR Donnelley & Sons Co. 9,980 ------------ 524,135 ------------ COMPUTERS: 5.1% 3,750 @ Apple Computer, Inc. 67,387 1,550 @ Computer Sciences Corp. 61,535 38,250 @ Dell Computer Corp. 1,196,842 18,650 @ EMC Corp. 201,793 25,637 Hewlett-Packard Co. 499,921 17,900 International Business Machines Corp. 1,575,916 2,800 @ Lexmark Intl., Inc. 208,320 18,700 Seagate Technology, Inc. 1,496 38,800 @ Sun Microsystems, Inc. 168,004 2,700 @ Sungard Data Systems, Inc. 62,100 3,800 @ Unisys Corp. 42,902 5,900 @ Veritas Software Corp. 163,725 ------------ 4,249,941 ------------ COSMETICS/PERSONAL CARE: 3.2% 400 Alberto-Culver Co. 20,440 800 Avon Products, Inc. 48,752 4,700 Colgate-Palmolive Co. 280,214 14,550 Gillette Co. 489,026 4,400 Kimberly-Clark Corp. 228,492 17,450 Procter & Gamble Co. 1,602,259 ------------ 2,669,183 ------------ DIVERSIFIED FINANCIAL SERVICES: 8.9% 11,400 American Express Co. 474,924 1,700 Bear Stearns Cos., Inc. 131,359 3,100 Capital One Financial Corp. 149,327 4,700 Charles Schwab Corp. 45,590 44,000 Citigroup, Inc. 1,804,880 2,750 Countrywide Financial Corp. 202,537 11,750 Fannie Mae 869,500 900 Franklin Resources, Inc. 33,633 12,650 Freddie Mac 756,597 4,050 Goldman Sachs Group, Inc. 330,075 17,050 JP Morgan Chase & Co. 560,263 5,050 Lehman Brothers Holdings, Inc. 361,731 10,775 MBNA Corp. 216,039 17,050 Merrill Lynch & Co., Inc. 738,265 9,150 Morgan Stanley 418,613 3,650 @ Providian Financial Corp. 32,996 1,300 SLM Corp. 156,000 1,350 T Rowe Price Group, Inc. 49,572 ------------ 7,331,901 ------------ ELECTRIC: 2.6% 1,350 Ameren Corp. 61,425 3,300 American Electric Power Co., Inc. 95,832 3,500 Centerpoint Energy, Inc. 33,425 3,600 Cinergy Corp. 136,584 3,800 CMS Energy Corp. 30,096 1,750 Consolidated Edison, Inc. 75,232 1,400 Constellation Energy Group, Inc. 46,410 2,750 Dominion Resources, Inc. 173,250 1,450 DTE Energy Co. 62,828 7,750 Duke Energy Corp. 150,195 2,700 @ Edison Intl. 43,956 1,850 Entergy Corp. 95,626 4,650 Exelon Corp. 266,445 2,500 FirstEnergy Corp. 92,025 1,550 FPL Group, Inc. 103,028 2,000 NiSource, Inc. 39,220 3,500 @ PG&E Corp. 59,500 2,450 PPL Corp. 99,078 2,000 Progress Energy, Inc. 94,100 1,850 Public Service Enterprise Group, Inc. 79,050 6,100 Southern Co. 192,028 2,800 TXU Corp. 56,672 3,500 Xcel Energy, Inc. 53,865 ------------ 2,139,870 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 0.3% 3,450 @ American Power Conversion 53,510 3,650 Emerson Electric Co. 190,895 1,550 Molex, Inc. 42,408 ------------ 286,813 ------------ ELECTRONICS: 0.2% 1,650 Applera Corp. - Applied Biosystems Group 32,126 1,650 @ Jabil Circuit, Inc. 34,634 450 Parker Hannifin Corp. 18,194 3,850 @ Sanmina-SCI Corp. 22,022 2,300 Symbol Technologies, Inc. 30,820 800 @ Thermo Electron Corp. 16,880 1,400 @ Waters Corp. 39,704 ------------ 194,380 ------------ ENGINEERING & CONSTRUCTION: 0.0% 1,000 Fluor Corp. 35,490 ------------ 35,490 ------------ ENTERTAINMENT: 0.1% 750 @ International Game Technology 66,030 ------------ 66,030 ------------ ENVIRONMENTAL CONTROL: 0.2% 3,200 @ Allied Waste Industries, Inc. 31,616 5,050 Waste Management, Inc. 128,624 ------------ 160,240 ------------ FOOD: 2.0% 3,100 Albertson's, Inc. 64,697 5,710 Archer-Daniels-Midland Co. 68,348 4,050 Campbell Soup Co. 101,048 4,450 ConAgra Foods, Inc. 108,001 3,100 General Mills, Inc. 145,018 1,350 Hershey Foods Corp. 95,985 7,300 HJ Heinz Co. 241,411 6,100 Kellogg Co. 214,720 6,350 @ Kroger Co. 101,918 1,300 McCormick & Co., Inc. 34,970 6,600 Sara Lee Corp. 120,252 1,100 Supervalu, Inc. 21,835 5,650 Sysco Corp. 174,811 1,950 Winn-Dixie Stores, Inc. 27,573 2,000 WM Wrigley Jr Co. 113,000 ------------ 1,633,587 ------------ See Accompanying Notes to Financial Statements 97 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- FOREST PRODUCTS & PAPER: 0.2% 500 Boise Cascade Corp. $ 12,285 4,150 International Paper Co. 152,180 750 Weyerhaeuser Co. 37,785 ------------ 202,250 ------------ GAS: 0.2% 1,250 KeySpan Corp. 44,025 550 Nicor, Inc. 19,585 550 Peoples Energy Corp. 23,452 1,800 Sempra Energy 49,086 ------------ 136,148 ------------ HAND/MACHINE TOOLS: 0.1% 1,750 Black & Decker Corp. 75,793 500 Snap-On, Inc. 15,205 1,150 Stanley Works 32,154 ------------ 123,152 ------------ HEALTHCARE-PRODUCTS: 3.4% 600 Bausch & Lomb, Inc. 22,764 2,100 Becton Dickinson & Co. 84,000 2,800 Biomet, Inc. 77,000 3,550 @ Boston Scientific Corp. 184,955 900 CR Bard, Inc. 63,135 6,300 @ Guidant Corp. 266,364 25,200 Johnson & Johnson 1,369,620 10,400 Medtronic, Inc. 506,792 1,550 @ St. Jude Medical, Inc. 86,955 1,650 Stryker Corp. 111,111 1,650 @ Zimmer Holdings, Inc. 74,019 ------------ 2,846,715 ------------ HEALTHCARE-SERVICES: 1.2% 2,200 A Aetna, Inc. 126,324 2,650 @ Anthem, Inc. 194,378 750 @ Humana, Inc. 9,742 250 @ Manor Care, Inc. 5,922 4,450 UnitedHealth Group, Inc. 426,933 3,150 @ WellPoint Health Networks 268,821 ------------ 1,032,120 ------------ HOME BUILDERS: 0.2% 1,100 Centex Corp. 85,393 500 KB Home 31,250 200 Pulte Homes, Inc. 13,118 ------------ 129,761 ------------ HOME FURNISHINGS: 0.1% 2,050 Leggett & Platt, Inc. 45,244 550 Whirlpool Corp. 31,295 ------------ 76,539 ------------ HOUSEHOLD PRODUCTS/WARES: 0.2% 400 Avery Dennison Corp. 22,192 1,950 Clorox Co. 87,087 1,350 Fortune Brands, Inc. 70,740 ------------ 180,019 ------------ HOUSEWARES: 0.1% 2,200 Newell Rubbermaid, Inc. 62,700 ------------ 62,700 ------------ INSURANCE: 5.5% 3,600 @@ ACE Ltd. 131,400 10,600 Aflac, Inc. 348,846 15,350 Allstate Corp. 552,446 950 AMBAC Financial Group, Inc. 63,374 22,050 American Intl. Group 1,276,254 2,650 AON Corp. 67,999 1,500 Chubb Corp. 96,045 1,450 Cigna Corp. 81,345 600 Cincinnati Financial Corp. 22,272 2,150 Hartford Financial Services Group, Inc. 100,276 1,450 Jefferson-Pilot Corp. 61,176 2,350 John Hancock Financial Services, Inc. 71,088 1,600 Loews Corp. 76,960 4,600 Marsh & McLennan Cos., Inc. 230,598 1,250 MBIA, Inc. 62,562 6,200 Metlife, Inc. 173,414 1,000 MGIC Investment Corp. 54,020 6,750 Principal Financial Group 214,380 3,250 Progressive Corp. 234,000 4,650 Prudential Financial, Inc. 155,868 3,000 Safeco Corp. 108,420 1,250 Torchmark Corp. 48,275 8,605 Travelers Property Casualty Corp. 139,143 3,300 UnumProvident Corp. 42,570 1,100 @@ XL Capital Ltd. 95,755 ------------ 4,508,486 ------------ INTERNET: 0.7% 2,700 @ eBay, Inc. 274,617 3,200 @ Symantec Corp. 144,704 4,950 @ Yahoo!, Inc. 147,758 ------------ 567,079 ------------ IRON/STEEL: 0.0% 300 Nucor Corp. 14,292 400 United States Steel Corp. 6,300 ------------ 20,592 ------------ LEISURE TIME: 0.2% 700 Brunswick Corp. 15,365 2,850 Harley-Davidson, Inc. 120,156 ------------ 135,521 ------------ LODGING: 0.1% 950 @ Harrah's Entertainment, Inc. 38,085 1,650 Hilton Hotels Corp. 22,869 800 Marriott Intl., Inc. 31,280 ------------ 92,234 ------------ MACHINERY-CONSTRUCTION & MINING: 0.2% 3,000 Caterpillar, Inc. 156,450 ------------ 156,450 ------------ MACHINERY-DIVERSIFIED: 0.4% 5,050 Deere & Co. 220,534 1,800 Dover Corp. 54,558 2,800 Rockwell Automation, Inc. 66,220 ------------ 341,312 ------------ See Accompanying Notes to Financial Statements 98 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- MEDIA: 3.5% 37,750 @ AOL Time Warner, Inc. $ 574,555 5,250 @ Clear Channel Communications, Inc. 213,675 19,650 @ Comcast Corp. 591,662 2,300 Gannett Co., Inc. 181,700 650 Knight-Ridder, Inc. 45,786 1,800 McGraw-Hill Cos., Inc. 113,778 600 Meredith Corp. 26,382 2,650 Tribune Co. 132,182 14,950 @ Viacom, Inc. 680,524 17,800 Walt Disney Co. 349,770 ------------ 2,910,014 ------------ METAL FABRICATE/HARDWARE: 0.0% 1,200 Worthington Industries 17,916 ------------ 17,916 ------------ MINING: 0.3% 3,100 Alcoa, Inc. 76,291 1,650 Freeport-McMoRan Copper & Gold, Inc. 36,217 3,350 Newmont Mining Corp. 99,361 950 @ Phelps Dodge Corp. 34,627 ------------ 246,496 ------------ MISCELLANEOUS MANUFACTURING: 5.8% 3,400 3M Co. 429,998 750 Cooper Industries Ltd. 29,918 150 Crane Co. 3,132 1,300 Danaher Corp. 86,996 6,350 Eastman Kodak Co. 194,564 700 Eaton Corp. 58,751 110,450 General Electric Co. 3,169,915 7,450 Honeywell Intl., Inc. 195,190 2,650 Illinois Tool Works, Inc. 164,432 1,400 @@ Ingersoll-Rand Co. 61,320 800 ITT Industries, Inc. 50,128 1,050 Textron, Inc. 36,592 17,000 @@ Tyco Intl., Ltd. 300,900 ------------ 4,781,836 ------------ OFFICE/BUSINESS EQUIPMENT: 0.2% 2,100 Pitney Bowes, Inc. 80,661 8,250 @ Xerox Corp. 90,171 ------------ 170,832 ------------ OIL & GAS: 5.0% 750 Amerada Hess Corp. 36,750 3,550 Anadarko Petroleum Corp. 174,944 1,395 Apache Corp. 91,958 1,700 Burlington Resources, Inc. 90,593 9,100 ChevronTexaco Corp. 645,554 5,978 ConocoPhillips 322,633 1,950 Devon Energy Corp. 101,400 900 EOG Resources, Inc. 38,790 56,550 Exxon Mobil Corp. 2,058,420 6,300 Marathon Oil Corp. 162,099 1,200 @,@@ Nabors Industries Ltd. 54,096 600 @ Noble Corp. 21,396 4,800 Occidental Petroleum Corp. 161,952 400 @ Rowan Cos., Inc. 9,576 700 Sunoco, Inc. 25,788 1,100 @ Transocean, Inc. 25,707 4,000 Unocal Corp. 120,360 ------------ 4,142,016 ------------ OIL & GAS SERVICES: 0.2% 3,750 Halliburton Co. 89,513 2,000 Schlumberger Ltd. 97,240 ------------ 186,753 ------------ PACKAGING & CONTAINERS: 0.2% 800 Ball Corp. 39,616 500 Bemis Co. 22,890 2,300 @ Pactiv Corp. 44,965 750 @ Sealed Air Corp. 32,918 ------------ 140,389 ------------ PHARMACEUTICALS: 7.5% 13,250 Abbott Laboratories 590,287 400 AmerisourceBergen Corp. 25,076 6,700 Bristol-Myers Squibb Co. 171,520 3,950 Cardinal Health, Inc. 227,955 9,700 Eli Lilly & Co. 579,769 5,300 @ Forest Laboratories, Inc. 267,650 2,600 @ King Pharmaceuticals, Inc. 37,206 2,350 @ Medimmune, Inc. 83,308 24,350 Merck & Co., Inc. 1,353,373 67,640 Pfizer, Inc. 2,098,193 12,150 Schering-Plough Corp. 224,167 1,500 @ Watson Pharmaceuticals, Inc. 55,530 11,650 Wyeth 510,853 ------------ 6,224,887 ------------ PIPELINES: 0.1% 1,250 Kinder Morgan, Inc. 63,812 3,100 Williams Cos., Inc. 24,521 ------------ 88,333 ------------ REITS: 0.2% 1,400 Equity Office Properties Trust 37,674 2,500 Equity Residential 66,200 1,600 Simon Property Group, Inc. 60,192 ------------ 164,066 ------------ RETAIL: 6.3% 3,400 @ Autonation, Inc. 47,328 350 @ Autozone, Inc. 29,288 2,750 @ Bed Bath & Beyond, Inc. 115,060 1,200 @ Big Lots, Inc. 16,332 4,000 @ Costco Wholesale Corp. 148,200 3,900 CVS Corp. 101,790 2,050 Darden Restaurants, Inc. 40,610 1,500 Dillard's, Inc. 20,040 6,900 Dollar General Corp. 129,030 1,550 Family Dollar Stores 56,498 4,150 @ Federated Department Stores 134,875 13,350 Gap, Inc. 226,950 19,700 Home Depot, Inc. 640,053 2,150 JC Penney Co., Inc. 37,238 1,150 @ Kohl's Corp. 60,203 4,550 Limited Brands 69,433 6,750 Lowe's Cos., Inc. 285,255 1,300 May Department Stores Co. 28,197 10,850 McDonald's Corp. 203,220 See Accompanying Notes to Financial Statements 99 ING Disciplined LargeCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- RETAIL (CONTINUED): 5,300 @ Office Depot, Inc. $ 71,020 1,300 RadioShack Corp. 31,330 10,250 @ Staples, Inc. 198,748 3,200 @ Starbucks Corp. 78,851 4,600 TJX Cos., Inc. 83,720 8,950 Walgreen Co. 275,571 37,500 Wal-Mart Stores, Inc. 1,972,875 1,000 Wendy's Intl., Inc. 30,110 2,700 @ Yum! Brands, Inc. 75,492 ------------ 5,207,317 ------------ SAVINGS & LOANS: 0.8% 1,350 Golden West Financial Corp. 105,016 13,100 Washington Mutual, Inc. 534,218 ------------ 639,234 ------------ SEMICONDUCTORS: 2.3% 3,100 @ Altera Corp. 59,768 3,100 @ Analog Devices, Inc. 119,505 5,650 @ Applied Materials, Inc. 87,914 1,000 @ Broadcom Corp. 24,480 56,150 Intel Corp. 1,170,166 2,600 Linear Technology Corp. 94,536 3,350 @ LSI Logic Corp. 21,440 2,800 Maxim Integrated Products 109,788 1,250 @ Novellus Systems, Inc. 43,313 1,900 @ Nvidia Corp. 49,723 850 @ QLogic Corp. 42,576 2,750 @ Xilinx, Inc. 82,143 ------------ 1,905,352 ------------ SOFTWARE: 5.9% 2,300 Adobe Systems, Inc. 81,167 550 Autodesk, Inc. 8,201 5,300 Automatic Data Processing 184,970 2,000 @ BMC Software, Inc. 33,920 2,600 @ Citrix Systems, Inc. 56,758 4,800 Computer Associates Intl., Inc. 104,016 7,150 @ Compuware Corp. 43,400 1,250 @ Electronic Arts, Inc. 85,700 6,400 First Data Corp. 265,088 1,650 @ Fiserv, Inc. 54,599 2,250 IMS Health, Inc. 40,140 1,700 @ Intuit, Inc. 78,353 1,000 @ Mercury Interactive Corp. 39,310 106,350 Microsoft Corp. 2,617,273 82,500 @ Oracle Corp. 1,073,325 1,150 @ Peoplesoft, Inc. 18,814 7,500 @ Siebel Systems, Inc. 70,425 ------------ 4,855,459 ------------ TELECOMMUNICATIONS: 6.3% 2,600 Alltel Corp. 124,488 1,350 @ Andrew Corp. 13,419 14,860 AT&T Corp. 289,621 20,650 @ AT&T Wireless Services, Inc. 160,451 21,100 BellSouth Corp. 559,361 1,500 CenturyTel, Inc. 50,505 4,250 @ CIENA Corp. 24,437 79,200 @ Cisco Systems, Inc. 1,289,376 2,200 @ Citizens Communications Co. 27,104 2,850 @ Comverse Technology, Inc. 43,349 19,400 @ JDS Uniphase Corp. 75,078 14,900 @ Lucent Technologies, Inc. 32,929 7,800 Motorola, Inc. 66,456 19,850 @ Nextel Communications, Inc. 297,552 7,000 Qualcomm, Inc. 235,060 24,950 SBC Communications, Inc. 635,227 1,950 Scientific-Atlanta, Inc. 38,396 7,450 Sprint Corp.-FON Group 101,022 3,100 @ Tellabs, Inc. 24,614 29,150 Verizon Communications, Inc. 1,103,328 ------------ 5,191,773 ------------ TEXTILES: 0.1% 1,450 Cintas Corp. 53,679 ------------ 53,679 ------------ TOYS/GAMES/HOBBIES: 0.3% 2,000 Hasbro, Inc. 32,020 9,150 Mattel, Inc. 196,816 ------------ 228,836 ------------ TRANSPORTATION: 2.0% 3,100 Burlington Northern Santa Fe Corp. 91,481 4,350 FedEx Corp. 278,313 3,400 Norfolk Southern Corp. 74,528 2,100 Union Pacific Corp. 128,079 17,200 United Parcel Service, Inc. 1,073,796 ------------ 1,646,197 ------------ TRUCKING & LEASING: 0.0% 600 Ryder System, Inc. 15,936 ------------ 15,936 ------------ Total Common Stock (Cost $80,736,922) 82,242,505 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $80,736,922)* 99.6% $ 82,242,505 OTHER ASSETS AND LIABILITIES-NET 0.4 347,915 ----- ------------ NET ASSETS 100.0% $ 82,590,420 ===== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt A Related Party * Cost for federal income tax purposes is $85,785,685. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 5,249,435 Gross Unrealized Depreciation (8,792,615) ------------ Net Unrealized Appreciation $ (3,543,180) ============ See Accompanying Notes to Financial Statements 100 ING Large Company Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 97.0% AEROSPACE/DEFENSE: 2.0% 41,000 General Dynamics Corp. $ 2,739,620 ------------ 2,739,620 ------------ AGRICULTURE: 3.8% 125,715 Altria Group, Inc. 5,192,030 ------------ 5,192,030 ------------ APPAREL: 1.4% 35,000 Nike, Inc. 1,959,650 ------------ 1,959,650 ------------ AUTO MANUFACTURERS: 2.0% 259,400 Ford Motor Co. 2,723,700 ------------ 2,723,700 ------------ BANKS: 5.6% 50,200 Bank of America Corp. 3,724,840 82,500 Wells Fargo & Co. 3,984,750 ------------ 7,709,590 ------------ BUILDING MATERIALS: 1.6% 90,100 Masco Corp. 2,216,460 ------------ 2,216,460 ------------ CHEMICALS: 3.7% 100,700 Dow Chemical Co. 3,202,260 32,900 Praxair, Inc. 1,973,671 ------------ 5,175,931 ------------ COMPUTERS: 2.1% 146,074 Hewlett-Packard Co. 2,848,443 ------------ 2,848,443 ------------ DIVERSIFIED FINANCIAL SERVICES: 15.1% 67,200 Fannie Mae 4,972,800 84,900 Freddie Mac 5,077,869 114,800 JP Morgan Chase & Co. 3,772,328 82,500 Merrill Lynch & Co., Inc. 3,572,250 75,500 Morgan Stanley 3,454,125 ------------ 20,849,372 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 1.9% 49,300 Emerson Electric Co. 2,578,390 ------------ 2,578,390 ------------ ELECTRONICS: 3.3% 229,000 @@ Koninklijke Philips Electronics NV 4,502,140 ------------ 4,502,140 ------------ FOOD: 5.3% 73,700 @@ Nestle SA ADR 3,876,620 57,700 @@ Unilever NV 3,375,450 ------------ 7,252,070 ------------ FOREST PRODUCTS & PAPER: 1.9% 72,100 International Paper Co. 2,643,907 ------------ 2,643,907 ------------ HEALTHCARE-PRODUCTS: 2.1% 72,000 Beckman Coulter, Inc. 2,926,800 ------------ 2,926,800 ------------ HEALTHCARE-SERVICES: 2.5% 204,600 @ Tenet Healthcare Corp. 3,414,774 ------------ 3,414,774 ------------ INSURANCE: 6.9% 69,800 American Intl. Group 4,040,024 83,000 John Hancock Financial Services, Inc. 2,510,750 107,700 Metlife, Inc. 3,012,369 ------------ 9,563,143 ------------ MEDIA: 1.4% 24,600 Gannett Co., Inc. 1,943,400 ------------ 1,943,400 ------------ MISCELLANEOUS MANUFACTURING: 3.4% 178,500 Honeywell Intl., Inc. 4,676,700 ------------ 4,676,700 ------------ OIL & GAS: 13.7% 72,900 Anadarko Petroleum Corp. 3,592,512 109,900 @@ BP PLC ADR 4,603,711 61,500 ChevronTexaco Corp. 4,362,810 104,500 Exxon Mobil Corp. 3,803,800 56,300 @@ Royal Dutch Petroleum Co. 2,564,465 ------------ 18,927,298 ------------ PHARMACEUTICALS: 4.0% 122,700 Bristol-Myers Squibb Co. 3,141,120 43,700 Merck & Co., Inc. 2,428,846 ------------ 5,569,966 ------------ RETAIL: 3.2% 82,300 May Department Stores Co. 1,785,087 136,900 McDonald's Corp. 2,564,137 ------------ 4,349,224 ------------ SAVINGS & LOANS: 2.9% 98,200 Washington Mutual, Inc. 4,004,596 ------------ 4,004,596 ------------ TELECOMMUNICATIONS: 4.7% 118,400 SBC Communications, Inc. 3,014,464 91,600 Verizon Communications, Inc. 3,467,060 ------------ 6,481,524 ------------ TRANSPORTATION: 2.5% 53,100 FedEx Corp. 3,397,338 ------------ 3,397,338 ------------ Total Common Stock (Cost $135,939,259) 133,646,066 ------------ See Accompanying Notes to Financial Statements 101 ING Large Company Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 3.0% REPURCHASE AGREEMENT: 3.0% $ 4,169,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $4,169,393 to be received upon repurchase (Collateralized by $3,405,000 U.S. Treasury Bonds, 6.125%, Market Value $4,253,257, due 08/15/29) $ 4,169,000 ------------ Total Short-Term Investments (Cost $4,169,000) 4,169,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $140,108,259)* 100.0% $137,815,066 OTHER ASSETS AND LIABILITIES-NET 0.0 16,586 ----- ------------ NET ASSETS 100.0% $137,831,652 ===== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 6,106,187 Gross Unrealized Depreciation (8,399,380) ------------ Net Unrealized Depreciation $ (2,293,193) ============ See Accompanying Notes to Financial Statements 102 ING MagnaCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 98.9% AEROSPACE/DEFENSE: 2.6% 89,900 General Dynamics Corp. $ 6,007,118 ------------ 6,007,118 ------------ AGRICULTURE: 3.8% 211,100 Altria Group, Inc. 8,718,430 ------------ 8,718,430 ------------ APPAREL: 1.4% 58,800 Nike, Inc. 3,292,212 ------------ 3,292,212 ------------ AUTO MANUFACTURERS: 2.0% 435,700 Ford Motor Co. 4,574,850 ------------ 4,574,850 ------------ BANKS: 5.6% 84,400 Bank of America Corp. 6,262,480 138,700 Wells Fargo & Co. 6,699,210 ------------ 12,961,690 ------------ BUILDING MATERIALS: 1.6% 151,500 Masco Corp. 3,726,900 ------------ 3,726,900 ------------ CHEMICALS: 3.9% 169,100 Dow Chemical Co. 5,377,380 61,100 Praxair, Inc. 3,665,389 ------------ 9,042,769 ------------ COMPUTERS: 3.1% 370,282 Hewlett-Packard Co. 7,220,499 ------------ 7,220,499 ------------ DIVERSIFIED FINANCIAL SERVICES: 15.0% 112,800 Fannie Mae 8,347,200 142,700 Freddie Mac 8,534,887 187,700 JP Morgan Chase & Co. 6,167,822 127,900 Merrill Lynch & Co., Inc. 5,538,070 132,700 Morgan Stanley 6,071,025 ------------ 34,659,004 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 2.5% 110,000 Emerson Electric Co. 5,753,000 ------------ 5,753,000 ------------ FOOD: 4.7% 119,600 @@ Nestle SA ADR 6,290,960 79,600 @@ Unilever NV 4,656,600 ------------ 10,947,560 ------------ FOREST PRODUCTS & PAPER: 1.9% 121,200 @ International Paper Co. 4,444,404 ------------ 4,444,404 ------------ HEALTHCARE-PRODUCTS: 2.3% 211,700 Baxter Intl., Inc. 5,364,478 ------------ 5,364,478 ------------ HEALTHCARE-SERVICES: 2.2% 298,700 Tenet Healthcare Corp. 4,985,303 ------------ 4,985,303 ------------ INSURANCE: 7.2% 121,300 American Intl. Group 7,020,844 181,000 Metlife, Inc. 5,062,570 132,300 Prudential Financial, Inc. 4,434,696 ------------ 16,518,110 ------------ MEDIA: 1.6% 45,400 Gannett Co., Inc. 3,586,600 ------------ 3,586,600 ------------ MISCELLANEOUS MANUFACTURING: 3.9% 339,400 Honeywell Intl., Inc. 8,892,280 ------------ 8,892,280 ------------ OIL & GAS: 13.0% 129,000 Anadarko Petroleum Corp. 6,357,120 89,600 ChevronTexaco Corp. 6,356,224 108,000 ConocoPhillips 5,828,760 219,600 Exxon Mobil Corp. 7,993,440 90,000 @ Valero Energy Corp. 3,375,000 ------------ 29,910,544 ------------ PHARMACEUTICALS: 4.2% 219,900 Bristol-Myers Squibb Co. 5,629,440 73,400 Merck & Co., Inc. 4,079,572 ------------ 9,709,012 ------------ RETAIL: 3.4% 142,400 May Department Stores Co. 3,088,656 259,400 McDonald's Corp. 4,858,562 ------------ 7,947,218 ------------ SAVINGS & LOANS: 3.0% 168,500 Washington Mutual, Inc. 6,871,430 ------------ 6,871,430 ------------ SEMICONDUCTORS: 2.7% 300,000 Intel Corp. 6,252,000 ------------ 6,252,000 ------------ TELECOMMUNICATIONS: 4.9% 199,000 SBC Communications, Inc. 5,066,540 163,000 Verizon Communications, Inc. 6,169,550 ------------ 11,236,090 ------------ TRANSPORTATION: 2.4% 87,000 FedEx Corp. 5,566,260 ------------ 5,566,260 ------------ Total Common Stock (Cost $228,197,344) 228,187,761 ------------ See Accompanying Notes to Financial Statements 103 ING MagnaCap Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 1.9% REPURCHASE AGREEMENT: 1.9% $ 4,312,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $4,312,406 to be received upon repurchase (Collateralized by $2,960,000 U.S. Treasury Bond, 8.125%, Market Value $4,402,926, due 08/15/21) $ 4,312,000 ------------ Total Short-Term Investments (Cost $4,312,000) 4,312,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $232,509,344)* 100.8% $232,499,761 OTHER ASSETS AND LIABILITIES-NET (0.8) (1,745,973) ----- ------------ NET ASSETS 100.0% $230,753,788 ===== ============ @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is $232,815,864. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 13,158,509 Gross Unrealized Depreciation (13,474,612) ------------ Net Unrealized Depreciation $ (316,103) ============ See Accompanying Notes to Financial Statements 104 ING MidCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 95.3% AGRICULTURE: 8.0% 51,140 Loews Corp. - Carolina Group $ 1,286,682 25,550 R.J. Reynolds Tobacco Holdings, Inc. 871,000 28,340 UST, Inc. 1,000,685 ------------ 3,158,367 ------------ AIRLINES: 3.3% 97,780 @ AMR Corp. 619,925 47,300 Delta Air Lines, Inc. 631,928 ------------ 1,251,853 ------------ APPAREL: 1.3% 58,380 @,@@ Tommy Hilfiger Corp. 496,230 ------------ 496,230 ------------ AUTO PARTS & EQUIPMENT: 5.3% 72,600 Delphi Corp. 640,332 126,240 Goodyear Tire & Rubber Co. 823,085 105,000 Visteon Corp. 645,750 ------------ 2,109,167 ------------ BUILDING MATERIALS: 0.8% 12,690 York Intl. Corp. 328,544 ------------ 328,544 ------------ CHEMICALS: 4.1% 33,030 Great Lakes Chemical Corp. 760,681 30,970 Sherwin-Williams Co. 847,959 ------------ 1,608,640 ------------ COMMERCIAL SERVICES: 1.9% 185,000 @ Service Corp. Intl. 769,600 ------------ 769,600 ------------ COMPUTERS: 7.7% 252,000 @ Gateway, Inc. 841,680 39,850 @ NCR Corp. 999,040 106,490 @ Unisys Corp. 1,202,272 ------------ 3,042,992 ------------ DIVERSIFIED FINANCIAL SERVICES: 3.7% 61,500 CIT Group, Inc. 1,475,385 ------------ 1,475,385 ------------ ELECTRIC: 8.4% 43,680 Alliant Energy Corp. 872,726 46,550 @ Edison Intl. 757,834 162,000 @ Mirant Corp. 560,520 42,770 @ PG&E Corp. 727,090 70,740 @ Sierra Pacific Resources 381,996 ------------ 3,300,166 ------------ ELECTRONICS: 2.5% 249,000 @ Solectron Corp. 996,000 ------------ 996,000 ------------ FOOD: 8.2% 113,100 @ Del Monte Foods Co. 1,031,472 61,500 @ Smithfield Foods, Inc. 1,290,885 97,400 Tyson Foods, Inc. 925,300 ------------ 3,247,657 ------------ HEALTHCARE-SERVICES: 0.1% 105,000 @ Healthsouth Corp. 31,500 ------------ 31,500 ------------ HOME FURNISHINGS: 2.0% 32,820 Maytag Corp. 802,777 ------------ 802,777 ------------ HOUSEHOLD PRODUCTS/WARES: 2.6% 37,180 @ American Greetings 659,201 24,110 Tupperware Corp. 382,867 ------------ 1,042,068 ------------ INSURANCE: 10.6% 20,050 @ Allmerica Financial Corp. 351,076 6,060 American National Insurance 518,978 32,380 @ CNA Financial Corp. 786,186 35,030 Mony Group, Inc. 932,148 32,100 Nationwide Financial Services 1,035,546 64,770 Phoenix Cos., Inc. 544,716 ------------ 4,168,650 ------------ IRON/STEEL: 2.2% 54,450 United States Steel Corp. 857,588 ------------ 857,588 ------------ OFFICE/BUSINESS EQUIPMENT: 2.4% 84,960 @ Xerox Corp. 928,613 ------------ 928,613 ------------ PIPELINES: 2.9% 66,700 Aquila, Inc. 184,759 112,400 EL Paso Corp. 977,880 ------------ 1,162,639 ------------ RETAIL: 5.7% 57,000 Dillard's, Inc. 761,520 15,000 May Department Stores Co. 325,350 101,190 @ Toys R US, Inc. 1,177,852 ------------ 2,264,722 ------------ SEMICONDUCTORS: 1.9% 67,400 @ Micron Technology, Inc. 762,968 ------------ 762,968 ------------ TELECOMMUNICATIONS: 8.4% 211,460 @ Avaya, Inc. 1,399,865 360,110 @ Lucent Technologies, Inc. 795,843 143,430 @ Tellabs, Inc. 1,138,834 ------------ 3,334,542 ------------ TOYS/GAMES/HOBBIES: 1.3% 31,180 Hasbro, Inc. 499,192 ------------ 499,192 ------------ Total Common Stock (Cost $45,138,971) 37,639,860 ------------ See Accompanying Notes to Financial Statements 105 ING MidCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 4.5% REPURCHASE AGREEMENT: 4.5% $ 1,767,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $1,767,166 to be received upon repurchase (Collateralized by $1,480,000 U.S. Treasury Bonds, 6.000%, Market Value $1,803,843, due 02/15/26) $ 1,767,000 ------------ Total Short-Term Investments (Cost $1,767,000) 1,767,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $46,905,971)* 99.8% $ 39,406,860 OTHER ASSETS AND LIABILITIES-NET 0.2 70,011 ----- ------------ NET ASSETS 100.0% $ 39,476,871 ===== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is the same as for fi- nancial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 3,053,847 Gross Unrealized Depreciation (10,552,958) ------------ Net Unrealized Depreciation $ (7,499,111) ============ See Accompanying Notes to Financial Statements 106 ING SmallCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 99.0% APPAREL: 7.1% 40,000 @ Nautica Enterprises, Inc. $ 422,000 60,000 Stride Rite Corp. 540,000 81,830 @,@@ Tommy Hilfiger Corp. 695,555 89,300 @ Vans, Inc. 623,314 ------------ 2,280,869 ------------ AUTO PARTS & EQUIPMENT: 6.6% 27,600 Cooper Tire & Rubber Co. 438,564 176,399 Goodyear Tire & Rubber Co. 1,150,121 83,800 Visteon Corp. 515,370 ------------ 2,104,055 ------------ BUILDING MATERIALS: 1.5% 18,650 York Intl. Corp. 482,848 ------------ 482,848 ------------ CHEMICALS: 8.9% 22,570 @ Cytec Industries, Inc. 747,067 25,600 Great Lakes Chemical Corp. 589,568 9,490 Lubrizol Corp. 302,731 118,390 PolyOne Corp. 589,582 56,240 Wellman, Inc. 632,700 ------------ 2,861,648 ------------ COMMERCIAL SERVICES: 5.7% 34,630 Kelly Services, Inc. 858,477 233,510 @ Service Corp. Intl. 971,402 ------------ 1,829,879 ------------ COMPUTERS: 2.5% 234,700 @ Gateway, Inc. 783,898 ------------ 783,898 ------------ ELECTRIC: 1.1% 66,940 @ Sierra Pacific Resources 361,476 ------------ 361,476 ------------ ELECTRICAL EQUIPMENT: 3.8% 59,850 Belden, Inc. 813,960 32,700 @ Rayovac Corp. 411,693 ------------ 1,225,653 ------------ ELECTRONICS: 4.9% 104,560 @ Kemet Corp. 1,056,056 87,400 @ Sanmina-SCI Corp. 499,928 ------------ 1,555,984 ------------ FOOD: 4.2% 56,830 @ Del Monte Foods Co. 518,290 18,120 Sensient Technologies Corp. 410,237 19,800 @ Smithfield Foods, Inc. 415,602 ------------ 1,344,129 ------------ HAND/MACHINE TOOLS: 1.5% 38,420 Starrett (L.S.) Co. 491,008 ------------ 491,008 ------------ HEALTHCARE-SERVICES: 4.1% 28,400 @ Orthodontic Centers of America 225,780 27,940 @ Pacificare Health Systems 1,080,132 ------------ 1,305,912 ------------ HOME BUILDERS: 4.0% 119,190 @ Fleetwood Enterprises, Inc. 908,228 81,300 @ National RV Holdings, Inc. 386,175 ------------ 1,294,403 ------------ HOUSEHOLD PRODUCTS/WARES: 4.2% 48,320 @ American Greetings 856,714 31,460 Tupperware Corp. 499,585 ------------ 1,356,299 ------------ HOUSEWARES: 1.1% 10,450 National Presto Industries, Inc. 337,849 ------------ 337,849 ------------ INSURANCE: 5.6% 15,000 @ Allmerica Financial Corp. 262,650 3,560 American National Insurance 304,878 8,420 Landamerica Financial Group, Inc. 397,003 13,500 Mony Group, Inc. 359,235 54,010 Phoenix Cos., Inc. 454,224 ------------ 1,777,990 ------------ IRON/STEEL: 6.0% 117,480 Ryerson Tull, Inc. 1,039,698 56,540 United States Steel Corp. 890,505 ------------ 1,930,203 ------------ LEISURE TIME: 2.4% 78,250 @ K2, Inc. 753,548 ------------ 753,548 ------------ MACHINERY-DIVERSIFIED: 2.1% 18,060 Tecumseh Products Co. 666,595 ------------ 666,595 ------------ METAL FABRICATE/HARDWARE: 4.4% 23,100 Precision Castparts Corp. 675,675 124,620 @ Wolverine Tube, Inc. 735,258 ------------ 1,410,933 ------------ MINING: 1.4% 102,500 @ Stillwater Mining Co. 438,700 ------------ 438,700 ------------ MISCELLANEOUS MANUFACTURING: 2.5% 45,730 Trinity Industries, Inc. 791,129 ------------ 791,129 ------------ OIL & GAS SERVICES: 1.0% 708,470 @ Seitel, Inc. 311,727 ------------ 311,727 ------------ RETAIL: 1.7% 10,110 Blair Corp. 214,332 24,400 Dillard's, Inc. 325,984 ------------ 540,316 ------------ SOFTWARE: 0.8% 68,000 @ Midway Games, Inc. 240,040 ------------ 240,040 ------------ See Accompanying Notes to Financial Statements 107 ING SmallCap Value Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 6.9% 190,980 @ Avaya, Inc. $ 1,264,287 62,770 @ Comverse Technology, Inc. 954,731 ------------ 2,219,018 ------------ TOYS/GAMES/HOBBIES: 3.0% 59,290 Hasbro, Inc. 949,233 ------------ 949,233 ------------ Total Common Stock (Cost $35,044,019) 31,645,342 ------------ Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 1.1% REPURCHASE AGREEMENT: 1.1% $ 349,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $349,033 to be received upon repurchase (Collateralized by $295,000 U.S. Treasury Bonds, 6.000%, Market Value $359,550, due 02/15/26) $ 349,000 ------------ Total Short-Term Investments (Cost $349,000) 349,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $35,393,019)* 100.1% $ 31,994,342 OTHER ASSETS AND LIABILITIES-NET (0.1) (17,352) ----- ------------ NET ASSETS 100.0% $ 31,976,990 ===== ============ @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $35,753,868. Net un- realized depreciation consists of: Gross Unrealized Appreciation $ 3,759,747 Gross Unrealized Depreciation (7,519,271) ------------ Net Unrealized Depreciation $ (3,759,526) ============ See Accompanying Notes to Financial Statements 108 ING Convertible Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 5.6% AEROSPACE/DEFENSE: 0.4% 85,000 @ Titan Corp. $ 738,650 ------------ 738,650 ------------ FOOD: 0.7% 27,905 @ Dean Foods Co. 1,276,653 ------------ 1,276,653 ------------ HEALTHCARE-SERVICES: 1.0% 90,000 @ Community Health Systems, Inc. 1,874,700 ------------ 1,874,700 ------------ MISCELLANEOUS MANUFACTURING: 0.5% 36,000 General Electric Co. 1,033,200 ------------ 1,033,200 ------------ PHARMACEUTICALS: 0.4% 15,000 Cardinal Health, Inc. 865,650 ------------ 865,650 ------------ RETAIL: 0.9% 60,000 Wendy's International, Inc. 1,806,600 ------------ 1,806,600 ------------ SOFTWARE: 0.8% 10,000 @ Electronic Arts, Inc. 685,600 138,600 @ MSC.Software Corp. 941,094 ------------ 1,626,694 ------------ TELECOMMUNICATIONS: 0.9% 53,000 Qualcomm, Inc. 1,779,740 ------------ 1,779,740 ------------ Total Common Stock (Cost $10,913,959) 11,001,887 ------------ Principal Amount Value - -------------------------------------------------------------------------------- CONVERTIBLE BONDS: 70.1% ADVERTISING: 1.8% $ 992,000 # Interpublic Group of Cos., Inc., 4.500%, due 03/15/23 $ 1,442,120 2,000,000 Young & Rubicam, Inc., 3.000%, due 01/15/05 1,987,500 ------------ 3,429,620 ------------ AGRICULTURE: 0.9% 1,490,000 # Bunge Ltd. Finance Corp., 3.750%, due 11/15/22 1,709,775 ------------ 1,709,775 ------------ AIRLINES: 0.5% 992,000 # Alaska Air Group, Inc., 3.786%, due 03/21/23 1,046,560 ------------ 1,046,560 ------------ AUTO PARTS & EQUIPMENT: 1.4% 6,000,000 Lear Corp., 4.890%, due 02/20/22 2,790,000 ------------ 2,790,000 ------------ BIOTECHNOLOGY: 4.1% 3,300,000 Amgen, Inc., 1.250%, due 03/01/32 2,615,250 5,511,000 Millennium Pharmaceuticals, Inc., 5.500%, due 01/15/07 5,283,671 ------------ 7,898,921 ------------ COMPUTERS: 2.1% 2,004,000 #,@@ ASML Holding NV, 4.250%, due 11/30/04 2,006,605 1,000,000 @@ ASML Holding NV, 4.250%, due 11/30/04 1,001,300 990,000 # Electronics for Imaging, 1.500%, due 06/01/23 990,000 ------------ 3,997,905 ------------ DISTRIBUTION/WHOLESALE: 1.8% 4,000,000 Costco Wholesale Corp., 1.180%, due 08/19/17 3,420,000 ------------ 3,420,000 ------------ ELECTRIC: 5.8% 2,000,000 Calpine Corp., 4.000%, due 12/26/06 1,622,500 495,000 # Centerpoint Energy, Inc., 3.750%, due 05/15/23 561,825 1,980,000 Duke Energy Corp., 1.750%, due 05/15/23 2,069,100 4,000,000 Mirant Corp., 2.500%, due 06/15/21 2,900,000 3,960,000 # PPL Energy Supply LLC, 2.625%, due 05/15/23 4,123,350 ------------ 11,276,775 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 0.6% 990,000 # Wilson Greatbatch Technologies, Inc., 2.250%, due 06/15/13 1,154,588 ------------ 1,154,588 ------------ FOOD: 3.9% 4,470,000 # General Mills, Inc., 2.000%, due 10/28/22 3,263,100 4,000,000 S,@@ Koninklijke Ahold NV, 3.000%, due 09/30/03 2,054,098 1,000,000 @@ Koninklijke Numico BV, 4.250%, due 06/26/05 1,040,539 1,000,000 @@ Numico NV, 1.500%, due 09/22/04 1,189,271 ------------ 7,547,008 ------------ HEALTHCARE-SERVICES: 4.2% 3,000,000 Laboratory Corp. of America Holdings, 2.000%, due 09/11/21 2,156,250 2,000,000 Quest Diagnostics, 1.750%, due 11/30/21 2,115,000 6,000,000 Universal Health Services, Inc., 0.426%, due 06/23/20 3,832,500 ------------ 8,103,750 ------------ INSURANCE: 0.9% 1,970,000 # AmerUs Group Co., 2.000%, due 03/06/32 1,738,525 ------------ 1,738,525 ------------ See Accompanying Notes to Financial Statements 109 ING Convertible Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- LODGING: 2.5% $15,000,000 @@ Four Seasons Hotels, Inc., 4.500%, due 09/23/29 $ 4,875,000 ------------ 4,875,000 ------------ MACHINERY-DIVERSIFIED: 0.6% 1,000,000 Briggs & Stratton, 5.000%, due 05/15/06 1,136,250 ------------ 1,136,250 ------------ MEDIA: 3.1% 2,000,000 America Online, Inc., 3.000%, due 12/06/19 1,215,000 3,500,000 EchoStar Communications Corp., 4.875%, due 01/01/07 3,574,375 495,000 # Sinclair Broadcast Group, Inc., 4.875%, due 07/15/18 517,894 495,000 Sirius Satellite Radio, Inc., 3.500%, due 06/01/08 650,925 ------------ 5,958,194 ------------ METAL FABRICATE/HARDWARE: 0.3% 919,000 Shaw Group, Inc., 2.270%, due 05/01/21 590,458 ------------ 590,458 ------------ MINING: 1.5% 1,500,000 @@ Inco Ltd., 3.250%, due 03/29/21 1,021,875 1,985,000 #,@@ Inco Ltd., 1.000%, due 03/14/23 1,826,200 ------------ 2,848,075 ------------ MISCELLANEOUS MANUFACTURING: 1.1% 1,985,000 #,@@ Tyco International Group SA, 2.750%, due 01/15/18 2,131,394 ------------ 2,131,394 ------------ OIL & GAS: 7.6% 3,498,000 Devon Energy Corp., 4.900%, due 08/15/08 3,576,705 2,500,000 Kerr-McGee Corp., 5.250%, due 02/15/10 2,750,000 2,165,000 Nabors Industries, Inc., 2.530%, due 02/05/21 1,434,313 2,100,000 Parker Drilling Co., 5.500%, due 08/01/04 2,047,500 1,985,000 # Pride Intl., Inc., 3.250%, due 05/01/33 2,257,938 3,000,000 @@ Transocean, Inc., 1.500%, due 05/15/21 2,932,500 ------------ 14,998,956 ------------ OIL & GAS SERVICES: 1.0% 1,975,000 Cooper Cameron Corp., 1.750%, due 05/17/21 2,014,500 ------------ 2,014,500 ------------ PHARMACEUTICALS: 5.0% 3,000,000 Alza Corp., 3.000%, due 07/28/20 2,287,500 2,000,000 # Celgene Corp., 1.750%, due 06/01/08 2,060,000 2,000,000 Cephalon, Inc., 2.500%, due 12/15/06 1,922,500 1,000,000 Cephalon, Inc., 5.250%, due 05/01/06 1,041,250 1,985,000 # Watson Pharmaceuticals, Inc., 1.750%, due 03/15/23 2,317,488 ------------ 9,628,738 ------------ RETAIL: 2.1% 6,000,000 Duane Reade, Inc., 2.148%, due 04/16/22 3,075,000 990,000 # Triarc Cos., 5.000%, due 05/15/23 1,054,350 ------------ 4,129,350 ------------ SEMICONDUCTORS: 7.0% 3,000,000 Advanced Micro Devices, Inc., 4.750%, due 02/01/22 2,313,750 2,000,000 Analog Devices, Inc., 4.750%, due 10/01/05 2,045,000 2,475,000 #,@@ ASM International NV, 5.250%, due 05/15/10 2,666,812 3,000,000 @@ Chartered Semiconductor Manufacturing Ltd., 2.500%, due 04/02/06 3,078,750 1,000,000 # Cypress Semiconductor Corp., 1.250%, due 06/15/08 1,016,250 1,985,000 # Micron Technology, Inc., 2.500%, due 02/01/10 2,391,925 ------------ 13,512,487 ------------ SOFTWARE: 3.2% 3,500,000 BEA Systems, Inc., 4.000%, due 12/15/06 3,355,625 2,500,000 First Data Corp., 2.000%, due 03/01/08 2,856,250 ------------ 6,211,875 ------------ TELECOMMUNICATIONS: 7.1% 1,980,000 Lucent Technologies, Inc., 2.750%, due 06/15/23 1,980,000 2,000,000 Nextel Communications, Inc., 6.000%, due 06/01/11 2,100,000 3,000,000 # Nextel Partners, Inc., 1.500%, due 11/15/08 3,052,500 2,000,000 Tekelec, 3.250%, due 11/02/04 1,925,000 3,980,000 US Cellular Corp., 6.000%, due 06/15/15 1,805,925 1,985,000 # Utstarcom, Inc., 0.875%, due 03/01/08 2,863,363 ------------ 13,726,788 ------------ Total Convertible Bonds (Cost $127,437,480) 135,875,492 ------------ See Accompanying Notes to Financial Statements 110 ING Convertible Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- CORPORATE BONDS: 1.6% ENGINEERING & CONSTRUCTION: 1.1% 1,980,000 # Massey Energy Co., 4.750%, due 05/15/23 $ 2,093,850 ------------ 2,093,850 ------------ INSURANCE: 0.5% 1,000,000 American Intl. Group, 0.500%, due 05/15/07 957,500 ------------ 957,500 ------------ Total Corporate Bonds (Cost $2,913,033) 3,051,350 ------------ MUTUAL FUNDS: 3.0% EQUITY FUND: 3.0% 60,000 SPDR Trust Series 1 5,817,000 ------------ 5,817,000 ------------ Total Mutual Funds (Cost $5,309,940) 5,817,000 ------------ Shares Value - -------------------------------------------------------------------------------- PREFERRED STOCK: 17.5% AUTO MANUFACTURERS: 2.4% 55,000 @ Ford Motor Co Capital Trust II $ 2,462,350 85,000 General Motors Corp. 2,113,950 ------------ 4,576,300 ------------ DIVERSIFIED FINANCIAL SERVICES: 1.0% 88,300 @ Gabelli Asset Management, Inc. 1,951,430 ------------ 1,951,430 ------------ ENVIRONMENTAL CONTROL: 1.1% 34,700 @ Allied Waste Industries, Inc. 2,047,300 ------------ 2,047,300 ------------ FOOD: 0.7% 23,164 @ Suiza Capital Trust II 1,331,930 ------------ 1,331,930 ------------ FOREST PRODUCTS & PAPER: 0.6% 25,000 International Paper Capital 1,237,500 ------------ 1,237,500 ------------ HEALTHCARE-SERVICES: 1.2% 25,000 @ Anthem, Inc. 2,232,500 ------------ 2,232,500 ------------ INSURANCE: 5.9% 79,000 Hartford Financial Services Group, Inc. 4,105,584 20,000 Prudential Financial, Inc. 1,118,000 62,000 Reinsurance Group of America 3,357,300 118,000 Travelers Property Casualty Corp. 2,944,100 ------------ 11,524,984 ------------ MEDIA: 1.1% 19,850 # News Corp. Finance Trust II 2,123,950 ------------ 2,123,950 ------------ OIL & GAS: 0.2% 4,960 # Chesapeake Energy Corp. 323,640 ------------ 323,640 ------------ OIL & GAS SERVICES: 1.5% 57,005 @@ Weatherford Intl. Ltd. 2,992,762 ------------ 2,992,762 ------------ SAVINGS & LOANS: 1.0% 33,000 Washington Mutual, Inc. 1,930,500 ------------ 1,930,500 ------------ TELECOMMUNICATIONS: 0.5% 10,000 @ Lucent Technologies, Inc. 1,038,800 1 @,X WinStar Communications, Inc., Series A -- 51,931 @,X WinStar Communications, Inc., Series D -- ------------ 1,038,800 ------------ TRANSPORTATION: 0.3% 990 # Kansas City Southern 523,586 ------------ 523,586 ------------ Total Preferred Stock (Cost $33,346,008) 33,835,182 ------------ Total Long-Term Investments (Cost $179,920,420) 189,580,911 ------------ Pricipal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 0.9% REPURCHASE AGREEMENT: 0.9% $ 1,761,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $1,761,166 to be received upon repurchase (Collateralized by $1,605,000 U.S. Treasury Bond, 5.250%, Market Value $1,799,606, due 02/15/26) $ 1,761,000 ------------ Total Short-Term Investments (Cost $1,761,000) 1,761,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $181,681,420)* 98.7% $191,341,911 OTHER ASSETS AND LIABILITIES-NET 1.3% 2,472,134 ----- ------------ NET ASSETS 100.0% $193,814,045 ===== ============ @ Non-income producing security @@ Foreign Issuer # Securities with purchase pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Fund's Board of Trustees. X Market Value determined by ING Valuation Committee appointed by the Fund's Board of Directors. S Segregated securities for when-issued or delayed delivery securities held at May 31, 2003. * Cost for federal income tax purposes is $181,801,809. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 16,580,703 Gross Unrealized Depreciation (7,040,601) ------------ Net Unrealized Appreciation $ 9,540,102 ============ See Accompanying Notes to Financial Statements 111 ING Equity and Bond Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 53.8% AEROSPACE/DEFENSE: 0.6% 6,500 General Dynamics Corp. $ 434,330 ------------ 434,330 ------------ BANKS: 2.2% 10,700 Bank of America Corp. 793,940 16,700 Wells Fargo & Co. 806,610 ------------ 1,600,550 ------------ COMMERCIAL SERVICES: 0.6% 26,700 @ Cendant Corp. 448,560 ------------ 448,560 ------------ COMPUTERS: 1.8% 41,800 @ EMC Corp. 452,276 43,984 Hewlett-Packard Co. 857,688 ------------ 1,309,964 ------------ COSMETICS/PERSONAL CARE: 0.9% 12,700 Kimberly-Clark Corp. 659,511 ------------ 659,511 ------------ DIVERSIFIED FINANCIAL SERVICES: 4.3% 35,100 Citigroup, Inc. 1,439,802 5,300 Goldman Sachs Group, Inc. 431,950 13,200 JP Morgan Chase & Co. 433,752 16,800 Morgan Stanley 768,600 ------------ 3,074,104 ------------ ELECTRIC: 0.9% 96,500 @ Reliant Resources, Inc. 646,550 ------------ 646,550 ------------ ELECTRICAL COMPONENT & EQUIPMENT: 0.9% 12,700 Emerson Electric Co. 664,210 ------------ 664,210 ------------ FOOD: 0.5% 19,000 Sara Lee Corp. 346,180 ------------ 346,180 ------------ FOREST PRODUCTS & PAPER: 0.7% 12,600 Bowater, Inc. 493,794 ------------ 493,794 ------------ HEALTHCARE-SERVICES: 1.3% 11,000 @ WellPoint Health Networks 938,740 ------------ 938,740 ------------ INSURANCE: 7.7% 8,000 American Intl. Group 463,040 10,100 Chubb Corp. 646,703 16,900 Cigna Corp. 948,090 20,800 Hartford Financial Services Group, Inc. 970,112 19,500 Loews Corp. 937,950 16,000 St. Paul Cos. 585,280 60,450 Travelers Property Casualty Corp. 987,149 ------------ 5,538,324 ------------ MEDIA: 3.2% 38,400 @ AOL Time Warner, Inc. 584,448 22,300 @ Comcast Corp. 671,453 13,300 @ Viacom, Inc. 605,416 21,200 Walt Disney Co. 416,580 ------------ 2,277,897 ------------ MINING: 2.3% 47,900 Alcoa, Inc. 1,178,819 23,600 Freeport-McMoRan Copper & Gold, Inc. 518,020 ------------ 1,696,839 ------------ MISCELLANEOUS MANUFACTURING: 1.7% 29,500 Honeywell Intl., Inc. 772,900 24,100 @@ Tyco International Ltd. 426,570 ------------ 1,199,470 ------------ OIL & GAS: 6.9% 8,400 Amerada Hess Corp. 411,600 16,700 Anadarko Petroleum Corp. 822,976 12,668 Apache Corp. 835,075 7,900 ChevronTexaco Corp. 560,426 12,800 ConocoPhillips 690,816 11,300 Kerr-McGee Corp. 537,654 14,700 @@ Royal Dutch Petroleum Co. 669,585 20,400 @ Transocean, Inc. 476,748 ------------ 5,004,880 ------------ OIL & GAS SERVICES: 0.7% 22,600 Halliburton Co. 539,462 ------------ 539,462 ------------ PHARMACEUTICALS: 3.8% 7,500 @ Barr Laboratories, Inc. 395,625 24,600 @ King Pharmaceuticals, Inc. 352,026 37,275 Pfizer, Inc. 1,156,271 18,400 Wyeth 806,840 ------------ 2,710,762 ------------ PIPELINES: 0.6% 52,700 EL Paso Corp. 458,490 ------------ 458,490 ------------ RETAIL: 4.5% 24,200 CVS Corp. 631,620 20,100 @ Federated Department Stores 653,250 19,000 Home Depot, Inc. 617,310 48,000 McDonald's Corp. 899,040 14,600 Sears Roebuck and Co. 437,708 ------------ 3,238,928 ------------ SAVINGS & LOANS: 1.1% 20,000 Washington Mutual, Inc. 815,600 ------------ 815,600 ------------ SEMICONDUCTORS: 0.7% 69,300 @ Advanced Micro Devices, Inc. 504,504 ------------ 504,504 ------------ See Accompanying Notes to Financial Statements 112 ING Equity and Bond Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 5.9% 56,900 @ 3Com Corp. $ 278,810 65,000 @ AT&T Wireless Services, Inc. 505,050 175,200 @ Lucent Technologies, Inc. 387,192 25,100 SBC Communications, Inc. 639,046 170,000 @ Tellabs, Inc. 1,349,800 29,848 Verizon Communications, Inc. 1,129,747 ------------ 4,289,645 ------------ Total Common Stock (Cost $42,184,668) 38,891,294 ------------ Principal Amount Value - -------------------------------------------------------------------------------- CONVERTIBLE BONDS: 0.0% TELECOMMUNICATIONS: 0.0% $ 2,000,000 #,X,@ SA Telecommunications, Inc., 10.000%, due 08/15/06 $ -- ------------ -- ------------ Total Convertible Bonds (Cost $2,000,000) -- ------------ CORPORATE BONDS: 20.9% AGRICULTURE: 0.1% 40,000 # Bunge Ltd. Finance Corp., 5.875%, due 05/15/13 41,219 ------------ 41,219 ------------ CHEMICALS: 0.8% 500,000 Dow Chemical Co., 5.750%, due 12/15/08 551,146 ------------ 551,146 ------------ DIVERSIFIED FINANCIAL SERVICES: 3.1% 500,000 Boeing Capital Corp., 7.100%, due 09/27/05 552,290 550,000 General Motors Acceptance Corp., 6.125%, due 09/15/06 577,143 900,000 # Goldman Sachs Group LP, 6.625%, due 12/01/04 968,760 120,000 #,@@ PF Export Receivables Master Trust, 3.748%, due 06/01/13 122,315 ------------ 2,220,508 ------------ ELECTRIC: 3.1% 450,000 @@ Empresa Nacional de Electricidad SA/Chile, 8.500%, due 04/01/09 473,439 450,000 Exelon Corp., 6.750%, due 05/01/11 528,105 90,000 Nisource Finance Corp., 6.150%, due 03/01/13 96,653 500,000 Progress Energy, Inc., 6.750%, due 03/01/06 556,030 500,000 @@ Tenaga Nasional BHD, 7.625%, due 04/01/11 590,479 ------------ 2,244,706 ------------ FOOD: 0.9% 450,000 ConAgra Foods, Inc., 9.750%, due 03/01/21 648,143 ------------ 648,143 ------------ INSURANCE: 0.1% 90,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 98,672 ------------ 98,672 ------------ IRON/STEEL: 0.1% 50,000 Armco, Inc., 9.000%, due 09/15/07 45,250 ------------ 45,250 ------------ MEDIA: 1.8% 40,000 AMFM, Inc., 8.000%, due 11/01/08 47,307 500,000 AOL Time Warner, Inc., 5.625%, due 05/01/05 529,746 400,000 Comcast Corp., 10.625%, due 07/15/12 523,400 100,000 Mediacom Broadband LLC, 11.000%, due 07/15/13 110,500 70,000 Time Warner, Inc., 6.950%, due 01/15/28 75,628 ------------ 1,286,581 ------------ MULTI-NATIONAL: 0.1% 100,000 @@ Corp. Andina de Fomento CAF, 5.200%, due 05/21/13 101,867 ------------ 101,867 ------------ OIL & GAS: 1.7% 400,000 Conoco, Inc., 5.900%, due 04/15/04 415,094 90,000 # Enterprise Products Partners LP, 6.875%, due 03/01/33 102,986 120,000 @@ Husky Oil Co., 8.900%, due 08/15/28 135,300 500,000 Pemex Project Funding Master Trust, 7.375%, due 12/15/14 553,750 ------------ 1,207,130 ------------ PIPELINES: 0.8% 130,000 CenterPoint Energy Resources Corp., 8.125%, due 07/15/05 140,852 400,000 Kinder Morgan, Inc., 6.500%, due 09/01/12 461,053 ------------ 601,905 ------------ SOVEREIGN: 5.0% 1,000,000 @@ Canadian Government Bond, 4.500%, due 09/01/07 754,170 615,705 @@ Federal Republic of Brazil, 8.000%, due 04/15/14 548,047 1,000,000 @@ German Government Bond, 4.500%, due 08/17/07 1,255,706 500,000 @@ Mexican Government Bond, 6.375%, due 01/16/13 539,250 500,000 @@ Turkish Government Bond 11.000%, due 01/14/13 513,750 ------------ 3,610,923 ------------ See Accompanying Notes to Financial Statements 113 ING Equity and Bond Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 3.3% $ 500,000 AT&T Wireless Services, Inc., 8.125%, due 05/01/12 $ 608,293 500,000 Citizens Communications Co., 7.450%, due 01/15/04 516,561 500,000 @@ France Telecom, 10.000%, due 03/01/31 689,305 500,000 Sprint Capital Corp., 8.375%, due 03/15/12 584,838 500,000 @ X WinStar Communications, Inc., 12.750%, due 04/15/10 100 ------------ 2,399,097 ------------ Total Corporate Bonds (Cost $13,886,081) 15,057,147 ------------ U.S. TREASURY OBLIGATIONS: 3.5% U.S. TREASURY BOND: 1.9% 1,225,000 S 5.375%, due 02/15/31 1,423,680 ------------ 1,423,680 ------------ U.S. TREASURY NOTES: 1.6% 505,000 S 1.625%, due 04/30/05 508,294 150,000 2.625%, due 05/15/08 152,496 500,000 S 3.625%, due 05/15/13 511,602 ------------ 1,172,392 ------------ Total U.S. Treasury Obligations (Cost $2,532,735) 2,596,072 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS: 15.1% FEDERAL HOME LOAN BANK: 0.7% 500,000 4.500%, due 11/15/12 535,419 ------------ 535,419 ------------ FEDERAL HOME LOAN MORTGAGE ASSOCIATION: 2.7% 459,925 5.500%, due 01/01/14 478,810 225,091 6.000%, due 04/01/14 234,212 635,558 6.500%, due 12/01/31 661,377 531,920 7.000%, due 06/01/29 558,417 ------------ 1,932,816 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION: 8.9% 500,000 5.000%, due 12/31/99 511,094 1,162,998 6.000%, due 01/01/32 1,208,907 584,088 6.000%, due 02/01/32 607,167 1,700,000 6.000%, due 12/31/99 1,761,095 682,775 6.500%, due 06/01/14 717,870 103,257 6.500%, due 08/01/15 108,502 373,661 6.500%, due 12/01/31 389,549 830,789 7.000%, due 03/01/15 885,339 131,488 7.500%, due 09/01/30 139,827 79,227 8.000%, due 08/01/30 85,726 ------------ 6,415,076 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 2.8% 1,498,412 6.500%, due 06/15/29 1,573,324 229,147 7.500%, due 11/15/29 243,852 177,250 8.000%, due 07/15/30 191,671 ------------ 2,008,847 ------------ Total U.S. Government Agency Obligations (Cost $10,330,789) 10,892,158 ------------ OTHER ASSET-BACKED SECURITIES: 0.9% DIVERSIFIED FINANCIAL SERVICES: 0.1% 60,000 #, @@ PF Export Receivables Master Trust 60,600 ------------ 60,600 ------------ HOME EQUITY ABS: 0.8% 534,951 Emergent Home Equity Loan Trust 577,068 ------------ 577,068 ------------ Total Other Asset Backed Securities (Cost $576,043) 637,668 ------------ Shares Value - -------------------------------------------------------------------------------- MUTUAL FUNDS: 1.5% MUTUAL FUND: 1.5% 128,416 B ING High Yield Bond Fund 1,087,687 ------------ Total Mutual Funds (Cost $1,080,920) 1,087,687 ------------ PREFERRED STOCK: 1.6% DIVERSIFIED FINANCIAL SERVICES: 1.6% 33,800 Alliance Capital Management Holding LP 1,183,000 ------------ 1,183,000 ------------ TELECOMMUNICATIONS: 0.0% 10 @ XO Communications, Inc. -- ------------ -- ------------ Total Preferred Stock (Cost $1,115,320) 1,183,000 ------------ Number of Warrants Value - -------------------------------------------------------------------------------- WARRANTS: 0.0% BUILDING MATERIALS: 0.0% 400 # @ X Dayton Superior Corp. 4 Food/Beverage: 0.0% 370 @ X North Atlantic Trading Co. -- Telecommunications: 0.0% 500 @ X Iridium World Communications, Inc. 5 ------------ Total Warrants (Cost $57,953) 9 ------------ Total Long-Term Investments (Cost $73,764,509) $ 70,345,035 ------------ See Accompanying Notes to Financial Statements 114 ING Equity and Bond Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 (Continued) - -------------------------------------------------------------------------------- Pricipal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 5.3% Repurchase Agreements: 5.3% $ 3,847,000 State Street Repurchase Agreement dated 05/30/03, 1.130%, due 06/02/03, $3,847,362 to be received upon repurchase (Collateralized by $ 3,225,000 U.S. Treasury Bond, 6.000%, Market Value $3,930,672, due 02/15/26) $ 3,847,000 ------------ Total Short-Term Investments (Cost $3,847,000) 3,847,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $77,611,509)* 102.6% $ 74,192,035 OTHER ASSETS AND LIABILITIES-NET (2.6)% (1,909,679) ----- ------------ NET ASSETS 100.0% $ 72,282,356 ===== ============ @ Non-income producing security @@ Foreign Issuer B Represents investments in an affiliated fund. # Securities with purchase pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Fund's Board of Trustees. S Segregated securities for when-issued or delayed delivery securities held at May 31, 2003. X Market Value determined by ING Valuation Committee appointed by the Fund's Board of Directors. * Cost for federal income tax purposes is $77,635,027. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 4,818,824 Gross Unrealized Depreciation (8,261,817) ------------ Net Unrealized Depreciation $ (3,442,993) ============ See Accompanying Notes to Financial Statements 115 ING Real Estate Fund PORTFOLIO OF INVESTMENTS as of May 31, 2003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMON STOCK: 5.1% HOME BUILDERS: 1.0% 9,600 Lennar Corp. $ 643,680 22,000 @ Toll Brothers, Inc. 638,660 ------------ 1,282,340 ------------ LODGING: 4.1% 232,800 Hilton Hotels Corp. 3,226,608 66,100 Starwood Hotels & Resorts Worldwide, Inc. 1,915,578 ------------ 5,142,186 ------------ Total Common Stock (Cost $5,962,013) 6,424,526 ------------ REAL ESTATE INVESTMENT TRUSTS: 91.7% APARTMENTS: 16.7% 23,500 Archstone-Smith Trust 558,360 168,300 Camden Property Trust 5,846,742 162,700 Equity Residential 4,308,296 107,500 Gables Residential Trust 3,170,175 104,300 Home Properties of NY, Inc. 3,744,370 210,100 United Dominion Realty Trust, Inc. 3,592,710 ------------ 21,220,653 ------------ DIVERSIFIED FINANCIAL SERVICES: 13.7% 76,200 Colonial Properties Trust 2,667,000 155,100 iStar Financial, Inc. 5,118,300 151,161 Keystone Property Trust 3,204,072 193,900 Liberty Property Trust 6,451,053 ------------ 17,440,425 ------------ HEALTH CARE: 4.5% 88,500 Health Care REIT, Inc. 2,633,760 213,600 Ventas, Inc. 3,022,440 ------------ 5,656,200 ------------ HOTELS: 0.8% 107,400 @ Host Marriott Corp. 966,600 ------------ 966,600 ------------ OFFICE PROPERTY: 27.4% 221,500 Arden Realty, Inc. 5,725,775 78,500 Boston Properties, Inc. 3,290,720 108,100 Brandywine Realty Trust 2,564,132 135,700 CarrAmerica Realty Corp. 3,769,746 119,700 Corporate Office Properties Trust 1,900,836 174,679 Equity Office Properties Trust 4,700,612 169,900 Mack-Cali Realty Corp. 5,839,463 174,200 Prentiss Properties Trust 5,027,412 182,200 Trizec Properties, Inc. 1,991,446 ------------ 34,810,142 ------------ REGIONAL MALLS: 13.4% 83,700 CBL & Associates Properties, Inc. 3,629,232 43,000 General Growth Properties, Inc. 2,521,950 168,500 Macerich Co. 5,813,250 133,828 Simon Property Group, Inc. 5,034,609 ------------ 16,999,041 ------------ SHOPPING CENTERS: 8.5% 159,000 Developers Diversified Realty Corp. 4,488,570 160,500 Heritage Property Investment Trust 4,429,800 55,500 Regency Centers Corp. 1,885,890 ------------ 10,804,260 ------------ WAREHOUSE: 6.7% 150,400 Duke Realty Corp. 4,268,352 159,600 Prologis 4,291,644 ------------ 8,559,996 ------------ Total Real Estate Investment Trusts (Cost $98,600,164) 116,457,317 ------------ Total Long-Term Investments (Cost $104,562,177) 122,881,843 ------------ rincipal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 2.9% REPURCHASE AGREEMENT: 2.9% $ 3,723,531 State Street Repurchase Agreement, 1.250%, due 06/02/03, $3,723,919 to be received upon repurchase (Collateralized by $3,610,000 FNMA, 4.625%, Market Value $3,801,214, due 08/13/04) $ 3,723,531 ------------ Total Short-Term Investments (Cost $3,723,531) 3,723,531 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $108,285,708)* 99.7% $126,605,374 OTHER ASSETS AND LIABILITIES-NET 0.3 327,762 ----- ------------ NET ASSETS 100.0% $126,933,136 ===== ============ @ Non-income producing security * Approximate cost for federal income tax purposes is $108,191,252. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 18,782,423 Gross Unrealized Depreciation (368,299) ------------ Net Unrealized Appreciation $ 18,414,124 ============ See Accompanying Notes to Financial Statements 116 SHAREHOLDER MEETING INFORMATION (Unaudited) - -------------------------------------------------------------------------------- A special meeting of shareholders of the ING Retail Funds (formerly Pilgrim Retail Funds) and Variable Products held May 29, 2003, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. A brief description of each matter voted upon as well as the results are outlined below: 1. To approve a Sub-Advisory Agreement for each of the ING LargeCap Growth Fund and ING VP LargeCap Growth Portfolio, between ING Investments, LLC and Wellington Management Company, LLP with no change in the Adviser or the overall management fee paid by each Fund. 2. To transact such other business, not currently contemplated, that may properly come before the Special Meeting or any adjournment(s) thereof in the discretion of the proxies or their substitutes.
SHARES VOTED SHARES AGAINST OR SHARES BROKER TOTAL PROPOSAL VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED -------- --------- -------- --------- -------- ------------ ING LargeCap Growth Fund 1 7,092,546 90,270 98,647 -- 7,281,463 ING LargeCap Growth Fund 2 6,494,145 644,779 142,539 -- 7,281,463
117 TAX INFORMATION (Unaudited) - -------------------------------------------------------------------------------- Dividends paid during the year ended May 31, 2003 were as follows: FUND NAME TYPE PER SHARE AMOUNT - --------- ---- ---------------- Large Company Value Class A NII $ 0.0333 Class Q NII $ 0.0418 MagnaCap Class A NII $ 0.0279 Class Q NII $ 0.0450 MidCap Value Class A NII $ 0.0362 Class B NII $ 0.0081 Class C NII $ 0.0074 Class I NII $ 0.0742 Class Q NII $ 0.0629 All Classes STCG $ 0.1081 SmallCap Value Class A NII $ 0.0386 Class B NII $ 0.0003 Class C NII $ 0.0082 Class I NII $ 0.0794 All Classes STCG $ 0.0853 Convertible Class A NII $ 0.3123 Class B NII $ 0.2222 Class C NII $ 0.2327 Class Q NII $ 0.3412 Equity and Bond Class A NII $ 0.2460 Class B NII $ 0.1767 Class C NII $ 0.1948 Class Q NII $ 0.2515 Class T NII $ 0.2078 Real Estate Class A NII $ 0.1992 Class B NII $ 0.1650 Class C NII $ 0.0814 Class I NII $ 0.2028 - ---------- NII -- Net investment income STCG -- Short-term capital gain LTCG -- Long-term capital gain Of the ordinary distributions made during the fiscal periods ended May 31, 2003, the following percentages qualify for the dividends received deductions available to corporate shareholders; 100.00%, 100.00%, 100.00%, 18.27%, 14.04%, 58.48% and 57.24% for the ING Large Company Value Fund, ING MagnaCap Value Fund, ING MidCap Value Fund, ING SmallCap Value Fund, ING Convertible Fund, and ING Equity and Bond Fund, respectively. For the fiscal periods ended May 31, 2003, the following are percentages of ordinary dividends paid by the Funds that are designated as qualifying dividend income subject to reduced income tax rates for individuals; 13.30%, and 12.75% for the ING Convertible Fund, and ING Equity and Bond Fund, respectively. The above figure may differ from those cited elsewhere in this report due to differences in the calculation of income and gains under Generally Accepted Accounting Principles (book purposes) and Internal Revenue Service (tax purposes). Shareholder are strongly advised to consult their own tax advisers with respect to the tax consequences of their Investments in the Funds. In January 2003, shareholders, excluding corporate shareholders, received an IRS 1099 DIV regarding the federal tax status of the dividends and distributions received by them in calendar 2002. 118 TRUSTEE AND OFFICER INFORMATION (Unaudited) - -------------------------------------------------------------------------------- The business and affairs of the Trusts are managed under the direction of the Trusts' Board of Trustees. A Trustee who is not an interested person of the Trusts, as defined in the 1940 Act, is an independent trustee ("Independent Trustee"). The Trustees and Officers of the Trust are listed below. The Statement of Additional Information includes additional information about trustees of the Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- INDEPENDENT TRUSTEES Paul S. Doherty(2) Trustee October Mr. Doherty is 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 1999 - President and Partner, (February 2002 - Scottsdale, Arizona 85258 Present Doherty, Wallace, Present). Born: 1934 Pillsbury and Murphy, P.C., Attorneys (1996 - Present); Director, Tambrands, Inc. (1993 - 1998); and Trustee of each of the funds managed by Northstar Investment Management Corporation (1993 - 1999). J. Michael Earley(3) Trustee February President and Chief 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2002 - Executive Officer, (1997 - Present). Scottsdale, Arizona 85258 Present Bankers Trust Company, Born: 1945 N.A. (1992 - Present). R. Barbara Gitenstein(2) Trustee February President, College of 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2002 - New Jersey (1999 - (1997 - Present). Scottsdale, Arizona 85258 Present Present). Formerly, Born: 1948 Executive Vice President and Provost, Drake University (1992 - 1998). Walter H. May(2) Trustee October Retired. Formerly, 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 1999 - Managing Director and (February 2002 - Scottsdale, Arizona 85258 Present Director of Marketing, Present) and Best Prep Born: 1936 Piper Jaffray, Inc.; Charity (1991 - Trustee of each of the Present). funds managed by Northstar Investment Management Corporation (1996 - 1999). Jock Patton(2) Trustee August Private Investor (June 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 1995 - 1997 - Present). (February 2002 - Scottsdale, Arizona 85258 Present Formerly, Director and Present); Director, Born: 1945 Chief Executive Officer, Hypercom, Inc. (January Rainbow Multimedia 1999 - Present); JDA Group, Inc. (January Software Group, Inc. 1999 - December 2001); (January 1999 - Director of Stuart Present); Buick of Entertainment, Inc.; Scottsdale, Inc.; Director of Artisoft, Inc. National Airlines, Inc.; (1994 - 1998). BG Associates, Inc.; BK Entertainment, Inc.; and Arizona Rotorcraft, Inc.
119 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- David W.C. Putnam(3) Trustee October President and Director, 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 1999 - F.L. Putnam Securities (February 2002 - Scottsdale, Arizona 85258 Present Company, Inc. and its Present), Anchor Born: 1939 affiliates; President, International Bond Secretary and Trustee, (December 2000 - The Principled Equity Present); Progressive Marke Fund. Formerly, Capital Accumulation Trustee, Trust Realty Trust (August 1998 - Trust (December Corp.; Present); Principled Anchor Investment Equity Market Fund Trust; Bow 2000 - (November 1996 - Present); Ridge Mining Present), Mercy Company and each of Endowment the F.L. Putnam funds Foundation (1995 - managed by Northstar Present); Director, F.L. Investment Foundation Putnam Investment Management Management Company Corporation (1994 - (December 2001 - 1999). Present); Asian American Bank and Trust Company (June 1992 - Present); and Notre Dame Health Care Center (1991 - Present) F.L. Putnam Securities Company, Inc. (June 1978 - Present); and an Honorary Trustee, Mercy Hospital (1973 - Present). Blaine E. Rieke(3) Trustee February General Partner, 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - Huntington Partners (February 2002 - Scottsdale, Arizona 85258 Present (January 1997 - Present) and Morgan Born: 1933 Present). Chairman of Chase Trust Co. the Board and Trustee (January 1998 - of each of the funds Present). managed by ING Investment Management Co. LLC (November 1998 - February 2001). Roger B. Vincent(3) Trustee February President, Springwell 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - (1994 - Present); and Scottsdale, Arizona 85258 Present Present). Formerly, Director, AmeriGas Born: 1945 Director, Tatham Propane, Inc. (1998 - Offshore, Inc. (1996 - Present). 2000). Richard A. Wedemeyer(2) Trustee February Retired. Mr. 106 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - Wedemeyer was (February 2002 - Scottsdale, Arizona 85258 Present formerly Vice President Present) and Born: 1936 - Finance and Touchstone Consulting Administration, Group (1997 - Present). Channel Corporation (June 1996 - April 2002). Formerly, Vice President, Operations and Administration, Jim Henson Productions. (1979 - 1997); Trustee, First Choice Funds (1997 - 2001); and of each of the funds managed by ING Investment Management Co. LLC (1998 - 2001).
120 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- TRUSTEES WHO ARE "INTERESTED PERSONS" Thomas J. McInerney(4) Trustee February Chief Executive Officer, 160 Director, Hemisphere, 7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial Inc. (May 2003 - Scottsdale, Arizona 85258 Present Services (September Present); Trustee, GCG Born: 1956 2001 - Present); Trust (February 2002 - General Manager and Present); Equitable Life Chief Executive Officer, Insurance Co., Golden ING U.S. Worksite American Life Financial Services Insurance Co., Life (December 2000 - Insurance Company of Present); Member, ING Georgia, Midwestern Americas Executive United Life Insurance Committee (2001 - Co., ReliaStar Life Present); President, Insurance Co., Security Chief Executive Officer Life of Denver, Security and Director of Connecticut Life Northern Life Insurance Insurance Co., Company (March 2001 - Southland Life October 2002), ING Insurance Co., USG Aeltus Holding Annuity and Life Company, Inc. (2000 - Company, and United Present), ING Retail Life and Annuity Holding Company Insurance Co. Inc (1998 - Present), ING (March 2001 - Present); Life Insurance and Director, Ameribest Life Annuity Company Insurance Co., (March (September 1997 - 2001 to January 2003); November 2002) and Director, First ING Retirement Columbine Life Holdings, Inc. (1997 - Insurance Co. (March Present). Formerly, 2001 to December General Manager and 2002); Member of the Chief Executive Officer, Board, National ING Worksite Division Commission on (December 2000 - Retirement Policy, October 2001), Governor's Council on President, ING-SCI, Inc. Economic (August 1997 - Competitiveness and December 2000); Technology of President, Aetna Connecticut, Financial Services Connecticut Business (August 1997 - and Industry December 2000). Association, Bushnell; Connecticut Forum; Metro Hartford Chamber of Commerce; and is Chairman, Concerned Citizens for Effective Government.
121 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- John G. Turner(5) Trustee October Chairman, Hillcrest 106 Trustee, GCG; Director, 7337 E. Doubletree Ranch Rd. 1999 - Capital Partners (May Hormel Foods Scottsdale, Arizona 85258 Present 2002-Present); Corporation (March Born: 1939 President, Turner 2000 - Present); Shopko Investment Company Stores, Inc. (August (January 2002 - 1999 - Present); and Present). Mr. Turner M.A. Mortenson was formerly Vice Company (March 2002 - Chairman of ING Present). Americas (2000 - 2002); Chairman and Chief Executive Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company (1993 - 2000); Chairman of ReliaStar United Services Life Insurance Company (1995 - 1998); Chairman of ReliaStar Life Insurance Company of New York (1995 - 2001); Chairman of Northern Life Insurance Company (1992 - 2001); Chairman and Trustee of the Northstar affiliated investment companies (1993 - 2001) and Director, Northstar Investment Management Corporation and its affiliates (1993 - 1999).
- ---------- (1) Trustees serve until their successors are duly elected and qualified. (2) Valuation Committee member. (3) Audit Committee member. (4) Mr. McInerney is an "interested person," as defined by the 1940 Act, because of his affiliation with ING U.S. Worksite Financial Services, an affiliate of ING Investments, LLC. (5) Mr. Turner is an "interested person," as defined by the 1940 Act, because of his affiliation with ING Americas, an affiliate of ING Investments, LLC. 122 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ------- ------------------- -------------- --------------- OFFICERS: James M. Hennessy President and Chief February 2001 - President and Chief Executive 7337 E. Doubletree Ranch Rd., Executive Officer Present Officer of ING Capital Corporation, Scottsdale, Arizona 85258 LLC, ING Funds Services, LLC, ING Born: 1949 Chief Operating June 2000 - Present Advisors, Inc., ING Investments, Officer LLC, Lexington Funds Distributor, Inc., Express America T.C. Inc. and Senior Executive June 2000 - February EAMC Liquidation Corp. (since Vice President 2001 December 2001); Executive Vice President and Chief Operating Secretary April 1995 - February Officer of ING Funds Distributor, 2001 LLC (since June 2000). Formerly, Executive Vice President and Chief Operating Officer of ING Quantitative Management, Inc. (October 2001 to September 2002); Senior Executive Vice President (June 2000 to December 2000) and Secretary (April 1995 to December 2000) of ING Capital Corporation, LLC, ING Funds Services, LLC, ING Investments, LLC, ING Advisors, Inc., Express America T.C. Inc., and EAMC Liquidation Corp.; and Executive Vice President, ING Capital Corporation, LLC and its affiliates (May 1998 to June 2000) and Senior Vice President, ING Capital Corporation, LLC and its affiliates (April 1995 to April 1998). Stanley D. Vyner Executive Vice March 2003- Present Executive Vice President, ING 7337 E. Doubletree Ranch Rd., President (For the ING Funds) Advisors, Inc. and ING Investments, Scottsdale, Arizona 85258 LLC (July 2000 - Present) and Chief Born: 1950 July 1996 - March Investment Officer of the 2002 (For the International Portfolios, ING international Investments, LLC (July 1996 - portfolios of the Present.) Formerly, President and Pilgrim Funds) Chief Executive Officer, ING Investments, LLC (August 1996 - August 2002). Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief 7337 E. Doubletree Ranch Rd., President and Present Financial Officer and Treasurer of Scottsdale, Arizona 85258 Assistant Secretary ING Funds Services, LLC, ING Funds Born: 1958 Distributor, LLC, ING Advisors, Inc., Chief Financial Officer June 1998 - Present ING Investments, LLC (December 2001 to present), Lexington Funds Senior Vice President June 1998 - February Distributor, Inc., Express America 2002 T.C. Inc. and EAMC Liquidation Corp. (since December 2001). Formerly, Executive Vice President, Chief Financial Officer and Treasurer of ING Quantitative Management, Inc. (December 2001 to October 2002); Senior Vice President, ING Funds Services, LLC, ING Investments, LLC, and ING Funds Distributor, LLC (June 1998 to December 2001) and Chief Financial Officer of Endeavor Group (April 1997 to June 1998).
123 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ------- ------------------- -------------- --------------- OFFICERS: Robert S. Naka Senior Vice President November 1999 - Senior Vice President and Assistant 7337 E. Doubletree Ranch Rd., Present Secretary of ING Funds Services, Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC, Born: 1963 Assistant Secretary July 1996 - Present ING Advisors, Inc., ING Investments, LLC (October 2001 to present) and Lexington Funds Distributor, Inc. (since December 2001). Formerly, Senior Vice President and Assistant Secretary for ING Quantitative Management, Inc. (October 2001 to October 2002); Vice President, ING Investments, LLC (April 1997 to October 1999) , ING Funds Services, LLC (February 1997 to August 1999) and Assistant Vice President, ING Funds Services, LLC (August 1995 to February 1997). Robyn L. Ichilov Vice President November 1997 - Vice President of ING Funds 7337 E. Doubletree Ranch Rd., Present Services, LLC (since October 2001) Scottsdale, Arizona 85258 and ING Investments, LLC (since Born: 1967 August 1997); Accounting Manager, ING Investments, LLC (since November 1995). Kimberly A. Anderson Vice President and February 2001 - Vice President and Assistant 7337 E. Doubletree Ranch Rd., Secretary Present Secretary of ING Funds Services, Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC, Born: 1964 Assistant November 1999 - ING Advisors, Inc., ING Vice President and February 2001 Investments, LLC (since October Assistant Secretary 2001) and Lexington Funds Distributor, Inc. (since December 2001). Formerly, Vice President for ING Quantitative Management, Inc. (October 2001 to October 2002); Assistant Vice President of ING Funds Services, LLC (November 1999 to January 2001) and has held various other positions with ING Funds Services, LLC for more than the last five years Lauren D. Bensinger Vice President February 2003 - Vice President and Chief 7337 E. Doubletree Ranch Rd., Present Compliance Officer, ING Funds Scottsdale, Arizona 85258 Distributor, LLC (July 1995 to Born: 1954 Present); Vice President (February 1996 to Present) and Chief Compliance Officer (October 2001 to Present), ING Investments, LLC; Vice President and Chief Compliance Officer, ING Advisors, Inc. (July 2000 to Present); Formerly, Vice President and Chief Compliance Officer ING Quantitative Management, Inc. (July 2000 to September 2002) and Vice President ING Fund Services, LLC (July 1995 to Present). Todd Modic Assistant August 2001 - Present Vice-President of Financial 7337 E. Doubletree Ranch Rd., Vice President Reporting-Fund Accounting of ING Scottsdale, Arizona 85258 Funds Services, LLC (September Born: 1967 2002 to present). Director of Financial Reporting of ING Investments, LLC (March 2001 to September 2002). Formerly, Director of Financial Reporting, Axient Communications, Inc. (May 2000 to January 2001) and Director of Finance, Rural/Metro Corporation (March 1995 to May 2000).
124 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ------- ------------------- -------------- --------------- OFFICERS: Maria M. Anderson Assistant August 2001 - Present Assistant Vice President of ING 7337 E. Doubletree Ranch Rd., Vice President Funds Services, LLC (since October Scottsdale, Arizona 85258 2001). Formerly, Manager of Fund Born: 1958 Accounting and Fund Compliance, ING Investments, LLC (September 1999 to November 2001); Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 to August 1999); and Financial Reporting Analyst, Stein Roe Mutual Funds (August 1997 to July 1998). Susan P. Kinens Assistant February 2003 - Assistant Vice President and 7337 E. Doubletree Ranch Rd. Vice President and Present (For the ING Assistant Secretary, ING Funds Scottsdale, Arizona 85258 Assistant Secretary Funds) Services, LLC (December 2002 - Born: 1976 Present); and has held various other positions with ING Funds Services, LLC for the last five years.
- ---------- (1) The officers hold office until the next meeting of the Trustees and until their successors shall have been elected and qualified. 125 ING Funds Distributor, LLC offers the funds listed below. Investors may obtain a copy of a prospectus of any ING Fund by calling ING Funds Distributor, LLC at (800) 992-0180. Please read the prospectus carefully before investing or sending money. INTERNATIONAL EQUITY DOMESTIC EQUITY VALUE FUNDS ING Emerging Countries Fund ING Financial Services Fund ING Foreign Fund ING Large Company Value Fund ING International Fund ING MagnaCap Fund ING International Growth Fund ING Tax Efficient Equity Fund ING International SmallCap Growth Fund ING Value Opportunity Fund ING International Value Fund ING SmallCap Value Fund ING Precious Metals Fund ING MidCap Value Fund ING Russia Fund DOMESTIC EQUITY AND INCOME FUNDS INTERNATIONAL GLOBAL EQUITY ING Equity and Bond Fund ING Global Technology Fund ING Convertible Fund ING Global Real Estate Fund ING Balanced Fund ING Worldwide Growth Fund ING Growth and Income Fund DOMESTIC EQUITY FUNDS FIXED INCOME FUNDS ING Growth Fund ING Bond Fund ING Growth + Value Fund ING Classic Money Market Fund* ING Growth Opportunities Fund ING Government Fund ING LargeCap Growth Fund ING GNMA Income Fund ING MidCap Opportunities Fund ING High Yield Opportunity Fund ING Small Company Fund ING High Yield Bond Fund ING SmallCap Opportunities Fund ING Intermediate Bond Fund ING Technology Fund ING Lexington Money Market Trust* ING National Tax Exempt Bond Fund DOMESTIC EQUITY INDEX FUNDS ING Money Market Fund* ING Index Plus LargeCap Fund ING Aeltus Money Market Fund* ING Index Plus MidCap Fund ING Strategic Bond Fund ING Index Plus SmallCap Fund ING Disciplined LargeCap STRATEGIC ALLOCATION FUNDS ING Strategic Allocation Growth Fund ING Strategic Allocation Balanced Fund ING Strategic Allocation Income Fund LOAN PARTICIPATION FUNDS ING Prime Rate Trust ING Senior Income Fund
* An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. INVESTMENT MANAGER ING Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 ADMINISTRATOR ING Funds Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 DISTRIBUTOR ING Funds Distributor, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 1-800-992-0180 TRANSFER AGENT DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141-6368 CUSTODIAN Bank of New York 100 Colonial Center Parkway, Suite 300 Lake Mary, FL 32746 LEGAL COUNSEL Dechert 1775 Eye Street, N.W. Washington, D.C. 20006 INDEPENDENT AUDITORS KPMG LLP 99 High Street Boston, MA 02110-2371 Prospectus containing more complete information regarding the Funds, including charges and expenses, may be obtained by calling ING Funds Distributor, LLC, at 1-800-992-0180. Please read the prospectus carefully before you invest or send money. [LION LOGO] DEI&QAR0503-0729 ING FUNDS ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEMS 4-8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Based on our evaluation conducted within 90 days of the filing date, hereof, the design and operation of the registrant's disclosure controls and procedures are effective to ensure that material information relating to the registrant is made known to the certifying officers by others within the appropriate entities, particularly during the period in which Forms N-CSR are being prepared, and the registrant's disclosure controls and procedures allow timely preparation and review of the information for the registrant's Form N-CSR and the officer certifications of such Form N-CSR. (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. (a) Not applicable. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT. The officer certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX-99.906CERT SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): ING Investment Funds, Inc. By /s/ James M. Hennessy ------------------------------------------- James M. Hennessy President and Chief Executive Officer Date August 4, 2003 ----------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James M. Hennessy ------------------------------------------- James M. Hennessy President and Chief Executive Officer Date August 4, 2003 ----------------------------------------- By /s/ Michael J. Roland ------------------------------------------- Michael J. Roland Executive Vice President and Chief Financial Officer Date August 4, 2003 ----------------------------------------- EX-99.CERT 3 ex99-cert.txt CERTIFICATIONS OF CEO AND CFO EX-99.CERT CERTIFICATION I, James M. Hennessy, certify that: 1. I have reviewed this report on Form N-CSR of ING Investment Funds, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ James M. Hennessy Date: August 4, 2003 - ----------------------------------------- ------------------ James M. Hennessy President and Chief Executive Officer EX-99.CERT CERTIFICATION I, Michael J. Roland, certify that: 1. I have reviewed this report on Form N-CSR of ING Investment Funds, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Michael J. Roland Date: August 4, 2003 - ----------------------------------------- ------------------ Michael J. Roland Executive Vice President and Chief Financial Officer EX-99.906CERT 4 ex99-906cert.txt SECTION 906 CERTIFICATIONS EX-99.906CERT CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING Investment Funds, Inc. Date of Form N-CSR: August 4, 2003 The undersigned, the principal executive officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING Investment Funds, Inc. and will be retained by ING Investment Funds, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 4th day of August, 2003. /s/ James M. Hennessy ---------------------------------------- James M. Hennessy EX-99.906CERT CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING Investment Funds, Inc. Date of Form N-CSR: August 4, 2003 The undersigned, the principal financial officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING Investment Funds, Inc. and will be retained by ING Investment Funds, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 4th day of August, 2003. /s/ Michael J. Roland ---------------------------------------- Michael J. Roland -----END PRIVACY-ENHANCED MESSAGE-----