497 1 d497.htm 497 FILING FOR ING MUTUAL FUNDS 497 FILING FOR ING MUTUAL FUNDS


[GRAPHIC APPEARS HERE]

Prospectus
MARCH 24, 2008

Class I
[|] ING Tactical Asset Allocation Fund

This Prospectus contains important information about investing in Class I shares
of ING Tactical Asset Allocation Fund. You should read it carefully before you
invest, and keep it for future reference. Please note that your investment: is
not a bank deposit, is not insured or guaranteed by the Federal Deposit
Insurance Corporation ("FDIC"), the Federal Reserve Board or any other
government agency and is affected by market fluctuations. There is no guarantee
that the Fund will achieve its investment objectives. As with all mutual funds,
the U.S. Securities and Exchange Commission ("SEC") has not approved or
disapproved these securities nor has the SEC judged whether the information in
this prospectus is accurate or adequate. Any representation to the contrary is a
criminal offense.

--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

MUTUAL FUNDS
--------------------------------------------------------------------------------




                                                                   WHAT'S INSIDE
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

       INVESTMENT
       OBJECTIVE
[GRAPHIC APPEARS HERE]

       PRINCIPAL
       INVESTMENT
       STRATEGIES
[GRAPHIC APPEARS HERE]

       RISKS

[GRAPHIC APPEARS HERE]

       WHAT YOU
       PAY TO
       INVEST

These pages contain a description of the Fund included in this Prospectus,
including the Fund's investment objective, principal investment strategies and
risks.

You'll also find:

WHAT YOU PAY TO INVEST. A list of the fees and expenses you pay - both directly
and indirectly - when you invest in the Fund.

INTRODUCTION TO THE FUND             1
ING Tactical Asset Allocation Fund   2

WHAT YOU PAY TO INVEST                        4
MANAGEMENT OF THE FUND                       12
MORE INFORMATION ABOUT RISKS                 13
DIVIDENDS, DISTRIBUTIONS AND TAXES           17
FINANCIAL HIGHLIGHTS                         18
WHERE TO GO FOR MORE INFORMATION     Back Cover




                      (THIS PAGE INTENTIONALLY LEFT BLANK)




                                                        INTRODUCTION TO THE FUND
--------------------------------------------------------------------------------

Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities in which they invest. Please read this Prospectus carefully to be
sure you understand the principal investment strategies and risks associated
with the Fund. You should consult the Statement of Additional Information
("SAI") for a complete list of the investment strategies and risks.

[GRAPHIC APPEARS HERE]

If you have any questions about the Fund, please call your investment
professional or us at 1-800-992-0180.

This Prospectus is designed to help you make informed decisions about your
investments.

 ING Tactical Asset Allocation Fund seeks to outperform the Standard & Poor's
 500(Reg. TM) Composite Stock Price Index ("S&P 500(Reg. TM) Index").

     It may be a suitable investment if you:

      o are investing for the long-term - at least several years; and
      o are willing to accept higher risk in exchange for the potential for
        long-term growth.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.


                                                    Introduction to the Fund   1




                                                                        ADVISER
                                                            ING Investments, LLC


                                                                     SUB-ADVISER
                                                   ING Investment Management Co.
ING TACTICAL ASSET ALLOCATION FUND
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

INVESTMENT OBJECTIVE

The Fund seeks to outperform the S&P 500(Reg. TM) Index. The Fund's investment
objective is not fundamental and may be changed without a shareholder vote.

[GRAPHIC APPEARS HERE]

PRINCIPAL  INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in securities that
make up the S&P 500(Reg. TM) Index, equity securities of issuers located within
and outside the United States, bond and currency markets, and exchange-traded
funds ("ETFs"). Equity securities include, but are not limited to, common and
preferred stocks, warrants and convertible securities. The Fund will also
invest in derivatives including, but not limited to, futures, swaps and forward
currency contracts. The Fund will invest in companies with market
capitalizations of any size.

The Fund will generally invest in the sovereign debt of developed nations with
effective maturities of five to thirty years.

The Fund will follow a tactical asset allocation strategy which seeks to
evaluate the attractiveness of a range of asset classes across various regions
and countries and to position the portfolio to benefit from pricing
inefficiencies. Tactical asset allocation differs from traditional "bottom up"
approaches because it seeks to derive its source of outperformance from macro
or "top down" decisions. The Sub-Aviser decides which country's equity markets,
bond markets and currencies to overweight and underweight as opposed to
individual securities. Other types of macro decisions may involve broad asset
classes (stocks and bonds), regions/

countries within global stocks and bonds, currencies, as well as sectors.

The Fund may also invest in other investment companies, including ETFs, to the
extent permitted under the Investment Company Act of 1940, as amended and the
rules and regulations thereunder.

The Fund also may lend portfolio securities on a short-term or long-term basis,
up to 33  1/3% of its total assets.

The Adviser may sell securities for a variety of reasons such as to secure
gains, limit losses, or redeploy assets into opportunities believed to be more
promising, among others.

--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

RISKS
You could lose money on an
investment in the Fund. The Fund may be affected by the following risks, among
others:

ASSET ALLOCATION - the success of the Fund's strategy depends on the
Sub-Adviser's skill in allocating Fund assets between equities and debt and in
choosing investments within those categories. Because the Fund's assets are
allocated between equity and fixed-income securities, the Fund may underperform
stock funds when stocks are in favor and underperform bond funds when bonds are
in favor.

CONVERTIBLE AND DEBT SECURITIES -
the value of convertible and debt securities may fall when interest rates rise.
Convertible and debt securities with longer maturities tend to be more
sensitive to changes in interest rates, usually making them more volatile than
convertible and debt securities with shorter maturities. The Fund could lose
money if the issuer of a convertible or debt security is unable to meet its
financial obligations or goes bankrupt.

DERIVATIVES - derivatives are subject to the risk of changes in the market
price of the underlying securities, credit risk with respect to the
counterparty to the derivative instruments 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 and may reduce its
returns.

EXCHANGE-TRADED FUNDS ("ETF") -
ETFs present risks similar to those of an investment in the underlying
securities held by the ETF. Because ETFs trade on an exchange, they may not
trade at net asset value ("NAV"). Sometimes the prices of ETFs may vary
significantly from the ETF's underlying NAVs. Additionally, if the Fund elects
to redeem its ETF shares rather than selling them on the secondary market, the
Fund will receive the underlying securities which it must then sell in order to
obtain cash. Furthermore, you may pay a proportionate share of the expenses of
the ETF in addition to the expenses of the Fund.

FOREIGN INVESTING - foreign investments may be riskier than U.S. investments
for many reasons, including: changes in currency exchange rates; unstable
political, social and economic conditions; a lack of adequate or accurate
company information; differences in the way securities markets operate; less
secure foreign banks or securities depositories than those in the United
States; less standardization of accounting standards and market regulations in
certain foreign countries; and varying foreign controls on investment. Foreign
investments may also be affected by administrative difficulties, such as delays
in clearing and settling transactions. Additionally, securities of foreign
companies may be denominated in foreign currency. Exchange rate fluctuations
may reduce or eliminate gains or create losses. Hedging strategies intended to
reduce this risk may not perform as expected. These factors may make foreign
investments more volatile and potentially less liquid than U.S. investments.

INTEREST RATE - the value of the convertible and debt securities held by the
Fund may fall when interest rates rise. Due to their hybrid nature, convertible
securities are typically more sensitive to changes in interest rates than the
underlying common stock, but less sensitive to interest rate changes than a
fixed-rate corporate bond.

MARKET TRENDS - from time to time, the stock market may not favor the
securities in which the Fund invests. Rather, the market could favor securities
or industries to which the Fund is not exposed, or may not favor equities at
all.

OTHER INVESTMENT COMPANIES -
the main risk of investing in other investment companies is the risk that the
value of the underlying securities might decrease. Because the Fund may invest
in other investment companies, you will pay a proportionate share of the
expenses of that other investment company (including management fees,
administration fees and custodial fees) in addition to the expenses of the
Fund.

PRICE VOLATILITY - the value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and other
risks, and their values may fluctuate, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value due to factors
affecting securities markets generally or particular industries. Issuer risk is
the risk that the value of a security may decline for reasons relating to the
issuer such as changes in the financial condition of the issuer. While equities
may offer the potential for greater long-term growth than most debt securities,
they generally have higher volatility.

SMALL- AND MID-SIZED COMPANIES -
stocks of small- and mid-sized companies may carry higher risks than stocks of
larger companies.

Smaller companies may lack the management experience, financial resources,
product diversification, and competitive strengths of larger companies.

In many instances, the frequency and volume of trading in small- and mid-cap
stocks are substantially less than stocks of larger companies. As a result, the
stocks of smaller companies may be subject to wider price fluctuations and/
or may be less liquid. The Fund could lose money if it cannot sell a security
at the time and price that would be most beneficial to the Fund.

When selling a large quantity of a particular stock, the Fund may have to sell
at a discount from quoted prices or may have to make a series of small sales
over an extended period of time due to the more limited trading volume of
smaller company stocks.

Stocks of smaller companies can be particularly sensitive to unexpected changes
in interest rates, borrowing costs and earnings.

INABILITY TO SELL SECURITIES -
convertible securities, smaller company securities, and high-yield debt
securities may be less liquid than other investments. The Fund could lose money
if it cannot sell a security at the time and price that would be most
beneficial to the Fund.

SECURITIES LENDING - there is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and it may
lose the opportunity to sell the securities at a desirable price. Engaging in
securities lending could have a leveraging effect which may intensify the
market risk, credit risk and other risks associated with investments in the
Fund.

SOVEREIGN DEBT - issued or guaranteed by foreign government entities.
Investments in sovereign debt are subject to the risk that a government entity
may delay or refuse to pay interest or repay principal on its sovereign debt.
Some of these reasons may include cash flow problems, insufficient foreign
currency reserves, political considerations, the relative size of its debt
position relative to its economy, or its failure to put in place economic
reforms required by the International Monetary Fund or other agencies. If a
government entity defaults, it may ask for more time in which to pay, or for
further loans. There is no legal process for collecting sovereign debts that a
government does not pay, or bankruptcy proceeding by which all or part of
sovereign debt that a government entity has not repaid may be collected.

A more detailed discussion of the risks associated with investing in the Fund
is available in the "More Information About Risks" section.

2  ING Tactical Asset Allocation Fund




                                              ING TACTICAL ASSET ALLOCATION FUND
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

HOW THE FUND HAS PERFORMED

     Since ING Tactical Asset Allocation Fund had not commenced operations as of
     December 31, 2007, there is no performance information included in this
     Prospectus. Please visit the Fund's website at www.ingfunds.com to obtain
     performance information once it is available.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                           ING Tactical Asset Allocation Fund  3




WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

     There are two types of fees and expenses when you invest in mutual funds:
     fees, including sales charges, you pay directly when you buy or sell
     shares, and operating expenses paid each year by the Fund. The tables that
     follow show the fees and estimated operating expenses paid each year by the
     Fund. Actual expenses paid by the Fund may vary from year to year.

FEES YOU PAY DIRECTLY

                                                                   CLASS I
                                                                ------------
 MAXIMUM SALES CHARGE ON YOUR INVESTMENT (AS A % OF                    none
  OFFERING PRICE)
 MAXIMUM DEFERRED SALES CHARGE (AS A % OF PURCHASE OR SALES            none
  PRICE, WHICHEVER IS LESS)

OPERATING EXPENSES PAID EACH YEAR BY THE FUND(1)
(as a % of average net assets)

CLASS I

                                                  DISTRIBUTION                               TOTAL                        NET
                                                   AND SERVICE                 ACQUIRED       FUND        WAIVERS,        FUND
                                       MANAGEMENT    (12B-1)      OTHER       FUND FEES    OPERATING   REIMBURSEMENTS  OPERATING
FUND                                       FEE        FEES     EXPENSES(2) AND EXPENSES(3)  EXPENSES AND RECOUPMENT(4)  EXPENSES
----------------------------------     ---------- ------------ ----------- --------------- --------- ----------------- ---------
ING Tactical Asset Allocation Fund  %        0.45          N/A        1.06             N/A      1.51            (0.81)      0.70

--------------------------------------------------------------------------------

(1)      This table shows the estimated operating expenses for Class I shares
         of the Fund as a ratio of expenses to average daily net assets. The
         Fund had not commenced operations as of May 31, 2007, therefore,
         "Other Expenses" are estimated for the current fiscal year.

(2)      ING Funds Services, LLC receives an annual administration fee equal to
         0.10% of the Fund's average daily net assets which is reflected in
         "other Expenses." Also includes 0.46% of non-recurring offering
         expenses and excluding this amount, Total Fund Operating Expenses
         would have been 1.05%.


(3)      The Acquired Fund Fees and Expenses are not fees or expenses incurred
         by the Fund directly. These fees and expenses include the Fund's pro
         rata share of the cumulative expenses charged by the Acquired Funds in
         which the Fund invests. The fees and expenses will vary based on the
         Fund's allocation of assets to, and the annualized net expenses of,
         the particular Acquired Funds. The impact of these fees and expenses
         is shown in "Net Fund Operating Expenses."

(4)      ING Investments, LLC, has entered into a written expense limitation
         agreement with the Fund under which it will limit expenses of the
         Fund, excluding interest, taxes, brokerage and extraordinary expenses,
         and Acquired Fund Fees and Expenses, subject to possible recoupment by
         ING Investments, LLC within three years. The amount of the Fund's
         expenses waived, reimbursed or recouped during the last fiscal year by
         ING Investments, LLC, is shown under the heading "Waivers,
         Reimbursements and Recoupment." The expense limit will continue
         through at least October 1, 2009. The expense limitation agreement is
         contractual and shall renew automatically for one-year terms unless
         ING Investments, LLC provides written notice of the termination of the
         expense limitation agreement within 90 days of the end of the then
         current terms or upon termination of the investment management
         agreement. In addition, the expense limitation agreement may be
         terminated by the Company upon at least 90 days' prior written notice
         to ING Investments, LLC. For more information on the expense
         limitation agreement, please see the SAI.

4  What You Pay to Invest




                                                          WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

     EXAMPLE

     The Example that follows is intended to help you compare the cost of
     investing in the Fund with the cost of investing in other mutual funds. The
     Example assumes that you invested $10,000, that you reinvested all your
     dividends, that the Fund earned an average annual return of 5%, and that
     annual operating expenses remained at the current level. Keep in mind that
     this is only an estimate - actual expenses and performance may vary.

CLASS I

FUND                                                   1 YEAR      3 YEARS
---------------------------------------               --------    --------
 ING Tactical Asset Allocation Fund(1)      $             72          299

--------------------------------------------------------------------------------

(1)   The Example reflects the expense limitation agreement/waivers for the
      one-year period and the first year of the three-year period.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                       What You Pay to Invest  5




SHAREHOLDER GUIDE                                         HOW TO PURCHASE SHARES
--------------------------------------------------------------------------------

PURCHASE OF SHARES

The minimum initial investment amount for Class I shares is $250,000. Class I
shares are available only to (i) qualified retirement plans such as 401(a),
401(k) or other defined contribution plans and defined benefit plans; (ii)
insurance companies and foundations investing for their own account; (iii) wrap
programs offered by broker-dealers and financial institutions; (iv) accounts of
or managed by trust departments; (v) retirement plans affiliated with ING Groep
N.V.; (vi) ING Groep N.V. affiliates for purposes of corporate cash management;
(vii) by other ING Funds in the ING Family of Funds; and (viii) shareholders
holding Class I shares of other ING Funds as of February 28, 2002, as long as
they maintain a shareholder account.

There are no investment minimums for any subsequent investments.

Make your investment using the methods outlined in the table on the right.

More information may be found on the Fund's website by going to
www.ingfunds.com, clicking on the "Fund Information" link,and then using the
"Forms & Literature" and then using the "Shareholder Guides" link found under
the "Prospectuses & Reports" section and selecting the appropriate Fund link.
Other funds offer additional classes that are not available in this Prospectus
that may be more appropriate for you. Please review the disclosure about all of
the available Fund classes carefully. Before investing, you should discuss
which share class may be right for you with your investment professional and
review the prospectus for those funds.

The Fund and ING Funds Distributor, LLC ("Distributor") reserve the right to
reject any purchase order. Please note that cash, travelers checks, third party
checks, money orders and checks drawn on non-U.S. banks (even if payment may be
effected through a U.S. bank) generally will not be accepted. The Fund and the
Distributor reserve the right to waive minimum investment amounts. Waiver of
the minimum investment amount can increase operating expenses of the Fund. The
Fund and the Distributor reserve the right to liquidate sufficient shares to
recover annual transfer agent fees or to close your account and redeem your
shares should you fail to maintain your account value at a minimum of $250,000.

CUSTOMER IDENTIFICATION

To help the government fight the funding of terrorism and money laundering
activities, federal law requires all financial institutions to obtain, verify
and record information that identifies each person that opens an account, and
to determine whether such person's name appears on government lists of known or
suspected terrorists and terrorist organizations.

What this means for you: The Fund, the Distributor, or a third-party selling
you the Fund must obtain the following information for each person that opens
an account:

o  Name;

o  Date of birth (for individuals);

o  Physical residential address (although post office boxes are still permitted
   for mailing); and

o  Social security number, taxpayer identification number, or other identifying
   number.

You may also be asked to show your driver's license, passport or other
identifying documents in order to verify your identity. In addition, it may be
necessary to verify your identity by cross-referencing your identification
information with a consumer report or other electronic database. Additional
information may be required to open accounts for corporations and other
non-natural persons.

FEDERAL LAW PROHIBITS THE FUND, THE DISTRIBUTOR AND OTHER FINANCIAL
INSTITUTIONS FROM OPENING ACCOUNTS UNLESS THEY RECEIVE THE MINIMUM IDENTIFYING
INFORMATION LISTED ABOVE. THEY ALSO MAY BE REQUIRED TO CLOSE YOUR ACCOUNT IF
THEY ARE UNABLE TO VERIFY YOUR IDENTITY WITHIN A REASONABLE TIME.

                               Initial                   Additional
      Method               Investment                  Investment
 BY CONTACTING        An investment               Visit or consult an
 YOUR               professional with an        investment
 INVESTMENT         authorized firm can         professional.
 PROFESSIONAL       help you establish and
                    maintain your account.
 BY MAIL              Visit or consult an         Fill out the Account
                    investment                  Additions form
                    professional. Make          included on the bottom
                    your check payable to       of your account
                    the ING Funds and mail      statement along with
                    it, along with a            your check payable to
                    completed Account           ING Funds and mail
                    Application. Please         them to the address on
                    indicate your               the account statement.
                    investment                  Remember to write
                    professional on the         your account number
                    New Account                 on the check.
                    Application.
 BY WIRE              Call the ING                Wire the funds in the
                    Operations                  same manner described
                    Department at               under "Initial
                    (800) 922-0180              Investment."
                    and select Option 4 to
                    obtain an account
                    number and indicate
                    your investment
                    professional on the
                    account.
                    Instruct your bank to
                    wire funds to the Fund
                    in the care of:
                    State Street Bank
                    and Trust Company
                    ABA # 011000028
                    Boston, MA
                    credit to:
                    __________
                    (the Fund)
                    A/C #75000216; for
                    further credit to
                    Shareholder
                    A/C #
                    __________
                    (A/C # you received
                    over the telephone)
                    Shareholder Name:

                    __________
                    (Your Name Here)
                    After wiring funds
                    you must complete
                    the Account
                    Application and send
                    it to:
                    ING Funds
                    P.O. Box 219368
                    Kansas City, MO
                    64121-9368

6    Shareholder Guide




HOW TO PURCHASE SHARES                                         SHAREHOLDER GUIDE
--------------------------------------------------------------------------------

FREQUENT TRADING - MARKET TIMING

The Fund is intended for long-term investment and not as a short-term trading
vehicle. Accordingly, organizations or individuals that use market timing
investment strategies should not purchase shares of the Fund. The Fund reserves
the right, in its sole discretion and without prior notice, to reject, restrict
or refuse purchase orders whether directly or by exchange, including purchase
orders that have been accepted by a shareholder's or retirement plan
participant's intermediary, that the Fund determines not to be in the best
interest of the Fund.

The Fund believes that market timing or frequent, short-term trading in any
account, including a retirement plan account, is not in the best interest of
the Fund or its shareholders. Due to the disruptive nature of this activity, it
can adversely affect the ability of the Adviser or Sub-Adviser to invest assets
in an orderly, long-term manner. Frequent trading can raise Fund expenses
through: increased trading and transaction costs; increased administrative
costs; and lost opportunity costs. This in turn can have an adverse effect on
Fund performance.

Because the Fund invests in foreign securities, it may present greater
opportunities for market timers and thus be at a greater risk for excessive
trading. If an event occurring after the close of a foreign market but before
the time the Fund computes its current NAV causes a change in the price of the
foreign security and such price is not reflected in the Fund's current NAV,
investors may attempt to take advantage of anticipated price movements in
securities held by the Fund based on such pricing discrepancies. This is often
referred to as "price arbitrage." Such price arbitrage opportunities may also
occur in funds which do not invest in foreign securities. For example, if
trading in a security held by the Fund is halted and does not resume prior to
the time the Fund calculates its NAV such "stale pricing" presents an
opportunity for investors to take advantage of the pricing discrepancy.
Similarly, when the Fund holds thinly-traded securities, such as certain
small-capitalization securities, it may be exposed to varying levels of pricing
arbitrage. The Fund has adopted fair valuation policies and procedures intended
to reduce the Fund's exposure to price arbitrage, stale pricing and other
potential pricing discrepancies. However, to the extent that the Fund's NAV
does not immediately reflect these changes in market conditions, short-term
trading may dilute the value of Fund shares which negatively affects long-term
shareholders.

The Fund's Board of Directors ("Board") has adopted policies and procedures
designed to deter frequent, short-term trading in shares of the Fund.
Consistent with this policy, the Fund monitors trading activity. Shareholders
may make exchanges among their accounts with ING Funds four (4) times each
year. All exchanges occurring on the same day for all accounts (individual,
IRA, 401(k), etc.) beneficially owned by the same shareholder will be treated
as a single transaction for these purposes. Subsequent transactions may not be
effected within 30 days of the last transaction. In addition, purchase and sale
transactions that are the functional equivalent of exchanges will be included
in these limits. On January 1 of each year, the limit restriction will be reset
for all shareholders and any trade restrictions that were placed on an account
due to a violation of the policy in the prior year will be removed. The Fund
reserves the right to specifically address any trading that might otherwise
appear to comply with the restrictions described above if, after consultation
with appropriate compliance personnel, it is determined that such trading is
nevertheless abusive or adverse to the interests of long-term shareholders. The
Fund also reserves the right to modify the frequent trading - market timing
policy at any time without prior notice depending on the needs of the Fund
and/or state or federal regulatory requirements.

If an activity is identified as problematic after further investigation, the
Fund reserves the right to take any necessary action to deter such activity.
Such action may include, but not be limited to: rejecting additional purchase
orders, whether directly or by exchange; extending settlement of a redemption
up to seven days; rejecting all purchase orders from broker-dealers or their
registered representatives suspected of violating the Fund's frequent trading
policy; or termination of the selling group agreement or other agreement with
broker-dealers or other financial intermediaries associated with frequent
trading.

Although the restrictions described above are designed to discourage frequent,
short-term trading, none of them alone, nor all of them taken together, can
eliminate the possibility that frequent, short-term trading activity in the
Fund will occur. Moreover, in enforcing such restrictions, the Fund is often
required to make decisions that are inherently subjective. The Fund strives to
make these decisions to the best of its ability in a manner that it believes is
in the best interest of shareholders.

Shareholders may invest in the Fund through omnibus account arrangements with
financial intermediaries. Omnibus accounts permit intermediaries to aggregate
transactions. Such intermediaries include broker-dealers, banks, investment
advisers, recordkeepers, retirement plans, and fee-based accounts such as wrap
fee programs. Omnibus accounts generally do not identify customers' trading
activity on an individual basis. The Fund's administrator has agreements which
require such intermediaries to provide detailed account information, including
trading history, upon request of the Fund.

In some cases, the Fund will rely on the intermediaries' excessive trading
policies and such policies shall define the trading activity in which the
shareholders may engage. This shall be the case where the Fund is used in
certain retirement plans offered by affiliates. With trading information
received as a result of agreements, the Fund may make a determination that
certain trading activity is harmful to the Fund and its shareholders even if
such activity is not strictly prohibited by the intermediaries' excessive
trading policy. As a result, a shareholder investing directly or indirectly in
the Fund may have their trading privileges suspended without violating the
stated excessive trading policy of the intermediary.

RETIREMENT PLANS

The Fund has available prototype qualified retirement plans for corporations
and for self-employed individuals. They also have available prototype IRA, Roth
IRA and Simple IRA plans (for both individuals and employers), Simplified
Employee Pension Plans, Pension and Profit Sharing Plans and Tax Sheltered
Retirement Plans for employees of public educational institutions and certain
non-profit, tax-exempt organizations. State Street Bank and Trust Company
("SSB") acts as the custodian under these plans. For further information,
contact a Shareholder Services Representative at (800) 992-0180. SSB currently
receives a $12 custodial fee annually for the maintenance of such accounts.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                          Shareholder Guide    7




SHAREHOLDER GUIDE                                           HOW TO REDEEM SHARES
--------------------------------------------------------------------------------

You may redeem shares by using the methods outlined in the table on the right.

Under unusual circumstances, the Fund may suspend the right of redemption as
allowed by federal securities laws.

SYSTEMATIC WITHDRAWAL PLAN

You may elect to make periodic withdrawals from your account on a regular
basis.

o  Your account must have a current value of at least $250,000.

o  Minimum withdrawal amount is $1,000.

o  You may choose from monthly, quarterly, semi-annual or annual payments.

For additional information, contact a Shareholder Services Representative,
refer to the Account Application or the SAI.

PAYMENTS

Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. The Fund has
the right to take up to seven days to pay your redemption proceeds, and may
postpone payment longer in the event of an economic emergency as determined by
the SEC. When you place a request to redeem shares for which the purchase money
has not yet been collected, the request will be executed at the next determined
NAV but the Fund will not release the proceeds until your purchase payment
clears. This may take up to 15 days or more. To reduce such delay, purchases
should be made by bank wire or federal funds.

The Fund normally intends to pay in cash for all shares redeemed but under
abnormal conditions that make payment in cash unwise, the Fund may make payment
wholly or partly in securities at its then current market value equal to the
redemption price. In such case, the Fund could elect to make payment in
securities for redemptions in excess of $250,000 or 1% of its net assets during
any 90-day period for any one shareholder. An investor may incur brokerage
costs in converting such securities to cash.

             Method                                 Procedures
 BY CONTACTING YOUR            You may redeem shares by contacting your
 INVESTMENT PROFESSIONAL      investment professional. Investment
                              professionals may charge for their services
                              in connection with your redemption
                              request but neither the Fund nor the
                              Distributor imposes any such charge.
 BY MAIL                       Send a written request specifying the Fund
                              name and share class, your account
                              number, the name(s) in which the account
                              is registered, and the dollar value or
                              number of shares you wish to redeem to:
                              ING Funds
                              P.O. Box 219368
                              Kansas City, MO 64121-9368
                              If certificated shares have been issued, the
                              certificate must accompany the written
                              request. Corporate investors and other
                              associations must have an appropriate
                              certification on file authorizing
                              redemptions. A suggested form of such
                              certification is provided on the Account
                              Application. A signature guarantee may be
                              required.
 BY TELEPHONE -                You may redeem shares by telephone on
 EXPEDITED REDEMPTION         all accounts other than retirement
                              accounts unless you check the box on the
                              Account Application which signifies that
                              you do not wish to use telephone
                              redemptions. To redeem by telephone, call
                              the Shareholder Services Representative at
                              (800) 992-0180.
                              RECEIVING PROCEEDS BY CHECK:
                              You may have redemption proceeds (up to
                              a maximum of $100,000) mailed to an
                              address which has been on record with ING
                              Funds for at least 30 days.
                              RECEIVING PROCEEDS BY WIRE:
                              You may have redemption proceeds
                              (subject to a minimum of $5,000) wired to
                              your pre-designated bank account. You will
                              not be able to receive redemption
                              proceeds by wire unless you check the box
                              on the Account Application which signifies
                              that you wish to receive redemption
                              proceeds by wire and attach a voided
                              check. Under normal circumstances,
                              proceeds will be transmitted to your bank
                              on the business day following receipt of
                              your instructions provided redemptions
                              may be made. In the event that share
                              certificates have been issued, you may not
                              request a wire redemption by telephone.

8    Shareholder Guide




TRANSACTION POLICIES                                           SHAREHOLDER GUIDE
--------------------------------------------------------------------------------

HOW WE COMPENSATE INTERMEDIARIES FOR SELLING ING MUTUAL FUNDS

ING mutual funds are distributed by ING Funds Distributor, LLC ("Distributor").
The Distributor is a broker-dealer that is licensed to sell securities. The
Distributor generally does not sell directly to the public but sells and
markets its products through intermediaries such as other broker-dealers. Each
ING mutual fund also has an investment adviser ("Adviser") which is responsible
for managing the money invested in each of the mutual funds. Both of these
entities (collectively, "ING") may compensate an intermediary for selling ING
mutual funds.

Only persons licensed with the Financial Industry Regulatory Authority
("FINRA") as a registered representative (often referred to as a broker or
financial advisor) and associated with a specific broker-dealer may sell an ING
mutual fund to you. The Distributor has agreements in place with each of these
broker-dealers defining specifically what those broker-dealers will be paid for
the sale of a particular ING mutual fund. Those broker-dealers then pay the
registered representative who sold you the mutual fund some or all of what they
receive from ING. They may receive a payment when the sale is made and can, in
some cases, continue to receive payments while you are invested in the mutual
fund.

The Fund's Adviser or the Distributor, out of its own resources and without
additional cost to the Fund or its shareholders, may provide additional cash or
non-cash compensation to intermediaries selling shares of the Fund including
affiliates of the Adviser and the Distributor. These amounts would be in
addition to the distribution payments made by the Fund under the distribution
agreements. The payments made under these arrangements are paid by the Adviser
or the Distributor. Additionally, if a fund is not sub-advised or is
sub-advised by an ING entity, ING may retain more revenue than on those funds
it must pay to have sub-advised by non-affiliated entities. Management
personnel of ING may receive additional compensation if the overall amount of
investments in funds advised by ING meets certain target levels or increases
over time.

The Distributor may pay, from its own resources, additional fees to these
broker-dealers or other financial institutions including affiliated entities.
These additional fees paid to intermediaries may take the following forms: (1)
a percentage of that entity's customer assets invested in ING mutual funds; (2)
a percentage of that entity's gross sales; or (3) some combination of these
payments. These payments may, depending on the broker-dealer's satisfaction of
the required conditions, be periodic and may be up to: (1) 0.30% per annum of
the value of the Fund's shares held by the broker-dealer's customers; or (2)
0.20% of the value of the Fund's shares sold by the broker-dealer during a
particular period. In accordance with these practices, if that initial
investment averages a value of $10,000 over the year, the Distributor could pay
a maximum of $30 on those assets. If you invested $10,000, the Distributor
could pay a maximum of $20 for that sale.

The Fund's Adviser or the Distributor may provide additional cash or non-cash
compensation to third parties selling our mutual funds including affiliated
companies. This may take the form of cash incentives and non-cash compensation
and may include, but is not limited to: cash; merchandise; trips; occasional
entertainment; meals or tickets to a sporting event; client appreciation
events; payment for travel expenses (including meals and lodging) to
pre-approved training and education seminars; and payment for advertising and
sales campaigns. The Distributor may also pay concessions in addition to those
described above to broker-dealers so that ING mutual funds are made available
by those broker-dealers for their customers. The Sub-Adviser of the Fund may
contribute to non-cash compensation arrangements.

Not all mutual funds pay the same amount to the broker-dealers who sell their
mutual funds. Broker-dealers can receive different payments based on the mutual
funds they offer, the companies with whom they are doing business, and how much
they sell. What these broker-dealers are paid also varies depending on the
class of mutual fund you purchase.

The top 25 firms we paid to sell our mutual funds as of the end of the last
calendar year are: A.G. Edwards & Sons, Inc.; Bear Stearns Securities Corp;
Charles Schwab & Co; Citigroup Global Markets; Directed Services LLC; Financial
Network Investment; First Clearing, LLC; H&R Block Financial Advisors; ING
DIRECT Securities, Inc.; ING Financial Advisors; ING Life Insurance and Annuity
Company; Linsco Private Ledger Financial; Merrill Lynch; MS & Co. ("Morgan
Stanley"); Multi Financial Securities; National Financial Services Corp;
Oppenheimer & Co.; Pershing, LLC; Primevest Financial Services, Inc.;
Prudential Investment Management Services; Raymond James Financial Services;
RBC Dain Rauscher, Inc.; UBS Financial Services, Inc.; Wachovia Securities; and
Wells Fargo Investments.

Your registered representative or broker-dealer could have a financial interest
in selling you a particular mutual fund, or the mutual funds of a particular
company, to increase the compensation they receive. Please make sure you read
fully each mutual fund prospectus and discuss any questions you have with your
registered representative.

NET ASSET VALUE

The NAV per share for the Fund is determined each business day as of the close
of regular trading ("Market Close") on the New York Stock Exchange ("NYSE")
(normally 4:00 p.m. Eastern time unless otherwise designated by the NYSE). The
Fund is open for business every day the NYSE is open. The NYSE is closed on all
weekends and on all national holidays and Good Friday. Fund shares will not be
priced on those days. The NAV per share of the Fund is calculated by taking the
value of the Fund's assets, subtracting the Fund's liabilities, and dividing by
the number of shares that are outstanding.

In general, assets are valued based on actual or estimated market value, with
special provisions for assets not having readily available market quotations
and short-term debt securities, and

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                          Shareholder Guide    9




SHAREHOLDER GUIDE                                           TRANSACTION POLICIES
--------------------------------------------------------------------------------

for situations where market quotations are deemed unreliable. Investments in
securities maturing in 60 days or less are valued at amortized cost, which,
when combined with accrued interest, approximates market value. Securities
prices may be obtained from automated pricing services. Shares of investment
companies held by the Fund will generally be valued at the latest NAV reported
by that investment company. The prospectuses for those investment companies
explain the circumstances under which they will use fair value pricing and the
effects of using fair value pricing.

Trading of foreign securities may not take place every day the NYSE is open.
Also, trading in some foreign markets and on some electronic trading networks
may occur on weekends or holidays when the Fund's NAV is not calculated. As a
result, the NAV of the Fund may change on days when shareholders will not be
able to purchase or redeem the Fund's shares.

When market quotations are not available or are deemed unreliable, the Fund
will use a fair value for the security that is determined in accordance with
procedures adopted by the Fund's Board. The types of securities for which such
fair value pricing might be required include, but are not limited to:

o  Foreign securities, where a foreign security whose value at the close of the
   foreign market on which it principally trades likely would have changed by
   the time of the close of the NYSE, or the closing value is otherwise deemed
   unreliable;

o  Securities of an issuer that has entered into a restructuring;

o  Securities whose trading has been halted or suspended;

o  Fixed-income securities that have gone into default and for which there are
   no current market value quotations; and

o  Securities that are restricted as to transfer or resale.

The Fund or the Adviser may rely on the recommendations of a fair value pricing
service approved by the Fund's Board in valuing foreign securities. Valuing
securities at fair value involves greater reliance on judgment than valuing
securities that have readily available market quotations. The Adviser makes
such determinations in good faith in accordance with procedures adopted by the
Fund's Board. Fair value determinations can also involve reliance on
quantitative models employed by a fair value pricing service. There can be no
assurance that the Fund could obtain the fair value assigned to a security if
it were to sell the security at approximately the time at which the Fund
determines its NAV per share.

PRICE OF SHARES

When you buy shares, you pay the NAV. When you sell shares, you receive the
NAV. Exchange orders are effected at NAV.

EXECUTION OF REQUESTS

Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or the Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase Shares" have been completed. If
you purchase by wire, however, the order will be deemed to be in proper form
after the telephone notification and the federal funds wire have been received.
If you purchase by wire, you must submit an application form in a timely
fashion. If an order or payment by wire is received after Market Close, the
shares will not be credited until the next business day. For your transaction
to be counted on the day you place your order with your broker-dealer or other
financial institution, they must receive your order before Market Close and
promptly transmit the order to the Transfer Agent or the Distributor.

You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You
may rely on these confirmations in lieu of certificates as evidence of your
ownership.

TELEPHONE ORDERS

The Fund and its Transfer Agent will not be responsible for the authenticity of
phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if they reasonably believe that such instructions were genuine.
The Fund and its Transfer Agent have established reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include recording telephone instructions for exchanges and expedited
redemptions, requiring the caller to give certain specific identifying
information, and providing written confirmation to shareholders of record not
later than five days following any such telephone transactions. If the Fund and
its Transfer Agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.

EXCHANGES

You may exchange Class I shares of the Fund for Class I shares of any other ING
Fund. You should review the prospectus of the ING Fund you intend to exchange
into before exchanging your shares.

The total value of shares being exchanged must at least equal the minimum
investment requirement of the ING Fund into which it is being exchanged.
Exchanges of shares are sales and may result in a gain or loss for federal and
state income tax purposes.

In addition to the Fund available in this Prospectus, the Distributor offers
many other funds. Shareholders exercising the exchange privilege with any ING
Fund should carefully review the prospectus of that fund before exchanging
their shares. For a list of the other ING Funds offered by the Distributor,
please see the inside back cover of this Prospectus. Investors may obtain a
copy of a prospectus of any ING Fund not discussed in this Prospectus by
calling (800) 992-0180 or by going to www.ingfunds.com.

You will automatically have the ability to request an exchange by calling a
Shareholder Services Representative unless you mark the box on the Account
Application that indicates that you do not

10    Shareholder Guide




TRANSACTION POLICIES                                           SHAREHOLDER GUIDE
--------------------------------------------------------------------------------

wish to have the telephone exchange privilege. The Fund may change or cancel
its exchange policies at any time, upon 60 days' prior written notice to
shareholders.

SMALL ACCOUNTS

Due to the relatively high cost of handling small investments, the Fund
reserves the right upon 30 days' prior written notice to redeem, at NAV, the
shares of any shareholder whose account (except for IRAs) has a total value
that is less than the Fund minimum. Before the Fund redeems such shares and
sends the proceeds to the shareholder, it will notify the shareholder that the
value of the shares in the account is less than the minimum amount allowed and
will allow the shareholder 30 days to make an additional investment in an
amount that will increase the value of the account to the minimum before the
redemption is processed. Your account will not be closed if its drop in value
is due to Fund performance.

ACCOUNT ACCESS

Unless your Fund shares are held through a third-party fiduciary or in an
omnibus registration at your bank or brokerage firm, you may be able to access
your account information over the internet at www.ingfunds.com, or via a touch
tone telephone by calling (800) 992-0180 and selecting Option 1. Should you
wish to speak with a Shareholder Services Representative, you may call the
toll-free number listed above and select Option 2.

PRIVACY POLICY

The Fund has adopted a policy concerning investor privacy. To review the
privacy policy, contact a Shareholder Services Representative at (800) 992-0180
and select Option 1, obtain a policy over the internet at www.ingfunds.com, or
see the privacy promise that accompanies this Prospectus.

HOUSEHOLDING

To reduce expenses, we may mail only one copy of the Fund's Prospectus and each
annual and semi-annual shareholder report to those addresses shared by two or
more accounts. If you wish to receive individual copies of these documents,
please call us at (800) 992-0180 or speak to your investment professional. We
will begin sending you individual copies thirty days after receiving your
request.

PORTFOLIO HOLDINGS DISCLOSURE POLICY

A description of the policies and procedures with respect to the disclosure of
the Fund's portfolio securities is available in the SAI. The Fund posts its
portfolio holdings schedule on its website on a calendar-quarter basis and
makes it available on the first day of the second month in the next quarter.
The portfolio holdings schedule is as of the last day of the month preceding
the quarter-end (e.g., the Fund will post the quarter ending June 30 holdings
on August 1). The Fund's portfolio holdings schedule will, at a minimum, remain
available on the Fund's website until the Fund files a Form N-CSR or Form N-Q
with the SEC for the period that includes the date as of which the website
information is current. The Fund's website is located at www.ingfunds.com.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                         Shareholder Guide    11




MANAGEMENT OF THE FUND                                   ADVISER AND SUB-ADVISER
--------------------------------------------------------------------------------

ADVISER

ING INVESTMENTS, LLC ("ING INVESTMENTS" OR "ADVISER"), an Arizona limited
liability company, serves as the investment adviser to the Fund. ING
Investments has overall responsibility for the management of the Fund. ING
Investments oversees all investment advisory and portfolio management services
for the Fund.

ING Investments is registered with the SEC as an investment adviser. ING
Investments is an indirect, wholly-owned subsidiary of ING Groep N.V. ("ING
Groep"). ING Groep is one of the largest financial services organizations in
the world with approximately 120,000 employees. Based in Amsterdam, ING Groep
offers an array of banking, insurance and asset management services to both
individual and institutional investors. ING Investments became an investment
management firm in April, 1995.

As of December 31, 2007, ING Investments managed approximately $54 billion in
assets.

The principal address of ING Investments is 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258.

ING Investments receives a monthly fee for its services based on the average
daily net assets of the Fund.

The following table shows the aggregate annual management fees paid by the Fund
for the most recent fiscal year as a percentage of that Fund's average daily
net assets:

                                MANAGEMENT
FUND                                FEE
 ING Tactical Asset Fund           0.45 %(1)

(1) Because the Fund had not commenced operations as of the fiscal year ended
      May 31, 2007, the management fee for the Fund reflects the current
      contract rate.

For information regarding the basis for the Board's approval of the investment
advisory and investment sub-advisory relationships, please refer to the Fund's
annual shareholder report that will be dated May 31, 2008.

SUB-ADVISER

ING Investments has engaged a sub-adviser to provide the day-to-day management
of the Fund's portfolio. The sub-adviser is an affiliate of ING Investments.

ING Investments acts as a "manager-of-managers" for the Fund. ING Investments
delegates to the sub-adviser of the Fund the responsibility for investment
management, subject to ING Investment's oversight. ING Investments is
responsible for monitoring the investment program and performance of the
sub-adviser of the Fund.

From time to time, ING Investments may also recommend the appointment of
additional sub-advisers or replacement of non-affiliated sub-advisers to the
Fund's Board. It is not expected that ING Investments would normally recommend
replacement of affiliated sub-advisers as part of its oversight
responsibilities. The Fund and ING Investments have received exemptive relief
from the SEC to permit ING Investments, with the approval of the Fund's Board,
to appoint additional non-affiliated sub-advisers or to replace an existing
sub-adviser with a non-affiliated sub-adviser as well as change the terms of a
contract with a non-affiliated sub-adviser, without submitting the contract to
a vote of the Fund's shareholders. The Fund will notify shareholders of any
change in the identity of the sub-adviser of the Fund. In this event, the name
of the Fund and its principal investment strategies may also change.

Under the terms of the sub-advisory agreement, the agreement can be terminated
by either ING Investments or the Fund's Board. In the event the sub-advisory
agreement is terminated, the sub-adviser may be replaced subject to any
regulatory requirements or ING Investments may assume day-to-day investment
management of the Fund.

ING INVESTMENT MANAGEMENT CO.

ING Investment Management Co. ("ING IM" or "Sub-Adviser"), a Connecticut
corporation, serves as the Sub-Adviser to the Fund. ING IM is responsible for
managing the assets of the Fund in accordance with the Fund's investment
objective and policies, subject to oversight by ING Investments and the Fund's
Board.

Founded in 1972, ING IM is registered with the SEC as an investment adviser.
ING IM is an indirect, wholly-owned subsidiary of ING Groep and is an affiliate
of ING Investments. ING IM has acted as adviser or sub-adviser to mutual funds
since 1994 and has managed institutional accounts since 1972.

As of December 31, 2007, ING IM managed approximately $73.5 billion in assets.

The principal office of ING IM is 230 Park Avenue, New York, New York 10169.

The following individual is responsibile for the day-to-day management of the
Fund:

Paul Zemsky, Portfolio Manager, has managed the Fund since its inception. Mr.
Zemsky is the head of ING's Multi-Asset Strategies & Solutions Group. He joined
ING IM in 2005 as Head of Derivative Strategies. Prior to assuming his role at
ING, Mr. Zemsky spent 18 years at J.P. Morgan Investment Management, where he
held a number of key positions including having responsibility for asset
allocation for the firm's fixed-income business and handling option trading in
both the exchange-traded and over-the-counter markets.

ADDITIONAL INFORMATION REGARDING PORTFOLIO MANAGER

The SAI provides additional information about the portfolio manager's
compensation, other accounts managed by the portfolio manager and the portfolio
manager's ownership of securities in the Fund.

12    Management of the Fund




MORE                                                     INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

All mutual funds involve risk - some more than others - and there is always the
chance that you could lose money or not earn as much as you hope. The Fund's
risk profile is largely a factor of the principal securities in which it
invests and investment techniques that it uses. The following pages discuss the
risks associated with certain of the types of securities in which the Fund may
invest and certain of the investment practices that the Fund may use. For more
information about these and other types of securities and investment techniques
that may be used by the Fund, see the SAI.

Many of the investment techniques and strategies discussed in this Prospectus
and in the SAI are discretionary which means that the Adviser or Sub-Adviser
can decide whether to use them or not. The Fund may invest in these securities
or use these techniques as part of the Fund's principal investment strategies.
However, the Adviser or Sub-Adviser may also use these investment techniques or
make investments in securities that are not a part of the Fund's principal
investment strategies.

PRINCIPAL RISKS

The principal risks of the Fund are highlighted below. Please see the SAI for a
further discussion of the principal and other investment strategies employed by
the Fund.

CONVERTIBLE AND DEBT SECURITIES. The price of a convertible and debt security
will normally fluctuate in some proportion to changes in the price of the
underlying equity security, and as such is subject to risks relating to the
activities of the issuer and general market and economic conditions. The income
component of convertible and debt securities causes fluctuations based upon
changes in interest rates and the credit quality of the issuer. Convertible and
debt securities are often lower rated securities. The Funds may be required to
redeem or convert a convertible and debt security before the holder would
otherwise choose.

DERIVATIVES. Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the
performance of an underlying asset or assets. Some derivatives are
sophisticated instruments that typically involve a small investment of cash
relative to the magnitude of risks assumed. These may include swap agreements,
options, forwards and futures. Derivative securities are subject to market risk
which could be significant for those that have a leveraging effect. Derivatives
are also subject to credit risks related to the counterparty's ability to
perform and any deterioration in the counterparty's creditworthiness could
adversely affect the instrument. In addition, derivatives and their underlying
securities may experience periods of illiquidity which could cause the Fund to
hold a security it might otherwise sell or could force the sale of a security
at inopportune times or for prices that do not reflect current market value. A
risk of using derivatives is that the Adviser or Sub-Adviser might imperfectly
judge the market's direction. For instance, if a derivative is used as a hedge
to offset investment risk in another security, the hedge might not correlate to
the market's movements and may have unexpected or undesired results such as a
loss or a reduction in gains.

FOREIGN SECURITIES. There are certain risks in owning foreign securities,
including those resulting from: fluctuations in currency exchange rates;
devaluation of currencies; political or economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions; reduced availability of public information concerning issuers;
accounting, auditing and financial reporting standards or other regulatory
practices and requirements that are not uniform when compared to those
applicable to domestic companies; settlement and clearance procedures in some
countries that may not be reliable and can result in delays in settlement;
higher transaction and custody expenses than for domestic securities; and
limitations on foreign ownership of equity securities. Also, securities of many
foreign companies may be less liquid and the prices more volatile than those of
domestic companies. With certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the
use or removal of assets of the Fund, including the withholding of dividends.

The Fund may enter into foreign currency transactions either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts in order to have the necessary currencies to settle transactions, to
help protect Fund assets against adverse changes in foreign currency exchange
rates, or to provide exposure to a foreign currency commensurate with the
exposure to securities from that country. Such efforts could limit potential
gains that might result from a relative increase in the value of such
currencies, and might, in certain cases, result in losses to the Fund.

MORTGAGE-RELATED SECURITIES. Although mortgage loans underlying a
mortgage-backed security may have maturities of up to 30 years, the actual
average life of a mortgage-backed security typically will be substantially less
because the mortgages will be subject to normal principal amortization and may
be prepaid prior to maturity. Like other fixed-income securities, when interest
rates rise, the value of a mortgage-backed security generally will decline;
however, when interest rates are declining, the value of mortgage-backed
securities with prepayment features may not increase as much as other
fixed-income securities. The rate of prepayments on underlying mortgages will
affect the price and volatility of a mortgage-related security, and may have
the effect of shortening or extending the effective maturity of the security
beyond what was anticipated at the time of the purchase. Unanticipated rates of
prepayment on underlying mortgages can be expected to increase the volatility
of such securities. In addition, the value of these securities may fluctuate in
response to the market's perception of the creditworthiness of the issuers of
mortgage-related securities owned by a Fund. Additionally, although mortgages
and mortgage-related securities are generally supported by some form of
government or private guarantee and/or insurance, there is no assurance that
private guarantors or insurers will be able to meet their obligations, and
thus, are subject to risk of default.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                              More Information About Risks    13




MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

OTHER INVESTMENT COMPANIES. The Fund may invest in other investment companies
to the extent permitted by the 1940 Act and the rules and regulations
thereunder. These may include exchange-traded funds ("ETFs") and Holding
Company Depositary Receipts ("HOLDRs"), among others. ETFs are exchange traded
investment companies that are designed to provide investment results
corresponding to an equity index and include, among others, Standard & Poor's
Depositary Receipts ("SPDRs"), PowerShares QQQTM ("QQQQ"), Dow Jones Industrial
Average Trading Stocks ("Diamonds") and iShares exchange-traded funds
("iShares"). The main risk of investing in other investment companies
(including ETFs) is that the value of the underlying securities held by the
investment company might decrease. The value of the underlying securities can
fluctuate in response to activities of individual companies or in response to
general market and/or economic conditions. Because the Fund may invest in other
investment companies, you will pay a proportionate share of the expenses of
that other investment company (including management fees, administration fees
and custodial fees). Additional risks of investments in ETFs include: (i) an
active trading market for an ETF's shares may not develop or be maintained or
(ii) trading may be halted if the listing exchanges' officials deem such action
appropriate, the shares are delisted from the exchange, or the activation of
market-wide "circuit breakers" (which are tied to large decreases in stock
prices) halts trading generally. Because HOLDRs concentrate in the stocks of a
particular industry, trends in that industry may have a dramatic impact on
their value.

To seek to achieve a return on uninvested cash or for other reasons,the Fund
may invest its assets in ING Institutional Prime Money Market Fund and/or one
or more other money market funds advised by ING affiliates ("ING Money Market
Funds"). The Fund's purchase of shares of an ING Money Market Fund will result
in the Fund paying a proportionate share of the expenses of the ING Money
Market Fund. The Fund's Adviser will waive its fee in an amount equal to the
advisory fee received by the adviser of the ING Money Market Fund in which the
Fund invests resulting from the Fund's investment into the ING Money Market
Fund.

SMALL- AND MID-CAPITALIZATION COMPANIES. Investments in small- and
mid-capitalization companies involve greater risk than is customarily
associated with larger, more established companies due to the greater business
risks of small size, limited markets and financial resources, narrow product
lines and the frequent lack of depth of management. The securities of smaller
companies are often traded over-the-counter and may not be traded in volumes
typical on a national securities exchange. Consequently, the securities of
smaller companies may have limited market stability and may be subject to more
abrupt or erratic market movements than securities of larger, more established
companies or the market averages in general.

LENDING PORTFOLIO SECURITIES. In order to generate additional income, the Fund
may lend portfolio securities in an amount up to 33  1/3% of total Fund assets
to broker-dealers, major banks, or other recognized domestic institutional
borrowers of securities. When the Fund lends its securities, it is responsible
for investing the cash collateral it receives from the borrower of the
securities, and the Fund could incur losses in connection with the investment
of such cash collateral. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the collateral should the borrower
default or fail financially.

PORTFOLIO TURNOVER. The Fund is generally expected to engage in frequent and
active trading of portfolio securities to achieve its respective investment
objective. A high portfolio turnover rate involves greater expenses to the
Fund, including brokerage commissions and other transaction costs, which may
have an adverse effect on the performance of the Fund and is likely to generate
more taxable short-term gains for shareholders.

OTHER RISKS

BORROWING. Borrowing may exaggerate the affect of any increase or decrease in
the value of portfolio securities or the NAV of the Fund and money borrowed
will be subject to interest costs. Interest costs on borrowings may fluctuate
with changing market rates of interest and may partially offset or exceed the
return earned on borrowed funds. Under adverse market conditions, the Fund
might have to sell portfolio securities to meet interest or principal payments
at a time when fundamental investment considerations would not favor such
sales.

CORPORATE DEBT SECURITIES. Corporate debt securities are subject to the risk of
the issuer's inability to meet principal and interest payments on the
obligation and may also be subject to price volatility due to such factors as
interest rate sensitivity, market perception of the credit-worthiness of the
issuer and general market liquidity. When interest rates decline, the value of
the Fund's debt securities can be expected to rise and when interest rates
rise, the value of those securities can be expected to decline. Debt securities
with longer maturities tend to be more sensitive to interest rate movements
than those with shorter maturities.

One measure of risk for fixed-income securities is duration. Duration is one of
the tools used by a portfolio manager in selection of fixed-income securities.
Historically, the maturity of a bond was used as a proxy for the sensitivity of
a bond's price to changes in interest rates, otherwise known as a bond's
"interest rate risk" or "volatility". According to this measure, the longer the
maturity of a bond, the more its price will change for a given change in market
interest rates. However, this method ignores the amount and timing of all cash
flows from the bond prior to final maturity. Duration is a measure of average
life of a bond on a present value basis which was developed to incorporate a
bond's yield, coupons, final maturity and call features into one measure. For
point of reference, the duration of a noncallable 7% coupon bond with a
remaining maturity of 5 years is approximately 4.5 years and the duration of a
noncallable 7% coupon bond with a remaining maturity of 10 years is
approximately 8 years. Material changes in interest rates may impact the
duration calculation.

14    More Information About Risks




                                                    MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

INABILITY TO SELL SECURITIES. Some securities generally trade in lower volume
and may be less liquid than securities of large established companies. These
less liquid securities could include securities of small- and mid-sized U.S.
companies, high-yield securities, convertible securities, unrated debt and
convertible securities, securities that originate from small offerings, and
foreign securities, particularly those from companies in countries with an
emerging securities market. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund.

INTERESTS IN LOANS. The Fund may invest in participation interests or
assignments in secured variable or floating rate loans which include
participation interests in lease financings. Loans are subject to the credit
risk of nonpayment of principal or interest. Substantial increases in interest
rates may cause an increase in loan defaults. Although the loans will generally
be fully collateralized at the time of acquisition, the collateral may decline
in value, be relatively illiquid, or lose all or substantially all of its value
subsequent to the Fund's investment. Many loans are relatively illiquid and may
be difficult to value.

INVESTMENT BY FUNDS-OF-FUNDS. The Fund's shares may be purchased by other
investment companies, including through fund-of-funds arrangements within the
ING Funds family. In some cases, the Fund may serve as a primary or significant
investment vehicle for a fund-of-funds. From time to time, the Fund may
experience large inflows or redemptions due to allocations or rebalancings by
these funds-of funds. While it is impossible to predict the overall impact of
these transactions over time, there could be adverse effects on portfolio
management. For example, the Fund may be required to sell securities or invest
cash at times when it would not otherwise do so. These transactions could also
increase transaction costs or portfolio turnover. The Adviser or portfolio
manager will monitor transactions by the funds-of funds and will attempt to
minimize any adverse effects on the Fund and funds-of-funds as a result of
these transactions. So long as the Fund accepts investments by other investment
companies, it will not purchase securities of other investment companies,
except to the extent permitted by the 1940 Act or under the terms of an
exemptive order granted by the SEC.

MANAGEMENT. The Fund is subject to management risk because it is an actively
managed investment portfolio. The Adviser, the Sub-Adviser or the portfolio
manager will apply investment techniques and risk analyses in making investment
decisions for the Fund, but there can be no guarantee that these will produce
the desired results. Many sub-advisers of equity funds employ styles that are
characterized as "value" or "growth." However, these terms can have different
application by different managers. One sub-adviser's value approach may be
different from another, and one sub-adviser's growth approach may different
from another. For example, some value managers employ a style in which they
seek to identify companies that they believe are valued at a more substantial
or "deeper discount" to a company's net worth than other value managers.
Therefore, some funds that are characterized as growth or value can have
greater volatility than other funds managed by other managers in a growth or
value style.

PAIRING-OFF TRANSACTIONS. A pairing-off transaction occurs when the Fund
commits to purchase a security at a future date and then the Fund pairs-off the
purchase with a sale of the same security prior to or on the original
settlement date. Whether a pairing-off transaction on a debt security produces
a gain depends on the movement of interest rates. If interest rates increase,
then the money received upon the sale of the same security will be less than
the anticipated amount needed at the time the commitment to purchase the
security at the future date was entered and the Fund will experience a loss.

RESTRICTED AND ILLIQUID SECURITIES. If a security is illiquid, the Fund might
be unable to sell the security at a time when the Adviser or Sub-Adviser might
wish to sell and the security could have the effect of decreasing the overall
level of the Fund's liquidity. Further, the lack of an established secondary
market may make it more difficult to value illiquid securities which could vary
from the amount the Fund could realize upon disposition. Restricted securities,
i.e., securities subject to legal or contractual restrictions on resale, may be
illiquid. However, some restricted securities may be treated as liquid although
they may be less liquid than registered securities traded on established
secondary markets.

REPURCHASE AGREEMENTS. Repurchase agreements involve the purchase of a security
that the seller has agreed to repurchase at an agreed-upon date and price. If
the seller defaults and the collateral value declines, the Fund might incur a
loss. If the seller declares bankruptcy, the Fund may not be able to sell the
collateral at the desired time.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. A reverse repurchase agreement
or dollar roll involves the sale of a security with an agreement to repurchase
the same or substantially similar securities at an agreed upon price and date.
Whether such a transaction produces a gain for the Fund depends upon the costs
of the agreements and the income and gains of the securities purchased with the
proceeds received from the sale of the security. If the income and gains on the
securities purchased fail to exceed the costs, the Fund's NAV will decline
faster than otherwise would be the case. Reverse repurchase agreements and
dollar rolls, as leveraging techniques, may increase the Fund's yield; however,
such transactions also increase the Fund's risk to capital and may result in a
shareholder's loss of principal.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                              More Information About Risks    15




MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

TEMPORARY DEFENSIVE STRATEGIES. When the Adviser or the Sub-Adviser to the Fund
anticipates unusual market or other conditions, the Fund may temporarily depart
from its principal investment strategies as a defensive measure. To the extent
that the Fund invests defensively, it likely will not achieve capital
appreciation.

PERCENTAGE AND RATING LIMITATIONS. Unless otherwise stated, the percentage and
rating limitations in this Prospectus apply at the time of investment.


16    More Information About Risks




DIVIDENDS,                                               DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

The Fund generally distributes most or all of its net earnings in the form of
dividends and capital gain distributions. Dividends are normally expected to
consist primarily of ordinary income. The Fund distributes capital gains, if
any, annually.

DIVIDEND REINVESTMENT

Unless you instruct the Fund to pay you dividends in cash, dividends and
distributions paid by the Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class I shares of the Fund invested in another ING Fund that offers
Class I shares.

TAXES

The following information is meant as a general summary for U.S. shareholders.
Please see the SAI for additional information. You should rely on your own tax
adviser for advice about the particular federal, state and local tax
consequences to you of investing in the Fund.

The Fund will distribute all, or substantially all, of its net investment
income and net capital gains to its shareholders each year. Although the Fund
will not be taxed on amounts it distributes, most shareholders will be taxed on
amounts they receive. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. Except as described below,
it generally does not matter how long you have held your Fund shares or whether
you elect to receive your distributions in cash or reinvest them in additional
Fund shares. For example, if the Fund designates a particular distribution as a
long-term capital gains distribution, it will be taxable to you at your
long-term capital gains rate. Dividends attributable to interest income are not
eligible for the reductions in rates described below.

Current tax law (which is currently scheduled to apply through 2010) generally
provides for a maximum tax rate for individual taxpayers of 15% on long-term
gains from sales and from certain qualifying dividends on corporate stock.
Although these rate reductions do not apply to corporate taxpayers, such
taxpayers may be entitled to a corporate dividends received deduction with
respect to their share of eligible domestic corporate dividends received by the
Fund.

The following are guidelines for how certain distributions by the Fund are
generally taxed to individual taxpayers:

o  Distributions of earnings from qualifying dividends and qualifying long-term
   capital gains will be taxed at a maximum rate of 15%.

o  The maximum 15% tax rate for individual taxpayers on long-term capital gains
   and qualifying dividends is currently scheduled to apply through 2010. In
   the absence of further Congressional action, for the calendar years after
   2010, the maximum rate on long-term capital gains for individual taxpayers
   would increase to 20% and income from dividends would be taxed at the rates
   applicable to ordinary income.

o  Note that distributions of earnings from dividends paid by certain
   "qualified foreign corporations" can also qualify for the lower tax rates
   on qualifying dividends.

o  A shareholder will also have to satisfy a 60-day holding period with respect
   to any distributions of qualifying dividends in order to obtain the benefit
   of the lower tax rate.

o  Distributions of earnings from non-qualifying dividends, interest income,
   other types of ordinary income and short-term capital gains will be taxed
   at the ordinary income tax rate applicable to the taxpayer.

Dividends declared by the Fund in October, November or December and paid during
the following January will be treated as having been received by shareholders
in the year the distributions were declared.

You will receive an annual statement summarizing your dividend and capital
gains distributions.

If you buy shares of the Fund before it makes a distribution, the distribution
will be taxable to you even though it may actually be a return of a portion of
your investment. This is known as "buying a dividend."

If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax adviser about investment through a tax-deferred account.

There may be tax consequences to you if you sell or redeem Fund shares. You
will generally have a capital gain or loss, which will be long-term or
short-term, generally depending on how long you hold those shares. If you
exchange shares, you may be treated as if you sold them. If your tax basis in
your shares exceeds the amount of proceeds you receive from a sale, exchange or
redemption of shares, you will recognize a taxable loss on the sale of shares
of the Fund. Any loss recognized on shares held for six months or less will be
treated as long-term capital loss to the extent of any long-term capital gain
distributions that were received with respect to the shares. Additionally, any
loss realized on a sale, redemption or exchange of shares of the Fund may be
disallowed under "wash sale" rules to the extent the shares disposed of are
replaced with other shares of that Fund within a period of 61 days beginning 30
days before and ending 30 days after shares are disposed of, such as pursuant
to a dividend reinvestment in shares of the Fund. If disallowed, the loss will
be reflected in an adjustment to the tax basis of the shares acquired. You are
responsible for any tax liabilities generated by your transactions.

As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the current rate of 28% of all taxable distributions payable to
you if you fail to provide the Fund with your correct taxpayer identification
number or to make required certifications, or if you have been notified by the
IRS that you are subject to backup withholding. Backup withholding is not an
additional tax; rather, it is a way in which the IRS ensures it will collect
taxes otherwise due. Any amounts withheld may be credited against your U.S.
federal income tax liability.

Please see the SAI for further information regarding tax matters.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.


                                        Dividends, Distributions and Taxes    17




FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

Because the Fund did not commence operations as of the fiscal year ended May
31, 2007, financial highlights are not available.

18  Financial Highlights




In addition to the Fund offered in this prospectus, the Distributor also offers
Class I shares of the funds listed below. Before investing in a fund,
shareholders should carefully review the fund's prospectus. Investors may
obtain a copy of a prospectus of any ING Fund not discussed in this Prospectus
by calling (800) 992-0180 or by going to www.ingfunds.com.

Domestic Equity and Income Fund
ING Real Estate Fund

Domestic Equity Growth Funds
ING 130/30 Fundamental Research Fund
ING Fundamental Research Fund
ING LargeCap Growth Fund
ING MidCap Opportunities Fund
ING Opportunistic LargeCap Fund
ING SmallCap Opportunities Fund

Domestic Equity Value Funds
ING LargeCap Value Fund
ING MagnaCap Fund
ING Value Choice Fund
ING SmallCap Value Multi-Manager Fund

Fixed Income Funds
ING GNMA Income Fund
ING Intermediate Bond Fund

Global Equity Funds
ING Global Equity Dividend Fund
ING Global Natural Resources Fund
ING Global Real Estate Fund
ING Global Science and Technology Fund

International Equity Funds
ING Disciplined International SmallCap Fund
ING Emerging Countries Fund
ING Foreign Fund
ING Greater China Fund
ING Index Plus International Equity Fund
ING International Capital Appreciation Fund
ING International Growth Opportunities Fund
ING International Equity Fund
ING International Real Estate Fund
ING International SmallCap Multi-Manager Fund
ING International Value Choice Fund
ING International Value Fund

Global and International Fixed-Income Funds
ING Global Bond Fund
ING Emerging Markets Fixed Income Fund

International Fund-of-Funds
ING Diversified International Fund

Money Market Funds
ING Money Market Fund




WHERE TO GO FOR MORE INFORMATION
YOU'LL FIND MORE INFORMATION ABOUT THE FUND IN OUR:


ANNUAL/SEMI-ANNUAL SHAREHOLDER REPORTS
In the Funds' annual/semi-annual shareholder reports, when available, you will
find a discussion of the recent market conditions and principal investment
strategies that significantly affected the Funds' performance during their last
fiscal year, the financial statements and the independent registered public
accounting firm's reports (in the annual shareholder report only).

STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI contains more detailed information about the Fund. The SAI is legally
part of this Prospectus (it is incorporated by reference). A copy has been
filed with the SEC.

Please write, call or visit our website for a free copy of the current annual/
semi-annual shareholder reports, the SAI or other Fund information.

To make shareholder inquiries contact:

THE ING FUNDS
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258-2034

(800) 992-0180

Or visit our website at WWW.INGFUNDS.COM

This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-551-8090 for information on the
operation of the Public Reference Room. Otherwise, you may obtain the
information for a fee by contacting the SEC at:

U.S. SECURITIES AND EXCHANGE COMMISSION
Public Reference Section
100 F Street, N.E.
Washington, D.C. 20549

or at the e-mail address: PUBLICINFO@SEC.GOV

Or obtain the information at no cost by visiting the SEC's Internet website at
WWW.SEC.GOV.

When contacting the SEC, you will want to refer to the Funds' SEC file number.
The file number is as follows:

ING Series Fund, Inc.                       811-6352
  {ING DISCIPLINED CORE FUND}
  ING Tactical Asset Allocation Fund
  ING Global Science and Technology Fund

PRPRO-TACAAFI                                                    (0308-032408)
[GRAPHIC APPEARS HERE]

--------------------------------------------------------------------------------




[GRAPHIC]

Prospectus
MARCH 24, 2008

Class A, Class B and Class C

ING GLOBAL INCOME BUILDER FUND

This Prospectus contains important information about investing in Class A, Class
B and Class C shares of ING Global Income Builder Fund. You should read it
carefully before you invest, and keep it for future reference. Please note that
your investment: is not a bank deposit, is not insured or guaranteed by the
Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or any
other government agency and is affected by market fluctuations. There is no
guarantee that the Fund will achieve its investment objectives. As with all
mutual funds, the U.S. Securities and Exchange Commission ("SEC") has not
approved or disapproved these securities nor has the SEC judged whether the
information in this prospectus is accurate or adequate. Any representation to
the contrary is a criminal offense.
-------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

MUTUAL FUNDS
--------------------------------------------------------------------------------







                                                                   WHAT'S INSIDE
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

       INVESTMENT
       OBJECTIVE
[GRAPHIC APPEARS HERE]

       PRINCIPAL
       INVESTMENT
       STRATEGIES
[GRAPHIC APPEARS HERE]

       RISKS

[GRAPHIC APPEARS HERE]

       WHAT YOU
       PAY TO
       INVEST

Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities in which they invest. Please read this Prospectus carefully to be
sure you understand the principal investment strategies and risks associated
with the Fund. You should consult the Statement of Additional Information
("SAI") for a complete list of the investment strategies and risks.

[GRAPHIC APPEARS HERE]

If you have any questions about the Fund, please call your investment
professional or us at 1-800-992-0180.

These pages contain a description of the Fund included in this Prospectus,
including the Fund's investment objective, principal investment strategies and
risks.

You'll also find:

WHAT YOU PAY TO INVEST. A list of the fees and expenses you pay - both directly
and indirectly - when you invest in the Fund.

INTRODUCTION                                                                   1
ING Global Income Builder Fund                                                 2

WHAT YOU PAY TO INVEST                                                         4
SHAREHOLDER GUIDE                                                             12
MANAGEMENT OF THE FUND                                                        22
MORE INFORMATION ABOUT RISKS                                                  23
DIVIDENDS, DISTRIBUTIONS AND TAXES                                            28
FINANCIAL HIGHLIGHTS                                                          30
WHERE TO GO FOR MORE INFORMATION                                      Back Cover




                      (THIS PAGE INTENTIONALLY LEFT BLANK)




INTRODUCTION
--------------------------------------------------------------------------------

AN INTRODUCTION TO THE FUND

The Fund's investment objective is total return, consisting of capital
appreciation and current income. The Fund seeks to achieve its investment
objective by investing in other ING Funds ("Underlying Funds") and uses asset
allocation strategies to determine how much to invest in the Underlying Funds.
In addition, the Fund will write call options on securities. The Fund is
designed to meet the needs of investors who wish to seek exposure to various
types of global securities through a single diversified investment.

The Fund invests primarily in a combination of the Underlying Funds that, in
turn, invest directly in a wide range of global securities. Although an investor
may achieve the same level of diversification by investing directly in a variety
of the Underlying Funds, the Fund provides investors with a means to simplify
their investment decisions by investing in a single diversified portfolio. For
more information about the Underlying Funds, please see "More Information on
Investment Strategies" on page 7 and "Description of the Investment Objectives,
Main Investments and Risks of the Underlying Funds" beginning on page 8 of this
Prospectus.


Although the Fund is designed to serve as a diversified investment portfolio, no
single mutual fund can provide an appropriate investment program for all
investors. You should evaluate the Fund in the context of your personal
financial situation, investment objectives and other investments.

This Prospectus explains the investment objective, principal investment
strategies and risks of the Fund. Reading this Prospectus will help you to
decide whether the Fund is the right investment for you. You should keep this
Prospectus for future reference.

AN INTRODUCTION TO THE ASSET ALLOCATION PROCESS


ING Investments, LLC ("ING Investments" or "Adviser") is the investment adviser
of the Fund and ING Investment Management Co. ("ING IM" or "Sub-Adviser") is the
sub-adviser. ING Investments and ING IM are indirect, wholly-owned subsidiaries
of ING Groep, N.V. ("ING Groep") (NYSE: ING).


ING Investments and ING IM, working together, have designed the Fund that will
be constructed and managed in accordance with the following process:

ING IM uses an asset allocation process to determine the Fund's investment mix.
This asset allocation process can be described as follows:


1.   In the first stage, the mix of global asset classes that is likely to
     produce the optimal return for the Fund is estimated. This estimate is made
     with reference to an investment model that incorporates historical and
     expected returns, standard deviations and correlation coefficients of
     global asset classes as well as other financial variables. The mix of
     global asset classes arrived at for the Fund is called the "Target
     Allocation." ING IM will review the Target Allocation at least annually.


2.   ING IM determines the Underlying Funds in which the Fund invests to attain
     its Target Allocation. In choosing an Underlying Fund, ING IM considers,
     among other factors, the degree to which the Underlying Fund's holdings or
     other characteristics correspond to the desired Target Allocation. ING IM,
     at any time, may change the Underlying Funds in which the Fund invests, may
     add or drop Underlying Funds, and may determine to make tactical changes in
     the Fund's Target Allocation depending on market conditions. ING
     Investments supervises the determination of Target Allocation and selection
     of Underlying Funds by ING IM.


ING IM will have authority over the asset allocations, investments in particular
Underlying Funds (including any Underlying Funds organized in the future) and
the Target Allocation for the Fund, including determining the transition pattern
of the Fund in a timely but reasonable manner based upon market conditions at
the time of allocation changes. The pre-defined mixes will be reviewed at least
annually and analyzed for consistency with current market conditions and
industry trends.


1    Introduction




                                                                        ADVISER
                                                            ING Investments, LLC

                                                                     SUB-ADVISER
                                                   ING Investment Management Co.

ING GLOBAL INCOME BUILDER FUND
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

INVESTMENT OBJECTIVE

The Fund's investment objective is total return, consisting of capital
appreciation and current income. The Fund's investment objective is not
fundamental and may be changed without a shareholder vote.

[GRAPHIC APPEARS HERE]

PRINCIPAL  INVESTMENT STRATEGIES

The Fund invests in a combination of Underlying Funds that in turn invest in
fixed income and/or equity securities of issuers located in a number of
different countries, one of which may be the United States. The Fund also
expects to employ a strategy of writing (selling) call options on equity
indices, baskets of securities and exchange-traded funds ("ETFs") ("Option
Strategy") in an attempt to generate gains from option premiums as a means of
enhancing distributions paid to shareholders. Under normal conditions,
approximately 30% of the Fund's total assets will be allocated to funds
investing in fixed-income securities and 70% will be allocated to funds
investing in equity securities. The sub-adviser seeks to diversify the Fund's
holdings globally by including Underlying Funds that invest in companies of all
market capitalizations, Underlying Funds that invest using a growth or value
style and Underlying Funds that invest in companies in both developed countries
and countries with emerging securities markets.

The fixed income component of the allocation will have a minimum quality rating
of at least investment grade and an average duration between three and ten
years.

The value of the securities underlying the options written by the Fund will
ordinarily be between 0-30% of the Fund's equity holdings. By selling these call
options, the Fund will receive payments, or premiums, which add to the Fund's
distributable income. The extent of the Fund's call option writing activity will
depend upon market conditions and the Sub-Adviser's ongoing assessment of the
attractiveness of writing call options on equity securities. Call options will
be written (sold) usually at-the-money or near-the-money, usually on a one- to
three-month basis and will be written both in exchanged-listed option markets
and over-the-counter markets with major international banks, broker-dealers and
financial institutions. As it writes call options over more of its portfolio,
the Fund is limited in its ability to benefit from capital appreciation. In
addition to the use of written option contracts under the Option Strategy, the
Fund may utilize additional option strategies, including utilizing call spreads,
purchase put options or other types of options.

The Fund's current approximate Target Allocations (expressed as a percentage of
its net assets) among the asset classes are set out below. As these are Target
Allocations, the actual allocations of the Fund's assets may deviate from the
percentages shown.

International Core Equity Stocks                                           23.5%
International SmallCap Stocks                                                 5%
Global Real Estate Stocks                                                     5%

Emerging Markets Stocks                                                      10%

U.S. Mid Capitalization Stocks                                                5%
U.S. Small Capitalization Stocks                                              5%
U.S. Large Capitalization Stocks                                           16.5%

Intermediate-Term Bonds                                                      30%

The Fund intends to invest approximately 15% of its assets in ING Tactical Asset
Allocation Fund. ING Tactical Asset Allocation Fund will follow a tactical asset
allocation strategy which seeks to evaluate the attractiveness of a range of
asset classes across various regions and countries and to benefit from pricing
inefficiencies. The Fund seeks to benefit from ING Tactical Asset Allocation
Fund's strategy to adjust the asset allocations within the Fund's long-term
strategic allocations.


The Fund may be rebalanced periodically to return to the Target Allocation and
inflows and outflows may be managed to attain the Target Allocation. The Target
Allocation may be changed, at any time, as described under "An Introduction to
the Asset Allocation Process."

--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

RISKS
You could lose money on an investment in the Fund. The Fund may be affected by
the following risks, among others:


AFFILIATED FUNDS - in managing the Fund, ING Investments will have authority to
select and substitute Underlying Funds. ING Investments may be subject to
potential conflicts of interest in selecting Underlying Funds because the fees
paid to it by some Underlying Funds are higher than fees paid by other
Underlying Funds. However, ING Investments is a fiduciary to the Fund and is
legally obligated to act in the Fund's best interests when selecting Underlying
Funds.


ASSET ALLOCATION - assets will be allocated among funds and markets based on
judgments made by the Adviser or Sub-Adviser. There is a risk that the Fund may
allocate assets to an Underlying Fund or market that underperforms other asset
classes. For example, the Fund may be underweighted in assets or a market that
is experiencing significant returns or overweighted in assets or a market with
significant declines.


CREDIT - the Fund could lose money if the issuer of a security is unable to meet
its financial obligations or goes bankrupt. This is especially true during
periods of economic uncertainty or economic downturns. This Fund may be subject
to more credit risk than many bond funds, because the convertible securities and
debt securities in which it invests may be lower-rated securities.


DERIVATIVES - derivatives are subject to the risk of changes in the market price
of the underlying securities, credit risk with respect to the counterparty to
the derivative instruments, 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 and may reduce its returns.


FOREIGN INVESTING - the Fund allocates assets to Underlying Funds that invest in
foreign investments. Foreign investments may be riskier than U.S. investments
for many reasons, including: changes in currency exchange rates; unstable
political and economic conditions; a lack of adequate company information;
differences in the way securities markets operate; less secure foreign banks or
securities depositories than those in the United States; less standardization of
accounting standards and market regulations in certain foreign countries and
varying foreign controls on investments. Foreign investments may also be
affected by administrative difficulties, such as delays in clearing and settling
transactions. Additionally, securities of foreign companies may be denominated
in foreign currencies. Exchange rate fluctuations may reduce or eliminate gains
or create losses. Hedging strategies intended to reduce this risk may not
perform as expected. These factors may make foreign investments more volatile
and potentially less liquid than U.S. investments. To the extent an Underlying
Fund invests in countries with emerging securities markets, the risks of foreign
investing may be greater, as these countries may be less politically and
economically stable than other countries. It may also be more difficult to buy
and sell securities in countries with emerging securities markets.

INTEREST RATE - fixed-income securities are subject to the risk that interest
rates will rise, which generally causes bond prices to fall. Economic and market
conditions may cause issuers to default or go bankrupt. High-yield instruments
are even more sensitive to economic and market conditions than other
fixed-income instruments.


MARKET TRENDS - from time to time, the stock market may not favor growth or
value oriented securities in which an Underlying Fund invests. Rather, the
market could favor securities to which an Underlying Fund is not exposed, or may
not favor equities at all.


OPTIONS - There are numerous risks associated with transactions in options. A
decision as to whether, when and how to write (sell) call options under the
Fund's strategy involves the exercise of skill and judgment, and even a
well-conceived transaction may be adversely affected by market behavior or
unexpected events. The Fund will write (sell) call options on equity indices,
baskets of securities and ETFs. The purchaser of the call option has the right
to any appreciation in the value of the index, basket of securities or ETF over
the exercise price up to and including the expiration date. Because the exercise
of such options is settled in cash, writers (sellers) of such options cannot
provide in advance for their potential settlement obligations by acquiring and
holding the underlying securities. When a call option sold by the Fund is
exercised or closed out, the Fund may be required to sell portfolio holdings to
satisfy its obligations when it would not otherwise choose to do so, or the Fund
may choose to sell portfolio holdings to realize gains to offset the losses
realized upon option exercise. Such sales would involve transaction costs borne
by the Fund and may result in realization of taxable capital gains, including
short-term capital gains taxed at ordinary income tax rates, and may adversely
impact the Fund's after-tax returns.

PRICE VOLATILITY - the value of the Fund changes as the prices of the Underlying
Funds' investments go up or down. Equity securities face market, issuer and
other risks, and their values may fluctuate, sometimes rapidly and
unpredictably. Market risk is the risk that securities may decline in value due
to factors affecting securities markets generally or particular industries.
Issuer risk is the risk that the value of a security may decline for reasons
relating to the issuer, such as changes in the financial condition of the
issuer. While equities may offer the potential for greater long-term growth than
most debt securities, they generally have higher volatility.


The Fund may invest in Underlying Funds that invest in small- and mid-sized
companies, which may be more susceptible to greater price volatility than larger
companies because they typically have fewer financial resources, more limited
product and market diversification and may be dependent on a few key managers.




If you would like additional information regarding the Fund's investment
strategies and risks or the Underlying Funds' investment strategies and risks
please see "More Information on Investment Strategies" beginning on page 7,
"Description of the Investment Objectives, Main Investments and Risks of the
Underlying Funds" beginning on page 8, and "More Information About Risks"
beginning on page 23 of this Prospectus.

2    ING Global Income Builder Fund




                                                  ING GLOBAL INCOME BUILDER FUND
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

HOW THE FUND HAS
PERFORMED


                Since ING Global Income Builder Fund had not commenced
                operations as of December 31, 2007, there is no performance
                information included in this Prospectus. Please visit the
                Fund's website at www.ingfunds.com to obtain performance
                information once it is available.


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                             ING Global Income Builder Fund    3




WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

                There are two types of fees and expenses when you invest in
                mutual funds: fees, including sales charges, you pay directly
                when you buy or sell shares, and operating expenses paid each
                year by the Fund.

                The table that follows shows the fees and expenses you pay if
                you buy and hold shares of the Fund. The table that follows
                shows the fees and the estimated operating expenses for the
                Fund. Shareholders of the Fund will indirectly bear the expenses
                of an Underlying Fund based upon the percentage of the Fund's
                assets that is allocated to the Underlying Fund. Because the
                fees and annual net operating expenses of the Underlying Fund,
                and the Fund's allocation to that Underlying Fund, will vary
                from year to year, the fees and expenses paid by the Fund may
                vary from year to year.

FEES YOU PAY DIRECTLY


                                                            CLASS A/(1)/   CLASS B    CLASS C
                                                            ------------  ---------  ---------
MAXIMUM SALES CHARGE ON YOUR INVESTMENT (AS A % OF            5.75/(2)/      none      none
   OFFERING PRICE)
MAXIMUM DEFERRED SALES CHARGE (AS A % OF PURCHASE OR SALES    none/(3)/   5.00/(4)/  1.00/(5)/
   PRICE, WHICHEVER IS LESS)


(1)    The Fund does not impose any front-end sales charge (load) on reinvested
       dividends or distributions.

(2)    Reduced for purchases of $50,000 and over. Please see the discussion of
       sales charges in the "Shareholder Guide" section of this Prospectus.

(3)    A contingent deferred sales charge ("CDSC") of no more than 1% may be
       assessed on redemptions of Class A shares that were purchased without an
       initial sales charge as part of an investment of $1 million or more.
       Please see the discussion of sales charges in the "Shareholder Guide"
       section of this Prospectus.

(4)    A CDSC is imposed upon redemptions within 6 years from purchase. The fee
       has scheduled reductions after the first year. Please see the discussion
       of sales charges in the "Shareholder Guide" section of this Prospectus.

(5)    A CDSC is imposed upon redemptions within 1 year from purchase. Please
       see the discussion of sales charges in the "Shareholder Guide" section of
       this Prospectus.

OPERATING EXPENSES PAID EACH YEAR BY THE FUND/(1)/
(as a % of average net assets)


                                                               ACQUIRED
                              DISTRIBUTION                   (UNDERLYING)       TOTAL                             NET
                               AND SERVICE                      FUNDS            FUND                             FUND
                 MANAGEMENT      (12B-1)        OTHER            FEES         OPERATING        WAIVERS AND      OPERATING
CLASS               FEES          FEES      EXPENSES/(2)/  AND EXPENSES/(3)/   EXPENSES    REIMBURSEMENTS/(4)/  EXPENSES
----------      ------------ -------------- ------------- -----------------  ------------- ------------------- ----------
 Class A    %       0.08          0.25           0.47            0.75            1.55         (0.25)               1.30
 Class B    %       0.08          1.00           0.47            0.75            2.30         (0.25)               2.05
 Class C    %       0.08          1.00           0.47            0.75            2.30         (0.25)               2.05


--------------------------------------------------------------------------------


(1)    This table shows the estimated operating expenses for the Fund by class
       as a ratio of expenses to average daily net assets. The Fund had not
       commenced operations as of October 31, 2007, therefore, "Other Expenses"
       are estimated for the current fiscal year.



(2)    ING Funds Services, LLC receives an annual administrative fee equal to
       0.10% of the Fund's average daily net assets which is reflected in "other
       Expenses." Also includes an estimated 0.09% of non-recuring offering
       expenses and excluding this amount, Total Portfolio Operating Expenses
       would have been 1.46%, 2.21% and 2.21%, respectively.


(3)    The Fund's Acquired (Underlying) Funds Fees and Expenses is based on a
       weighted average of the fees and expenses of the Underlying Funds in
       which it invests. The amount of fees and expenses of the Underlying Funds
       borne by a Fund will vary based on the Fund's allocation of assets to,
       and the annualized net expenses of, the particular Underlying Funds
       during the Fund's fiscal year.


(4)    ING Investments, LLC has entered into a written expense limitation
       agreement with the Fund under which it will limit expenses of the Fund
       excluding interest, taxes, brokerage and extraordinary expenses, and
       Acquired (Underlying) Fund Fees and Expenses, subject to possible
       recoupment by ING Investments within three years. The amount of the
       Fund's expenses proposed to be waived or reimbursed during the current
       fiscal year by ING Investments, LLC adjusted for contractual changes, if
       any, is shown under the heading "Waivers and Reimbursements." The expense
       limits will continue through at least March 1, 2009. The expense
       limitation agreement is contractual and shall renew automatically for
       one-year terms unless ING Investments, LLC provides written notice of the
       termination of the expense limitation agreement within 90 days of the end
       of the then- current term or upon termination of the investment
       management agreement. For more information on the expense limitation
       agreement, please see the SAI.


4    What You Pay to Invest




                                                         WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------

             ACQUIRED (UNDERLYING) FUNDS ANNUAL OPERATING EXPENSES
                 (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)


Because we use a weighted average in calculating expenses attributable to the
Fund, the amount of the fees and expenses of the Class I shares of the
Underlying Funds indirectly borne by the Fund will vary based on the Fund's
allocation of assets to, and the annualized net operating expenses of, the
particular Underlying Funds during the Fund's fiscal year. The following are the
annual net expense ratios (as an annual percentage of average daily net assets)
for each Underlying Fund.


CLASS I


                                                                   NET OPERATING
UNDERLYING FUND                                                       EXPENSES
-------------------------------------------                        -------------
ING Disciplined International SmallCap/(1)/                             0.86%
ING Emerging Countries/(1)/                                             1.56%
ING Global Equity Dividend/(1)/                                         0.90%
ING Global Real Estate/(1)/                                             0.95%
ING Index Plus International Equity/(1)/                                0.87%
ING Index Plus Mid Cap/(2)/                                             0.75%
ING Institutional Prime Money Market/(3)/                               0.10%
ING Intermediate Bond/(3)/                                              0.35%
ING Index Plus SmallCap/(2)/                                            0.75%
ING Tactical Asset Allocation Fund/(4)/                                 0.70%



(1)    As of October 31, 2007.

(2)    As of November 30, 2007.

(3)    As of September 30, 2007.

(4)    As the Underlying Fund did not have a full calendar year of operation as
       of the fiscal year ended October 31, 2007, the expense ratio is
       estimated.


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                     What You Pay to Invest    5




WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

      EXAMPLES/(1)/

      The Examples are intended to help you compare the cost of investing in
      shares of the Fund, including the costs of the Underlying Funds, with the
      cost of investing in other mutual funds. The Examples assume that you
      invest $10,000 in the shares of the Fund for the time periods indicated
      and then redeem all of your shares at the end of those periods. The
      Examples also assume that your investment has a 5% return each year, that
      all dividends and distributions are reinvested, and that the Class I
      shares of the Underlying Fund's total net annual operating expenses
      remain the same. Although your actual costs may be higher or lower, the
      Examples show what your costs would be based on these assumptions.


                  1 YEAR      3 YEARS
                 --------    --------
Class A       $     700          995



                                           IF YOU DON'T SELL
                   IF YOU SELL YOUR               YOUR
                        SHARES                   SHARES
                  1 YEAR      3 YEARS      1 YEAR      3 YEARS
                 --------    ---------    --------    --------
Class B      $     708          976         208          676



                                           IF YOU DON'T SELL
                   IF YOU SELL YOUR               YOUR
                        SHARES                   SHARES
                  1 YEAR      3 YEARS      1 YEAR      3 YEARS
                 --------    ---------    --------    --------
Class C       $    308          676         208          676



(1)    The Examples reflect any expense limitation agreements/waivers of the
       Fund and the Underlying Funds for the one-year period and the first year
       of the three-year period.


6    What You Pay to Invest




MORE INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------------------

MORE ON THE ASSET ALLOCATION PROCESS

As described earlier in this Prospectus, the Fund pursues its investment
objective by investing in a combination of the Underlying Funds. Subject to the
supervision of ING Investments, ING IM determines the mix of Underlying Funds
and sets the appropriate Target Allocations and ranges for investments in those
Underlying Funds.

Periodically, based upon a variety of quantitative and qualitative factors, ING
IM uses economic and statistical methods to determine the optimal Target
Allocations and ranges for the Fund, the resulting allocations to the Underlying
Funds, and whether any Underlying Funds should be added or removed from the mix.

The factors considered may include the following:

(i)    the investment objective of the Fund and each of the Underlying Funds;

(ii)   economic and market forecasts;

(iii)  proprietary and third-party reports and analyses;

(iv)   the risk/return characteristics, relative performance, and volatility of
       Underlying Funds; and

(v)    the correlation and covariance among Underlying Funds.


As market prices of the Underlying Funds' portfolio securities change, the
Fund's actual allocations will vary somewhat from the Target Allocations,
although the percentages generally will remain within an acceptable range of the
Target Allocation percentages. If material changes are made, those changes will
be reflected in the Prospectus. However, it may take some time to fully
implement the changes. ING IM will implement the changes over a reasonable
period of time while seeking to minimize disruptive effects and added costs to
the Fund and the Underlying Funds.

ING IM intends to rebalance the Fund on a periodic basis to attain the Target
Allocation investment allocations. When the Fund receives new investment
proceeds or redemption requests, depending on the Fund's current cash reserves,
ING IM may determine to purchase additional shares or redeem shares of
Underlying Funds. In making those purchases or redemptions, ING IM will attempt
to rebalance the Fund's holdings of Underlying Funds to bring them more closely
in line with the Fund's Target Allocations. If ING IM believes it is in the best
interests of the Fund and its shareholders to deviate from the Target
Allocations, it may rebalance more frequently, limit the degree of rebalancing
or avoid rebalancing altogether, pending further analysis and more favorable
market conditions.


INVESTMENT OBJECTIVES, MAIN INVESTMENTS AND RISKS OF THE UNDERLYING FUNDS


The Fund seeks to meet its investment objective by allocating its assets among
the Underlying Funds. Because the Fund invests in the Underlying Funds,
shareholders will be affected by the investment strategies of each Underlying
Fund. Information is provided below on each Underlying Fund, including its
investment objective, main investments, main risks, investment adviser, and
sub-adviser. This information is intended to provide potential investors in the
Fund with information that they may find useful in understanding the investment
history and risks of the Underlying Funds. Please refer to the section entitled
"More Information About Risks" on page 23 for an expanded discussion of the
risks listed below for a particular Underlying Fund.


You should note that over time the Fund will alter its allocation of assets
among the Underlying Funds, and may add or delete Underlying Funds that are
considered for investment. Therefore, it is not possible to predict the extent
to which the Fund will be invested in each Underlying Fund at any one time. As a
result, the degree to which the Fund may be subject to the risks of a particular
Underlying Fund will depend on the extent to which the Fund has invested in the
Underlying Fund.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                  More Information on Investment Strategies    7




MORE INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------------------

         DESCRIPTION OF THE INVESTMENT OBJECTIVES, MAIN INVESTMENTS AND
                          RISKS OF THE UNDERLYING FUNDS


                                                  UNDERLYING                         INVESTMENT
  INVESTMENT ADVISER/SUB-ADVISER                     FUND                             OBJECTIVE
INVESTMENT ADVISER:                 ING Disciplined International         Long-term capital appreciation.
ING Investments, LLC                SmallCap Fund

SUB-ADVISER:
ING Investment Management Co.

                                                MAIN INVESTMENTS                        MAIN RISKS
                                    Invests at least 80% of its assets     Derivatives risk, foreign investing
                                    in securities of small-                risk, inability to sell securities risk,
                                    capitalization companies (those        market trends risk, non-
                                    that have a market capitalization      diversified investment company
                                    that falls in the range of             risk, other investment companies
                                    companies in the S&P/Citigroup         risk, portfolio turnover risk, price
                                    Extended Market Index World            volatility risk, securities lending
                                    Ex. U.S. Index). At least 65% of its   risk, small-sized companies risk,
                                    assets will be invested in             and value investing risk.
                                    companies located in a number
                                    of different countries, other than
                                    the United States. May invest up
                                    to 35% of its assets in U.S.
                                    issuers. May invest in companies
                                    with emerging securities
                                    markets. May invest in
                                    derivatives, including but not
                                    limited to, futures, options,
                                    foreign currency contracts and
                                    futures contracts. May invest in
                                    other investment companies to
                                    the extent permitted by the
                                    Investment Company Act of
                                    1940, as amended ("1940 Act")
                                    and the rules and regulations
                                    thereunder. The Fund is non
                                    diversified which means it may
                                    invest a significant portion of its
                                    assets in a single issuer.

                                                  UNDERLYING                         INVESTMENT
  INVESTMENT ADVISER/SUB-ADVISER                     FUND                             OBJECTIVE
INVESTMENT ADVISER:                 ING Emerging                           Maximum long-term capital appreciation.
ING Investments, LLC                Countries Fund

SUB-ADVISER:
Brandes Investment Partners, L.P.

                                                MAIN INVESTMENTS                        MAIN RISKS
                                    Invests at least 80% of its assets     Convertible securities risk,
                                    in securities of issuers located in    emerging markets investments
                                    a number of different countries        risk, foreign investing risk,
                                    with emerging securities               inability to sell securities risk,
                                    markets. The Fund may invest in        market trends risk, price volatility
                                    large-, mid- and small-sized           risk, securities lending risk, small-
                                    companies. The Fund holds              and mid- capitalization
                                    common stocks, preferred stocks,       companies risk and value
                                    American, European and Global          investing risk.
                                    Depositary Receipts and
                                    convertible securities. The Fund
                                    will typically invest, at the time
                                    of purchase, up to the greater of
                                    either: (1) 20% of total Fund
                                    assets in any particular country
                                    or industry at the time of
                                    purchase, or (2) 150% of the
                                    weighting of such country or
                                    industry as represented in the
                                    Morgan Stanley International
                                    Emerging Markets Index at the
                                    time of purchase.


8    More Information on Investment Strategies




MORE INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------------------


                                                  UNDERLYING                         INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                      FUND                             OBJECTIVE
INVESTMENT ADVISER:                 ING Global Equity                      Growth of capital with dividend
ING Investments, LLC                Dividend Fund                          income as a secondary consideration.

SUB-ADVISER:
ING Investment Management
Advisors B.V.

                                               MAIN INVESTMENTS                        MAIN RISKS
                                    Invests at least 80% of its assets     Convertible securities risk,
                                    in a portfolio of equity securities    foreign investing risk, inability to
                                    of dividend-paying companies.          sell securities risk, market trends
                                    At least 65% of its net assets will    risk, price volatility risk, small-
                                    be invested in equity securities of    and mid-sized companies risk
                                    issuers of a number of different       and securities lending risk.
                                    countries, one of which may be
                                    the United States, with at least
                                    75% of total assets invested in
                                    common and preferred stocks,
                                    warrants and convertible
                                    securities. May invest in
                                    companies located in countries
                                    with emerging securities
                                    markets.

                                                  UNDERLYING                         INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                      FUND                             OBJECTIVE
INVESTMENT ADVISER:                 ING Global Real                        High total return.
ING Investments, LLC                Estate Fund

SUB-ADVISER:
Clarion Real Estate Securities L.P
                                               MAIN INVESTMENTS                        MAIN RISKS
                                    Invests at least 80% of its assets     Concentration risk, foreign
                                    in a portfolio of equity securities    investing risk, inability to sell
                                    of companies that are principally      securities risk, market trends risk,
                                    engaged in the real estate             non-diversified investment
                                    industry. The Fund expects these       company risk, price volatility risk,
                                    investments to be in common            real estate risk, securities lending
                                    stocks of large-, mid- and small-      risk and small- and mid-sized
                                    sized companies, including real        companies risk.
                                    estate investment trusts. May
                                    invest in companies located in
                                    countries with emerging
                                    securities markets. The Fund is
                                    non-diversified, which means it
                                    may invest a significant portion
                                    of its assets in a single issuer.


                                                 UNDERLYING                         INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                      FUND                             OBJECTIVE
INVESTMENT ADVISER:                 ING Index Plus                         Seeks to outperform the total
ING Investments, LLC                International Equity                   return performance of the Morgan
                                    Fund                                   Stanley Capital International
SUB-ADVISER:                                                               Europe, Australasia and Far East
ING Investment Management                                                  (Reg. TM) Index ("MSCI EAFE
Advisors B.V.                                                              (Reg. TM)"), while maintaining
                                                                           a market level of risk.

                                               MAIN INVESTMENTS                        MAIN RISKS
                                    Invests at least 80% of its assets     Convertible securities risk,
                                    in stocks includes in the MSCI         derivatives risk, foreign investing
                                    EAFE(Reg. TM) Index, exchange-traded   risk, inability to sell securities risk,
                                    funds and derivatives, including       other investment companies risk,
                                    futures and options whose              portfolio turnover risk, price
                                    economic returns are similar to        volatility risk, securities lending
                                    the MSCI EAFE(Reg. TM) Index or its    risk and small- and mid-sized
                                    components. May also invest in         companies risk.
                                    securities that are convertible
                                    into common stocks included in
                                    the MSCI EAFE(Reg. TM) Index. At any
                                    one time, the Fund will hold
                                    between 300 to 400 of the stocks
                                    included in the Index.

                                                 UNDERLYING                         INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                      FUND                             OBJECTIVE
INVESTMENT ADVISER:                 ING Index Plus                         Seeks to outperform the total
ING Investments, LLC                MidCap Fund                            return performance of the
                                                                           Standard & Poor's MidCap
SUB-ADVISER:                                                               400 Index, while maintaining
ING Investment Management Co.                                              a market level of risk.

                                              MAIN INVESTMENTS                        MAIN RISKS
                                    Invests at least 80% of its assets     Derivatives risk, manager risk,
                                    in securities of mid-capitalization    mid-sized companies risk, other
                                    companies included in the S&P          investment companies risk, price
                                    MidCap 400 Index. The Sub-             volatility risk, and securities
                                    Adviser defines mid-                   lending risk.
                                    capitalization companies as
                                    companies that are included in
                                    the Index at the time of
                                    purchase. May invest in
                                    derivative instruments. May
                                    invest in other investment
                                    companies to the extent
                                    permitted under the 1940 Act
                                    and the rules and regulations
                                    thereunder.

[GRAPHIC APPEARS HERE]

If you have any questions, please call 1-800-992-0180.


                                  More Information on Investment Strategies    9




MORE INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------------------


                                               UNDERLYING                            INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                   FUND                                OBJECTIVE
INVESTMENT ADVISER:                 ING Index Plus                         Seeks to outperform the total
ING Investments, LLC                SmallCap Fund                          return performance of the
                                                                           Standard & Poor's SmallCap
SUB-ADVISER:                                                               600 Index, while maintaining a
ING Investment Management Co.                                              market level of risk.

                                           MAIN INVESTMENTS                         MAIN RISKS
                                    Invests at least 80% of its assets     Derivatives risk, manager risk,
                                    in securities of small-                other investment companies risk,
                                    capitalization companies               price volatility risk, securities
                                    included in the S&P SmallCap 600       lending risk and small-sized
                                    Index. The Sub-Adviser defines         companies risk.
                                    small-capitalization companies as
                                    companies that are included in
                                    the Index at the time of
                                    purchase. May invest in
                                    derivative instruments. May
                                    invest in other investment
                                    companies to the extent
                                    permitted under the 1940 Act
                                    and the rules and regulations
                                    thereunder.

                                               UNDERLYING                            INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                   FUND                                OBJECTIVE
INVESTMENT ADVISER:                 ING Institutional                      High level of current income,
ING Investments, LLC                Prime Money Market                     consistent with the preservation
                                    Fund                                   of capital and liquidity and the
SUB-ADVISER:                                                               maintenance of a stable $1.00
ING Investment Management Co.                                              NAV per share.

                                           MAIN INVESTMENTS                         MAIN RISKS
                                    Invests in a portfolio of high-        Concentration risk, credit and
                                    quality, U.S. dollar denominated       interest rate risk, foreign
                                    short-term debt securities that        investing risk, mortgage-related
                                    are determined by the sub-             securities risk, other investment
                                    adviser to present minimal credit      companies risk, prepayment risk,
                                    risks. Obligations in which the        repurchase agreement risk and
                                    Fund invests generally have            U.S. government securities &
                                    remaining maturities of 397 days       obligations risk.
                                    or less, although upon satisfying
                                    certain conditions of Rule 2a-7,
                                    the Fund may, to the extent
                                    permissible, invest in instruments
                                    subject to repurchase
                                    agreements and certain variable
                                    and floating rate obligations
                                    that bear longer final maturity.
                                    The dollar-weighted average
                                    portfolio maturity of the Fund
                                    will not exceed 90 days. The
                                    Fund will invest in obligations
                                    permitted to be purchased under
                                    Rule 2a-7. May invest more than
                                    25% of its total assets in
                                    instruments issued by domestic
                                    banks. May significantly invest in
                                    securities issued by financial
                                    services companies including,
                                    among other entities, banks and
                                    bank holding companies,
                                    investment banks, trust
                                    companies, insurance companies,
                                    finance companies and broker-
                                    dealers. May purchase securities
                                    on a when-issued basis and
                                    purchase or sell them on a
                                    forward commitment basis. May
                                    also invest in variable rate master
                                    demand obligations.


10   More Information on Investment Strategies




MORE INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------------------


                                                UNDERLYING                              INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                    FUND                                  OBJECTIVE
INVESTMENT ADVISER:                 ING Intermediate                       High level of current income,
ING Investments, LLC                Bond Fund                              consistent with the preservation
                                                                           of capital and liquidity.
SUB-ADVISER:
ING Investment Management Co.

                                             MAIN INVESTMENTS                            MAIN RISKS
                                    Invests at least 80% of its assets     Credit risk, derivatives risk,
                                    in a portfolio of bonds,               extension risk, foreign investing
                                    including, but not limited to,         risk, high-yield, lower-grade debt
                                    corporate, government and              securities risk, inability to sell
                                    mortgage bonds, which, at the          securities risk, interest rate risk,
                                    time of investment, are rated          mortgage-related securities risk,
                                    investment grade (at least BBB-        other investment companies risk,
                                    by Standard & Poor's Rating            portfolio turnover risk,
                                    Corporation or Baa3 by Moody's         prepayment risk, price volatility
                                    Investors Service, Inc. or have an     risk, securities lending risk and
                                    equivalent rating by a nationally      U.S. government securities &
                                    recognized statistical rating          obligations risk.
                                    organization or of comparable
                                    quality if unrated). May invest a
                                    portion of its assets in high-yield
                                    debt securities. The Fund will
                                    seek to maintain a minimum
                                    average portfolio quality rating
                                    of at least investment grade.
                                    Generally, the sub-adviser
                                    maintains a dollar-weighted
                                    average duration between three
                                    and ten years for the Fund. The
                                    Fund may also invest in preferred
                                    stocks, high-quality money
                                    market instruments, municipal
                                    bonds, debt securities of foreign
                                    issuers, securities denominated in
                                    foreign currencies, foreign
                                    currencies, mortgage- and asset-
                                    backed securities, options and
                                    futures contract involving
                                    securities, securities indices and
                                    interest rates, including options
                                    and futures contracts
                                    denominated in foreign
                                    securities, May engage in dollar
                                    roll transactions and swap
                                    agreements. May invest in other
                                    investment companies to the
                                    extent permitted under the 1940
                                    Act and the rules and regulations
                                    thereunder.

                                                UNDERLYING                             INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                    FUND                                 OBJECTIVE
ADVISER:                            ING Tactical                           Seeks to outperform the Standard &
ING Investments LLC                 Asset Allocation                       Poor's 500(Reg. TM) Composite
                                    Fund                                   Stock Price Index by overweighting
SUB-ADVISER:                                                               and underweighting various
ING Investment Management Co.                                              global equity, bond and currency
                                                                           markets.

                                                MAIN INVESTMENTS                        MAIN RISKS
                                    Invests primarily in S&P 500(Reg. TM)  Asset allocation risk, convertible
                                    Index equities and equity              and debt securities risk, credit
                                    securities of issuers located          risk, derivatives risk, emerging
                                    within and outside the U.S.            markets risk, foreign investing
                                    equity securities include, but are     risk, inability to sell securities risk,
                                    not limited to, common and             interest rate risk, market trends
                                    preferred, warrants and                risk, other investment companies
                                    convertible securities. The Fund       risk, prepayment or call risk, price
                                    will also invest in derivatives,       volatility risk, securities lending
                                    including, but not limited to,         risk and small- and mid-
                                    futures, swaps and forward             capitalization companies risk.
                                    contracts. The Fund may also
                                    invest in other investment
                                    companies to the extent
                                    permitted under the Investment
                                    Company Act of 1940 and the
                                    rules and regulations thereunder.



[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                  More Information on Investment Strategies   11




SHAREHOLDER GUIDE                                         CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------

ING PURCHASE OPTIONS

You may select from up to five separate classes of shares. Class A, Class B,
Class C, Class I and Class W shares. Class I and Class W shares are not offered
in this Prospectus.


CLASS A

.   Front-end sales charge, as described later in this section.

.    Distribution and service (12b-1) fees of 0.25%.

CLASS B

.    No front-end sales charge; all your money goes to work for you right away.

.    Distribution and service (12b-1) fees of 1.00%.

.    A contingent deferred sales charge ("CDSC"), as described later in this
     section.

.    Automatic conversion to Class A shares after eight years, thus reducing
     future annual expenses.

CLASS C

.    No front-end sales charge; all your money goes to work for you right away.

.    Distribution and service (12b-1) fees of 1.00%.

.    A 1.00% CDSC on shares sold within one year of purchase.

.    No automatic conversion to Class A shares, so annual expenses continue at
     the Class C level throughout the life of your investment.

When choosing between classes, you should carefully consider:

.    How long you plan to hold shares of the Fund;

.    The amount of your investment;

.    The expenses you'll pay for each class including ongoing annual expenses
     along with the initial sales charge or the CDSC; and

.    Whether you qualify for any sales charge discounts.

The relative impact of the initial sales charge and ongoing annual expenses will
depend on the length of time a share is held. Higher distribution fees mean a
higher expense ratio, so Class B shares and Class C shares pay correspondingly
lower dividends and may have a lower net asset value ("NAV") than Class A
shares.

Class B shares and Class C shares are not intended for purchase in excess of
$100,000 and $1,000,000, respectively. Purchase orders from an individual
investor for Class B shares in excess of $100,000 and for Class C shares in
excess of $1,000,000 will be declined.

Because the Fund may not be able to identify an individual investor's trading
activities when investing through omnibus account arrangements, you and/or your
investment professional are responsible for ensuring that your investment in
Class B shares does not exceed the maximum of $100,000 and your investment in
Class C shares does not exceed $1,000,000. The Fund cannot ensure that the Fund
will identify purchase orders that would cause your investment in Class B shares
or Class C shares to exceed the maximum allowed amount. When investing through
such arrangements, you and/or your investment professional should be diligent in
determining that you have selected the appropriate share class for you.


You and/or your investment professional also should take care to assure that you
are receiving any sales charge reductions or other benefits to which you may be
entitled. As an example, as is discussed below, you may be able to reduce a
Class A sales charge payable by aggregating purchases to achieve breakpoint
discounts. The Fund uses the net amount invested when determining whether a
shareholder has reached the required investment amount in order to be eligible
for a breakpoint discount. In order to ensure that you are receiving any
applicable sales charge reduction, it may be necessary for you to inform the
Fund or your financial intermediary of the existence of other accounts that may
be eligible to be aggregated. The SAI discusses specific classes of investors
who may be eligible for a reduced sales charge. In addition, more information
regarding sales charges and applicable breakpoints may be found on the Fund's
website by going to www.ingfunds.com, clicking on the "Forms & Literature" link,
and then using the "Shareholder Guides" link found under the "Prospectuses &
Reports" section and selecting the appropriate Fund link. Finally, there are
classes that are not available in this Prospectus that may be more appropriate
for you. Please review the disclosure about all of the available Fund classes
carefully. Before investing, you should discuss which share class may be right
for you with your investment professional and review the prospectus for that
share class.


DISTRIBUTION AND SHAREHOLDER SERVICE FEES

To pay for the cost of promoting the Fund and servicing your shareholder
account, each class of the Fund has adopted a Rule 12b-1 plan which requires
fees to be paid out of the assets of each class. Over time the fees will
increase your cost of investing and may exceed the cost of paying other types of
sales charges.

HOW WE COMPENSATE INTERMEDIARIES FOR SELLING ING MUTUAL FUNDS

ING mutual funds are distributed by ING Funds Distributor, LLC ("Distributor").
The Distributor is a broker-dealer that is licensed to sell securities. The
Distributor generally does not sell directly to the public but sells and markets
its products through intermediaries such as other broker-dealers. Each ING
mutual fund also has an investment adviser ("Adviser") which is responsible for
managing the money invested in each of the mutual funds. Both of these entities
(collectively, "ING") may compensate an intermediary for selling ING mutual
funds.

Only persons licensed with the Financial Industry Regulatory Authority ("FINRA")
as a registered representative (often referred to as a broker or financial
advisor) and associated with a specific broker-dealer may sell an ING mutual
fund to you. The

12   Shareholder Guide




CHOOSING A SHARE CLASS                                         SHAREHOLDER GUIDE
--------------------------------------------------------------------------------

Distributor has agreements in place with each of these broker-dealers defining
specifically what those broker-dealers will be paid for the sale of a particular
ING mutual fund. Those broker-dealers then pay the registered representative who
sold you the mutual fund some or all of what they receive from ING. They may
receive a payment when the sale is made and can, in some cases, continue to
receive payments while you are invested in the mutual fund.

The Fund's Adviser or Distributor, out of its own resources and without
additional cost to the Fund or its shareholders, may provide additional cash or
non-cash compensation to intermediaries selling shares of the Fund including
affiliates of the Adviser and the Distributor. These amounts would be in
addition to the distribution payments made by the Fund under the distribution
agreements. The payments made under these arrangements are paid by the Adviser
or the Distributor. Additionally, if a fund is not sub-advised or is sub-advised
by an ING entity, ING may retain more revenue than on those funds it must pay to
have sub-advised by non-affiliated entities. Management personnel of ING may
receive additional compensation if the overall amount of investments in funds
advised by ING meets certain target levels or increases over time.

The Distributor may pay, from its own resources, additional fees to these
broker-dealers or other financial institutions including affiliated entities.
These additional fees paid to intermediaries may take the following forms: (1) a
percentage of that entity's customer assets invested in ING mutual funds; (2) as
a percentage of that entity's gross sales; or (3) some combination of these
payments. These payments may, depending on the broker-dealer's satisfaction of
the required conditions, be periodic and may be up to: (1) 0.30% per annum of
the value of the Fund's shares held by the broker-dealer's customers; or (2)
0.20% of the value of the Fund's shares sold by the broker-dealer during a
particular period. In accordance with these practices, if that initial
investment averages a value of $10,000 over the year, the Distributor could pay
a maximum of $30 on those assets. If you invested $10,000, the Distributor could
pay a maximum of $20 for that sale.

The Fund's Adviser or Distributor may provide additional cash or non-cash
compensation to third parties selling our mutual funds including affiliated
companies. This may take the form of cash incentives and non-cash compensation
and may include, but is not limited to: cash; merchandise; trips; occasional
entertainment; meals or tickets to a sporting event; client appreciation events;
payment for travel expenses (including meals and lodging) to pre-approved
training and education seminars; and payment for advertising and sales
campaigns. The Distributor may also pay concessions in addition to those
described above to broker-dealers so that ING mutual funds are made available by
those broker-dealers for their customers. The Sub-Adviser of the Fund may
contribute to non-cash compensation arrangements.

Not all mutual funds pay the same amount to the broker-dealers who sell their
mutual funds. Broker-dealers can receive different payments based on the mutual
funds they offer, the companies with whom they are doing business, and how much
they sell. What these broker-dealers are paid also varies depending on the class
of mutual fund you purchase.

The top 25 firms we paid to sell our mutual funds, as of the end of the last
calendar year are: A.G. Edwards & Sons, Inc.; Bear Stearns Securities Corp;
Charles Schwab & Co; Citigroup Global Markets; Directed Services LLC; Financial
Network Investment; First Clearing, LLC; H&R Block Financial Advisors; ING
DIRECT Securities, Inc.; ING Financial Advisors; ING Life Insurance and Annuity
Company; Linsco Private Ledger Financial; Merrill Lynch; MS & Co. ("Morgan
Stanley"); Multi Financial Securities; National Financial Services Corp;
Oppenheimer & Co.; Pershing, LLC; Primevest Financial Services, Inc.; Prudential
Investment Management Services; Raymond James Financial Services; RBC Dain
Rauscher, Inc.; UBS Financial Services, Inc.; Wachovia Securities; and Wells
Fargo Investments.

Your registered representative or broker-dealer could have a financial interest
in selling you a particular mutual fund, or the mutual funds of a particular
company, to increase the compensation they receive. Please make sure you read
fully each mutual fund prospectus and discuss any questions you have with your
registered representative.

SALES CHARGE CALCULATION

CLASS A

Class A shares of the Fund are sold subject to the following sales charge:


                                AS A % OF           AS A % OF NET
YOUR INVESTMENT             OFFERING PRICE/(1)/    AMOUNT INVESTED
 Less than $50,000                5.75                   6.10
 $50,000 - $99,999                4.50                   4.71
 $100,000 - $249,999              3.50                   3.63
 $250,000 - $499,999              2.50                   2.56
 $500,000 - $1,000,000            2.00                   2.04
 $1,000,000 and over                                See below


----------
(1)   The term "offering price" includes the front-end sales charge.

INVESTMENTS OF $1 MILLION OR MORE. There is no front-end sales charge if you
purchase Class A shares in an amount of $1 million or more. However, except as
described below, the shares will be subject to a CDSC if they are redeemed
within one or two years of purchase, depending on the amount of the purchase, as
follows:

                                               PERIOD DURING WHICH
YOUR INVESTMENT                     CDSC          CDSC APPLIES
 $1,000,000 - $2,499,999            1.00%            2 years
 $2,500,000 - $4,999,999            0.50%             1 year
 $5,000,000 and over                0.25%             1 year

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                          Shareholder Guide   13




SHAREHOLDER GUIDE                                         CHOOSING A SHARE CLASS
--------------------------------------------------------------------------------

CLASS B AND CLASS C

Class B and Class C shares are offered at their NAV per share without any
initial sales charge. However, you may be charged a CDSC on shares that you sell
within a certain period of time after you bought them. The amount of the CDSC is
based on the lesser of the NAV of the shares at the time of purchase or
redemption. The CDSCs are as follows:

CLASS B DEFERRED SALES CHARGE

                                  CDSC ON SHARES
YEARS AFTER PURCHASE                BEING SOLD
 1st year                              5.00%
 2nd year                              4.00%
 3rd year                              3.00%
 4th year                              3.00%
 5th year                              2.00%
 6th year                              1.00%
 After 6th year                        none

CLASS C DEFERRED SALES CHARGE

                                  CDSC ON SHARES
YEARS AFTER PURCHASE                BEING SOLD
 1st year                              1.00%
 After 1st year                        none

To keep your CDSC as low as possible, each time you place a request to redeem
shares the Fund will first redeem shares in your account that are not subject to
a CDSC and then will sell shares that have the lowest CDSC.

There is no CDSC on certain shares acquired through the reinvestment of
dividends and capital gains distributions.

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCED OR WAIVED FRONT-END SALES CHARGES. You may reduce the initial sales
charge on a purchase of Class A shares of the Fund by combining multiple
purchases to take advantage of the breakpoints in the sales charge schedules.
You may do this by:

.    LETTER OF INTENT - lets you purchase shares over a 13-month period and pay
     the same sales charge as if the shares had all been purchased at once.

.    RIGHTS OF ACCUMULATION - lets you add the value of shares of any open-end
     ING Fund (excluding ING Money Market Fund and ING Classic Money Market
     Fund) you already own to the amount of your next purchase for purposes of
     calculating the sales charge.

.   COMBINATION PRIVILEGE - shares held by investors in the ING Funds which
     impose a CDSC may be combined with Class A shares for a reduced sales
     charge.

In addition, certain investors may be eligible for special purchases of Class A
shares at NAV. This may be done by:

.    REINSTATEMENT PRIVILEGE - If you sell Class A shares of the Fund (or shares
     of other ING Funds managed by ING Investments, LLC) and reinvest any of the
     proceeds in Class A shares of another ING Fund within 90 days. For
     additional information regarding the reinstatement privilege, contact a
     Shareholder Services Representative, or see the SAI; or

.    PURCHASES BY CERTAIN ACCOUNTS - Class A shares may be purchased at NAV by
     certain fee-based programs offered through selected registered investment
     advisers, broker dealers and other financial intermediaries.

See the Account Application or the SAI for details, or contact your investment
professional or a Shareholder Services Representative for more information.

CDSC WAIVERS. If you notify the Transfer Agent at the time of redemption, the
CDSC for each class will be waived in the following cases:

.    Redemptions following the death or permanent disability of a shareholder if
     made within one year of death or the initial determination of permanent
     disability. The waiver is available only for shares held at the time of
     death or initial determination of permanent disability.

.    For Class B and Class C shares, redemptions pursuant to a Systematic
     Withdrawal Plan, up to a maximum of 12% per year of a shareholder's account
     value based on the value of the account at the time the plan is established
     and annually thereafter, provided all dividends and distributions are
     reinvested and the total redemptions do not exceed 12% annually.

.    Reinvestment of dividends and capital gains distributions.

If you think you may be eligible for a CDSC waiver, contact your investment
professional or a Shareholder Services Representative.

REINSTATEMENT PRIVILEGE. If you sell Class A, Class B or Class C shares of the
Fund, you may be eligible for a full or prorated credit of the CDSC paid on the
sale when you make an investment up to the amount redeemed in the same share
class within 90 days of the eligible sale. Reinstated Class B and Class C shares
will retain their original cost and purchase date for purposes of the CDSC. This
privilege can be used only once per calendar year. If you want to use the
Reinstatement Privilege, contact your investment professional or a Shareholder
Services Representative, or see the SAI for more information.

14   Shareholder Guide




HOW TO PURCHASE SHARES                                         SHAREHOLDER GUIDE
--------------------------------------------------------------------------------

PURCHASE OF SHARES

The minimum initial investment amounts for the Fund are as follows:

.    Non-retirement accounts: $1,000

.    Retirement accounts: $250

.    Pre-Authorized Investment Plan: $1,000 to open; you must invest at least
     $100 a month.

.    Certain omnibus accounts (accounts of investors who purchase fund shares
     through certain financial intermediaries where the share holdings are held
     in the name of the financial intermediary): $250

There are no investment minimums for any subsequent purchases.

Make your investment using the methods outlined in the table on the right.

The Fund and the Distributor reserve the right to reject any purchase order.
Please note that cash, travelers checks, third-party checks, money orders and
checks drawn on non-U.S. banks (even if payment may be effected through a U.S.
bank) generally will not be accepted. The Fund and the Distributor reserve the
right to waive minimum investment amounts. Waiver of the minimum investment
amount can increase operating expenses of the Fund.The Fund and the Distributor
reserve the right to liquidate sufficient shares to recover annual transfer
agent fees or to close your account and redeem your shares should you fail to
maintain your account value at a minimum of $1,000 ($250 for IRAs).


                       Initial                 Additional
   Method            Investment                Investment
BY CONTACTING     An investment             Visit or consult an
YOUR            professional with an      investment
INVESTMENT      authorized firm can       professional.
PROFESSIONAL    help you establish and
                maintain your account.
BY MAIL           Visit or consult an       Fill out the Account
                investment                Additions form
                professional. Make        included on the bottom
                your check payable to     of your account
                the ING Funds and mail    statement along with
                it, along with a          your check payable to
                completed Account         ING Funds and mail
                Application. Please       them to the address on
                indicate your             the account statement.
                investment                Remember to write
                professional on the       your account number
                New Account               on the check.
                Application.
BY WIRE           Call the ING              Wire the funds in the
                Operations                same manner described
                Department at             under "Initial
                (800) 922-0180            Investment."
                and select Option 4 to
                obtain an account
                number and indicate
                your investment
                professional on the
                account.
                Instruct your bank to
                wire funds to the Fund
                in the care of:
                State Street Bank
                and Trust Company
                ABA # 011000028
                Boston, MA
                credit to:
                __________
                (the Fund)
                A/C #75000216; for
                further credit to
                Shareholder
                A/C #
                __________
                (A/C # you received
                over the telephone)
                Shareholder Name:

                __________
                (Your Name Here)
                After wiring funds
                you must complete
                the Account
                Application and send
                it to:
                ING Funds
                P.O. Box 219368
                Kansas City, MO
                64121-9368


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                          Shareholder Guide   15




SHAREHOLDER GUIDE                                         HOW TO PURCHASE SHARES
--------------------------------------------------------------------------------

CUSTOMER IDENTIFICATION

To help the government fight the funding of terrorism and money laundering
activities, federal law requires all financial institutions to obtain, verify
and record information that identifies each person that opens an account, and to
determine whether such person's name appears on government lists of known or
suspected terrorists and terrorist organizations.

What this means for you: The Fund, the Distributor, or a third-party selling you
the Fund must obtain the following information for each person that opens an
account:

.    Name;

.    Date of birth (for individuals);

.    Physical residential address (although post office boxes are still
     permitted for mailing); and

.    Social security number, taxpayer identification number, or other
     identifying number.

You may also be asked to show your driver's license, passport or other
identifying documents in order to verify your identity. In addition, it may be
necessary to verify your identity by cross-referencing your identification
information with a consumer report or other electronic database. Additional
information may be required to open accounts for corporations and other
non-natural persons.

FEDERAL LAW PROHIBITS THE FUND, THE DISTRIBUTOR AND OTHER FINANCIAL INSTITUTIONS
FROM OPENING ACCOUNTS UNLESS THEY RECEIVE THE MINIMUM IDENTIFYING INFORMATION
LISTED ABOVE. THEY ALSO MAY BE REQUIRED TO CLOSE YOUR ACCOUNT IF THEY ARE UNABLE
TO VERIFY YOUR IDENTITY WITHIN A REASONABLE TIME.

FREQUENT TRADING - MARKET TIMING

The Fund is intended for long-term investment and not as a short-term trading
vehicle. Accordingly, organizations or individuals that use market timing
investment strategies should not purchase shares of the Fund. The Fund reserves
the right, in its sole discretion and without prior notice, to reject, restrict
or refuse purchase orders whether directly or by exchange, including purchase
orders that have been accepted by a shareholder's or retirement plan
participant's intermediary, that the Fund determines not to be in the best
interest of the Fund.

The Fund believes that market timing or frequent, short-term trading in any
account, including a retirement plan account, is not in the best interest of the
Fund or its shareholders. Due to the disruptive nature of this activity, it can
adversely affect the ability of the Adviser to invest assets in an orderly,
long-term manner. Frequent trading can raise Fund expenses through: increased
trading and transaction costs; increased administrative costs; and lost
opportunity costs. This in turn can have an adverse effect on Fund performance.

Because the Underlying Funds invest in foreign securities it may present greater
opportunities for market timers and thus be at a greater risk for excessive
trading. If an event occurring after the close of a foreign market, but before
the time an Underlying Fund computes its current NAV, causes a change in the
price of the foreign security and such price is not reflected in the Underlying
Fund's current NAV, investors may attempt to take advantage of anticipated price
movements in securities held by the Underlying Funds based on such pricing
discrepancies. This is often referred to as "price arbitrage." Such price
arbitrage opportunities may also occur in Underlying Funds which do not invest
in foreign securities. For example, if trading in a security held by an
Underlying Fund is halted and does not resume prior to the time the Underlying
Fund calculates its NAV such "stale pricing" presents an opportunity for
investors to take advantage of the pricing discrepancy. Similarly, Underlying
Funds that hold thinly-traded securities, such as certain small-capitalization
securities, may be exposed to varying levels of pricing arbitrage. The
Underlying Funds have adopted fair valuation policies and procedures intended to
reduce the Underlying Funds' exposure to price arbitrage, stale pricing and
other potential pricing discrepancies. However, to the extent that an Underlying
Fund does not immediately reflect these changes in market conditions, short-term
trading may dilute the value of the Underlying Funds' shares which negatively
affects long-term shareholders.


The Fund and Underlying Funds' Boards of Trustees ("Boards") have adopted
policies and procedures designed to deter frequent, short-term trading in shares
of the Fund and the Underlying Funds. Consistent with this policy, the Fund and
the Underlying Funds monitor trading activity. Shareholders may make exchanges
among their accounts with ING Funds four (4) times each year. All exchanges
occurring on the same day for all accounts (individual, IRA, 401(k), etc.)
beneficially owned by the same shareholder will be treated as a single
transaction. Subsequent transactions may not be effected within 30 days of the
last transaction. In addition, purchase and sale transactions that are the
functional equivalent of exchanges will be subject to these limits. On January 1
of each year, the limit restriction will be reset for all shareholders and any
trade restrictions that were placed on an account due to a violation of the
policy in the prior year will be removed. The Funds and the Underlying Funds
reserve the right to specifically address any trading that might otherwise
appear to comply with the restrictions described above if after consultation
with appropriate compliance personnel, it is determined that such trading is
nevertheless abusive or adverse to the interests of long-term shareholders. The
Fund and the Underlying Funds also reserve the right to modify the frequent
trading-market timing policy at any time without prior notice depending on the
needs of the Fund and the Underlying Funds and/or state or federal regulatory
requirements.


If an activity is identified as problematic after further investigation, the
Fund and the Underlying Funds reserve the right to take any necessary action to
deter such activity. Such action may include, but not be limited to: rejecting
additional purchase orders, whether directly or by exchange; extending
settlement of a redemption up to seven days; rejecting all purchase orders from
broker-dealers or their registered representatives suspected of violating the
Fund and the Underlying Funds' frequent trading policy; or termination of the
selling group agreement or other agreement with broker-dealers or other
financial intermediaries associated with frequent trading.

16   Shareholder Guide




HOW TO PURCHASE SHARES                                         SHAREHOLDER GUIDE
--------------------------------------------------------------------------------

Although the restrictions described above are designed to discourage frequent,
short-term trading, none of them alone, nor all of them taken together, can
eliminate the possibility that frequent, short-term trading activity in the Fund
and the Underlying Funds will occur. Moreover, in enforcing such restrictions,
the Fund and the Underlying Funds are often required to make decisions that are
inherently subjective. The Fund and the Underlying Funds strive to make these
decisions to the best of their abilities in a manner that they believe is in the
best interest of shareholders.

Shareholders may invest in the Fund and the Underlying Funds through omnibus
account arrangements with financial intermediaries. Omnibus accounts permit
intermediaries to aggregate transactions. Such intermediaries include
broker-dealers, banks, investment advisers, record keepers, retirement plans,
and fee-based accounts such as wrap fee programs. Omnibus accounts generally do
not identify customers' trading activity on an individual basis. The Fund and
the Underlying Funds administrator now has agreements which require such
intermediaries to provide detailed account information, including trading
history, upon request of the Fund and the Underlying Funds.

In some cases, the Fund and the Underlying Funds will rely on the
intermediaries' excessive trading policies and such policies shall define the
trading activity in which the shareholder may engage. This shall be the case
where the Fund and the Underlying Funds are used in certain retirement plans
offered by affiliates. With trading information received as a result of
agreements, the Fund and the Underlying Funds may make a determination that
certain trading activity is harmful to the Funds and their shareholders even if
such activity is not strictly prohibited by the intermediaries' excessive
trading policy. As a result, a shareholder investing directly or indirectly in
the Fund and the Underlying Funds may have their trading privileges suspended
without violating the stated excessive trading policy of the intermediary.

RETIREMENT PLANS

The Fund has available prototype qualified retirement plans for corporations and
for self-employed individuals. They also have available prototype IRA, Roth IRA
and Simple IRA plans (for both individuals and employers), Simplified Employee
Pension Plans, Pension and Profit Sharing Plans and Tax Sheltered Retirement
Plans for employees of public educational institutions and certain non-profit,
tax-exempt organizations. State Street Bank and Trust Company ("SSB") acts as
the custodian under these plans. For further information, contact a Shareholder
Services Representative at (800) 992-0180. SSB currently receives a $12
custodial fee annually for the maintenance of such accounts.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                          Shareholder Guide   17




SHAREHOLDER GUIDE                                           HOW TO REDEEM SHARES
--------------------------------------------------------------------------------

You may redeem shares by using the methods outlined in the table on the right.

Under unusual circumstances, the Fund may suspend the right of redemption as
allowed by federal securities laws.

SYSTEMATIC WITHDRAWAL PLAN

You may elect to make periodic withdrawals from your account on a regular basis.

.    Your account must have a current value of at least $10,000.

.    Minimum withdrawal amount is $100.

.    You may choose from monthly, quarterly, semi-annual or annual payments.

For additional information, contact a Shareholder Services Representative, or
refer to the Account Application or the SAI.

PAYMENTS

Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. The Fund has
the right to take up to seven days to pay your redemption proceeds, and may
postpone payment longer in the event of an economic emergency as determined by
the SEC. When you place a request to redeem shares for which the purchase money
has not yet been collected, the request will be executed at the next determined
NAV, but the Fund will not release the proceeds until your purchase payment
clears. This may take up to 15 days or more. To reduce such delay, purchases
should be made by bank wire or federal funds.

The Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, the Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, the Fund could elect to make payment in
securities for redemptions in excess of $250,000 or 1% of its net assets during
any 90-day period for any one shareholder. An investor may incur brokerage costs
in converting such securities to cash.

            Method                              Procedures

BY CONTACTING YOUR          You may redeem shares by contacting your
INVESTMENT PROFESSIONAL   investment professional. Investment
                          professionals may charge for their services
                          in connection with your redemption
                          request but neither the Fund nor the
                          Distributor imposes any such charge.
BY MAIL                    Send a written request specifying the Fund
                          name and share class, your account
                          number, the name(s) in which the account
                          is registered, and the dollar value or
                          number of shares you wish to redeem to:
                          ING Funds
                          P.O. Box 219368
                          Kansas City, MO 64121-9368
                          If certificated shares have been issued, the
                          certificate must accompany the written
                          request. Corporate investors and other
                          associations must have an appropriate
                          certification on file authorizing
                          redemptions. A suggested form of such
                          certification is provided on the Account
                          Application. A signature guarantee may be
                          required.
BY TELEPHONE -              You may redeem shares by telephone on
EXPEDITED REDEMPTION      all accounts other than retirement
                          accounts unless you check the box on the
                          Account Application which signifies that
                          you do not wish to use telephone
                          redemptions. To redeem by telephone, call
                          the Shareholder Services Representative at
                          (800) 992-0180.
                          RECEIVING PROCEEDS BY CHECK:
                          You may have redemption proceeds (up to
                          a maximum of $100,000) mailed to an
                          address which has been on record with ING
                          Funds for at least 30 days.
                          RECEIVING PROCEEDS BY WIRE:
                          You may have redemption proceeds
                          (subject to a minimum of $5,000) wired to
                          your pre-designated bank account. You will
                          not be able to receive redemption
                          proceeds by wire unless you check the box
                          on the Account Application which signifies
                          that you wish to receive redemption
                          proceeds by wire and attach a voided
                          check. Under normal circumstances,
                          proceeds will be transmitted to your bank
                          on the business day following receipt of
                          your instructions provided redemptions
                          may be made. In the event that share
                          certificates have been issued, you may not
                          request a wire redemption by telephone.

18   Shareholder Guide




TRANSACTION POLICIES                                           SHAREHOLDER GUIDE
--------------------------------------------------------------------------------

NET ASSET VALUE

The NAV per share for each class of the Fund is determined each business day as
of the close of regular trading ("Market Close") on the New York Stock Exchange
("NYSE") (normally 4:00 p.m. Eastern time unless otherwise designated by the
NYSE). The Fund is open for business every day the NYSE is open. The NYSE is
closed on all weekends and on all national holidays and Good Friday. Fund shares
will not be priced on those days. The NAV per share of each class of the Fund is
calculated by taking the value of the Fund's assets attributable to that class,
subtracting the Fund's liabilities attributable to that class, and dividing by
the number of shares of that class that are outstanding.


The NAV of the Fund is generally based upon the NAVs of the Underlying Funds. In
general, assets of the Underlying Funds are valued based on actual or estimated
market value, with special provisions for assets not having readily available
market quotations and short-term debt securities, and for situations where
market quotations are deemed unreliable. Investments in securities maturing in
60 days or less are valued at amortized cost, which, when combined with accrued
interest, approximates market value. Securities prices may be obtained from
automated pricing services. Shares of investment companies held by the
Underlying Funds will generally be valued at the latest NAV reported by those
investment companies. The prospectuses for those investment companies explain
the circumstances under which they will use fair value pricing and the effects
of using fair value pricing.

Trading of foreign securities may not take place every day the NYSE is open.
Also, trading in some foreign markets and on some electronic trading networks
may occur on weekends or holidays when the Fund's or an Underlying Fund's NAV is
not calculated. As a result, the NAV of the Fund may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.


When market quotations are not available or are deemed unreliable, a sub-adviser
to an Underlying Fund will use a fair value for the security that is determined
in accordance with procedures adopted by an Underlying Fund's Board. The types
of securities for which such fair value pricing might be required include, but
are not limited to:

.    Foreign securities, where a foreign security whose value at the close of
     the foreign market on which it principally trades likely would have changed
     by the time of the close of the NYSE, or the closing value is otherwise
     deemed unreliable;

.    Securities of an issuer that has entered into a restructuring;

.    Securities whose trading has been halted or suspended;

.    Fixed-income securities that have gone into default and for which there are
     no current market value quotations; and

.    Securities that are restricted as to transfer or resale.


Options that are traded over-the-counter will be valued using one of three
methods: (1) dealer quotes, (2) industry models with objective inputs, or (3) by
using a benchmark arrived at by comparing prior-day dealer quotes with the
corresponding change in the underlying security or index. Exchange traded
options will be valued using the last reported sale. If no last sale is
reported, exchange traded options will be valued using an industry accepted
model such as "Black Scholes." Options on currencies purchased by the Fund are
valued at their last bid price in the case of listed options or at the average
of the last bid prices obtained from dealers in the case of over-the-counter
options.

Each Underlying Fund's Adviser or sub-adviser may rely on the recommendations of
a fair value pricing service approved by an Underlying Fund's Board in valuing
foreign securities. Valuing securities at fair value involves greater reliance
on judgment than valuing securities that have readily available market
quotations. The Adviser makes such determinations in good faith in accordance
with procedures adopted by an Underlying Fund's Board. Fair value determinations
can also involve reliance on quantitative models employed by a fair value
pricing service. There can be no assurance that an Underlying Fund could obtain
the fair value assigned to a security if it were to sell the security at
approximately the time at which an Underlying Fund determines its NAV per share.
Please refer to the prospectus for each Underlying Fund for an explanation of
the circumstances under which an Underlying Fund will use fair pricing and the
effect of fair pricing.


PRICE OF SHARES

When you buy shares, you pay the NAV plus any applicable sales charge. When you
sell shares, you receive the NAV minus any applicable CDSC. Exchange orders are
effected at NAV.

EXECUTION OF REQUESTS

Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or the Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase Shares" have been completed. If you
purchase by wire, however, the order will be deemed to be in proper form after
the telephone notification and the federal funds wire have been received. If you
purchase by wire, you must submit an application form in a timely fashion. If an
order or payment by wire is received after Market Close, the shares will not be
credited until the next business day. For your transaction to be counted on the
day you place your order with your broker-dealer or other financial institution,
they must receive your order before Market Close and promptly transmit the order
to the Transfer Agent or the Distributor.


You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You
may rely on these confirmations in lieu of certificates as evidence of your
ownership.


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                          Shareholder Guide   19




SHAREHOLDER GUIDE                                           TRANSACTION POLICIES
--------------------------------------------------------------------------------

TELEPHONE ORDERS

The Fund and its Transfer Agent will not be responsible for the authenticity of
phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if they reasonably believe that such instructions were genuine. The
Fund and its Transfer Agent have established reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include recording telephone instructions for exchanges and expedited
redemptions, requiring the caller to give certain specific identifying
information, and providing written confirmation to shareholders of record not
later than five days following any such telephone transactions. If the Fund and
its Transfer Agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.

EXCHANGES

You may exchange shares of the Fund for shares of the same class of any other
ING Fund, except for ING Corporate Leaders Trust Fund, without paying any
additional sales charge. However, for Class A shares of ING Money Market Fund
and ING Classic Money Market Fund, for which no sales charge was paid, you must
pay the applicable sales load on an exchange into Class A shares of another
Fund. Shares subject to a CDSC will continue to age from the date that the
original shares were purchased. If you exchange shares of a Fund that at the
time you acquired the shares was a Nicholas-Applegate Mutual Fund, the shares
you receive on the exchange will be subject to the current CDSC structure and
conversion rights of the Fund being acquired, although the shares will continue
to age for CDSC and conversion purposes from the date the original shares were
acquired.

The total value of shares being exchanged must at least equal the minimum
investment requirement of the Fund into which they are being exchanged.
Exchanges of shares are sales and may result in a gain or loss for federal and
state income tax purposes.

If you exchange into ING Senior Income Fund, your ability to sell or liquidate
your investment will be limited. ING Senior Income Fund is a closed-end interval
fund and does not redeem its shares on a daily basis. It is not expected that a
secondary market for ING Senior Income Fund's shares will develop, so you will
not be able to sell them through a broker or other investment professional. To
provide a measure of liquidity, ING Senior Income Fund will normally make
monthly repurchase offers for not less than 5% of its outstanding common shares.
If more than 5% of ING Senior Income Fund's common shares are tendered, you may
not be able to completely liquidate your holdings in any one month. You also
would not have liquidity between these monthly repurchase dates. Investors
exercising the exchange privilege into ING Senior Income Fund should carefully
review the prospectus of that fund. Investors may obtain a copy of the ING
Senior Income Fund prospectus or any other ING Fund prospectus by calling (800)
992-0180 or by going to www.ingfunds.com.

In addition to the Fund available in this Prospectus, the Distributor offers
many other funds. Shareholders exercising the exchange privilege with any other
ING Fund should carefully review the prospectus of that fund before exchanging
their shares. For a list of the other funds offered by the Distributor, please
see the inside back cover of this Prospectus. Investors may obtain a copy of a
prospectus of any ING Fund not discussed in this Prospectus by calling (800)
992-0180 or by going to www.ingfunds.com.

You will automatically have the ability to request an exchange by calling a
Shareholder Services Representative unless you mark the box on the Account
Application that indicates that you do not wish to have the telephone exchange
privilege. The Fund may change or cancel its exchange policies at any time, upon
60 days' prior written notice to shareholders.

CDSC ON EXCHANGES INTO ING SENIOR INCOME FUND

You are not required to pay an applicable CDSC upon an exchange from the Fund
described in this Prospectus into ING Senior Income Fund. However, if you
exchange into ING Senior Income Fund and subsequently offer your common shares
for repurchase by that fund, the Fund's CDSC will apply. After an exchange into
ING Senior Income Fund, the time period for application of the CDSC will be
based on the first date you acquired your shares in the ING Fund.

SYSTEMATIC EXCHANGE PRIVILEGE

With an initial account balance of at least $5,000 and subject to the
information and limitations outlined above, you may elect to have a specified
dollar amount of shares systematically exchanged, monthly, quarterly,
semi-annually or annually (on or about the 10th of the applicable month), from
your account to an identically registered account in the same class of any other
open-end ING Fund, except for ING Corporate Leaders Trust Fund. This exchange
privilege may be modified at any time or terminated upon 60 days' prior written
notice to shareholders.

SMALL ACCOUNTS

Due to the relatively high cost of handling small investments, the Fund reserves
the right upon 30 days' prior written notice to redeem, at NAV (less any
applicable deferred sales charge), the shares of any shareholder whose account
(except for IRAs) has a total value that is less than the Fund minimum. Before
the Fund redeems such shares and sends the proceeds to the shareholder, it will
notify the shareholder that the value of the shares in the account is less than
the minimum amount allowed and will allow the shareholder 30 days to make an
additional investment in an amount that will increase the value of the account
to the minimum before the redemption is processed. Your account will not be
closed if its drop in value is due to Fund performance.

ACCOUNT ACCESS

Unless your Fund shares are held through a third-party fiduciary or in an
omnibus registration at your bank or brokerage firm, you may be able to access
your account information over the

20   Shareholder Guide




TRANSACTION POLICIES                                           SHAREHOLDER GUIDE
--------------------------------------------------------------------------------

internet at www.ingfunds.com, or via a touch tone telephone by calling (800)
992-0180 and selecting Option 1. Should you wish to speak with a Shareholder
Services Representative, you may call the toll-free number listed above and
select Option 2.

PRIVACY POLICY

The Fund has adopted a policy concerning investor privacy. To review the privacy
policy, contact a Shareholder Services Representative at (800) 992-0180 and
select Option 1, obtain a policy over the internet at www.ingfunds.com, or see
the privacy promise that accompanies this Prospectus.

HOUSEHOLDING

To reduce expenses, we may mail only one copy of the Fund's prospectus and each
annual and semi-annual shareholder report to those addresses shared by two or
more accounts. If you wish to receive individual copies of these documents,
please call us at (800) 992-0180 or speak to your investment professional. We
will begin sending you individual copies thirty days after receiving your
request.

PORTFOLIO HOLDINGS DISCLOSURE POLICY

A description of the policies and procedures with respect to the disclosure of
the Fund's portfolio securities is available in the SAI. The Fund posts its
portfolio holdings schedule on its website on a calendar-quarter basis and makes
it available on the first day of the second month in the next quarter. The
portfolio holdings schedule is as of the last day of the month preceding the
quarter-end (e.g., the Fund will post the quarter ending June 30 holdings on
August 1). The Fund's portfolio holdings schedule will, at a minimum, remain
available on the Fund's website until the Fund files a Form N-CSR or Form N-Q
with the SEC for the period that includes the date as of which the website
information is current. The Fund's website is located at www.ingfunds.com.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                          Shareholder Guide   21




MANAGEMENT OF THE FUND                                                   ADVISER
--------------------------------------------------------------------------------

ADVISER

ING INVESTMENTS, LLC ("ING INVESTMENTS" OR "ADVISER"), an Arizona limited
liability company, serves as the investment adviser to the Fund. ING Investments
has overall responsibility for the management of the Fund. ING Investments
oversees all investment advisory and portfolio management services for the Fund.

ING Investments is registered with the SEC as an investment adviser. ING
Investments is an indirect, wholly-owned subsidiary of ING Groep N.V. ("ING
Groep"). ING Groep is one of the largest financial services organizations in the
world with approximately 120,000 employees. Based in Amsterdam, ING Groep offers
an array of banking, insurance and asset management services to both individual
and institutional investors. ING Investments became an investment management
firm in April, 1995.

As of December 31, 2007 ING Investments managed approximately $54 billion in
assets.


The principal address of ING Investments is 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258.


ING Investments receives a monthly fee for its services based on the average
daily net assets of the Fund.


ING Investments will receive a management fee of 0.08%. Because the Fund had not
commenced operations as of the fiscal year ended October 31, 2007, the
management fee for the Fund reflects the current contract rate.


For information regarding the basis for the Board's approval of the Fund's
investment advisory and sub-advisory relationships, please refer to the Fund's
semi-annual shareholder report that will be dated April 30, 2008.


SUB-ADVISER


ING Investments has engaged a sub-adviser to provide the day-to-day management
of the Fund's portfolio. The sub-adviser is an affiliate of ING Investments.

ING Investments acts as a "manager-of-managers" for the Fund. ING Investments
delegates to the sub-adviser of the Fund the responsibility for investment
management, subject to ING Investment's oversight. ING Investments is
responsible for monitoring the investment program and performance of the
sub-adviser of the Fund.

From time to time, ING Investments may also recommend the appointment of
additional sub-advisers or replacement of non-affiliated sub-advisers to the
Fund's Board. It is not expected that ING Investments would normally recommend
replacement of affiliated sub-advisers as part of its oversight
responsibilities. The Fund and ING Investments have received exemptive relief
from the SEC to permit ING Investments, with the approval of the Fund's Board,
to appoint additional non-affiliated sub-advisers or to replace an existing
sub-adviser with a non-affiliated sub-adviser as well as change the terms of a
contract with a non-affiliated sub-adviser, without submitting the contract to a
vote of the Fund's shareholders. The Fund will notify shareholders of any change
in the identity of the sub-adviser of the Fund. In this event, the name of the
Fund and its principal investment strategies may also change.

Under the terms of the sub-advisory agreement, the agreement can be terminated
by either ING Investments or the Fund's Board. In the event the sub-advisory
agreement is terminated, the sub-adviser may be replaced subject to any
regulatory requirements or ING Investments may assume day-to-day investment
management of the Fund.


ING INVESTMENT MANAGEMENT CO.


ING Investment Management Co. ("ING IM" or "Sub-Adviser"), a Connecticut
corporation, serves as the Sub-Adviser to the Fund. ING IM is responsible for
managing the assets of the Fund in accordance with the Fund's investment
objective and policies, subject to oversight by ING Investments and the Fund's
Board.

Founded in 1972, ING IM is registered with the SEC as an investment adviser. ING
IM has acted as adviser or sub-adviser to mutual funds since 1994 and has
managed institutional accounts since 1972. ING IM is an indirect, wholly-owned
subsidiary of ING Groep and is an affiliate of ING Investments. As of December
31, 2007, ING IM managed approximately $73.5 billion in assets. The principal
office of ING IM is 230 Park Avenue, New York, NY 10169.


The following individual is responsible for the day-today management of the
Fund:

Paul Zemsky, Portfolio Manager, has managed the Fund since its inception. Mr.
Zemsky is head of ING's Multi-Asset Strategies & Solutions Group. He joined ING
IM in 2005 as Head of Derivative Strategies. Prior to assuming his role at ING,
Mr. Zemsky spent 18 years at J.P. Morgan Investment Management, where he held a
number of key position, including having responsibility for asset allocation for
the firm's fixed-income business and handling option trading in both the
exchange-traded and over-the-counter markets.

ADDITIONAL INFORMATION REGARDING PORTFOLIO MANAGERS

The SAI provides additional information about the portfolio manager's
compensation, other accounts managed by the portfolio manager and the portfolio
manager's ownership of securities in the Fund.

22   Management of the Fund




MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

All mutual funds involve risk - some more than others - and there is always the
chance that you could lose money or not earn as much as you hope. The Fund's
risk profile is largely a factor of the principal securities in which the
Underlying Funds invest and investment techniques that they use. The following
pages discuss the risks associated with certain of the types of securities in
which an Underlying Fund may invest and certain of the investment practices that
an Underlying Fund may use. For more information about these and other types of
securities and investment techniques that may be used by the Underlying Funds,
see the SAI.

ASSET ALLOCATION IS NO GUARANTEE AGAINST LOSS


Although asset allocation seeks to optimize returns given various levels of risk
tolerance, you still may lose money and experience volatility. Market and asset
class performance may differ in the future from the historical performance and
the assumptions used to form the asset allocations for the Fund. Furthermore,
ING IM's allocation of the Fund's assets may not anticipate market trends
successfully. For example, weighting Underlying Funds that invest in common
stocks too heavily during a stock market decline may result in a failure to
preserve capital. Conversely, investing too heavily in Underlying Funds that
invest in fixed-income securities during a period of stock market appreciation
may result in lower total return.


There is a risk that you could achieve better returns by investing in an
Underlying Fund or other mutual funds representing a single asset class than in
the Fund.


Assets will be allocated among funds and markets based on judgments made by ING
IM. There is a risk that the Fund may allocate assets to an asset class or
market that underperforms other funds. For example, the Fund may be
underweighted in assets or a market that is experiencing significant returns or
overweighted in assets or a market with significant declines.


PERFORMANCE OF THE UNDERLYING FUNDS WILL VARY

The performance of the Fund depends upon the performance of the Underlying
Funds, which are affected by changes in the economy and financial markets. The
value of the Fund changes as the asset values of the Underlying Funds it holds
go up or down. The value of your shares will fluctuate and may be worth more or
less than the original cost. The timing of your investment may also affect
performance.

TEMPORARY DEFENSIVE POSITIONS

The Fund or an Underlying Fund may depart from its principal investment
strategies by temporarily investing for defensive purposes when adverse market,
economic, political or other conditions affect the Fund or Underlying Fund.
Instead, the Fund or Underlying Fund may invest in securities believed to
present less risk, such as cash items, government securities and short term
paper. While the Fund or an Underlying Fund invests defensively, it may not be
able to pursue its investment objective. The Fund's or Underlying Fund's
defensive investment position may not be effective in protecting its value.

CONFLICT OF INTEREST

In making decisions on the allocation of the assets of the Fund among the
Underlying Funds, ING Investments is subject to several conflicts of interest
because it serves as the investment adviser to the Fund and to the Underlying
Funds. These conflicts could arise because some Underlying Funds pay advisory
fees that are higher than others, and some Underlying Funds may have a
sub-adviser that is affiliated with the Adviser, while others do not. ING
Investments may also subsidize the expenses of some of the Underlying Funds, but
does not subsidize others. Further, ING Investments may believe that a
redemption from an Underlying Fund will be harmful to that fund or to ING
Investments or an affiliate or may believe that an Underlying Fund may benefit
from additional assets. Therefore, ING Investments may have incentives to
allocate and reallocate in a fashion that would advance its own interests or the
interests of an Underlying Fund rather than the Fund.

PRINCIPAL RISKS

The Fund is also affected by other kinds of risks, depending on the types of
securities held or strategies used by an Underlying Fund.

For certain of these Underlying Funds, the risk associated with the strategy is
a principal risk. Other Underlying Funds may engage, to a lesser extent, in
these strategies, and when so engaged are subject to the attendant risks. Please
see the SAI for a further discussion of the principal and other investment
strategies employed by each Underlying Fund.

CONVERTIBLE SECURITIES. The price of a convertible security will normally
fluctuate in some proportion to changes in the price of the underlying equity
security, and as such is subject to risks relating to the activities of the
issuer and general market and economic conditions. The income component of
convertible securities causes fluctuations based upon changes in interest rates
and the credit quality of the issuer. Convertible securities are often lower
rated securities. An Underlying Fund may be required to redeem or convert a
convertible security before the holder would otherwise choose.

CORPORATE DEBT SECURITIES

Certain Underlying Funds may invest in corporate debt securities. Corporate debt
securities are subject to the risk of the issuer's inability to meet principal
and interest payments on the obligation and may also be subject to price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity. When
interest rates decline, the value of the Fund's debt securities can be expected
to rise, and when interest rates rise, the value of those securities can be
expected to decline. Debt securities with longer maturities tend to be more
sensitive to interest rate movements than those with shorter maturities.

One measure of risk for fixed-income securities is duration. Duration is one of
the tools used by a portfolio manager in the selection of fixed-income
securities. Historically, the maturity of a

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                               More Information About Risks   23




MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

bond was used as a proxy for the sensitivity of a bond's price to changes in
interest rates, otherwise known as a bond's "interest rate risk" or
"volatility". According to this measure, the longer the maturity of a bond, the
more its price will change for a given change in market interest rates. However,
this method ignores the amount and timing of all cash flows from the bond prior
to final maturity. Duration is a measure of average life of a bond on a present
value basis, which was developed to incorporate a bond's yield, coupons, final
maturity and call features into one measure. For point of reference, the
duration of a noncallable 7.00% coupon bond with a remaining maturity of 5 years
is approximately 4.5 years, and the duration of a noncallable 7.00% coupon bond
with a remaining maturity of 10 years is approximately 8 years. Material changes
in interest rates may impact the duration calculation.


DERIVATIVES. Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the performance
of an underlying asset or assets. Some derivatives are sophisticated instruments
that typically involve a small investment of cash relative to the magnitude of
risks assumed. These may include swap agreements, options, forwards and futures.
Derivative securities are subject to market risk, which could be significant for
those that have a leveraging effect. Derivatives are also subject to credit
risks related to the counterparty's ability to perform, and any deterioration in
the counterparty's creditworthiness could adversely affect the instrument. In
addition, derivatives and their underlying securities may experience periods of
illiquidity, which could cause the Underlying Fund to hold a security it might
otherwise sell or could force the sale of a security at inopportune times or for
prices that do not reflect current market value. A risk of using derivatives is
that the Adviser or Sub-Adviser might imperfectly judge the market's direction.
For instance, if a derivative is used as a hedge to offset investment risk in
another security, the hedge might not correlate to the market's movements and
may have unexpected or undesired results, such as a loss or a reduction in
gains.


EMERGING MARKETS INVESTMENTS. Because of less developed markets and economies
and, in some countries, less mature governments and governmental institutions,
the risks of investing in foreign securities can be intensified in the case of
investments in issuers domiciled or doing substantial business in countries with
an emerging securities market. These risks include: high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries; political and social uncertainties; over-dependence on
exports, especially with respect to primary commodities, making these economies
vulnerable to changes in commodity prices; overburdened infrastructure and
obsolete or unseasoned financial systems; environmental problems; less developed
legal systems; and less reliable custodial services and settlement practices.

FOREIGN SECURITIES. There are certain risks in owning foreign securities,
including those resulting from: fluctuations in currency exchange rates;
devaluation of currencies; political or economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions; reduced availability of public information concerning issuers;
accounting, auditing and financial reporting standards or other regulatory
practices and requirements that are not uniform when compared to those
applicable to domestic companies; settlement and clearance procedures in some
countries that may not be reliable and can result in delays in settlement;
higher transaction and custody expenses than for domestic securities; and
limitations on foreign ownership of equity securities. Also, securities of many
foreign companies may be less liquid and the prices more volatile than those of
domestic companies. With certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the use
or removal of funds or other assets of Underlying Funds, including the
withholding of dividends.

Each Underlying Fund may enter into foreign currency transactions either on a
spot or cash basis at prevailing rates or through forward foreign currency
exchange contracts in order to have the necessary currencies to settle
transactions, to help protect Underlying Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign currency
commensurate with the exposure to securities from that country. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to the
Underlying Fund. The risks of investing in foreign securities may be greater for
countries with an emerging securities market.

HIGH-YIELD, LOWER-GRADE DEBT SECURITIES. Certain Underlying Funds may invest in
high-yield, lower-grade debt securities. Investments in high-yield debt
securities generally provide greater income and increased opportunity for
capital appreciation than investments in higher quality debt securities, but
they also typically entail greater potential price volatility and principal and
income risk. High-yield debt securities are not considered investment grade, and
are regarded as predominantly speculative with respect to the issuing company's
continuing ability to meet principal and interest payments. The prices of
high-yield debt securities have been found to be less sensitive to interest rate
changes than higher-rated investments, but more sensitive to adverse economic
downturns or individual corporate developments. High-yield debt securities
structured as zero-coupon or pay- in-kind securities tend to be more volatile.
The secondary market in which high-yield debt securities are traded is generally
less liquid than the market for higher grade bonds. At times of less liquidity,
it may be more difficult to value high-yield debt securities.

MORTGAGE-RELATED SECURITIES Certain Underlying Funds may invest in
mortgae-related securities. The prices of mortgage-related securities, in
addition to being sensitive to changes in interest rates, are also sensitive to
changes in the prepayment

24   More Information About Risks




MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, the price of the
mortgage-related security may fall.


NON-DIVERSIFIED INVESTMENT COMPANY. An Underlying Fund classified as a
non-diversified investment company under the 1940 Act, means that the Underlying
Fund is not limited by the 1940 Act in the proportion of assets that it may
invest in the obligations of a single issuer. Declines in the value of that
single company can significantly impact the value of the Underlying Fund. The
investment of a large percentage of the Underlying Fund's assets in the
securities of a small number of issuers may cause an Underlying Fund's share
price to fluctuate more than that of a diversified investment company.
Conversely, even though classified as non-diversified, an Underlying Fund may
actually maintain a portfolio that is diversified with a large number of
issuers. In such an event, an Underlying Fund would benefit less from
appreciation in a single corporate issuer than if it had greater exposure to
that issuer.

OPTIONS. There are special risks associated with uncovered call option writing
which expose the investor to potentially significant loss. The Fund when writing
uncovered call options is in a risky position and may incur large losses if the
value of the underlying instrument increases above the exercise price. If a
secondary market in options were to become unavailable, the Fund could not
engage in closing transactions and, as the option writer, would remain obligated
until expiration or assignment. The Fund, when writing a U.S. option is subject
to being assigned an exercise at any time after the Fund has written the option
until the option expires. By contrast, the Fund, when writing a European option,
is subject to exercise assignment only during the exercise period.


OTHER INVESTMENT COMPANIES. An Underlying Fund may invest in other companies to
the extent permitted by the 1940 Act and the rules thereunder. These may include
exchange-traded funds ("ETFs") and Holding Company Depositary Receipts
("HOLDRs"), among others. ETFs are exchange-traded investment companies that are
designed to provide investment results corresponding to an equity index and
include, among others, Standard & Poor's Depository Receipts ("SPDRs"),
PowerShares QQQTM("QQQQ"), Dow Jones Industrial Average Tracking Stocks
("Diamonds") and iShares exchange-traded funds ("iShares"). The main risk of
investing in other investment companies (including ETFs) is that the value of
the underlying securities held by the investment company might decrease. The
value of the underlying securities can fluctuate in response to activities of
individual companies or in response to general market and/or economic
conditions. Because an Underlying Fund may invest in other investment companies,
you will pay a proportionate share of the expenses of those other investment
companies (including management fees, administration fees and custodial fees).
Additional risks of investments in ETFs include: (i) an active trading market
for an ETF's shares may not develop or be maintained or (ii) trading may be
halted if the listing exchange's officials deem such action appropriate, the
shares are delisted from the exchange, or the activation of market-wide
"circuit-breakers" (which are tied to large decreases in stock prices) halts
trading generally. Because HOLDRs concentrate in the stocks of a particular
industry, trends in that industry may have a dramatic impact on their value.


To seek to achieve a return on uninvested cash or for other reasons, an
Underlying Fund may invest its assets in ING Institutional Prime Money Market
Fund and/or one or more other money market funds advised by ING affiliates ("ING
Money Market Funds"). An Underlying Fund's purchase of shares of an ING Money
Market Fund will result in the Underlying Fund paying a proportionate share of
the expenses of the ING Money Market Fund. The Underlying Fund's Adviser will
waive its fee in an amount equal to the advisory fee received by the adviser of
the ING Money Market Fund in which the Underlying Fund invests resulting from
the Underlying Fund's investment into the ING Money Market Fund.


PREPAYMENT The Fund may invest in mortgage-related securities, which can be paid
off early if the borrowers on the underlying mortgages pay off their mortgages
sooner than scheduled. If interest rates are falling, the Fund will be forced to
reinvest its money at lower yields.

REAL ESTATE SECURITIES. Investments in issuers that are primarily engaged in
real estate, including REITs, may subject an Underlying Fund to risks similar to
those associated with the direct ownership of real estate (in addition to
securities market risks). 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
creditworthiness of the issuer. REITs may also be affected by tax and regulatory
requirements.

REPURCHASE AGREEMENTS. Repurchase agreements involve the purchase by an
Underlying Fund of a security that the seller has agreed to repurchase at an
agreed-upon price. If the seller defaults and the collateral value declines, an
Underlying Fund might incur a loss. If the seller declares bankruptcy, an
Underlying Fund may not be able to sell the collateral at the desired time.

SMALL- AND MID-CAPITALIZATION COMPANIES. Certain Underlying Funds may invest in
small- and mid-capitalization companies. Investments in small- and
mid-capitalization companies involve greater risk than is customarily associated
with larger, more established companies due to the greater business risks of
small size, limited markets and financial resources, narrow product lines and
the frequent lack of depth of management. The securities of smaller companies
are often traded over-the-counter and may not be traded in volume typical on a
national securities exchange. Consequently, the securities of smaller companies
may have limited market stability and may be subject to more abrupt or erratic
market movements than securities of larger, more established companies or the
market averages in general.


U.S. GOVERNMENT SECURITIES AND OBLIGATIONS. Obligations issued by some U.S.
government agencies, authorities, instrumentalities or sponsored enterprises,
such as the Government National Mortgage Association, are backed by the full
faith and credit of the U.S. Treasury while obligations issued by others, such
as the


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                               More Information About Risks   25




MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

Federal National Mortgage Association, Federal Home Loan Mortgage Corporation
and Federal Home Loan Banks, are backed solely by the entity's own resources or
by the ability of the entity to borrow from the U.S. Treasury. No assurance can
be given that the U.S. government will provide financial support to U.S.
government agencies, authorities, instrumentalities or sponsored enterprises if
it is not obliged to do so by law.

INABILITY TO SELL SECURITIES. Certain securities generally trade in lower volume
and may be less liquid than securities of large established companies. These
less liquid securities could include securities of small- and mid-sized U.S.
companies, high-yield securities, convertible securities, unrated debt and
convertible securities, securities that originate from small offerings, and
foreign securities, particularly those from companies in countries with an
emerging securities market. An Underlying Fund could lose money if it cannot
sell a security at the time and price that would be most beneficial to the
Underlying Fund.

LENDING PORTFOLIO SECURITIES. In order to generate additional income, an
Underlying Fund may lend portfolio securities in an amount up to 30% or 33 1/3%,
depending upon the Underlying Fund, of total Underlying Fund assets to
broker-dealers, major banks, or other recognized domestic institutional
borrowers of securities. When an Underlying Fund lends its securities, it is
responsible for investing the cash collateral it receives from the borrower of
the securities, and the Underlying Fund could incur losses in connection with
the investment of such cash collateral. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower default or fail financially.

PORTFOLIO TURNOVER. Certain Underlying Funds are generally expected to engage in
frequent and active trading of portfolio securities to achieve their respective
investment objective. A high portfolio turnover rate involves greater expenses
to an Underlying Fund, including brokerage commissions and other transaction
costs, and is likely to generate more taxable short-term gains for shareholders,
which may have an adverse effect on the performance of the Underlying Fund.

OTHER RISKS

BORROWING. An Underlying Fund may borrow subject to certain limits. Borrowing
may exaggerate the effect of any increase or decrease in the value of portfolio
securities or the NAV of an Underlying Fund, and money borrowed will be subject
to interest costs. Interest costs on borrowings may fluctuate with changing
market rates of interest and may partially offset or exceed the return earned on
borrowed funds. Under adverse market conditions, an Underlying Fund might have
to sell portfolio securities to meet interest or principal payments at a time
when fundamental investment considerations would not favor such sales.

INDEX STRATEGY Certain Underlying Funds may use an indexing strategy that does
not attempt to manage market volatility, use defensive strategies or reduce the
effects of any long-term periods of poor stock performance. The correlation
between a Fund and an Index performance may be affected by the Fund's expenses ,
and the timing of purchases and redemptions of a Fund's shares.

INTERESTS IN LOANS. Certain Underlying Funds may invest in participation
interests or assignments in secured variable or floating rate loans which
include participation interests in lease financings. Loans are subject to the
credit risk of nonpayment of principal or interest. Substantial increases in
interest rates may cause an increase in loan defaults. Although the loans will
generally be fully collateralized at the time of acquisition, the collateral may
decline in value, be relatively illiquid, or lose all or substantially all of
its value subsequent to an Underlying Fund's investment. Many loans are
relatively illiquid and may be difficult to value.

MANAGEMENT. Each Underlying Fund is subject to management risk because it is an
actively managed investment portfolio. The Adviser, the sub-adviser or each
individual portfolio manager will apply investment techniques and risk analyses
in making investment decisions for the Underlying Funds, but there can be no
guarantee that these will produce the desired results.

Many sub-advisers of equity funds employ styles that are characterized as
"value" or "growth." However, these terms can have different application by
different managers. One sub-adviser's value approach may be different from
another, and one sub-adviser's growth approach may be different from another.
For example, some value managers employ a style in which they seek to identify
companies that they believe are valued at a more substantial or "deeper
discount" to a company's net worth than other value managers. Therefore, some
funds that are characterized as growth or value can have greater volatility than
other funds managed by other managers in a growth or value style.


PAIRING-OFF TRANSACTIONS. A pairing-off transaction occurs when an Underlying
Fund commits to purchase a security at a future date, and then the Underlying
Fund pairs-off the purchase with a sale of the same security prior to or on the
original settlement date. Whether a pairing-off transaction on a debt security
produces a gain depends on the movement of interest rates. If interest rates
increase, then the money received upon the sale of the same security will be
less than the anticipated amount needed at the time the commitment to purchase
the security at the future date was entered and the Underlying Fund will
experience a loss.


RESTRICTED AND ILLIQUID SECURITIES. If a security is illiquid, an Underlying
Fund may not be able to sell the security at a time when the Adviser or
Sub-Adviser might wish to sell, and the security could have the effect of
decreasing the overall level of the Underlying Fund's liquidity. Further, the
lack of an established secondary market may make it more difficult to value
illiquid securities, which could vary from the amount the Underlying Fund could
realize upon disposition. Restricted securities, i.e., securities subject to
legal or contractual restrictions on resale,

26   More Information About Risks




MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

may be illiquid. However, some restricted securities may be treated as liquid,
although they may be less liquid than registered securities traded on
established secondary markets.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. A reverse repurchase agreement
or dollar roll involves the sale of a security, with an agreement to repurchase
the same or substantially similar securities at an agreed upon price and date.
Whether such a transaction produces a gain for a Fund depends upon the costs of
the agreements and the income and gains of the securities purchased with the
proceeds received from the sale of the security. If the income and gains on the
securities purchased fail to exceed the costs, an Underlying Fund's NAV will
decline faster than otherwise would be the case. Reverse repurchase agreements
and dollar rolls, as leveraging techniques, may increase a Fund's yield;
however, such transactions also increase a Fund's risk to capital and may result
in a shareholder's loss of principal.

SHORT SALES. A "short sale" is the sale by an Underlying Fund of a security
which has been borrowed from a third party on the expectation that the market
price will drop. If the price of the security rises, the Underlying Fund may
have to cover its short position at a higher price than the short sale price,
resulting in a loss.

INVESTMENT BY FUNDS-OF-FUNDS. Each of the Underlying Funds' shares may be
purchased by other investment companies. In some cases, an Underlying Fund may
experience large inflows or redemptions due to allocations or rebalancings.
While it is impossible to predict the overall impact of these transactions over
time, there could be adverse effects on portfolio management. The Adviser will
monitor transactions by the Fund and will attempt to minimize any adverse
effects on the Underlying Funds and the Fund as a result of these transactions.
So long as an Underlying Fund accepts investments by other investment companies,
it will not purchase securities of other investment companies, except to the
extent permitted by the 1940 Act or under the terms of an exemptive order
granted by the SEC.

PERCENTAGE AND RATING LIMITATIONS Unless otherwise stated, the percentage and
rating limitations in this Prospectus apply at the time of investment.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                               More Information About Risks   27




DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

The Fund generally distributes most or all of its net earnings in the form of
dividends and capital gain distributions. Dividends are normally expected to
consist primarily of ordinary income and are expected to be distributed to
shareholders on a quarterly basis. The Fund distributes capital gains, if any,
annually.


DIVIDEND REINVESTMENT

Unless you instruct the Fund to pay you dividends in cash, dividends and
distributions paid by the Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class A, Class B or Class C of the Fund invested in another ING Fund
that offers the same class of shares.

TAXES

The following information is meant as a general summary for U.S. shareholders.
Please see the SAI for additional information. You should rely on your own tax
adviser for advice about the particular federal, state and local tax
consequences to you of investing in the Fund.


The Fund will distribute all, or substantially all, of its net investment income
and net capital gains to its shareholders each year. Although the Fund will not
be taxed on amounts it distributes, most shareholders will be taxed on amounts
they receive. A particular distribution generally will be taxable as either
ordinary income or long-term capital gain. Except as described below, it
generally does not matter how long you have held your Fund shares or whether you
elect to receive your distributions in cash or reinvest them in additional Fund
shares. For example, if the Fund designates a particular distribution as a
long-term capital gains distribution, it will be taxable to you at your
long-term capital gains rate. Dividends attributable to interest are not
eligible for the reductions in rates described below.

Current tax law (which is currently scheduled to apply through 2010) generally
provides for a maximum tax rate for individual taxpayers of 15% on long-term
gains from sales and from certain qualifying dividends on corporate stock.
Although these rate reductions do not apply to corporate taxpayers, such
taxpayers may be entitled to a corporate dividends received deduction with
respect to their share of eligible domestic corporate dividends received by the
Fund. The following are guidelines for how certain distributions by the Fund are
generally taxed to individual taxpayers:


.    Distributions of earnings from qualifying dividends and qualifying
     long-term capital gains from an Underlying Fund to the Fund which is
     distributed to individual shareholders will be taxed at a maximum rate of
     15%.

.    Note that distributions of earnings from dividends paid by certain
     "qualified foreign corporations" to the Underlying Fund which is then
     distributed to the Fund can also qualify for the lower tax rates on
     qualifying dividends.

.    A shareholder and the Fund will also have to satisfy a more than 60-day
     holding period with respect to any distributions of qualifying dividends in
     order to obtain the benefit of the lower tax rate.

.    Distributions of earnings from an Underlying Fund to the Fund of
     non-qualifying dividends, interest income, other types of ordinary income
     and short-term capital gains will be taxed at the ordinary income tax rate
     applicable to the taxpayer.

.    The maximum 15% tax rate for individual taxpayers on long-term capital
     gains and qualifying dividends is currently scheduled to apply through
     2010. In the absence of further Congressional action, for the calendar
     years after 2010, the maximum rate on long-term capital gains for
     individual taxpayers would increase to 20% and income from dividends would
     be taxed at the rates applicable to ordinary income.


Dividends declared by the Fund in October, November or December and paid during
the following January will be treated as having been received by shareholders in
the year the distributions were declared.


You will receive an annual statement summarizing your dividend and capital gains
distributions.


If you buy shares of a Fund before it makes a distribution, the distribution
will be taxable to you even though it may actually be a return of a portion of
your investment. This is known as "buying a dividend."


If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax adviser about investment through a tax-deferred account.

The Fund may have income, gains or losses from any distribution or redemption in
the Underlying Funds. Distributions of long-term capital gains or qualifying
dividends of either the Fund or the Underlying Funds will generally be taxed as
long-term capital gains. Other distributions, including short-term capital
gains, will be taxed as ordinary income. The structure of the Fund and the
reallocation of investments among Underlying Funds could affect the amount,
timing and character of distributions.

There may be tax consequences to you if you sell or redeem Fund shares. You will
generally have a capital gain or loss, which will be long-term or short-term,
generally depending on how long you hold those shares. If you exchange shares,
you may be treated as if you sold them. If your tax basis in your shares exceeds
the amount of proceeds you receive from a sale, exchange or redemption of
shares, you will recognize a taxable loss on the sale of shares of a Fund. Any
loss recognized on shares held for six months or less will be treated as
long-term capital loss to the extent of any long-term capital gain distributions
that were received with respect to the shares. Additionally, any loss realized
on a sale, redemption or exchange of shares of a Fund may be disallowed under
"wash sale" rules to the extent the shares disposed of are replaced with other
shares of that Fund within a period of 61 days beginning 30 days before and
ending

28   Dividends, Distributions and Taxes




DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------

30 days after shares are disposed of, such as pursuant to a dividend
reinvestment in shares of that Fund. If disallowed, the loss will be reflected
in an adjustment to the tax basis of the shares acquired. You are responsible
for any tax liabilities generated by your transactions.

As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the current rate of 28% of all taxable distributions payable to
you if you fail to provide the Fund with your correct taxpayer identification
number or to make required certifications, or if you have been notified by the
IRS that you are subject to backup withholding. Backup withholding is not an
additional tax; rather, it is a way in which the IRS ensures it will collect
taxes otherwise due. Any amounts withheld may be credited against your U.S.
federal income tax liability.

Please see the SAI for further information regarding tax matters.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                         Dividends, Distributions and Taxes   29




FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

Because the Fund did not commence operations as of the fiscal year ended October
31, 2007, financial highlights are not available.

30  Financial Highlights





In addition to the Fund offered in this prospectus, the Distributor also offers
the funds listed below. Before investing in a fund, shareholders should
carefully review the fund's prospectus. Investors may obtain a copy of a
prospectus of any ING Fund not discussed in this Prospectus by calling (800)
992-0180 or by going to www.ingfunds.com.


Domestic Equity and Income Funds

ING Equity Dividend Fund
ING Fundamental Research Fund

ING Growth and Income Fund
ING Real Estate Fund

Domestic Equity Growth Funds

ING 130/30 Fundamental Research Fund

ING LargeCap Growth Fund
ING MidCap Opportunities Fund
ING Opportunistic LargeCap Fund
ING Small Company Fund
ING SmallCap Opportunities Fund

Domestic Equity Index Funds
ING Index Plus LargeCap Fund
ING Index Plus MidCap Fund
ING Index Plus SmallCap Fund

Domestic Equity Value Funds
ING Financial Services Fund
ING LargeCap Value Fund

ING SmallCap Value Multi-Manager Fund

ING Value Choice Fund

Fixed-Income Funds
ING GNMA Income Fund
ING High Yield Bond Fund

ING Intermediate Bond Fund

ING National Tax-Exempt Bond Fund

Global Equity Funds
ING Global Equity Dividend Fund
ING Global Natural Resources Fund
ING Global Real Estate Fund

ING Global Science and Technology Fund

ING Global Value Choice Fund

International Equity Funds

ING Asia-Pacific Real Estate

ING Disciplined International Small Cap Fund
ING Emerging Countries Fund

ING European Real Estate

ING Foreign Fund
ING Greater China Fund

ING Index Plus International Equity Fund

ING International Capital Appreciation Fund

ING International Equity Dividend
ING International Growth Opportunities Fund

ING International Real Estate Fund

ING International SmallCap Multi-Manager Fund

ING International Value Choice Fund
ING International Value Opportunities Fund
ING Russia Fund


Global and International Fixed-Income Funds
ING Emerging Markets Fixed Income Fund
ING Global Bond Fund

International Fund-of-Funds
ING Diversified International Fund


Loan Participation Fund
ING Senior Income Fund


Money Market Funds
ING Classic Money Market Fund
ING Money Market Fund


Strategic Allocation Funds
ING Strategic Allocation Conservative Fund
ING Strategic Allocation Growth Fund
ING Strategic Allocation Moderate Fund




WHERE TO GO FOR MORE INFORMATION YOU'LL FIND MORE INFORMATION ABOUT THE FUND IN
OUR:

ANNUAL/SEMI-ANNUAL SHAREHOLDER REPORTS

In the Fund's annual/semi-annual shareholder reports, when available, you will
find a discussion of the recent market conditions and principal investment
strategies that significantly affected the Fund's performance during their last
fiscal year, the financial statements and the independent registered public
accounting firm's reports (in the annual shareholder report only).


STATEMENT OF ADDITIONAL INFORMATION ("SAI")

The SAI contains more detailed information about the Fund. The SAI is legally
part of this Prospectus (it is incorporated by reference). A copy has been filed
with the SEC.

Please write, call or visit our website for a free copy of the current annual/
semi-annual shareholder reports, the SAI or other Fund information.

To make shareholder inquiries contact:

THE ING FUNDS
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258-2034

1-800-992-0180

Or visit our website at WWW.INGFUNDS.COM

This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-551-8090 for information on the
operation of the Public Reference Room. Otherwise, you may obtain the
information for a fee by contacting the SEC at:

U.S. SECURITIES AND EXCHANGE COMMISSION
Public Reference Section
100 F Street, N.E.
Washington, D.C. 20549

or at the e-mail address: PUBLICINFO@SEC.GOV

Or obtain the information at no cost by visiting the SEC's Internet website at
WWW.SEC.GOV.

When contacting the SEC, you will want to refer to the Fund's SEC file numbers.
The file numbers are as follows:

ING Series Fund, Inc.                   811-6352
  ING Global Income Builder Fund

                                    (0308-032408)
[GRAPHIC APPEARS HERE]

--------------------------------------------------------------------------------




[GRAPHIC APPEARS HERE]


Prospectus
MARCH 24, 2008



Class I and Class W


ING GLOBAL INCOME BUILDER FUND


 This Prospectus contains important information about investing in Class I and
 Class W shares of ING Global Income Builder Fund. You should read it carefully
 before you invest, and keep it for future reference. Please note that your
 investment: is not a bank deposit, is not insured or guaranteed by the Federal
 Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or any other
 government agency and is affected by market fluctuations. There is no
 guarantee that the Fund will achieve its investment objectives. As with all
 mutual funds, the U.S. Securities and Exchange Commission ("SEC") has not
 approved or disapproved these securities nor has the SEC judged whether the
 information in this prospectus is accurate or adequate. Any representation to
 the contrary is a criminal offense.

-------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

MUTUAL FUNDS
--------------------------------------------------------------------------------





                                                                  WHAT'S INSIDE
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

       INVESTMENT
       OBJECTIVE
[GRAPHIC APPEARS HERE]

       PRINCIPAL
       INVESTMENT
       STRATEGIES
[GRAPHIC APPEARS HERE]

       RISKS

[GRAPHIC APPEARS HERE]

       WHAT YOU
       PAY TO
       INVEST

Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities in which they invest. Please read this Prospectus carefully to be
sure you understand the principal investment strategies and risks associated
with the Fund. You should consult the Statement of Additional Information
("SAI") for a complete list of the investment strategies and risks.

[GRAPHIC APPEARS HERE]

If you have any questions about the Fund, please call your investment
professional or us at 1-800-992-0180.

These pages contain a description of the Fund included in this Prospectus,
including the Fund's investment objective, principal investment strategies and
risks.

You'll also find:

WHAT YOU PAY TO INVEST. A list of the fees and expenses you pay - both directly
and indirectly - when you invest in the Fund.

INTRODUCTION                                  1
ING Global Income Builder Fund                2


WHAT YOU PAY TO INVEST                        4
SHAREHOLDER GUIDE                            12
MANAGEMENT OF THE FUND                       20
MORE INFORMATION ABOUT RISKS                 21
DIVIDENDS, DISTRIBUTIONS AND TAXES           26
FINANCIAL HIGHLIGHTS                         28
WHERE TO GO FOR MORE INFORMATION     Back Cover





                      (THIS PAGE INTENTIONALLY LEFT BLANK)




INTRODUCTION
--------------------------------------------------------------------------------

AN INTRODUCTION TO THE FUND

The Fund's investmet objective is total return, consisting of capital
appreciation and current income. The Fund seeks to achieve its investment
objective by investing in other ING Funds ("Underlying Funds") and uses asset
allocation strategies to determine how much to invest in the Underlying Funds.
In addition, the Fund will write call options on securities. The Fund is
designed to meet the needs of investors who wish to seek exposure to various
types of global securities through a single diversified investment.

The Fund invests primarily in a combination of the Underlying Funds that, in
turn, invest directly in a wide range of global securities. Although an
investor may achieve the same level of diversification by investing directly in
a variety of the Underlying Funds, the Fund provides investors with a means to
simplify their investment decisions by investing in a single diversified
portfolio. For more information about the Underlying Funds, please see "More
Information on Investment Strategies" on page 7 and "Description of the
Investment Objectives, Main Investments and Risks of the Underlying Funds"
beginning on page 8 of this Prospectus.


Although the Fund is designed to serve as a diversified investment portfolio,
no single mutual fund can provide an appropriate investment program for all
investors. You should evaluate the Fund in the context of your personal
financial situation, investment objectives and other investments.

This Prospectus explains the investment objective, principal investment
strategies and risks of the Fund. Reading this Prospectus will help you to
decide whether the Fund is the right investment for you. You should keep this
Prospectus for future reference.

AN INTRODUCTION TO THE ASSET ALLOCATION PROCESS


ING Investments, LLC ("ING Investments" or "Adviser") is the investment adviser
of the Fund and ING Investment Management Co. ("ING IM" or "Sub-Adviser") is
the sub-adviser. ING Investments and ING IM are indirect, wholly-owned
subsidiaries of ING Groep, N.V. ("ING Groep") (NYSE: ING).


ING Investments and ING IM, working together, have designed the Fund that will
be constructed and managed in accordance with the following process:

ING IM uses an asset allocation process to determine the Fund's investment mix.
This asset allocation process can be described as follows:


1. In the first stage, the mix of global asset classes that is likely to
   produce the optimal return for the Fund is estimated. This estimate is made
   with reference to an investment model that incorporates historical and
   expected returns, standard deviations and correlation coefficients of
   global asset classes as well as other financial variables. The mix of
   global asset classes arrived at for the Fund is called the "Target
   Allocation." ING IM will review the Target Allocation at least annually.


2. ING IM determines the Underlying Funds in which the Fund invests to attain
   its Target Allocation. In choosing an Underlying Fund, ING IM considers,
   among other factors, the degree to which the Underlying Fund's holdings or
   other characteristics correspond to the desired Target Allocation. ING IM,
   at any time, may change the Underlying Funds in which the Fund invests, may
   add or drop Underlying Funds, and may determine to make tactical changes in
   the Fund's Target Allocation depending on market conditions. ING
   Investments supervises the determination of Target Allocation and selection
   of Underlying Funds by ING IM.


ING IM will have authority over the asset allocations, investments in
particular Underlying Funds (including any Underlying Funds organized in the
future) and the Target Allocation for the Fund, including determining the
transition pattern of the Fund in a timely but reasonable manner based upon
market conditions at the time of allocation changes. The pre-defined mixes will
be reviewed at least annually and analyzed for consistency with current market
conditions and industry trends.


1    Introduction




                                                                        ADVISER
                                                            ING Investments, LLC

                                                                     SUB-ADVISER
                                                   ING Investment Management Co.
ING GLOBAL INCOME BUILDER FUND
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

INVESTMENT OBJECTIVE

The Fund's investment objective is total return, consisting of capital
appreciation and current income. The Fund's investment objective is not
fundamental and may be changed without a shareholder vote.

[GRAPHIC APPEARS HERE]

PRINCIPAL  INVESTMENT STRATEGIES

The Fund invests in a combination of Underlying Funds that in turn invest in
fixed income and/or equity securities of issuers located in a number of
different countries, one of which may be the United States. The Fund also
expects to employ a strategy of writing (selling) call options on equity
indices, baskets of securities and exchange-traded funds ("ETFs") ("Option
Strategy") in an attempt to generate gains from option premiums as a means of
enhancing distributions paid to shareholders. Under normal conditions,
approximately 30% of the Fund's total assets will be allocated to funds
investing in fixed-income securities and 70% will be allocated to funds
investing in equity securities. The sub-adviser seeks to diversify the Fund's
holdings globally by including Underlying Funds that invest in companies of all
market capitalizations, Underlying Funds that invest using a growth or value
style and Underlying Funds that invest in companies in both developed countries
and countries with emerging securities markets.

The fixed income component of the allocation will have a minimum quality rating
of at least investment grade and an average duration between three and ten
years.

The value of the securities underlying the options written by the Fund will
ordinarily be between 0-30% of the Fund's equity holdings. By selling these
call options, the Fund will receive payments, or premiums, which add to the
Fund's distributable income. The extent of the Fund's call option writing
activity will depend upon market conditions and the Sub-Adviser's ongoing
assessment of the attractiveness of writing call options on equity securities.
Call options will be written (sold) usually at-the-money or near-the-money,
usually on a one- to three-month basis and will be written both in
exchanged-listed option markets and over-the-counter markets with major
international banks, broker-dealers and financial institutions. As it writes
call options over more of its portfolio, the Fund is limited in its ability to
benefit from capital appreciation. In addition to the use of written option
contracts under the Option Strategy, the Fund may utilize additional option
strategies, including utilizing call spreads, purchase put options or other
types of options.

The Fund's current approximate Target Allocations (expressed as a percentage of
its net assets) among the asset classes are set out below. As these are Target
Allocations, the actual allocations of the Fund's assets may deviate from the
percentages shown.

International Core Equity Stocks                                         23.5%
International SmallCap Stocks                                               5%
Global Real Estate Stocks                                                   5%

Emerging Markets Stocks                                                    10%

U.S. Mid Capitalization Stocks                                              5%
U.S. Small Capitalization Stocks                                            5%
U.S. Large Capitalization Stocks                                         16.5%

Intermediate-Term Bonds                                                    30%

The Fund intends to invest approximately 15% of its assets in ING Tactical
Asset Allocation Fund. ING Tactical Asset Allocation Fund will follow a
tactical asset allocation strategy which seeks to evaluate the attractiveness
of a range of asset classes across various regions and countries and to benefit
from pricing inefficiencies. The Fund seeks to benefit from ING Tactical Asset
Allocation Fund's strategy to adjust the asset allocations within the Fund's
long-term strategic allocations.


The Fund may be rebalanced periodically to return to the Target Allocation and
inflows and outflows may be managed to attain the Target Allocation. The Target
Allocation may be changed, at any time, as described under "An Introduction to
the Asset Allocation Process."

--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

RISKS
You could lose money on an
investment in the Fund. The Fund may be affected by the following risks, among
others:


AFFILIATED FUNDS - in managing the Fund, ING Investments will have authority to
select and substitute Underlying Funds. ING Investments may be subject to
potential conflicts of interest in selecting Underlying Funds because the fees
paid to it by some Underlying Funds are higher than fees paid by other
Underlying Funds. However, ING Investments is a fiduciary to the Fund and is
legally obligated to act in the Fund's best interests when selecting Underlying
Funds.


ASSET ALLOCATION - assets will be allocated among funds and markets based on
judgments made by the Adviser or Sub-Adviser. There is a risk that the Fund may
allocate assets to an Underlying Fund or market that underperforms other asset
classes. For example, the Fund may be underweighted in assets or a market that
is experiencing significant returns or overweighted in assets or a market with
significant declines.


CREDIT - the Fund could lose money if the issuer of a security is unable to
meet its financial obligations or goes bankrupt. This is especially true during
periods of economic uncertainty or economic downturns. This Fund may be subject
to more credit risk than many bond funds, because the convertible securities
and debt securities in which it invests may be lower-rated securities.


DERIVATIVES - derivatives are subject to the risk of changes in the market
price of the underlying securities, credit risk with respect to the
counterparty to the derivative instruments, 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 and may reduce its
returns.


FOREIGN INVESTING - the Fund allocates assets to Underlying Funds that invest
in foreign investments. Foreign investments may be riskier than U.S.
investments for many reasons, including: changes in currency exchange rates;
unstable political and economic conditions; a lack of adequate company
information; differences in the way securities markets operate; less secure
foreign banks or securities depositories than those in the United States; less
standardization of accounting standards and market regulations in certain
foreign countries and varying foreign controls on investments. Foreign
investments may also be affected by administrative difficulties, such as delays
in clearing and settling transactions. Additionally, securities of foreign
companies may be denominated in foreign currencies. Exchange rate fluctuations
may reduce or eliminate gains or create losses. Hedging strategies intended to
reduce this risk may not perform as expected. These factors may make foreign
investments more volatile and potentially less liquid than U.S. investments. To
the extent an Underlying Fund invests in countries with emerging securities
markets, the risks of foreign investing may be greater, as these countries may
be less politically and economically stable than other countries. It may also
be more difficult to buy and sell securities in countries with emerging
securities markets.

INTEREST RATE - fixed-income securities are subject to the risk that interest
rates will rise, which generally causes bond prices to fall. Economic and
market conditions may cause issuers to default or go bankrupt. High-yield
instruments are even more sensitive to economic and market conditions than
other fixed-income instruments.

MARKET TRENDS - from time to time, the stock market may not favor growth or
value oriented securities in which an Underlying Fund invests. Rather, the
market could favor securities to which an Underlying Fund is not exposed, or
may not favor equities at all.


OPTIONS - There are numerous risks associated with transactions in options. A
decision as to whether, when and how to write (sell) call options under the
Fund's strategy involves the exercise of skill and judgment, and even a
well-conceived transaction may be adversely affected by market behavior or
unexpected events. The Fund will write (sell) call options on equity indices,
baskets of securities and ETFs. The purchaser of the call option has the right
to any appreciation in the value of the index, basket of securities or ETF over
the exercise price up to and including the expiration date. Because the
exercise of such options is settled in cash, writers (sellers) of such options
cannot provide in advance for their potential settlement obligations by
acquiring and holding the underlying securities. When a call option sold by the
Fund is exercised or closed out, the Fund may be required to sell portfolio
holdings to satisfy its obligations when it would not otherwise choose to do
so, or the Fund may choose to sell portfolio holdings to realize gains to
offset the losses realized upon option exercise. Such sales would involve
transaction costs borne by the Fund and may result in realization of taxable
capital gains, including short-term capital gains taxed at ordinary income tax
rates, and may adversely impact the Fund's after-tax returns.

PRICE VOLATILITY - the value of the Fund changes as the prices of the
Underlying Funds' investments go up or down. Equity securities face market,
issuer and other risks, and their values may fluctuate, sometimes rapidly and
unpredictably. Market risk is the risk that securities may decline in value due
to factors affecting securities markets generally or particular industries.
Issuer risk is the risk that the value of a security may decline for reasons
relating to the issuer, such as changes in the financial condition of the
issuer. While equities may offer the potential for greater long-term growth
than most debt securities, they generally have higher volatility.


The Fund may invest in Underlying Funds that invest in small- and mid-sized
companies, which may be more susceptible to greater price volatility than
larger companies because they typically have fewer financial resources, more
limited product and market diversification and may be dependent on a few key
managers.

If you would like additional information regarding the Fund's investment
strategies and risks or the Underlying Funds' investment strategies and risks
please see "More Information on Investment Strategies" beginning on page 7,
"Description of the Investment Objectives, Main Investments and Risks of the
Underlying Funds" beginning on page 8, and "More Information About Risks"
beginning on page 21 of this Prospectus.
2  ING Global Income Builder Fund




                                                 ING GLOBAL INCOME BUILDER FUND
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

HOW THE FUND HAS
PERFORMED


                Since ING Global Income Builder Fund had not commenced
                operations as of December 31, 2007, there is no performance
                information included in this Prospectus. Please visit the
                Fund's website at www.ingfunds.com to obtain performance
                information once it is available.


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                               ING Global Income Builder Fund  3




WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]

      There are two types of fees and expenses when you invest in mutual funds:
      fees, including sales charges, you pay directly when you buy or sell
      shares, and operating expenses paid each year by the Fund.

      The table that follows shows the fees and expenses you pay if you buy and
      hold shares of the Fund. The table that follows shows the fees and the
      estimated operating expenses for the Fund. Shareholders of the Fund will
      indirectly bear the expenses of an Underlying Fund based upon the
      percentage of the Fund's assets that is allocated to the Underlying Fund.
      Because the fees and annual net operating expenses of the Underlying
      Fund, and the Fund's allocation to that Underlying Fund, will vary from
      year to year, the fees and expenses paid by the Fund may vary from year
      to year.

FEES YOU PAY DIRECTLY


                                                                 CLASS I      CLASS W
                                                                ---------    --------
 MAXIMUM SALES CHARGE ON YOUR INVESTMENT (AS A % OF                none         none
  OFFERING PRICE)
 MAXIMUM DEFERRED SALES CHARGE (AS A % OF PURCHASE OR SALES        none         none
  PRICE, WHICHEVER IS LESS)



OPERATING EXPENSES PAID EACH YEAR BY THE FUND(1)
(as a % of average net assets)


                                                               ACQUIRED
                              DISTRIBUTION                   (UNDERLYING)       TOTAL                        NET
                               AND SERVICE                      FUNDS           FUND                        FUND
                 MANAGEMENT      (12B-1)        OTHER            FEES         OPERATING    WAIVERS AND    OPERATING
CLASS               FEES          FEES       EXPENSES(2)   AND EXPENSES(3)    EXPENSES  REIMBURSEMENTS(4)  EXPENSES
----------      ------------ -------------- ------------- ----------------- ----------- ----------------- ----------
 Class I    %         0.08         N/A             0.47            0.75            1.30        (0.25)         1.05



                                                               ACQUIRED
                              DISTRIBUTION                   (UNDERLYING)       TOTAL                          NET
                               AND SERVICE                      FUNDS           FUND                          FUND
                 MANAGEMENT      (12B-1)        OTHER            FEES         OPERATING     WAIVERS AND     OPERATING
CLASS               FEES          FEES       EXPENSES(2)   AND EXPENSES(3)    EXPENSES    REIMBURSEMENTS(4)  EXPENSES
----------      ------------ -------------- ------------- ----------------- ------------- ----------------- ----------
 Class W    %         0.08         N/A             0.47            0.75            1.30          (0.25)         1.05


--------------------------------------------------------------------------------


(1)      This table shows the estimated operating expenses for the Fund by
         class as a ratio of expenses to average daily net assets. The Fund had
         not commenced operations as of October 31, 2007, therefore, "other
         Expenses" are estimated for the current fiscal year.

(2)      ING Funds Services, LLC receives an annual administrative fee equal to
         0.10% of the Fund's average daily net assets which is reflected in
         "Other Expenses." Also includes an estimated 0.09% of non-recurring
         offering expenses and excluding this amount, total Fund Operating
         Expenses would have been 1.21%.


(3)      The Fund's Acquired (Underlying) Funds Fees and Expenses is based on a
         weighted average of the fees and expenses of the Underlying Funds in
         which it invests. The amount of fees and expenses of the Underlying
         Funds borne by a Fund will vary based on the Fund's allocation of
         assets to, and the annualized net expenses of, the particular
         Underlying Funds during the Fund's fiscal year.


(4)      ING Investments, LLC has entered into a written expense limitation
         agreement with the Fund under which it will limit expenses of the Fund
         excluding interest, taxes, brokerage and extraordinary expenses, and
         Acquired (Underlying) Fund Fees and Expenses, subject to possible
         recoupment by ING Investments within three years. The amount of the
         Fund's expenses proposed to be waived or reimbursed during the current
         fiscal year by ING Investments, LLC adjusted for contractual changes,
         if any, is shown under the heading "Waivers and Reimbursements." The
         expense limits will continue through at least March 1, 2009. The
         expense limitation agreement is contractual and shall renew
         automatically for one-year terms unless ING Investments, LLC provides
         written notice of the termination of the expense limitation agreement
         within 90 days of the end of the then-current term or upon termination
         of the investment management agreement. For more information regarding
         the expense limitation agreement, please see the SAI.


4  What You Pay to Invest




                                                         WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------

             ACQUIRED (UNDERLYING) FUNDS ANNUAL OPERATING EXPENSES
                 (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)


Because we use a weighted average in calculating expenses attributable to the
Fund, the amount of the fees and expenses of the Class I shares of the
Underlying Funds indirectly borne by the Fund will vary based on the Fund's
allocation of assets to, and the annualized net operating expenses of, the
particular Underlying Funds during the Fund's fiscal year. The following are
the annual net expense ratios (as an annual percentage of average daily net
assets) for each Underlying Fund.


CLASS I


                                                 NET OPERATING
UNDERLYING FUND                                     EXPENSES
-------------------------------------------    -----------------
 ING Disciplined International SmallCap(1)                0.86%
 ING Emerging Countries(1)                                1.56%
 ING Global Equity Dividend(1)                            0.90%
 ING Global Real Estate(1)                                0.95%
 ING Index Plus International Equity(1)                   0.87%
 ING Index Plus Mid Cap(2)                                0.75%
 ING Institutional Prime Money Market(3)                  0.10%
 ING Intermediate Bond(3)                                 0.35%
 ING Index Plus SmallCap(2)                               0.75%
 ING Tactical Asset Allocation Fund(4)                    0.70%



(1)   As of October 31, 2007.

(2)   As of November 30, 2007.

(3)   As of September 30, 2007.

(4)   As the Underlying Fund did not have a full calendar year of operation as
      of the fiscal year ended October 31, 2007, the expense ratio is
      estimated.


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                       What You Pay to Invest  5




WHAT YOU PAY TO INVEST
--------------------------------------------------------------------------------

[GRAPHIC APPEARS HERE]


      EXAMPLES(1)



      The Examples are intended to help you compare the cost of investing in
      shares of the Fund, including the costs of the Underlying Funds, with the
      cost of investing in other mutual funds. The Examples assume that you
      invest $10,000 in the shares of the Fund for the time periods indicated
      and then redeem all of your shares at the end of those periods. The
      Examples also assume that your investment has a 5% return each year, that
      all dividends and distributions are reinvested, and that the Class I
      shares of the Underlying Fund's total net annual operating expenses
      remain the same. Although your actual costs may be higher or lower, the
      Examples show what your costs would be based on these assumptions.



                         1 YEAR      3 YEARS
                        --------    --------
 Class I      $            107          368



                         1 YEAR      3 YEARS
                        --------    --------
 Class W      $            107          368



(1)   The Examples reflect any expense limitation agreements/waivers of the
      Fund and the Underlying Funds for the one-year period and the first year
      of the three-year period.


6  What You Pay to Invest




MORE               INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------

MORE ON THE ASSET ALLOCATION PROCESS
As described earlier in this Prospectus, the Fund pursues its investment
objective by investing in a combination of the Underlying Funds. Subject to the
supervision of ING Investments, ING IM determines the mix of Underlying Funds
and sets the appropriate Target Allocations and ranges for investments in those
Underlying Funds.

Periodically, based upon a variety of quantitative and qualitative factors, ING
IM uses economic and statistical methods to determine the optimal Target
Allocations and ranges for the Fund, the resulting allocations to the
Underlying Funds, and whether any Underlying Funds should be added or removed
from the mix.

The factors considered may include the following:

(i)        the investment objective of the Fund and each of the Underlying
           Funds;

(ii)       economic and market forecasts;

(iii)      proprietary and third-party reports and analyses;

(iv)       the risk/return characteristics, relative performance, and
           volatility of Underlying Funds; and

(v)        the correlation and covariance among Underlying Funds.


As market prices of the Underlying Funds' portfolio securities change, the
Fund's actual allocations will vary somewhat from the Target Allocations,
although the percentages generally will remain within an acceptable range of the
Target Allocation percentages. If material changes are made, those changes will
be reflected in the Prospectus. However, it may take some time to fully
implement the changes. ING IM will implement the changes over a reasonable
period of time while seeking to minimize disruptive effects and added costs to
the Fund and the Underlying Funds.

ING IM intends to rebalance the Fund on a periodic basis to attain the Target
Allocation investment allocations. When the Fund receives new investment
proceeds or redemption requests, depending on the Fund's current cash reserves,
ING IM may determine to purchase additional shares or redeem shares of
Underlying Funds. In making those purchases or redemptions, ING IM will attempt
to rebalance the Fund's holdings of Underlying Funds to bring them more closely
in line with the Fund's Target Allocations. If ING IM believes it is in the
best interests of the Fund and its shareholders to deviate from the Target
Allocations, it may rebalance more frequently, limit the degree of rebalancing
or avoid rebalancing altogether, pending further analysis and more favorable
market conditions.


INVESTMENT OBJECTIVES, MAIN INVESTMENTS AND RISKS OF THE UNDERLYING FUNDS

The Fund seeks to meet its investment objective by allocating its assets among
the Underlying Funds. Because the Fund invests in the Underlying Funds,
shareholders will be affected by the investment strategies of each Underlying
Fund. Information is provided below on each Underlying Fund, including its
investment objective, main investments, main risks, investment adviser, and
sub-adviser. This information is intended to provide potential investors in the
Fund with information that they may find useful in understanding the investment
history and risks of the Underlying Funds. Please refer to the section entitled
"More Information About Risks" on page 21 for an expanded discussion of the
risks listed below for a particular Underlying Fund.

You should note that over time the Fund will alter its allocation of assets
among the Underlying Funds, and may add or delete Underlying Funds that are
considered for investment. Therefore, it is not possible to predict the extent
to which the Fund will be invested in each Underlying Fund at any one time. As
a result, the degree to which the Fund may be subject to the risks of a
particular Underlying Fund will depend on the extent to which the Fund has
invested in the Underlying Fund.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                  More Information on Investment Strategies    7




MORE INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------------------

         DESCRIPTION OF THE INVESTMENT OBJECTIVES, MAIN INVESTMENTS AND
                          RISKS OF THE UNDERLYING FUNDS


                                                UNDERLYING                             INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                    FUND                                 OBJECTIVE
INVESTMENT ADVISER:                 ING Disciplined International          Long-term capital appreciation.
ING Investments, LLC                SmallCap Fund

SUB-ADVISER:
ING Investment Management Co.
                                              MAIN INVESTMENTS                         MAIN RISKS
                                    Invests at least 80% of its assets     Derivatives risk, foreign investing
                                    in securities of small-                risk, inability to sell securities risk,
                                    capitalization companies (those        market trends risk, non-
                                    that have a market capitalization      diversified investment company
                                    that falls in the range of             risk, other investment companies
                                    companies in the S&P/Citigroup         risk, portfolio turnover risk, price
                                    Extended Market Index World            volatility risk, securities lending
                                    Ex. U.S. Index). At least 65% of its   risk, small-sized companies risk,
                                    assets will be invested in             and value investing risk.
                                    companies located in a number
                                    of different countries, other than
                                    the United States. May invest up
                                    to 35% of its assets in U.S.
                                    issuers. May invest in companies
                                    with emerging securities
                                    markets. May invest in
                                    derivatives, including but not
                                    limited to, futures, options,
                                    foreign currency contracts and
                                    futures contracts. May invest in
                                    other investment companies to
                                    the extent permitted by the
                                    Investment Company Act of
                                    1940, as amended ("1940 Act")
                                    and the rules and regulations
                                    thereunder. The Fund is non
                                    diversified which means it may
                                    invest a significant portion of its
                                    assets in a single issuer.

                                               UNDERLYING                             INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                   FUND                                 OBJECTIVE
INVESTMENT ADVISER:                 ING Emerging Countries Fund            Maximum long-term capital
ING Investments, LLC                                                       appreciation.

SUB-ADVISER:
Brandes Investment Partners, L.P.            MAIN INVESTMENTS                         MAIN RISKS
                                    Invests at least 80% of its assets     Convertible securities risk,
                                    in securities of issuers located in    emerging markets investments
                                    a number of different countries        risk, foreign investing risk,
                                    with emerging securities               inability to sell securities risk,
                                    markets. The Fund may invest in        market trends risk, price volatility
                                    large-, mid- and small-sized           risk, securities lending risk, small-
                                    companies. The Fund holds              and mid- capitalization
                                    common stocks, preferred stocks,       companies risk and value
                                    American, European and Global          investing risk.
                                    Depositary Receipts and
                                    convertible securities. The Fund
                                    will typically invest, at the time
                                    of purchase, up to the greater of
                                    either: (1) 20% of total Fund
                                    assets in any particular country
                                    or industry at the time of
                                    purchase, or (2) 150% of the
                                    weighting of such country or
                                    industry as represented in the
                                    Morgan Stanley International
                                    Emerging Markets Index at the
                                    time of purchase.


8    More Information on Investment Strategies




MORE INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------------------


                                                 UNDERLYING                             INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                     FUND                                 OBJECTIVE
INVESTMENT ADVISER:                 ING Global Equity                      Growth of capital with dividend
ING Investments, LLC                Dividend Fund                          income as a secondary
                                                                           consideration.
SUB-ADVISER:
ING Investment Management
Advisors B.V.

                                               MAIN INVESTMENTS                         MAIN RISKS
                                    Invests at least 80% of its assets     Convertible securities risk,
                                    in a portfolio of equity securities    foreign investing risk, inability to
                                    of dividend-paying companies.          sell securities risk, market trends
                                    At least 65% of its net assets will    risk, price volatility risk, small-
                                    be invested in equity securities of    and mid-sized companies risk
                                    issuers of a number of different       and securities lending risk.
                                    countries, one of which may be
                                    the United States, with at least
                                    75% of total assets invested in
                                    common and preferred stocks,
                                    warrants and convertible
                                    securities. May invest in
                                    companies located in countries
                                    with emerging securities
                                    markets.

                                                UNDERLYING                             INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                     FUND                                OBJECTIVE
INVESTMENT ADVISER:                 ING Global Real                        High total return.
ING Investments, LLC                Estate Fund
SUB-ADVISER:
Clarion Real Estate Securities L.P
                                               MAIN INVESTMENTS                         MAIN RISKS
                                    Invests at least 80% of its assets     Concentration risk, foreign
                                    in a portfolio of equity securities    investing risk, inability to sell
                                    of companies that are principally      securities risk, market trends risk,
                                    engaged in the real estate             non-diversified investment
                                    industry. The Fund expects these       company risk, price volatility risk,
                                    investments to be in common            real estate risk, securities lending
                                    stocks of large-, mid- and small-      risk and small- and mid-sized
                                    sized companies, including real        companies risk.
                                    estate investment trusts. May
                                    invest in companies located in
                                    countries with emerging
                                    securities markets. The Fund is
                                    non-diversified, which means it
                                    may invest a significant portion
                                    of its assets in a single issuer.

                                                UNDERLYING                             INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                     FUND                                OBJECTIVE
INVESTMENT ADVISER:                 ING Index Plus                         Seeks to outperform the total
ING Investments, LLC                International                          return performance of the
                                    Equity Fund                            Morgan Stanley Capital
SUB-ADVISER:                                                               International Europe,
ING Investment Management                                                  Australasia and Far East (Reg. TM)
Advisors B.V.                                                              Index ("MSCI EAFE(Reg. TM)"), while
                                                                           maintaining a market level of risk.

                                               MAIN INVESTMENTS                         MAIN RISKS
                                    Invests at least 80% of its assets     Convertible securities risk,
                                    in stocks includes in the MSCI         derivatives risk, foreign investing
                                    EAFE(Reg. TM) Index, exchange-traded   risk, inability to sell securities risk,
                                    funds and derivatives, including       other investment companies risk,
                                    futures and options whose              portfolio turnover risk, price
                                    economic returns are similar to        volatility risk, securities lending
                                    the MSCI EAFE(Reg. TM) Index or its    risk and small- and mid-sized
                                    components. May also invest in         companies risk.
                                    securities that are convertible
                                    into common stocks included in
                                    the MSCI EAFE(Reg. TM) Index. At any
                                    one time, the Fund will hold
                                    between 300 to 400 of the stocks
                                    included in the Index.

                                                UNDERLYING                             INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                     FUND                                OBJECTIVE
INVESTMENT ADVISER:                 ING Index Plus                         Seeks to outperform the total
ING Investments, LLC                MidCap Fund                            return performance of the Standard
                                                                           & Poor's MidCap 400 Index, while
SUB-ADVISER:                                                               maintaining a market level of risk.
ING Investment Management Co.
                                               MAIN INVESTMENTS                         MAIN RISKS
                                    Invests at least 80% of its assets     Derivatives risk, manager risk,
                                    in securities of mid-capitalization    mid-sized companies risk, other
                                    companies included in the S&P          investment companies risk, price
                                    MidCap 400 Index. The Sub-             volatility risk, and securities
                                    Adviser defines mid-                   lending risk.
                                    capitalization companies as
                                    companies that are included in
                                    the Index at the time of
                                    purchase. May invest in
                                    derivative instruments. May
                                    invest in other investment
                                    companies to the extent
                                    permitted under the 1940 Act
                                    and the rules and regulations
                                    thereunder.

[GRAPHIC APPEARS HERE]

If you have any questions, please call 1-800-992-0180.


                                  More Information on Investment Strategies    9




MORE INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------------------


                                               UNDERLYING                               INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                   FUND                                   OBJECTIVE
INVESTMENT ADVISER:                 ING Index Plus                         Seeks to outperform the total return
ING Investments, LLC                SmallCap Fund                          performance of the Standard & Poor's
                                                                           SmallCap 600 Index, while maintaining
SUB-ADVISER:                                                               a market level of risk.
ING Investment Management Co.

                                            MAIN INVESTMENTS                            MAIN RISKS
                                    Invests at least 80% of its assets     Derivatives risk, manager risk,
                                    in securities of small-                other investment companies risk,
                                    capitalization companies               price volatility risk, securities
                                    included in the S&P SmallCap 600       lending risk and small-sized
                                    Index. The Sub-Adviser defines         companies risk.
                                    small-capitalization companies as
                                    companies that are included in
                                    the Index at the time of
                                    purchase. May invest in
                                    derivative instruments. May
                                    invest in other investment
                                    companies to the extent
                                    permitted under the 1940 Act
                                    and the rules and regulations
                                    thereunder.

                                               UNDERLYING                               INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                   FUND                                   OBJECTIVE
INVESTMENT ADVISER:                 ING Institutional                      High level of current income,
ING Investments, LLC                Prime Money Market                     consistent with the preservation
                                    Fund                                   of capital and liquidity and the
SUB-ADVISER:                                                               maintenance of a stable $1.00
ING Investment Management Co.                                              NAV per share.

                                            MAIN INVESTMENTS                            MAIN RISKS
                                    Invests in a portfolio of high-        Concentration risk, credit and
                                    quality, U.S. dollar denominated       interest rate risk, foreign
                                    short-term debt securities that        investing risk, mortgage-related
                                    are determined by the sub-             securities risk, other investment
                                    adviser to present minimal credit      companies risk, prepayment risk,
                                    risks. Obligations in which the        repurchase agreement risk and
                                    Fund invests generally have            U.S. government securities &
                                    remaining maturities of 397 days       obligations risk.
                                    or less, although upon satisfying
                                    certain conditions of Rule 2a-7,
                                    the Fund may, to the extent
                                    permissible, invest in instruments
                                    subject to repurchase
                                    agreements and certain variable
                                    and floating rate obligations
                                    that bear longer final maturity.
                                    The dollar-weighted average
                                    portfolio maturity of the Fund
                                    will not exceed 90 days. The
                                    Fund will invest in obligations
                                    permitted to be purchased under
                                    Rule 2a-7. May invest more than
                                    25% of its total assets in
                                    instruments issued by domestic
                                    banks. May significantly invest in
                                    securities issued by financial
                                    services companies including,
                                    among other entities, banks and
                                    bank holding companies,
                                    investment banks, trust
                                    companies, insurance companies,
                                    finance companies and broker-
                                    dealers. May purchase securities
                                    on a when-issued basis and
                                    purchase or sell them on a
                                    forward commitment basis. May
                                    also invest in variable rate master
                                    demand obligations.


10   More Information on Investment Strategies




MORE INFORMATION ON INVESTMENT STRATEGIES
--------------------------------------------------------------------------------


                                                UNDERLYING                            INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                    FUND                                OBJECTIVE
INVESTMENT ADVISER:                 ING Intermediate Bond                  High level of current income,
ING Investments, LLC                Fund                                   consistent with the preservation
                                                                           of capital and liquidity.
SUB-ADVISER:
ING Investment Management Co.

                                             MAIN INVESTMENTS                        MAIN RISKS
                                    Invests at least 80% of its assets     Credit risk, derivatives risk,
                                    in a portfolio of bonds,               extension risk, foreign investing
                                    including, but not limited to,         risk, high-yield, lower-grade debt
                                    corporate, government and              securities risk, inability to sell
                                    mortgage bonds, which, at the          securities risk, interest rate risk,
                                    time of investment, are rated          mortgage-related securities risk,
                                    investment grade (at least BBB-        other investment companies risk,
                                    by Standard & Poor's Rating            portfolio turnover risk,
                                    Corporation or Baa3 by Moody's         prepayment risk, price volatility
                                    Investors Service, Inc. or have an     risk, securities lending risk and
                                    equivalent rating by a nationally      U.S. government securities &
                                    recognized statistical rating          obligations risk.
                                    organization or of comparable
                                    quality if unrated). May invest a
                                    portion of its assets in high-yield
                                    debt securities. The Fund will
                                    seek to maintain a minimum
                                    average portfolio quality rating
                                    of at least investment grade.
                                    Generally, the sub-adviser
                                    maintains a dollar-weighted
                                    average duration between three
                                    and ten years for the Fund. The
                                    Fund may also invest in preferred
                                    stocks, high-quality money
                                    market instruments, municipal
                                    bonds, debt securities of foreign
                                    issuers, securities denominated in
                                    foreign currencies, foreign
                                    currencies, mortgage- and asset-
                                    backed securities, options and
                                    futures contract involving
                                    securities, securities indices and
                                    interest rates, including options
                                    and futures contracts
                                    denominated in foreign
                                    securities, May engage in dollar
                                    roll transactions and swap
                                    agreements. May invest in other
                                    investment companies to the
                                    extent permitted under the 1940
                                    Act and the rules and regulations
                                    thereunder.

                                                UNDERLYING                            INVESTMENT
 INVESTMENT ADVISER/SUB-ADVISER                    FUND                                OBJECTIVE
ADVISER:                            ING Tactical Asset                     Seeks to outperform the Standard
ING Investments LLC                 Allocation Fund                        & Poor's 500(Reg. TM) Composite
                                                                           Stock Price Index by overweighting
SUB-ADVISER:                                                               and underweighting various
ING Investment Management Co.                                              global equity, bond and currency
                                                                           markets.

                                             MAIN INVESTMENTS                        MAIN RISKS
                                    Invests primarily in S&P 500(Reg. TM)  Asset allocation risk, convertible
                                    Index equities and equity              and debt securities risk, credit
                                    securities of issuers located          risk, derivatives risk, emerging
                                    within and outside the U.S.            markets risk, foreign investing
                                    equity securities include, but are     risk, inability to sell securities risk,
                                    not limited to, common and             interest rate risk, market trends
                                    preferred, warrants and                risk, other investment companies
                                    convertible securities. The Fund       risk, prepayment or call risk, price
                                    will also invest in derivatives,       volatility risk, securities lending
                                    including, but not limited to,         risk and small- and mid-
                                    futures, swaps and forward             capitalization companies risk.
                                    contracts. The Fund may also
                                    invest in other investment
                                    companies to the extent
                                    permitted under the Investment
                                    Company Act of 1940 and the
                                    rules and regulations thereunder.


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                  More Information on Investment Strategies   11




SHAREHOLDER GUIDE                    HOW TO PURCHASE SHARES
--------------------------------------------------------------------------------


PURCHASE OF SHARES

CLASS I

The minimum initial investment for Class I shares is $250,000. Class I shares
are available only to (i) qualified retirement plans such as 401(a), 401(k) or
other defined contribution plans and defined benefit plans; (ii) insurance
companies and foundations investing for their own account; (iii) wrap programs
offered by broker-dealers and financial institutions; (iv) accounts of or
managed by trust departments; (v) retirement plans affiliated with ING Groep
N.V.; (vi) ING Groep N.V. affiliates for purposes of corporate cash management;
and (vii) by other ING Funds in the ING Family of Funds.

CLASS W SHARES

The minimum initial investment for Class W shares is $1,000. Class W shares are
available only to: (i) wrap programs offered by broker-dealers and financial
institutions; (ii) retirement plans affiliated with ING Groep N.V. ("ING
Groep") (NYSE: ING); (iii) ING Groep affiliates for purposes of corporate cash
management; and (iv) by other ING Funds in the ING Family of Funds.


There are no investment minimums for any subsequent investments.

Make your investment using the methods outlined in the table on the right.


More information may be found on the Fund's website by going to
www.ingfunds.com, clicking on the "Forms & Literature" link and then selecting
"Shareholder Guides" from the "Prospectuses & Reports" category and selecting
the appropriate Fund link. The Fund offers additional classes that are not
available in this Prospectus that may be more appropriate for you. Please
review the disclosure about all of the available Fund classes carefully. Before
investing, you should discuss which share class may be right for you with your
investment professional and review the prospectus for those funds.

The Fund and ING Funds Distributor, LLC ("Distributor") reserve the right to
reject any purchase order. Please note that cash, travelers checks, third-party
checks, money orders and checks drawn on non-U.S. banks (even if payment may be
effected through a U.S. bank) generally will not be accepted. The Fund and the
Distributor reserve the right to waive minimum investment amounts. The Fund and
the Distributor reserve the right to liquidate sufficient shares to recover
annual transfer agent fees or to close your account and redeem your shares
should you fail to maintain your account value at a minimum of $250,000 for
Class I shares and $1,000 for Class W shares.



                               Initial                   Additional
      Method               Investment                  Investment
 BY CONTACTING        An investment               Visit or consult an
 YOUR               professional with an        investment
 INVESTMENT         authorized firm can         professional.
 PROFESSIONAL       help you establish and
                    maintain your account.
 BY MAIL              Visit or consult an         Fill out the Account
                    investment                  Additions form
                    professional. Make          included on the bottom
                    your check payable to       of your account
                    the ING Funds and mail      statement along with
                    it, along with a            your check payable to
                    completed Account           ING Funds and mail
                    Application. Please         them to the address on
                    indicate your               the account statement.
                    investment                  Remember to write
                    professional on the         your account number
                    New Account                 on the check.
                    Application.
 BY WIRE              Call the ING                Wire the funds in the
                    Operations                  same manner described
                    Department at               under "Initial
                    (800) 922-0180              Investment."
                    and select Option 4 to
                    obtain an account
                    number and indicate
                    your investment
                    professional on the
                    account.
                    Instruct your bank to
                    wire funds to the Fund
                    in the care of:
                    State Street Bank
                    and Trust Company
                    ABA # 011000028
                    Boston, MA
                    credit to:
                    __________
                    (the Fund)
                    A/C #75000216; for
                    further credit to
                    Shareholder
                    A/C #
                    __________
                    (A/C # you received
                    over the telephone)
                    Shareholder Name:

                    __________
                    (Your Name Here)
                    After wiring funds
                    you must complete
                    the Account
                    Application and send
                    it to:
                    ING Funds
                    P.O. Box 219368
                    Kansas City, MO
                    64121-9368


12    Shareholder Guide




HOW TO PURCHASE SHARES                                        SHAREHOLDER GUIDE
--------------------------------------------------------------------

CUSTOMER IDENTIFICATION
To help the government fight the funding of terrorism and money laundering
activities, federal law requires all financial institutions to obtain, verify
and record information that identifies each person that opens an account, and
to determine whether such person's name appears on government lists of known or
suspected terrorists and terrorist organizations.

What this means for you: The Fund, the Distributor, or a third-party selling
you the Fund must obtain the following information for each person that opens
an account:

o  Name;

o  Date of birth (for individuals);

o  Physical residential address (although post office boxes are still permitted
   for mailing); and

o  Social security number, taxpayer identification number, or other identifying
   number.

You may also be asked to show your driver's license, passport or other
identifying documents in order to verify your identity. In addition, it may be
necessary to verify your identity by cross-referencing your identification
information with a consumer report or other electronic database. Additional
information may be required to open accounts for corporations and other
non-natural persons.

FEDERAL LAW PROHIBITS THE FUND, THE DISTRIBUTOR AND OTHER FINANCIAL
INSTITUTIONS FROM OPENING ACCOUNTS UNLESS THEY RECEIVE THE MINIMUM IDENTIFYING
INFORMATION LISTED ABOVE. THEY ALSO MAY BE REQUIRED TO CLOSE YOUR ACCOUNT IF
THEY ARE UNABLE TO VERIFY YOUR IDENTITY WITHIN A REASONABLE TIME.

FREQUENT TRADING - MARKET TIMING

The Fund is intended for long-term investment and not as a short-term trading
vehicle. Accordingly, organizations or individuals that use market timing
investment strategies should not purchase shares of the Fund. The Fund reserves
the right, in its sole discretion and without prior notice, to reject, restrict
or refuse purchase orders whether directly or by exchange, including purchase
orders that have been accepted by a shareholder's or retirement plan
participant's intermediary, that the Fund determines not to be in the best
interest of the Fund.

The Fund believes that market timing or frequent, short-term trading in any
account, including a retirement plan account, is not in the best interest of
the Fund or its shareholders. Due to the disruptive nature of this activity, it
can adversely affect the ability of the Adviser to invest assets in an orderly,
long-term manner. Frequent trading can raise Fund expenses through: increased
trading and transaction costs; increased administrative costs; and lost
opportunity costs. This in turn can have an adverse effect on Fund performance.

Because the Underlying Funds invest in foreign securities it may present
greater opportunities for market timers and thus be at a greater risk for
excessive trading. If an event occurring after the close of a foreign market,
but before the time an Underlying Fund computes its current NAV, causes a
change in the price of the foreign security and such price is not reflected in
the Underlying Fund's current NAV, investors may attempt to take advantage of
anticipated price movements in securities held by the Underlying Funds based on
such pricing discrepancies. This is often referred to as "price arbitrage."
Such price arbitrage opportunities may also occur in Underlying Funds which do
not invest in foreign securities. For example, if trading in a security held by
an Underlying Fund is halted and does not resume prior to the time the
Underlying Fund calculates its NAV such "stale pricing" presents an opportunity
for investors to take advantage of the pricing discrepancy. Similarly,
Underlying Funds that hold thinly-traded securities, such as certain
small-capitalization securities, may be exposed to varying levels of pricing
arbitrage. The Underlying Funds have adopted fair valuation policies and
procedures intended to reduce the Underlying Funds' exposure to price
arbitrage, stale pricing and other potential pricing discrepancies. However, to
the extent that an Underlying Fund does not immediately reflect these changes
in market conditions, short-term trading may dilute the value of the Underlying
Funds' shares which negatively affects long-term shareholders.


The Fund and Underlying Funds' Boards of Trustees ("Boards") have adopted
policies and procedures designed to deter frequent, short-term trading in
shares of the Fund and the Underlying Funds. Consistent with this policy, the
Fund and the Underlying Funds monitor trading activity. Shareholders may make
exchanges among their accounts with ING Funds four (4) times each year. All
exchanges occurring on the same day for all accounts (individual, IRA, 401(k),
etc.) beneficially owned by the same shareholder will be treated as a single
transaction. Subsequent transactions may not be effected within 30 days of the
last transaction. In addition, purchase and sale transactions that are the
functional equivalent of exchanges will be subject to these limits. On January
1 of each year, the limit restriction will be reset for all shareholders and
any trade restrictions that were placed on an account due to a violation of the
policy in the prior year will be removed. The Funds and the Underlying Funds
reserve the right to specifically address any trading that might otherwise
appear to comply with the restrictions described above if after consultation
with appropriate compliance personnel, it is determined that such trading is
nevertheless abusive or adverse to the interests of long-term shareholders. The
Fund and the Underlying Funds also reserve the right to modify the frequent
trading-market timing policy at any time without prior notice depending on the
needs of the Fund and the Underlying Funds and/or state or federal regulatory
requirements.


If an activity is identified as problematic after further investigation, the
Fund and the Underlying Funds reserve the right to take any necessary action to
deter such activity. Such action may include, but not be limited to: rejecting
additional purchase orders, whether directly or by exchange; extending
settlement of a redemption up to seven days; rejecting all purchase orders from
broker-dealers or their registered representatives suspected of violating the
Fund and the Underlying Funds' frequent trading policy; or termination of the
selling group agreement or other agreement with broker-dealers or other
financial intermediaries associated with frequent trading.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                         Shareholder Guide    13




SHAREHOLDER GUIDE                    HOW TO PURCHASE SHARES
--------------------------------------------------------------------------------

Although the restrictions described above are designed to discourage frequent,
short-term trading, none of them alone, nor all of them taken together, can
eliminate the possibility that frequent, short-term trading activity in the
Fund and the Underlying Funds will occur. Moreover, in enforcing such
restrictions, the Fund and the Underlying Funds are often required to make
decisions that are inherently subjective. The Fund and the Underlying Funds
strive to make these decisions to the best of their abilities in a manner that
they believe is in the best interest of shareholders.

Shareholders may invest in the Fund and the Underlying Funds through omnibus
account arrangements with financial intermediaries. Omnibus accounts permit
intermediaries to aggregate transactions. Such intermediaries include
broker-dealers, banks, investment advisers, record keepers, retirement plans,
and fee-based accounts such as wrap fee programs. Omnibus accounts generally do
not identify customers' trading activity on an individual basis. The Fund and
the Underlying Funds administrator now has agreements which require such
intermediaries to provide detailed account information, including trading
history, upon request of the Fund and the Underlying Funds.

In some cases, the Fund and the Underlying Funds will rely on the
intermediaries' excessive trading policies and such policies shall define the
trading activity in which the shareholder may engage. This shall be the case
where the Fund and the Underlying Funds are used in certain retirement plans
offered by affiliates. With trading information received as a result of
agreements, the Fund and the Underlying Funds may make a determination that
certain trading activity is harmful to the Funds and their shareholders even if
such activity is not strictly prohibited by the intermediaries' excessive
trading policy. As a result, a shareholder investing directly or indirectly in
the Fund and the Underlying Funds may have their trading privileges suspended
without violating the stated excessive trading policy of the intermediary.

14    Shareholder Guide




HOW TO REDEEM SHARES                                          SHAREHOLDER GUIDE
--------------------------------------------------------------------

You may redeem shares by using the methods outlined in the table on the right.

Under unusual circumstances, the Fund may suspend the right of redemption as
allowed by federal securities laws.

SYSTEMATIC WITHDRAWAL PLAN

You may elect to make periodic withdrawals from your account on a regular
basis.


o  Your account must have a current value of at least $250,000.

o  Minimum withdrawal amount is $1,000.


o  You may choose from monthly, quarterly, semi-annual or annual payments.


For additional information, contact a Shareholder Services Representative,
refer to the Account Application or the SAI.


PAYMENTS

Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. The Fund has
the right to take up to seven days to pay your redemption proceeds, and may
postpone payment longer in the event of an economic emergency as determined by
the SEC. When you place a request to redeem shares for which the purchase money
has not yet been collected, the request will be executed at the next determined
NAV, but the Fund will not release the proceeds until your purchase payment
clears. This may take up to 15 days or more. To reduce such delay, purchases
should be made by bank wire or federal funds.

The Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, the Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, the Fund could elect to make payment in
securities for redemptions in excess of $250,000 or 1% of its net assets during
any 90-day period for any one shareholder. An investor may incur brokerage
costs in converting such securities to cash.

HOW WE COMPENSATE INTERMEDIARIES FOR SELLING ING MUTUAL FUNDS

ING mutual funds are distributed by ING Funds Distributor, LLC ("Distributor").
The Distributor is a broker-dealer that is licensed to sell securities. The
Distributor generally does not sell directly to the public but sells and
markets its products through intermediaries such as other broker-dealers. Each
ING mutual fund also has an investment adviser ("Adviser") which is responsible
for managing the money invested in each of the mutual funds. Both of these
entities (collectively, "ING") may compensate an intermediary for selling ING
mutual funds.

Only persons licensed with the Financial Industry Regulatory Authority
("FINRA") as a registered representative (often referred to as a broker or
financial advisor) and associated with a specific broker-dealer may sell an ING
mutual fund to you. The Distributor has agreements in place with each of these
broker-dealers defining specifically what those broker-dealers will be paid for
the sale of a particular ING mutual fund. Those broker-dealers then pay the
registered representative who sold you the mutual fund some or all of what they
receive from ING. They may receive a payment when the sale is made and can, in
some cases, continue to receive payments while you are invested in the mutual
fund.

The Fund's Adviser or Distributor, out of its own resources and without
additional cost to the Fund or its shareholders, may provide additional cash or
non-cash compensation to intermediaries selling shares of the Fund including
affiliates of the Adviser and the Distributor. These amounts would be in
addition to the distribution payments made by the Fund under the distribution
agreements. The payments made under these arrangements are paid by the Adviser
or the Distributor. Additionally, if a fund is not sub-advised or is
sub-advised by an ING entity, ING may retain more revenue than on those funds
it must pay to have sub-advised by non-affiliated entities. Management
personnel of ING may receive additional compensation if the overall amount of
investments in funds advised by ING meets certain target levels or increases
over time.

The Distributor may pay, from its own resources, additional fees to these
broker-dealers or other financial institutions including affiliated entities.
These additional fees paid to intermediaries may take the following forms: (1)
a percentage of that entity's customer assets invested in ING mutual funds; (2)
as a percentage of that entity's gross sales; or (3) some combination of these
payments. These payments may, depending on the broker-dealer's satisfaction of
the required conditions, be periodic and may be up to: (1) 0.30% per annum of
the value of the Fund's shares held by the broker-dealer's customers; or (2)
0.20% of the value of the Fund's shares sold by the broker-dealer during a
particular period. In accordance with these practices, if that initial
investment averages a value of $10,000 over the year, the Distributor could pay
a maximum of $30 on those assets. If you invested $10,000, the Distributor
could pay a maximum of $20 for that sale.

The Fund's Adviser or Distributor may provide additional cash or non-cash
compensation to third parties selling our mutual funds including affiliated
companies. This may take the form of cash incentives and non-cash compensation
and may include, but is not limited to: cash; merchandise; trips; occasional
entertainment; meals or tickets to a sporting event; client appreciation
events; payment for travel expenses (including meals and lodging) to
pre-approved training and education seminars; and payment for advertising and
sales campaigns. The Distributor may also pay concessions in addition to those
described above to broker-dealers so that ING mutual funds are made available
by those broker-dealers for their customers. The Sub-Adviser of the Fund may
contribute to non-cash compensation arrangements.

Not all mutual funds pay the same amount to the broker-dealers who sell their
mutual funds. Broker-dealers can receive different payments based on the mutual
funds they offer, the companies

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                         Shareholder Guide    15




SHAREHOLDER GUIDE                        HOW TO REDEEM SHARES
--------------------------------------------------------------------------------

with whom they are doing business, and how much they sell. What these
broker-dealers are paid also varies depending on the class of mutual fund you
purchase.

The top 25 firms we paid to sell our mutual funds, as of the end of the last
calendar year are: AG Edwards & Sons; Bear Stearns Securities Corp.; Charles
Schwab & Co.; Citigroup Global Markets; Directed Services LLC.; Financial
Network Investment; First Clearing, LLC; H&R Block Financial Advisors; ING
DIRECT Securities, Inc.; ING Financial Advisors; ING Life Insurance and Annuity
Company; Linsco Private Ledger Financial; Merrill Lynch; MS & Co. (Morgan
Stanley); Multi Financial Securities; National Financial Services Corp.;
Oppenheimer & Co; Pershing, LLC; Primevest Financial Services Inc.; Prudential
Investment Management Services; Raymond James Financial Services; RBC Dain
Rauscher Inc.; UBS Financial Services, Inc.; Wachovia Securities; and Wells
Fargo Investments.

Your registered representative or broker-dealer could have a financial interest
in selling you a particular mutual fund, or the mutual funds of a particular
company, to increase the compensation they receive. Please make sure you read
fully each mutual fund prospectus and discuss any questions you have with your
registered representative.

16    Shareholder Guide




TRANSACTION POLICIES                                          SHAREHOLDER GUIDE
--------------------------------------------------------------------

NET ASSET VALUE

The NAV per share for each class of the Fund is determined each business day as
of the close of regular trading ("Market Close") on the New York Stock Exchange
("NYSE") (normally 4:00 p.m. Eastern time unless otherwise designated by the
NYSE). The Fund is open for business every day the NYSE is open. The NYSE is
closed on all weekends and on all national holidays and Good Friday. Fund
shares will not be priced on those days. The NAV per share of each class of the
Fund is calculated by taking the value of the Fund's assets attributable to
that class, subtracting the Fund's liabilities attributable to that class, and
dividing by the number of shares of that class that are outstanding.


The NAV of the Fund is generally based upon the NAVs of the Underlying Funds.
In general, assets of the Underlying Funds are valued based on actual or
estimated market value, with special provisions for assets not having readily
available market quotations and short-term debt securities, and for situations
where market quotations are deemed unreliable. Investments in securities
maturing in 60 days or less are valued at amortized cost, which, when combined
with accrued interest, approximates market value. Securities prices may be
obtained from automated pricing services. Shares of investment companies held
by the Underlying Funds will generally be valued at the latest NAV reported by
those investment companies. The prospectuses for those investment companies
explain the circumstances under which they will use fair value pricing and the
effects of using fair value pricing.

Trading of foreign securities may not take place every day the NYSE is open.
Also, trading in some foreign markets and on some electronic trading networks
may occur on weekends or holidays when the Fund's or an Underlying Fund's NAV
is not calculated. As a result, the NAV of the Fund may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.


When market quotations are not available or are deemed unreliable, a
sub-adviser to an Underlying Fund will use a fair value for the security that
is determined in accordance with procedures adopted by an Underlying Fund's
Board. The types of securities for which such fair value pricing might be
required include, but are not limited to:

o  Foreign securities, where a foreign security whose value at the close of the
   foreign market on which it principally trades likely would have changed by
   the time of the close of the NYSE, or the closing value is otherwise deemed
   unreliable;

o  Securities of an issuer that has entered into a restructuring;

o  Securities whose trading has been halted or suspended;

o  Fixed-income securities that have gone into default and for which there are
   no current market value quotations; and

o  Securities that are restricted as to transfer or resale.


Options that are traded over-the-counter will be valued using one of three
methods: (1) dealer quotes, (2) industry models with objective inputs, or (3)
by using a benchmark arrived at by comparing prior-day dealer quotes with the
corresponding change in the underlying security or index. Exchange traded
options will be valued using the last reported sale. If no last sale is
reported, exchange traded options will be valued using an industry accepted
model such as "Black Scholes." Options on currencies purchased by the Fund are
valued at their last bid price in the case of listed options or at the average
of the last bid prices obtained from dealers in the case of over-the-counter
options.

Each Underlying Fund's Adviser or sub-adviser may rely on the recommendations
of a fair value pricing service approved by an Underlying Fund's Board in
valuing foreign securities. Valuing securities at fair value involves greater
reliance on judgment than valuing securities that have readily available market
quotations. The Adviser makes such determinations in good faith in accordance
with procedures adopted by an Underlying Fund's Board. Fair value
determinations can also involve reliance on quantitative models employed by a
fair value pricing service. There can be no assurance that an Underlying Fund
could obtain the fair value assigned to a security if it were to sell the
security at approximately the time at which an Underlying Fund determines its
NAV per share. Please refer to the prospectus for each Underlying Fund for an
explanation of the circumstances under which an Underlying Fund will use fair
pricing and the effect of fair pricing.


PRICE OF SHARES

When you buy shares, you pay the NAV plus any applicable sales charge. When you
sell shares, you receive the NAV minus any applicable CDSC. Exchange orders are
effected at NAV.

EXECUTION OF REQUESTS

Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or the Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase Shares" have been completed. If
you purchase by wire, however, the order will be deemed to be in proper form
after the telephone notification and the federal funds wire have been received.
If you purchase by wire, you must submit an application form in a timely
fashion. If an order or payment by wire is received after Market Close, the
shares will not be credited until the next business day. For your transaction
to be counted on the day you place your order with your broker-dealer or other
financial institution, they must receive your order before Market Close and
promptly transmit the order to the Transfer Agent or the Distributor.


You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You
may rely on these confirmations in lieu of certificates as evidence of your
ownership.


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                         Shareholder Guide    17




SHAREHOLDER GUIDE                                TRANSACTION POLICIES
--------------------------------------------------------------------------------

TELEPHONE ORDERS

The Fund and its Transfer Agent will not be responsible for the authenticity of
phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if they reasonably believe that such instructions were genuine.
The Fund and its Transfer Agent have established reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include recording telephone instructions for exchanges and expedited
redemptions, requiring the caller to give certain specific identifying
information, and providing written confirmation to shareholders of record not
later than five days following any such telephone transactions. If the Fund and
its Transfer Agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.

EXCHANGES

You may exchange shares of the Fund for shares of the same class of any other
ING Fund that offers those shares. You should review the prospectus of the ING
Fund you intend to exchange into before exchanging your shares.

The total value of shares being exchanged must at least equal the minimum
investment requirement of the Fund into which they are being exchanged.
Exchanges of shares are sales and may result in a gain or loss for federal and
state income tax purposes.

If you exchange into ING Senior Income Fund, your ability to sell or liquidate
your investment will be limited. ING Senior Income Fund is a closed-end
interval fund and does not redeem its shares on a daily basis. It is not
expected that a secondary market for ING Senior Income Fund's shares will
develop, so you will not be able to sell them through a broker or other
investment professional. To provide a measure of liquidity, ING Senior Income
Fund will normally make monthly repurchase offers for not less than 5% of its
outstanding common shares. If more than 5% of ING Senior Income Fund's common
shares are tendered, you may not be able to completely liquidate your holdings
in any one month. You also would not have liquidity between these monthly
repurchase dates. Investors exercising the exchange privilege into ING Senior
Income Fund should carefully review the prospectus of that fund. Investors may
obtain a copy of the ING Senior Income Fund prospectus or any other ING Fund
prospectus by calling (800) 992-0180 or by going to www.ingfunds.com.

In addition to the Fund available in this Prospectus, the Distributor offers
many other funds. Shareholders exercising the exchange privilege with any other
ING Fund should carefully review the prospectus of that fund before exchanging
their shares. For a list of the other funds offered by the Distributor, please
see the inside back cover of this Prospectus. Investors may obtain a copy of a
prospectus of any ING Fund not discussed in this Prospectus by calling (800)
992-0180 or by going to www.ingfunds.com.

You will automatically have the ability to request an exchange by calling a
Shareholder Services Representative unless you mark the box on the Account
Application that indicates that you do not wish to have the telephone exchange
privilege. The Fund may change or cancel its exchange policies at any time,
upon 60 days' prior written notice to shareholders.

SMALL ACCOUNTS

Due to the relatively high cost of handling small investments, the Fund
reserves the right upon 30 days' prior written notice to redeem, at NAV (less
any applicable deferred sales charge), the shares of any shareholder whose
account (except for IRAs) has a total value that is less than the Fund minimum.
Before the Fund redeems such shares and sends the proceeds to the shareholder,
it will notify the shareholder that the value of the shares in the account is
less than the minimum amount allowed and will allow the shareholder 30 days to
make an additional investment in an amount that will increase the value of the
account to the minimum before the redemption is processed. Your account will
not be closed if its drop in value is due to Fund performance.

ACCOUNT ACCESS

Unless your Fund shares are held through a third-party fiduciary or in an
omnibus registration at your bank or brokerage firm, you may be able to access
your account information over the internet at www.ingfunds.com, or via a touch
tone telephone by calling (800) 992-0180 and selecting Option 1. Should you
wish to speak with a Shareholder Services Representative, you may call the
toll-free number listed above and select Option 2.

PRIVACY POLICY

The Fund has adopted a policy concerning investor privacy. To review the
privacy policy, contact a Shareholder Services Representative at (800) 992-0180
and select Option 1, obtain a policy over the internet at www.ingfunds.com, or
see the privacy promise that accompanies this Prospectus.

HOUSEHOLDING

To reduce expenses, we may mail only one copy of the Fund's prospectus and each
annual and semi-annual shareholder report to those addresses shared by two or
more accounts. If you wish to receive individual copies of these documents,
please call us at (800) 992-0180 or speak to your investment professional. We
will begin sending you individual copies thirty days after receiving your
request.

PORTFOLIO HOLDINGS DISCLOSURE POLICY

A description of the policies and procedures with respect to the disclosure of
the Fund's portfolio securities is available in the SAI. The Fund posts its
portfolio holdings schedule on its website on a calendar-quarter basis and
makes it available on the first day of the second month in the next quarter.
The portfolio holdings schedule is as of the last day of the month preceding
the quarter-end (e.g., the Fund will post the quarter ending June 30 holdings
on August 1). The Fund's portfolio holdings schedule will, at a minimum, remain
available on the Fund's website until the Fund

18    Shareholder Guide




TRANSACTION POLICIES                                          SHAREHOLDER GUIDE
--------------------------------------------------------------------

files a Form N-CSR or Form N-Q with the SEC for the period that includes the
date as of which the website information is current. The Fund's website is
located at www.ingfunds.com.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                                         Shareholder Guide    19




MANAGEMENT OF THE FUND                                                 ADVISER
--------------------------------------------------------------------------------

ADVISER

ING INVESTMENTS, LLC ("ING INVESTMENTS" OR "ADVISER"), an Arizona limited
liability company, serves as the investment adviser to the Fund. ING
Investments has overall responsibility for the management of the Fund. ING
Investments oversees all investment advisory and portfolio management services
for the Fund.

ING Investments is registered with the SEC as an investment adviser. ING
Investments is an indirect, wholly-owned subsidiary of ING Groep N.V. ("ING
Groep"). ING Groep is one of the largest financial services organizations in
the world with approximately 120,000 employees. Based in Amsterdam, ING Groep
offers an array of banking, insurance and asset management services to both
individual and institutional investors. ING Investments became an investment
management firm in April, 1995.

As of December 31, 2007 ING Investments managed approximately $54 billion in
assets.


The principal address of ING Investments is 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258.


ING Investments receives a monthly fee for its services based on the average
daily net assets of the Fund.


ING Investments will receive a management fee of 0.08%. Because the Fund had
not commenced operations as of the fiscal year ended October 31, 2007, the
management fee for the Fund reflects the current contract rate.


For information regarding the basis for the Board's approval of the Fund's
investment advisory and sub-advisory relationships, please refer to the Fund's
semi-annual shareholder report that will be dated April 30, 2008.


SUB-ADVISER


ING Investments has engaged a sub-adviser to provide the day-to-day management
of the Fund's portfolio. The sub-adviser is an affiliate of ING Investments.

ING Investments acts as a "manager-of-managers" for the Fund. ING Investments
delegates to the sub-adviser of the Fund the responsibility for investment
management, subject to ING Investment's oversight. ING Investments is
responsible for monitoring the investment program and performance of the
sub-adviser of the Fund.

From time to time, ING Investments may also recommend the appointment of
additional sub-advisers or replacement of non-affiliated sub-advisers to the
Fund's Board. It is not expected that ING Investments would normally recommend
replacement of affiliated sub-advisers as part of its oversight
responsibilities. The Fund and ING Investments have received exemptive relief
from the SEC to permit ING Investments, with the approval of the Fund's Board,
to appoint additional non-affiliated sub-advisers or to replace an existing
sub-adviser with a non-affiliated sub-adviser as well as change the terms of a
contract with a non-affiliated sub-adviser, without submitting the contract to
a vote of the Fund's shareholders. The Fund will notify shareholders of any
change in the identity of the sub-adviser of the Fund. In this event, the name
of the Fund and its principal investment strategies may also change.

Under the terms of the sub-advisory agreement, the agreement can be terminated
by either ING Investments or the Fund's Board. In the event the sub-advisory
agreement is terminated, the sub-adviser may be replaced subject to any
regulatory requirements or ING Investments may assume day-to-day investment
management of the Fund.


ING INVESTMENT MANAGEMENT CO.


ING Investment Management Co. ("ING IM" or "Sub-Adviser"), a Connecticut
corporation, serves as the Sub-Adviser to the Fund. ING IM is responsible for
managing the assets of the Fund in accordance with the Fund's investment
objective and policies, subject to oversight by ING Investments and the Fund's
Board.

Founded in 1972, ING IM is registered with the SEC as an investment adviser.
ING IM has acted as adviser or sub-adviser to mutual funds since 1994 and has
managed institutional accounts since 1972. ING IM is an indirect, wholly-owned
subsidiary of ING Groep and is an affiliate of ING Investments. As of December
31, 2007, ING IM managed approximately $73.5 billion in assets. The principal
office of ING IM is 230 Park Avenue, New York, NY 10169.


The following individual is responsible for the day-today management of the
Fund:

Paul Zemsky, Portfolio Manager, has managed the Fund since its inception. Mr.
Zemsky is head of ING's Multi-Asset Strategies & Solutions Group. He joined ING
IM in 2005 as Head of Derivative Strategies. Prior to assuming his role at ING,
Mr. Zemsky spent 18 years at J.P. Morgan Investment Management, where he held a
number of key position, including having responsibility for asset allocation
for the firm's fixed-income business and handling option trading in both the
exchange-traded and over-the-counter markets.

ADDITIONAL INFORMATION REGARDING PORTFOLIO MANAGERS

The SAI provides additional information about the portfolio manager's
compensation, other accounts managed by the portfolio manager and the portfolio
manager's ownership of securities in the Fund.

20    Management of the Fund




MORE                                         INFORMATION ABOUT RISKS
--------------------------------------------------------------------

All mutual funds involve risk - some more than others - and there is always the
chance that you could lose money or not earn as much as you hope. The Fund's
risk profile is largely a factor of the principal securities in which the
Underlying Funds invest and investment techniques that they use. The following
pages discuss the risks associated with certain of the types of securities in
which an Underlying Fund may invest and certain of the investment practices
that an Underlying Fund may use. For more information about these and other
types of securities and investment techniques that may be used by the
Underlying Funds, see the SAI.

ASSET ALLOCATION IS NO GUARANTEE AGAINST LOSS


Although asset allocation seeks to optimize returns given various levels of
risk tolerance, you still may lose money and experience volatility. Market and
asset class performance may differ in the future from the historical
performance and the assumptions used to form the asset allocations for the
Fund. Furthermore, ING IM's allocation of the Fund's assets may not anticipate
market trends successfully. For example, weighting Underlying Funds that invest
in common stocks too heavily during a stock market decline may result in a
failure to preserve capital. Conversely, investing too heavily in Underlying
Funds that invest in fixed-income securities during a period of stock market
appreciation may result in lower total return.


There is a risk that you could achieve better returns by investing in an
Underlying Fund or other mutual funds representing a single asset class than in
the Fund.


Assets will be allocated among funds and markets based on judgments made by ING
IM. There is a risk that the Fund may allocate assets to an asset class or
market that underperforms other funds. For example, the Fund may be
underweighted in assets or a market that is experiencing significant returns or
overweighted in assets or a market with significant declines.


PERFORMANCE OF THE UNDERLYING FUNDS WILL VARY

The performance of the Fund depends upon the performance of the Underlying
Funds, which are affected by changes in the economy and financial markets. The
value of the Fund changes as the asset values of the Underlying Funds it holds
go up or down. The value of your shares will fluctuate and may be worth more or
less than the original cost. The timing of your investment may also affect
performance.

TEMPORARY DEFENSIVE POSITIONS

The Fund or an Underlying Fund may depart from its principal investment
strategies by temporarily investing for defensive purposes when adverse market,
economic, political or other conditions affect the Fund or Underlying Fund.
Instead, the Fund or Underlying Fund may invest in securities believed to
present less risk, such as cash items, government securities and short term
paper. While the Fund or an Underlying Fund invests defensively, it may not be
able to pursue its investment objective. The Fund's or Underlying Fund's
defensive investment position may not be effective in protecting its value.

CONFLICT OF INTEREST

In making decisions on the allocation of the assets of the Fund among the
Underlying Funds, ING Investments is subject to several conflicts of interest
because it serves as the investment adviser to the Fund and to the Underlying
Funds. These conflicts could arise because some Underlying Funds pay advisory
fees that are higher than others, and some Underlying Funds may have a
sub-adviser that is affiliated with the Adviser, while others do not. ING
Investments may also subsidize the expenses of some of the Underlying Funds,
but does not subsidize others. Further, ING Investments may believe that a
redemption from an Underlying Fund will be harmful to that fund or to ING
Investments or an affiliate or may believe that an Underlying Fund may benefit
from additional assets. Therefore, ING Investments may have incentives to
allocate and reallocate in a fashion that would advance its own interests or
the interests of an Underlying Fund rather than the Fund.

PRINCIPAL RISKS

The Fund is also affected by other kinds of risks, depending on the types of
securities held or strategies used by an Underlying Fund.

For certain of these Underlying Funds, the risk associated with the strategy is
a principal risk. Other Underlying Funds may engage, to a lesser extent, in
these strategies, and when so engaged are subject to the attendant risks.
Please see the SAI for a further discussion of the principal and other
investment strategies employed by each Underlying Fund.

CONVERTIBLE SECURITIES. The price of a convertible security will normally
fluctuate in some proportion to changes in the price of the underlying equity
security, and as such is subject to risks relating to the activities of the
issuer and general market and economic conditions. The income component of
convertible securities causes fluctuations based upon changes in interest rates
and the credit quality of the issuer. Convertible securities are often lower
rated securities. An Underlying Fund may be required to redeem or convert a
convertible security before the holder would otherwise choose.

CORPORATE DEBT SECURITIES

Certain Underlying Funds may invest in corporate debt securities. Corporate
debt securities are subject to the risk of the issuer's inability to meet
principal and interest payments on the obligation and may also be subject to
price volatility due to such factors as interest rate sensitivity, market
perception of the creditworthiness of the issuer and general market liquidity.
When interest rates decline, the value of the Fund's debt securities can be
expected to rise, and when interest rates rise, the value of those securities
can be expected to decline. Debt securities with longer maturities tend to be
more sensitive to interest rate movements than those with shorter maturities.

One measure of risk for fixed-income securities is duration. Duration is one of
the tools used by a portfolio manager in the selection of fixed-income
securities. Historically, the maturity of a

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                              More Information About Risks    21




MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

bond was used as a proxy for the sensitivity of a bond's price to changes in
interest rates, otherwise known as a bond's "interest rate risk" or
"volatility". According to this measure, the longer the maturity of a bond, the
more its price will change for a given change in market interest rates.
However, this method ignores the amount and timing of all cash flows from the
bond prior to final maturity. Duration is a measure of average life of a bond
on a present value basis, which was developed to incorporate a bond's yield,
coupons, final maturity and call features into one measure. For point of
reference, the duration of a noncallable 7.00% coupon bond with a remaining
maturity of 5 years is approximately 4.5 years, and the duration of a
noncallable 7.00% coupon bond with a remaining maturity of 10 years is
approximately 8 years. Material changes in interest rates may impact the
duration calculation.


DERIVATIVES. Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the
performance of an underlying asset or assets. Some derivatives are
sophisticated instruments that typically involve a small investment of cash
relative to the magnitude of risks assumed. These may include swap agreements,
options, forwards and futures. Derivative securities are subject to market
risk, which could be significant for those that have a leveraging effect.
Derivatives are also subject to credit risks related to the counterparty's
ability to perform, and any deterioration in the counterparty's
creditworthiness could adversely affect the instrument. In addition,
derivatives and their underlying securities may experience periods of
illiquidity, which could cause the Underlying Fund to hold a security it might
otherwise sell or could force the sale of a security at inopportune times or
for prices that do not reflect current market value. A risk of using
derivatives is that the Adviser or Sub-Adviser might imperfectly judge the
market's direction. For instance, if a derivative is used as a hedge to offset
investment risk in another security, the hedge might not correlate to the
market's movements and may have unexpected or undesired results, such as a loss
or a reduction in gains.


EMERGING MARKETS INVESTMENTS. Because of less developed markets and economies
and, in some countries, less mature governments and governmental institutions,
the risks of investing in foreign securities can be intensified in the case of
investments in issuers domiciled or doing substantial business in countries
with an emerging securities market. These risks include: high concentration of
market capitalization and trading volume in a small number of issuers
representing a limited number of industries, as well as a high concentration of
investors and financial intermediaries; political and social uncertainties;
over-dependence on exports, especially with respect to primary commodities,
making these economies vulnerable to changes in commodity prices; overburdened
infrastructure and obsolete or unseasoned financial systems; environmental
problems; less developed legal systems; and less reliable custodial services
and settlement practices.

FOREIGN SECURITIES. There are certain risks in owning foreign securities,
including those resulting from: fluctuations in currency exchange rates;
devaluation of currencies; political or economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions; reduced availability of public information concerning issuers;
accounting, auditing and financial reporting standards or other regulatory
practices and requirements that are not uniform when compared to those
applicable to domestic companies; settlement and clearance procedures in some
countries that may not be reliable and can result in delays in settlement;
higher transaction and custody expenses than for domestic securities; and
limitations on foreign ownership of equity securities. Also, securities of many
foreign companies may be less liquid and the prices more volatile than those of
domestic companies. With certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the
use or removal of funds or other assets of Underlying Funds, including the
withholding of dividends.

Each Underlying Fund may enter into foreign currency transactions either on a
spot or cash basis at prevailing rates or through forward foreign currency
exchange contracts in order to have the necessary currencies to settle
transactions, to help protect Underlying Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign currency
commensurate with the exposure to securities from that country. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to the
Underlying Fund. The risks of investing in foreign securities may be greater
for countries with an emerging securities market.

HIGH-YIELD, LOWER-GRADE DEBT SECURITIES. Certain Underlying Funds may invest in
high-yield, lower-grade debt securities. Investments in high-yield debt
securities generally provide greater income and increased opportunity for
capital appreciation than investments in higher quality debt securities, but
they also typically entail greater potential price volatility and principal and
income risk. High-yield debt securities are not considered investment grade,
and are regarded as predominantly speculative with respect to the issuing
company's continuing ability to meet principal and interest payments. The
prices of high-yield debt securities have been found to be less sensitive to
interest rate changes than higher-rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. High-yield
debt securities structured as zero-coupon or pay- in-kind securities tend to be
more volatile. The secondary market in which high-yield debt securities are
traded is generally less liquid than the market for higher grade bonds. At
times of less liquidity, it may be more difficult to value high-yield debt
securities.

MORTGAGE-RELATED SECURITIES Certain Underlying Funds may invest in
mortgae-related securities. The prices of mortgage-related securities, in
addition to being sensitive to changes in interest rates, are also sensitive to
changes in the prepayment

22    More Information About Risks




                            MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------

patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, the price of the
mortgage-related security may fall.


NON-DIVERSIFIED INVESTMENT COMPANY. An Underlying Fund classified as a
non-diversified investment company under the 1940 Act, means that the
Underlying Fund is not limited by the 1940 Act in the proportion of assets that
it may invest in the obligations of a single issuer. Declines in the value of
that single company can significantly impact the value of the Underlying Fund.
The investment of a large percentage of the Underlying Fund's assets in the
securities of a small number of issuers may cause an Underlying Fund's share
price to fluctuate more than that of a diversified investment company.
Conversely, even though classified as non-diversified, an Underlying Fund may
actually maintain a portfolio that is diversified with a large number of
issuers. In such an event, an Underlying Fund would benefit less from
appreciation in a single corporate issuer than if it had greater exposure to
that issuer.

OPTIONS. There are special risks associated with uncovered call option writing
which expose the investor to potentially significant loss. The Fund when
writing uncovered call options is in a risky position and may incur large
losses if the value of the underlying instrument increases above the exercise
price. If a secondary market in options were to become unavailable, the Fund
could not engage in closing transactions and, as the option writer, would
remain obligated until expiration or assignment. The Fund, when writing a U.S.
option is subject to being assigned an exercise at any time after the Fund has
written the option until the option expires. By contrast, the Fund, when
writing a European option, is subject to exercise assignment only during the
exercise period.


OTHER INVESTMENT COMPANIES. An Underlying Fund may invest in other companies to
the extent permitted by the 1940 Act and the rules thereunder. These may
include exchange-traded funds ("ETFs") and Holding Company Depositary Receipts
("HOLDRs"), among others. ETFs are exchange-traded investment companies that
are designed to provide investment results corresponding to an equity index and
include, among others, Standard & Poor's Depository Receipts ("SPDRs"),
PowerShares QQQTM("QQQQ"), Dow Jones Industrial Average Tracking Stocks
("Diamonds") and iShares exchange-traded funds ("iShares"). The main risk of
investing in other investment companies (including ETFs) is that the value of
the underlying securities held by the investment company might decrease. The
value of the underlying securities can fluctuate in response to activities of
individual companies or in response to general market and/or economic
conditions. Because an Underlying Fund may invest in other investment
companies, you will pay a proportionate share of the expenses of those other
investment companies (including management fees, administration fees and
custodial fees). Additional risks of investments in ETFs include: (i) an active
trading market for an ETF's shares may not develop or be maintained or (ii)
trading may be halted if the listing exchange's officials deem such action
appropriate, the shares are delisted from the exchange, or the activation of
market-wide "circuit-breakers" (which are tied to large decreases in stock
prices) halts trading generally. Because HOLDRs concentrate in the stocks of a
particular industry, trends in that industry may have a dramatic impact on
their value.


To seek to achieve a return on uninvested cash or for other reasons, an
Underlying Fund may invest its assets in ING Institutional Prime Money Market
Fund and/or one or more other money market funds advised by ING affiliates
("ING Money Market Funds"). An Underlying Fund's purchase of shares of an ING
Money Market Fund will result in the Underlying Fund paying a proportionate
share of the expenses of the ING Money Market Fund. The Underlying Fund's
Adviser will waive its fee in an amount equal to the advisory fee received by
the adviser of the ING Money Market Fund in which the Underlying Fund invests
resulting from the Underlying Fund's investment into the ING Money Market Fund.



PREPAYMENT The Fund may invest in mortgage-related securities, which can be
paid off early if the borrowers on the underlying mortgages pay off their
mortgages sooner than scheduled. If interest rates are falling, the Fund will
be forced to reinvest its money at lower yields.

REAL ESTATE SECURITIES. Investments in issuers that are primarily engaged in
real estate, including REITs, may subject an Underlying Fund to risks similar
to those associated with the direct ownership of real estate (in addition to
securities market risks). 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
creditworthiness of the issuer. REITs may also be affected by tax and
regulatory requirements.

REPURCHASE AGREEMENTS. Repurchase agreements involve the purchase by an
Underlying Fund of a security that the seller has agreed to repurchase at an
agreed-upon price. If the seller defaults and the collateral value declines, an
Underlying Fund might incur a loss. If the seller declares bankruptcy, an
Underlying Fund may not be able to sell the collateral at the desired time.

SMALL- AND MID-CAPITALIZATION COMPANIES. Certain Underlying Funds may invest in
small- and mid-capitalization companies. Investments in small- and
mid-capitalization companies involve greater risk than is customarily
associated with larger, more established companies due to the greater business
risks of small size, limited markets and financial resources, narrow product
lines and the frequent lack of depth of management. The securities of smaller
companies are often traded over-the-counter and may not be traded in volume
typical on a national securities exchange. Consequently, the securities of
smaller companies may have limited market stability and may be subject to more
abrupt or erratic market movements than securities of larger, more established
companies or the market averages in general.


U.S. GOVERNMENT SECURITIES AND OBLIGATIONS. Obligations issued by some U.S.
government agencies, authorities, instrumentalities or sponsored enterprises,
such as the Government National Mortgage Association, are backed by the full
faith and credit of the U.S. Treasury while obligations issued by others, such
as the


[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                              More Information About Risks    23




MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------------------

Federal National Mortgage Association, Federal Home Loan Mortgage Corporation
and Federal Home Loan Banks, are backed solely by the entity's own resources or
by the ability of the entity to borrow from the U.S. Treasury. No assurance can
be given that the U.S. government will provide financial support to U.S.
government agencies, authorities, instrumentalities or sponsored enterprises if
it is not obliged to do so by law.

INABILITY TO SELL SECURITIES. Certain securities generally trade in lower
volume and may be less liquid than securities of large established companies.
These less liquid securities could include securities of small- and mid-sized
U.S. companies, high-yield securities, convertible securities, unrated debt and
convertible securities, securities that originate from small offerings, and
foreign securities, particularly those from companies in countries with an
emerging securities market. An Underlying Fund could lose money if it cannot
sell a security at the time and price that would be most beneficial to the
Underlying Fund.

LENDING PORTFOLIO SECURITIES. In order to generate additional income, an
Underlying Fund may lend portfolio securities in an amount up to 30% or
33 1/3%, depending upon the Underlying Fund, of total Underlying Fund assets to
broker-dealers, major banks, or other recognized domestic institutional
borrowers of securities. When an Underlying Fund lends its securities, it is
responsible for investing the cash collateral it receives from the borrower of
the securities, and the Underlying Fund could incur losses in connection with
the investment of such cash collateral. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower default or fail financially.

PORTFOLIO TURNOVER. Certain Underlying Funds are generally expected to engage
in frequent and active trading of portfolio securities to achieve their
respective investment objective. A high portfolio turnover rate involves
greater expenses to an Underlying Fund, including brokerage commissions and
other transaction costs, and is likely to generate more taxable short-term
gains for shareholders, which may have an adverse effect on the performance of
the Underlying Fund.

OTHER RISKS

BORROWING. An Underlying Fund may borrow subject to certain limits. Borrowing
may exaggerate the effect of any increase or decrease in the value of portfolio
securities or the NAV of an Underlying Fund, and money borrowed will be subject
to interest costs. Interest costs on borrowings may fluctuate with changing
market rates of interest and may partially offset or exceed the return earned
on borrowed funds. Under adverse market conditions, an Underlying Fund might
have to sell portfolio securities to meet interest or principal payments at a
time when fundamental investment considerations would not favor such sales.

INDEX STRATEGY Certain Underlying Funds may use an indexing strategy that does
not attempt to manage market volatility, use defensive strategies or reduce the
effects of any long-term periods of poor stock performance. The correlation
between a Fund and an Index performance may be affected by the Fund's expenses
, and the timing of purchases and redemptions of a Fund's shares.

INTERESTS IN LOANS. Certain Underlying Funds may invest in participation
interests or assignments in secured variable or floating rate loans which
include participation interests in lease financings. Loans are subject to the
credit risk of nonpayment of principal or interest. Substantial increases in
interest rates may cause an increase in loan defaults. Although the loans will
generally be fully collateralized at the time of acquisition, the collateral
may decline in value, be relatively illiquid, or lose all or substantially all
of its value subsequent to an Underlying Fund's investment. Many loans are
relatively illiquid and may be difficult to value.

MANAGEMENT. Each Underlying Fund is subject to management risk because it is an
actively managed investment portfolio. The Adviser, the sub-adviser or each
individual portfolio manager will apply investment techniques and risk analyses
in making investment decisions for the Underlying Funds, but there can be no
guarantee that these will produce the desired results.

Many sub-advisers of equity funds employ styles that are characterized as
"value" or "growth." However, these terms can have different application by
different managers. One sub-adviser's value approach may be different from
another, and one sub-adviser's growth approach may be different from another.
For example, some value managers employ a style in which they seek to identify
companies that they believe are valued at a more substantial or "deeper
discount" to a company's net worth than other value managers. Therefore, some
funds that are characterized as growth or value can have greater volatility
than other funds managed by other managers in a growth or value style.


PAIRING-OFF TRANSACTIONS. A pairing-off transaction occurs when an Underlying
Fund commits to purchase a security at a future date, and then the Underlying
Fund pairs-off the purchase with a sale of the same security prior to or on the
original settlement date. Whether a pairing-off transaction on a debt security
produces a gain depends on the movement of interest rates. If interest rates
increase, then the money received upon the sale of the same security will be
less than the anticipated amount needed at the time the commitment to purchase
the security at the future date was entered and the Underlying Fund will
experience a loss.


RESTRICTED AND ILLIQUID SECURITIES. If a security is illiquid, an Underlying
Fund may not be able to sell the security at a time when the Adviser or
Sub-Adviser might wish to sell, and the security could have the effect of
decreasing the overall level of the Underlying Fund's liquidity. Further, the
lack of an established secondary market may make it more difficult to value
illiquid securities, which could vary from the amount the Underlying Fund could
realize upon disposition. Restricted securities, i.e., securities subject to
legal or contractual restrictions on resale,

24    More Information About Risks




                            MORE INFORMATION ABOUT RISKS
--------------------------------------------------------------------

may be illiquid. However, some restricted securities may be treated as liquid,
although they may be less liquid than registered securities traded on
established secondary markets.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. A reverse repurchase agreement
or dollar roll involves the sale of a security, with an agreement to repurchase
the same or substantially similar securities at an agreed upon price and date.
Whether such a transaction produces a gain for a Fund depends upon the costs of
the agreements and the income and gains of the securities purchased with the
proceeds received from the sale of the security. If the income and gains on the
securities purchased fail to exceed the costs, an Underlying Fund's NAV will
decline faster than otherwise would be the case. Reverse repurchase agreements
and dollar rolls, as leveraging techniques, may increase a Fund's yield;
however, such transactions also increase a Fund's risk to capital and may
result in a shareholder's loss of principal.

SHORT SALES. A "short sale" is the sale by an Underlying Fund of a security
which has been borrowed from a third party on the expectation that the market
price will drop. If the price of the security rises, the Underlying Fund may
have to cover its short position at a higher price than the short sale price,
resulting in a loss.

INVESTMENT BY FUNDS-OF-FUNDS. Each of the Underlying Funds' shares may be
purchased by other investment companies. In some cases, an Underlying Fund may
experience large inflows or redemptions due to allocations or rebalancings.
While it is impossible to predict the overall impact of these transactions over
time, there could be adverse effects on portfolio management. The Adviser will
monitor transactions by the Fund and will attempt to minimize any adverse
effects on the Underlying Funds and the Fund as a result of these transactions.
So long as an Underlying Fund accepts investments by other investment
companies, it will not purchase securities of other investment companies,
except to the extent permitted by the 1940 Act or under the terms of an
exemptive order granted by the SEC.

PERCENTAGE AND RATING LIMITATIONS Unless otherwise stated, the percentage and
rating limitations in this Prospectus apply at the time of investment.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                              More Information About Risks    25




DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

The Fund generally distributes most or all of its net earnings in the form of
dividends and capital gain distributions. Dividends are normally expected to
consist primarily of ordinary income and are expected to be distributed to
shareholders on a quarterly basis. The Fund distributes capital gains, if any,
annually.


DIVIDEND REINVESTMENT

Unless you instruct the Fund to pay you dividends in cash, dividends and
distributions paid by a Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on Class W shares of a Fund invested in another ING Fund that offers the
same class of shares.

TAXES

The following information is meant as a general summary for U.S. shareholders.
Please see the SAI for additional information. You should rely on your own tax
adviser for advice about the particular federal, state and local tax
consequences to you of investing in the Fund.


The Fund will distribute all, or substantially all, of its net investment
income and net capital gains to its shareholders each year. Although the Fund
will not be taxed on amounts it distributes, most shareholders will be taxed on
amounts they receive. A particular distribution generally will be taxable as
either ordinary income or long-term capital gain. Except as described below, it
generally does not matter how long you have held your Fund shares or whether
you elect to receive your distributions in cash or reinvest them in additional
Fund shares. For example, if the Fund designates a particular distribution as a
long-term capital gains distribution, it will be taxable to you at your
long-term capital gains rate. Dividends attributable to interest are not
eligible for the reductions in rates described below.

Current tax law (which is currently scheduled to apply through 2010) generally
provides for a maximum tax rate for individual taxpayers of 15% on long-term
gains from sales and from certain qualifying dividends on corporate stock.
Although these rate reductions do not apply to corporate taxpayers, such
taxpayers may be entitled to a corporate dividends received deduction with
respect to their share of eligible domestic corporate dividends received by the
Fund. The following are guidelines for how certain distributions by the Fund
are generally taxed to individual taxpayers:


o  Distributions of earnings from qualifying dividends and qualifying long-term
   capital gains from an Underlying Fund to the Fund which is distributed to
   individual shareholders will be taxed at a maximum rate of 15%.

o  Note that distributions of earnings from dividends paid by certain
   "qualified foreign corporations" to the Underlying Fund which is then
   distributed to the Fund can also qualify for the lower tax rates on
   qualifying dividends.

o  A shareholder and the Fund will also have to satisfy a more than 60-day
   holding period with respect to any distributions of qualifying dividends in
   order to obtain the benefit of the lower tax rate.

o  Distributions of earnings from an Underlying Fund to the Fund of
   non-qualifying dividends, interest income, other types of ordinary income
   and short-term capital gains will be taxed at the ordinary income tax rate
   applicable to the taxpayer.

o  The maximum 15% tax rate for individual taxpayers on long-term capital gains
   and qualifying dividends is currently scheduled to apply through 2010. In
   the absence of further Congressional action, for the calendar years after
   2010, the maximum rate on long-term capital gains for individual taxpayers
   would increase to 20% and income from dividends would be taxed at the rates
   applicable to ordinary income.


Dividends declared by the Fund in October, November or December and paid during
the following January will be treated as having been received by shareholders
in the year the distributions were declared.


You will receive an annual statement summarizing your dividend and capital
gains distributions.


If you buy shares of a Fund before it makes a distribution, the distribution
will be taxable to you even though it may actually be a return of a portion of
your investment. This is known as "buying a dividend."


If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax adviser about investment through a tax-deferred account.

The Fund may have income, gains or losses from any distribution or redemption
in the Underlying Funds. Distributions of long-term capital gains or qualifying
dividends of either the Fund or the Underlying Funds will generally be taxed as
long-term capital gains. Other distributions, including short-term capital
gains, will be taxed as ordinary income. The structure of the Fund and the
reallocation of investments among Underlying Funds could affect the amount,
timing and character of distributions.

There may be tax consequences to you if you sell or redeem Fund shares. You
will generally have a capital gain or loss, which will be long-term or
short-term, generally depending on how long you hold those shares. If you
exchange shares, you may be treated as if you sold them. If your tax basis in
your shares exceeds the amount of proceeds you receive from a sale, exchange or
redemption of shares, you will recognize a taxable loss on the sale of shares
of a Fund. Any loss recognized on shares held for six months or less will be
treated as long-term capital loss to the extent of any long-term capital gain
distributions that were received with respect to the shares. Additionally, any
loss realized on a sale, redemption or exchange of shares of a Fund may be
disallowed under "wash sale" rules to the extent the shares disposed of are
replaced with other shares of that Fund within a period of 61 days beginning 30
days before and ending

26    Dividends, Distributions and Taxes




                      DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------

30 days after shares are disposed of, such as pursuant to a dividend
reinvestment in shares of that Fund. If disallowed, the loss will be reflected
in an adjustment to the tax basis of the shares acquired. You are responsible
for any tax liabilities generated by your transactions.

As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the current rate of 28% of all taxable distributions payable to
you if you fail to provide the Fund with your correct taxpayer identification
number or to make required certifications, or if you have been notified by the
IRS that you are subject to backup withholding. Backup withholding is not an
additional tax; rather, it is a way in which the IRS ensures it will collect
taxes otherwise due. Any amounts withheld may be credited against your U.S.
federal income tax liability.

Please see the SAI for further information regarding tax matters.

[GRAPHIC APPEARS HERE]

                          If you have any questions, please call 1-800-992-0180.

                                        Dividends, Distributions and Taxes    27




FINANCIAL
 HIGHLIGHTS
--------------------------------------------------------------------

Because the Fund did not commence operations as of the fiscal year ended
October 31, 2007, financial highlights are not available.

28  Financial Highlights





In addition to the Fund offered in this prospectus, the Distributor also offers
the funds listed below. Before investing in a fund, shareholders should
carefully review the fund's prospectus. Investors may obtain a copy of a
prospectus of any ING Fund not discussed in this Prospectus by calling (800)
992-0180 or by going to www.ingfunds.com.

Domestic Equity and Income Funds
ING Equity Dividend Fund
ING Fundamental Research Fund
ING Growth and Income Fund

ING Real Estate Fund


Domestic Equity Growth Funds
ING 130/30 Fundamental Research Fund
ING LargeCap Growth Fund
ING MidCap Opportunities Fund

ING Opportunistic LargeCap Fund

ING Small Company Fund

ING SmallCap Opportunities Fund


Domestic Equity Index Funds
ING Index Plus LargeCap Fund
ING Index Plus MidCap Fund
ING Index Plus SmallCap Fund

Domestic Equity Value Funds
ING LargeCap Value Fund
ING SmallCap Value Multi-Manager Fund
ING Value Choice Fund


Fixed-Income Funds
ING GNMA Income Fund

ING Intermediate Bond Fund


Global Equity Funds
ING Global Equity Dividend Fund
ING Global Natural Resources Fund
ING Global Real Estate Fund

ING Global Science and Technology Fund
ING Global Value Choice Fund

International Equity Funds
ING Asia-Pacific Real Estate
ING Disciplined International Small Cap Fund

ING Emerging Countries Fund

ING European Real Estate
ING Foreign Fund
ING Greater China Fund
ING Index Plus International Equity Fund
ING International Capital Appreciation Fund
ING International Equity Dividend
ING International Growth Opportunities Fund
ING International Real Estate Fund
ING International SmallCap Multi-Manager Fund
ING International Value Choice Fund
ING International Value Opportunities Fund

Global and International Fixed-Income Funds
ING Emerging Markets Fixed Income Fund
ING Global Bond Fund


International Fund-of-Funds
ING Diversified International Fund


Loan Participation Fund
ING Senior Income Fund

Money Market Funds
ING Classic Money Market Fund
ING Money Market Fund

Strategic Allocation Funds
ING Strategic Allocation Conservative Fund
ING Strategic Allocation Growth Fund
ING Strategic Allocation Moderate Fund





WHERE TO GO FOR MORE INFORMATION
YOU'LL FIND MORE INFORMATION ABOUT THE FUND IN OUR:

ANNUAL/SEMI-ANNUAL SHAREHOLDER REPORTS

In the Fund's annual/semi-annual shareholder reports, when available, you will
find a discussion of the recent market conditions and principal investment
strategies that significantly affected the Fund's performance during their last
fiscal year, the financial statements and the independent registered public
accounting firm's reports (in the annual shareholder report only).


STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI contains more detailed information about the Fund. The SAI is legally
part of this Prospectus (it is incorporated by reference). A copy has been
filed with the SEC.

Please write, call or visit our website for a free copy of the current annual/
semi-annual shareholder reports, the SAI or other Fund information.

To make shareholder inquiries contact:

THE ING FUNDS
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258-2034

1-800-992-0180

Or visit our website at WWW.INGFUNDS.COM

This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-551-8090 for information on the
operation of the Public Reference Room. Otherwise, you may obtain the
information for a fee by contacting the SEC at:

U.S. SECURITIES AND EXCHANGE COMMISSION
Public Reference Section
100 F Street, N.E.
Washington, D.C. 20549

or at the e-mail address: PUBLICINFO@SEC.GOV

Or obtain the information at no cost by visiting the SEC's Internet website at
WWW.SEC.GOV.

When contacting the SEC, you will want to refer to the Fund's SEC file numbers.
The file numbers are as follows:

ING Series Fund, Inc.               811-6352
  ING Global Income Builder Fund


                                                     (0308-032408)


[GRAPHIC APPEARS HERE]

--------------------------------------------------------------------------------



                      STATEMENT OF ADDITIONAL INFORMATION

                                March 24, 2008

                             ING SERIES FUND, INC.
                        7337 East Doubletree Ranch Road
                        Scottsdale, Arizona 85258-2034
                                (800) 922-0180

                      ING Tactical Asset Allocation Fund

                                Class I Shares

This Statement of Additional Information ("SAI") relates to the series listed
above ("Fund") of ING Series Fund, Inc. ("Company"). A prospectus
("Prospectus") for the Fund dated March 24, 2008, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund or the Fund's principal underwriter, ING Funds
Distributor, LLC ("Distributor"), at the address listed above. This SAI is not
a prospectus but is incorporated therein by reference in and should be read in
conjunction with the Prospectus dated March 24, 2008 which has been filed with
the United States Securities and Exchange Commission ("SEC"). Capitalized terms
not defined in this SAI are used as defined in the Prospectus.

The information in this SAI expands on the information contained in the
Prospectus and any supplements thereto. The Fund's financial statements and the
independent registered public accounting firm's report thereon, included in the
annual shareholder report that will be dated May 31, 2008, are incorporated
herein by reference. Copies of the Fund's Prospectus and annual or semi-annual
shareholder reports, when available, may be obtained upon request and without
charge by contacting the Fund at the address and phone number written above.
Terms used in this SAI have the same meaning as in the Prospectus, and some
additional terms are defined particularly for this SAI.


                                      1



                               TABLE OF CONTENTS

           HISTORY OF THE COMPANY...............................   3
           SUPPLEMENTAL DESCRIPTION OF FUND INVESTMENTS AND RISK   3
           FUNDAMENTAL INVESTMENT RESTRICTIONS AND POLICIES.....  42
           PORTFOLIO TURNOVER...................................  44
           DISCLOSURE OF THE FUND'S PORTFOLIO SECURITIES........  44
           MANAGEMENT OF THE COMPANY............................  46
           CODE OF ETHICS.......................................  53
           PROXY VOTING PROCEDURES..............................  53
           CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS...........  53
           ADVISER..............................................  53
           EXPENSE LIMITATION AGREEMENT.........................  55
           SUB-ADVISER..........................................  55
           RULE 12(b)-1 PLANS...................................  58
           ADMINISTRATOR........................................  58
           CUSTODIAN............................................  59
           LEGAL COUNSEL........................................  59
           INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM........  59
           TRANSFER AGENT.......................................  59
           BROKERAGE ALLOCATION AND TRADING POLICIES............  59
           PURCHASE AND REDEMPTION OF SHARES....................  63
           SHAREHOLDER ACCOUNTS AND SERVICES....................  64
           NET ASSET VALUE......................................  65
           TAX CONSIDERATIONS...................................  67
           DISTRIBUTOR..........................................  73
           CALCULATION OF PERFORMANCE DATA......................  74
           PERFORMANCE COMPARISONS..............................  76
           FINANCIAL STATEMENTS.................................  76
           APPENDIX A........................................... A-1

                                      2



                            HISTORY OF THE COMPANY

The Company is a Maryland corporation registered as a diversified, open-end
management investment company. The Company was organized in June 1991 and
currently consists of 16 separately managed series.

This SAI pertains only to ING Tactical Asset Allocation Fund.

Incorporation. The Company was incorporated under the laws of the state of
Maryland on June 17, 1991.

Series and Classes. The Board of Directors ("Board") has the authority to
subdivide each series into classes of shares having different attributes so
long as each share of each class represents a proportionate interest in the
series equal to each other share in that series. Shares of the Fund currently
are classified into one class.

Capital Stock. Fund shares are fully paid and non-assessable when issued. Fund
shares have no preemptive or conversion rights. Each share of the Fund has the
same rights to share in dividends declared by the Fund for that share class.
Upon liquidation of the Fund, shareholders in the Fund are entitled to share
pro rata in the net assets of the Fund available for distribution to
shareholders.

Voting Rights. Shareholders are entitled to one vote for each full share held
(and fractional votes for fractional shares held) and will vote on the election
of Directors and on other matters submitted to the vote of shareholders.
Generally, all shareholders have voting rights on all matters. Voting rights
are not cumulative so that the holders of more than 50% of the shares voting in
the election of Directors can, if they choose to do so, elect all the Directors
in which event the holders of the remaining shares will be unable to elect any
person as a Director.

Shareholder Meetings. The Company is not required, and does not intend, to hold
annual shareholder meetings. The Articles of Incorporation provide for meetings
of shareholders to elect Directors at such times as may be determined by the
Directors or as required by the Investment Company Act of 1940, as amended
("1940 Act"). If requested by the holders of at least 10% of the Company's
outstanding shares, the Company will hold a shareholder meeting for the purpose
of voting on the removal of one or more Directors and will assist with
communication concerning that shareholder meeting.

1940 Act Classification. The Company is a diversified, open-end management
investment company as those terms are defined under the 1940 Act. The 1940 Act
generally requires, among other things, that with respect to 75% of its total
assets, a diversified company may not invest more than 5% of its total assets
in the securities of any one issuer.

            SUPPLEMENTAL DESCRIPTION OF FUND INVESTMENTS AND RISKS

Diversification

The Fund is "diversified" within the meaning of the 1940 Act. In order to
qualify as diversified, the Fund must diversify its holdings so that at all
times at least 75% of the value of its total assets is represented by cash and
cash items (including receivables), securities issued or guaranteed as to
principal or interest by the United States or its agencies or
instrumentalities, securities of other investment companies, and other
securities (for this purpose, other securities of any one issuer are limited to
an amount not greater than 5% of the value of the total assets of the Fund and
to not more than 10% of the outstanding voting securities of the issuer).

Investments, Investment Strategies and Risks

The table on the following pages identifies various securities and investment
techniques used by the adviser or sub-adviser in managing the Fund described in
this SAI. The table has been marked to indicate those securities and investment
techniques that the adviser and the sub-adviser may use to manage the Fund. The

                                      3



Fund may use any or all of these techniques at any one time, and the fact that
the Fund may use a technique does not mean that the technique will be used. The
Fund's transactions in a particular type of security or use of a particular
technique is subject to limitations imposed by the Fund's investment objective,
policies and restrictions described in the Fund's Prospectus and/or in this
SAI, as well as the federal securities laws. There can be no assurance that the
Fund will achieve its investment objective. The Fund's policies, investment
strategies and practices are non-fundamental unless otherwise indicated. A more
detailed description of the securities and investment techniques, as well as
the risks associated with those securities and investment techniques that the
Fund utilizes, follows the table. The descriptions of the securities and
investment techniques in this section supplement the discussion of principal
investment strategies contained in the Fund's Prospectus. Where a particular
type of security or investment technique is not discussed in the Fund's
Prospectus, that security or investment technique is not a principal investment
strategy and the Fund will not invest more than 5% of the Fund's assets in such
security or investment technique. See the Fund's fundamental investment
restrictions for further information.

 Asset Class/ Investment Techniques      ING Tactical Asset Allocation Fund
 ----------------------------------     -------------------------------------
 Equity Investments
 ------------------                     -------------------------------------
 Common Stock                                             X
 ------------                           -------------------------------------
 Convertible Securities                                   X
 ----------------------                 -------------------------------------
 Preferred Stock                                          X
 ---------------                        -------------------------------------
 Synthetic Convertible Securities/1/                      X
 -----------------------------------    -------------------------------------
 IPOs                                                     X
 ----                                   -------------------------------------
 Foreign and Emerging Market
 Investments
 ---------------------------            -------------------------------------
 ADRs/EDRs/GDRs                                           X
 --------------                         -------------------------------------
 Eurodollar/ Yankee Dollar
 Instruments/2/                                           X
 -------------------------              -------------------------------------
 Eurodollar Convertible Securities/2/                     X
 ------------------------------------   -------------------------------------
 Foreign and Emerging Market Equity
 Securities/3/                                            X
 ----------------------------------     -------------------------------------
 Foreign Bank Obligations/2/                              X
 ---------------------------            -------------------------------------
 Foreign Currency Exchange
 Transactions/4/                                          X
 -------------------------              -------------------------------------
 Foreign Mortgage-Related Securities/2/                   X
 -------------------------------------- -------------------------------------
 International Debt Securities/2/                         X
 --------------------------------       -------------------------------------
 Sovereign Debt Securities/2/                             X
 ----------------------------           -------------------------------------
 Supranational Agencies/2, 5/                             X
 ----------------------------           -------------------------------------
 Fixed-Income Investments
 ------------------------               -------------------------------------
 ARMS/2/                                                  X
 -------                                -------------------------------------
 Asset-Backed Securities
 (non-mortgage)/2/                                        X
 -----------------------                -------------------------------------
 Banking Industry
 Obligations/Short-Term Investments/2/                    X
 -------------------------------------  -------------------------------------
 Corporate Debt Securities/2/                             X
 ----------------------------           -------------------------------------
 Credit-Linked Notes/2/                                   X
 ----------------------                 -------------------------------------
 Debt Securities                                          X
 ---------------                        -------------------------------------
 Floating or Variable Rate
 Instruments/2/                                           X
 -------------------------              -------------------------------------
 GICs/2/                                                  X
 -------                                -------------------------------------
 Government Trust Certificates/2/                         X
 --------------------------------       -------------------------------------
 GNMA Certificates/2/                                     X
 --------------------                   -------------------------------------
 High-Yield Securities/6/                                 X
 ------------------------               -------------------------------------
 Mortgage-Related Securities/2/                           X
 ------------------------------         -------------------------------------
 Municipal Securities/2/                                  X
 -----------------------                -------------------------------------
 Municipal Lease Obligations/2/                           X
 ------------------------------         -------------------------------------
 Savings Association Obligations/2, 7/                    X
 -------------------------------------  -------------------------------------
 Tax Exempt Industrial Development
 Bonds & Pollution Control Bonds/2/                       X
 ----------------------------------     -------------------------------------
 Interest/Principal Only Stripped
 Mortgage-Backed Securities/2/                            X
 --------------------------------       -------------------------------------
 U.S. Government Securities/2/                            X
 -----------------------------          -------------------------------------
 Zero-Coupon and Pay-In-Kind/2/                           X
 ------------------------------         -------------------------------------
 Subordinated Mortgage Securities/2/                      X
 -----------------------------------    -------------------------------------
 Other Investments
 -----------------                      -------------------------------------
 Derivatives/8/                                           X
 --------------                         -------------------------------------
 Financial Futures Contracts and
 Related Options/9/                                       X
 -------------------------------        -------------------------------------


                                      4



 Forward Currency Contracts/9/                            X
 -----------------------------          -------------------------------------
 Foreign Futures Contracts and Foreign
 Options                                                  X
 -------------------------------------  -------------------------------------
 Forward Foreign Currency Contracts/4/                    X
 -------------------------------------  -------------------------------------
 Index-, Currency-, and Equity-Linked
 Securities/9/                                            X
 ------------------------------------   -------------------------------------
 Options on Futures/9/                                    X
 ---------------------                  -------------------------------------
 Over-the-Counter Options/9/                              X
 ---------------------------            -------------------------------------
 Put Call Options/ 9,10/                                  X
 -----------------------                -------------------------------------
 Stock Index Options/9/                                   X
 ----------------------                 -------------------------------------
 Straddles/9/                                             X
 ------------                           -------------------------------------
 Warrants                                                 X
 --------                               -------------------------------------
 Other Investment Companies/11/                           X
 ------------------------------         -------------------------------------
 Private Funds                                            X
 -------------                          -------------------------------------
 Real Estate Securities                                   X
 ----------------------                 -------------------------------------
 Restricted and Illiquid Securities                       X
 ----------------------------------     -------------------------------------
 TBA Sale Commitments                                     X
 --------------------                   -------------------------------------
 Foreign Currency Options/4/                              X
 ---------------------------            -------------------------------------
 Investment Techniques
 ---------------------                  -------------------------------------
 Borrowing                                                X
 ---------                              -------------------------------------
 Lending of Fund Securities                               X
 --------------------------             -------------------------------------
 Repurchase Agreements/2/                                 X
 ------------------------               -------------------------------------
 Reverse Repurchase Agreements and
 Dollar Rolls                                             X
 ---------------------------------      -------------------------------------
 Securities, Interest Rate and
 Currency Swaps/8/                                        X
 -----------------------------          -------------------------------------
 Short Sales/12/                                          X
 ---------------                        -------------------------------------
 Temporary Defensive Positions                            X
 -----------------------------          -------------------------------------
 When-Issued Securities and
 Delayed-Delivery Transactions                            X
 -----------------------------          -------------------------------------

   1 The Fund may only invest in synthetic convertibles with respect to
     companies whose corporate debt securities are rated "A" or higher by
     Moody's Investors Service Inc. ("Moody's") or "A" or higher by Standard &
     Poor's Rating Corporation ("S&P") and will not invest more than 15% of its
     net assets in such synthetic securities and other illiquid securities.
   2 The Fund may only invest in such instruments (which must be of high
     quality and short duration) for temporary and defensive or cash management
     purposes.
   3 Investments in emerging market equity securities will not exceed 5% of the
     Fund's total assets.
   4 The Fund may only invest in such instruments for the purposes of hedging.
   5 Other than for temporary and defensive or cash management purposes, the
     Fund may invest up to 10% of its net assets in securities of supranational
     agencies. These securities are not considered government securities and
     are not supported directly or indirectly by the U.S. government.
   6 The Fund will not invest more than 15% of the total value of its assets in
     high-yield bonds (securities rated below BBB- by S&P or Baa3 by Moody's,
     or, if unrated, considered by ING Investment Management Co., as
     applicable, to be of comparable quality).
   7 The certificates of deposit (interest-bearing time deposits) in which the
     Fund may invest are issued by savings banks or savings and loan
     associations that have capital surplus and undivided profits in excess of
     $100 million, based on latest published reports, or less than $100 million
     if the principal amount of such obligations is fully insured by the U.S.
     government.
   8 The Fund will not enter into a swap agreement with any single party if the
     net amount owed or to be received under existing contracts with that party
     would exceed 5% of the Fund's total assets.
   9 For purposes other than hedging, the Fund will invest no more than 5% of
     its assets in such instruments.
  10 The Fund is prohibited from having written call options outstanding at any
     one time on more than 30% of its total assets. The Fund will not write a
     put if it will require more than 50% of the Fund's net assets to be
     designated to cover all put obligations. The Fund may not buy options if
     more than 3% of its assets immediately following such purchase would
     consist of put options. The Fund may purchase call and sell put options on
     equity securities only to close out positions previously opened. The Fund
     will not write a call option on a security unless the call is "covered"
     (i.e. it already owns the underlying security). The Fund may purchase put
     options when ING Investment Management Co. believes that a temporary
     defensive position is desirable in light of market conditions, but does
     not desire to sell a portfolio security.
  11 The Fund may invest in other investment companies to the extent permitted
     under the 1940 Act, as amended, and the rules and regulations thereunder.
  12 The Fund may make short sales of Exchange Traded Funds for the purposes of
     hedging.


                                      5



EQUITY INVESTMENTS

Common Stock, Preferred Stocks, Convertible Securities and Other Equity
Securities

Common stocks represent an equity (ownership) interest in a company. This
ownership interest generally gives the Fund the right to vote on issues
affecting the company's organization and operations. Such investments may be
diversified over a cross-section of industries and individual companies. Some
of these companies will be organizations with market capitalizations of $500
million or less or companies that have limited product lines, markets and
financial resources and are dependent upon a limited management group. Examples
of possible investments include emerging growth companies employing new
technology, cyclical companies, initial public offerings of companies offering
high growth potential, or other corporations offering good potential for high
growth in market value. The securities of such companies may be subject to more
abrupt or erratic market movements than larger, more established companies both
because the securities typically are traded in lower volume and because the
issuers typically are subject to a greater degree of changes in earnings and
prospects.

Other types of equity securities may also be purchased, such as preferred
stock, convertible securities, or other securities that are exchangeable for
shares of common stock. Preferred stock, unlike common stock, offers a stated
dividend rate payable from a corporation's earnings. Such preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid before dividends are paid on the
issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stocks on the distribution of a corporation's assets in
the event of a liquidation are generally subordinate to the rights associated
with a corporation's debt securities.

A convertible security is a security that may be converted either at a stated
price or rate within a specified period of time into a specified number of
shares of common stock. A convertible bond or convertible preferred stock gives
the holder the option of converting these securities into common stock. Some
convertible securities contain a call feature whereby the issuer may redeem the
security at a stipulated price, thereby limiting the possible appreciation. By
investing in convertible securities, the Fund seeks the opportunity, through
the conversion feature, to participate in the capital appreciation of the
common stock into which the securities are convertible while investing at a
better price than may be available on the common stock or obtaining a higher
fixed rate of return than is available on common stocks. The value of a
convertible security is a function of its "investment value" (determined by its
yield in comparison with the yields of other securities of comparable maturity
and quality that do not have a conversion privilege) and its "conversion value"
(the security's worth, at market value, if converted into the underlying common
stock). The credit standing of the issuer and other factors may also affect the
investment value of a convertible security. The conversion value of a
convertible security is determined by the market price of the underlying common
stock. If the conversion value is low relative to the investment value, the
price of the convertible security is governed principally by its investment
value. To the extent the market price of the underlying common stock approaches
or exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value.

The market value of convertible debt securities tends to vary inversely with
the level of interest rates. The value of the security declines as interest
rates increase and increases as interest rates decline. Although under normal
market conditions longer-term debt securities have greater yields than do
shorter-term debt securities of similar quality, they are subject to greater
price fluctuations. A convertible security may be subject to redemption at the
option of the issuer at a price established in the instrument governing the
convertible security. If a convertible security held by the Fund is called for
redemption, the Fund must permit the issuer to

                                      6



redeem the security, convert it into the underlying common stock or sell it to
a third party. Rating requirements do not apply to convertible debt securities
purchased by the Fund because the Fund purchases such securities for their
equity characteristics.

"Synthetic" convertible securities are derivative positions composed of two or
more different securities whose investment characteristics, taken together,
resemble those of convertible securities. For example, the Fund may purchase a
non-convertible debt security and a warrant or option which enables the Fund to
have a convertible-like position with respect to a company, group of companies
or stock index. Synthetic convertible securities are typically offered by
financial institutions and investment banks in private placement transactions.
Upon conversion, the Fund generally receives an amount in cash equal to the
difference between the conversion price and the then current value of the
underlying security. Unlike a true convertible security, a synthetic
convertible comprises two or more separate securities each with its own market
value. Therefore, the market value of a synthetic convertible is the sum of the
values of its fixed-income component and its convertible component. For this
reason, the values of a synthetic convertible and a true convertible security
may respond differently to market fluctuations.

Securities of Small- and Mid-Capitalization Companies. Investments in small-
and mid-capitalization companies involve greater risk than is customarily
associated with larger, more established companies due to the greater business
risks of small size, limited markets and financial resources, narrow product
lines and the frequent lack of depth of management. The securities of smaller
companies are often traded over-the-counter and may not be traded in volumes
typical on a national securities exchange. Consequently, the securities of
smaller companies may have limited market stability and may be subject to more
abrupt or erratic market movements than securities of larger, more established
growth companies or the market averages in general. The trading volume of
securities of small-cap and mid-cap companies is normally less than that of
larger companies and, therefore, may disproportionately affect their market
price tending to make them rise more in response to buying demand and fall more
in response to selling pressure than is the case with larger companies.

Initial Public Offerings

Initial Public Offerings ("IPOs") occur when a company first offers its
securities to the public. Although companies can be any age or size at the time
of their IPO, they are often smaller and have a limited operating history which
involves a greater potential for the value of their securities to be impaired
following the IPO. Investors in IPOs can be adversely affected by substantial
dilution in the value of their shares, by sales of additional shares and by
concentration of control in existing management and principal shareholders. In
addition, all of the factors that affect stock market performance may have a
greater impact on the shares of IPO companies.

The price of a company's securities may be highly unstable at the time of its
IPO and for a period thereafter due to market psychology prevailing at the time
of the IPO, the absence of a prior public market, the small number of shares
available and limited availability of investor information. As a result of this
or other factors, the Fund's sub-adviser might decide to sell an IPO security
more quickly than it would otherwise which may result in a significant gain or
loss and greater transaction costs to the Fund. Any gains from shares held for
12 months or less will be treated as short-term gains, taxable as ordinary
income to the Fund's shareholders. In addition, IPO securities may be subject
to varying patterns of trading volume and may, at times, be difficult to sell
without an unfavorable impact on prevailing prices.

The effect of an IPO investment can have a magnified impact on the Fund's
performance when the Fund's asset bases are small. Consequently, IPOs may
constitute a significant portion of the Fund's returns particularly when the
Fund is small. Since the number of securities issued in an IPO is limited, it
is likely that IPO securities will represent a smaller component of the Fund's
assets as it increases in size and, therefore, have a more limited effect on
the Fund's performance.

There can be no assurance that IPOs will continue to be available for the Fund
to purchase. The number or

                                      7



quality of IPOs available for purchase by the Fund may vary, decrease or
entirely disappear. In some cases, the Fund may not be able to purchase IPOs at
the offering price but may have to purchase the shares in the aftermarket at a
price greatly exceeding the offering price making it more difficult for the
Fund to realize a profit.

FOREIGN AND EMERGING MARKET INVESTMENTS

American Depositary Receipts, European Depositary Receipts and Global
Depositary Receipts

American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs")
and Global Depositary Receipts ("GDRs") or other similar securities represent
securities of foreign issuers. These securities are typically dollar
denominated, although their market price is subject to fluctuations of the
foreign currency in which the underlying securities are denominated. Depositary
receipts include: ADRs which are receipts typically issued by a U.S. bank or
trust company evidencing ownership of the underlying foreign securities. ADRs
are typically designed for U.S. investors and held either in physical form or
in book entry form. EDRs are similar to ADRs but may be listed and traded on a
European exchange as well as in the United States (typically, these securities
are traded on the Luxembourg exchange in Europe). Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets, and EDRs,
in bearer form, are designed for use in the European securities markets. GDRs
are similar to EDRs although they may be held through foreign clearing agents
such as Euroclear and other foreign depositories. Depositary receipts
denominated in U.S. dollars will not be considered foreign securities for
purposes of the investment limitation concerning investment in foreign
securities.

Eurodollar and Yankee Dollar Instruments

Eurodollar instruments are bonds that pay interest and principal in U.S.
dollars held in banks outside the United States, primarily in Europe.
Eurodollar instruments are usually issued on behalf of multinational companies
and foreign governments by large underwriting groups composed of banks and
issuing houses from many countries. Yankee Dollar instruments are U.S. dollar
denominated bonds issued in the United States by foreign banks and
corporations. These investments involve risks that are different from
investments in securities issued by U.S. issuers.

Eurodollar Convertible Securities

Eurodollar convertible securities are fixed-income securities of a U.S. issuer
or a foreign issuer that are issued outside the United States and are
convertible into equity securities of the same or a different issuer. Interest
and dividends on Eurodollar securities are payable in U.S. dollars outside of
the United States. The Fund may invest without limitation in Eurodollar
convertible securities are convertible into foreign equity securities listed,
or represented by ADRs listed, on the New York Stock Exchange or the American
Stock Exchange or convertible into publicly traded common stock of U.S.
companies. The Fund may also invest up to 15% of its total assets invested in
convertible securities, taken at market value, in Eurodollar convertible
securities that are convertible into foreign equity securities, which are not
listed, or represented by ADRs listed, on such exchanges.

Foreign and Emerging Market Securities

Securities of foreign issuers have certain common characteristics and risks.
Foreign financial markets, while growing in volume have, for the most part,
substantially less volume than U.S. markets and securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable domestic companies. The foreign markets also have different
clearance and settlement procedures and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions making it difficult to conduct such transactions.
Delivery of securities may not occur at the same time as payment in some
foreign markets. Delays in settlement could result in temporary periods when a

                                      8



portion of the assets of the Fund is uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines
in value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser.

As foreign companies are not generally subject to uniform accounting, auditing
and financial reporting standards and practices comparable to those applicable
to domestic companies, there may be less publicly available information about
certain foreign companies than about domestic companies. There is generally
less government supervision and regulation of exchanges, financial institutions
and issuers in foreign countries than there is in the United States. A foreign
government may impose exchange control regulations that may have an impact on
currency exchange rates, and there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments that could affect U.S. investments in those countries.

Changes in foreign currency exchange rates will affect the value of securities
denominated or quoted in currencies other than the U.S. dollar and the
unrealized appreciation or depreciation of investments so far as U.S. investors
are concerned. Foreign securities markets, while growing in volume, have, for
the most part, substantially less volume than U.S. markets. Securities of many
foreign issuers are less liquid and their prices more volatile than securities
of comparable U.S. issuers. Transactional costs in non-U.S. securities markets
are generally higher than in U.S. securities markets. In addition, transactions
in foreign securities may involve greater time from the trade date until
settlement than domestic securities transactions and involve the risk of
possible losses through the holding of securities by custodians and securities
depositories in foreign countries.

Although the Fund will use reasonable efforts to obtain the best available
price and the most favorable execution with respect to all transactions and the
adviser or sub-adviser will consider the full range and quality of services
offered by the executing broker or dealer when making these determinations,
fixed commissions on many foreign stock exchanges are generally higher than
negotiated commissions on U.S. exchanges. Certain foreign governments levy
withholding taxes against dividend and interest income, or may impose other
taxes. Although in some countries a portion of these taxes are recoverable, the
non-recovered portion of foreign withholding taxes will reduce the income
received by the Fund on these investments.

The risks of investing in foreign securities may be intensified for investments
in issuers domiciled or doing substantial business in emerging markets or
countries with limited or developing capital markets. Security prices in
emerging markets can be significantly more volatile than in the more developed
nations of the world, reflecting the greater uncertainties of investing in
less-established markets and economies. In particular, countries with emerging
markets may have relatively unstable governments, present the risk of sudden
adverse government action and even nationalization of businesses, restrictions
on foreign ownership, or prohibitions of repatriation of assets, and may have
less protection of property rights than more developed countries. The economies
of countries with emerging markets may be predominantly based on only a few
industries, may be highly vulnerable to changes in local or global trade
conditions, and may suffer from extreme and volatile debt burdens or inflation
rates. Local securities markets may trade a small number of securities and may
be unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of substantial holdings difficult or impossible at
times. Transaction settlement and dividend collection procedures may be less
reliable in emerging markets than in developed markets. Securities of issuers
located in countries with emerging markets may have limited marketability and
may be subject to more abrupt or erratic price movements.

Foreign Bank Obligations

Obligations of foreign banks and foreign branches of U.S. banks involve
somewhat different investment risks from those affecting obligations of U.S.
banks including the possibilities that liquidity could be impaired because of
future political and economic developments; the obligations may be less
marketable than comparable obligations of U.S. banks; a foreign jurisdiction
might impose withholding taxes on interest

                                      9



income payable on those obligations; foreign deposits may be seized or
nationalized; foreign governmental restrictions (such as foreign exchange
controls) may be adopted which might adversely affect the payment of principal
and interest on those obligations; and the selection of those obligations may
be more difficult because there may be less publicly available information
concerning foreign banks. In addition, the accounting, auditing and financial
reporting standards, practices and requirements applicable to foreign banks may
differ from those applicable to U.S. banks. In that connection, foreign banks
are not subject to examination by any U.S. government agency or instrumentality.

Foreign Currency Exchange Transactions

The Fund may buy and sell securities denominated in currencies other than the
U.S. dollar, and receive interest, dividends and sale proceeds in currencies
other than the U.S. dollar, and therefore may enter into foreign currency
exchange transactions to convert to and from different foreign currencies and
to convert foreign currencies to and from the U.S. dollar. The Fund may either
enter into these transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or use forward foreign
currency contracts to purchase or sell foreign currencies. A forward foreign
currency exchange contract is an agreement to exchange one currency for another
-- for example, to exchange a certain amount of U.S. dollars for a certain
amount of Korean Won -- at a future date. Forward foreign currency contracts
are included in the group of instruments that can be characterized as
derivatives. Neither spot transactions nor forward foreign currency exchange
contracts eliminate fluctuations in the prices of the Fund's portfolio
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.

Although these transactions tend to minimize the risk of loss due to a decline
in the value of the hedged currency, at the same time, they tend to limit any
potential gain that might be realized should the value of the hedged currency
increase. The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of these securities in foreign currencies will change as a consequence of
market movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of currency
market movements is extremely difficult and the successful execution of a
hedging strategy is highly uncertain. Use of currency hedging techniques may
also be limited by management's need to protect the status of the Fund as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended ("Code").

Foreign Mortgage-Related Securities

Foreign mortgage-related securities are interests in pools of mortgage loans
made to residential home buyers domiciled in a foreign country. These include
mortgage loans made by trust and mortgage loan companies, credit unions,
chartered banks, and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related
and private organizations (e.g., Canada Mortgage and Housing Corporation and
First Australian National Mortgage Acceptance Corporation Limited). The
mechanics of these mortgage-related securities are generally the same as those
issued in the United States. However, foreign mortgage markets may differ
materially from the U.S. mortgage market with respect to matters such as the
sizes of loan pools, pre-payment experience, and maturities of loans.

International Debt Securities

International debt securities represent debt obligations (which may be
denominated in U.S. dollar or in non-U.S. currencies) of any rating issued or
guaranteed by foreign corporations, certain supranational entities (such as the
World Bank) and foreign governments (including political subdivisions having
taxing authority) or their agencies or instrumentalities, including ADRs. These
debt obligations may be bonds (including sinking fund and callable bonds),
debentures and notes, together with preferred stocks, pay-in-kind securities or
zero-coupon securities.

In determining whether to invest in debt obligations of foreign issuers, the
Fund will consider the relative

                                      10



yields of foreign and domestic high-yield securities, the economies of foreign
countries, the condition of such countries' financial markets, the interest
rate climate of such countries and the relationship of such countries' currency
to the U.S. dollar. These factors are judged on the basis of fundamental
economic criteria (e.g., relative inflation levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. Subsequent foreign currency losses may result in
the Fund having previously distributed more income in a particular period than
was available from investment income which could result in a return of capital
to shareholders. The Fund's portfolio of foreign securities may include those
of a number of foreign countries, or, depending upon market conditions, those
of a single country.

Investments in securities of issuers in non-industrialized countries generally
involve more risk and may be considered highly speculative. Although a portion
of the Fund's investment income may be received or realized in foreign
currencies, the Fund will be required to compute and distribute its income in
U.S. dollars and absorb the cost of currency fluctuations and the cost of
currency conversions. Investment in foreign securities involves considerations
and risks not associated with investment in securities of U.S. issuers. For
example, foreign issuers are not required to use generally accepted accounting
principles. If foreign securities are not registered under the Securities
Exchange Act of 1933, as amended ("1933 Act"), the issuer does not have to
comply with the disclosure requirements of the Securities Exchange Act of 1934,
as amended ("1934 Act"). The values of foreign securities investments will be
affected by incomplete or inaccurate information available to the adviser or
sub-adviser as to foreign issuers, changes in currency rates, exchange control
regulations or currency blockage, expropriation or nationalization of assets,
application of foreign tax laws (including withholding taxes), changes in
governmental administration or economic or monetary policy. In addition, it is
generally more difficult to obtain court judgments outside the United States.

Restrictions on Foreign Investments. Some developing countries prohibit or
impose substantial restrictions on investments in their capital markets,
particularly their equity markets, by foreign entities such as the Fund. For
example, certain countries may require governmental approval prior to
investments by foreign persons, limit the amount of investment by foreign
persons in a particular company or limit the investment by foreign persons to
only a specific class of securities of a company that may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. Certain countries may restrict investment
opportunities in issuers or industries deemed important to national interests.

The manner in which foreign investors may invest in companies in certain
developing countries, as well as limitations on such investments, also may have
an adverse impact on the operations of the Fund when it invests in such
countries. For example, the Fund may be required in certain of such countries
to invest initially through a local broker or other entity and then have the
shares purchased re-registered in the name of the Fund. Re-registration may in
some instances not be able to occur on timely basis resulting in a delay during
which the Fund may be denied certain of its rights as an investor including
rights as to dividends or to be made aware of certain corporate actions. There
also may be instances where the Fund places a purchase order but is
subsequently informed, at the time of re-registration, that the permissible
allocation of the investment to foreign investors has been filled depriving the
Fund of the ability to make its desired investment at that time.

Substantial limitations may exist in certain countries with respect to the
Fund's ability to repatriate investment income, capital or the proceeds of
sales of securities by foreign investors. The Fund could be adversely affected
by delays in, or a refusal to grant, any required governmental approval for
repatriation of capital as well as by the application to the Fund of any
restrictions on investments. No more than 15% of the Fund's net assets may be
comprised, in the aggregate, of assets that are: (i) subject to material legal
restrictions on repatriation; or (ii) invested in illiquid securities. Even
where there is no outright restriction on repatriation of capital, the
mechanics of repatriation may affect certain aspects of the operations of the
Fund. For example, funds may be withdrawn from the People's Republic of China
only in United States or Hong Kong dollars and only at an exchange rate
established by the government once each week.

In certain countries, banks and other financial institutions may be among the
leading companies or have actively traded securities. The 1940 Act restricts
the Fund's investments in any equity securities of an issuer

                                      11



that, in its most recent fiscal year, derived more than 15% of its revenues
from "securities related activities" as defined by the rules thereunder. The
provisions may restrict the Fund's investments in certain foreign banks and
other financial institutions.

Foreign Currency Risks. Currency risk is the risk that changes in foreign
exchange rates will affect, favorably or unfavorably, the U.S. dollar value of
foreign securities. In a period when the U.S. dollar generally rises against
foreign currencies, the returns on foreign stocks for a U.S. investor will be
diminished. By contrast, in a period when the U.S. dollar generally declines,
the returns on foreign securities will be enhanced. Unfavorable changes in the
relationship between the U.S. dollar and the relevant foreign currencies,
therefore, will adversely affect the value of the Fund's shares.

Risks of Investing in Foreign Securities. Investments in foreign securities
involve certain inherent risks including the following:

Market Characteristics. Settlement practices for transactions in foreign
markets may differ from those in U.S. markets and may include delays beyond
periods customary in the United States. Foreign security trading practices,
including those involving securities settlement where Fund assets may be
released prior to receipt of payment of securities, may expose the Fund to
increased risk in the event of a failed trade or the insolvency of a foreign
broker-dealer. Transactions in options on securities, futures contracts,
futures options and currency contracts may not be regulated as effectively on
foreign exchanges as similar transactions in the United States and may not
involve clearing mechanisms and related guarantees. The value of such positions
also could be adversely affected by the imposition of different exercise terms
and procedures and margin requirements than in the United States. The value of
the Fund's positions may also be adversely impacted by delays in its ability to
act upon economic events occurring in foreign markets during non-business hours
in the United States.

Legal and Regulatory Matters. In addition to nationalization, foreign
governments may take other actions that could have a significant effect on
market prices of securities and payment of interest including restrictions on
foreign investment, expropriation of goods and imposition of taxes, currency
restrictions and exchange control regulations.

Taxes. The interest payable on certain of the Fund's foreign securities may be
subject to foreign withholding taxes thus reducing the net amount of income
available for distribution to the Fund's shareholders. A shareholder otherwise
subject to U.S. federal income taxes may, subject to certain limitations, be
entitled to claim a credit or deduction of U.S. federal income tax purposes for
his/her proportionate share of such foreign taxes paid by the Fund.

Costs. The expense ratios of the Fund when it invests in foreign securities is
likely to be higher than those of investment companies investing in domestic
securities since the cost of maintaining the custody of foreign securities is
higher. In considering whether to invest in the securities of a foreign
company, the adviser or sub-adviser considers such factors as: the
characteristics of the particular company; differences between economic trends
and the performance of securities markets within the United States and those
within other countries; and factors relating to the general economic,
governmental and social conditions of the country or countries where the
company is located. The extent to which the Fund will be invested in foreign
companies and countries and depositary receipts will fluctuate from time to
time within the limitations described in the Prospectus depending on the
adviser's or sub-adviser's assessment of prevailing market, economic and other
conditions.

Sovereign Debt Securities

Sovereign debt securities are issued by governments of foreign countries. The
sovereign debt in which the Fund may invest may be rated below investment
grade. These securities usually offer higher yields than higher-rated
securities but are also subject to greater risk than higher-rated securities.
Brady Bonds represent a type of sovereign debt. These obligations were created
under a debt restructuring plan introduced by former U.S. Secretary of the
Treasury, Nicholas F. Brady, in which foreign entities issued these obligations
in

                                      12



exchange for their existing commercial bank loans. Brady Bonds have been issued
by Argentina, Brazil, Bulgaria, Costa Rica, Dominican Republic, Ecuador,
Mexico, Morocco, Nigeria, Philippines, Poland, and Uruguay, and may be issued
by other emerging countries.

Supranational Agencies

Supranational agencies are not considered government securities and are not
supported directly or indirectly by the U.S. government. Examples of
supranational agencies include, but are not limited to, the International Bank
for Reconstruction and Development (commonly referred to as the World Bank)
which was chartered to finance development projects in developing member
countries; the European Union which is a 27-nation organization engaged in
cooperative economic activities; and the Asian Development Bank which is an
international development bank established to lend funds, promote investment
and provide technical assistance to member nations in the Asian and Pacific
regions.

FIXED-INCOME SECURITIES

Adjustable Rate Mortgage Securities

Adjustable rate mortgage securities ("ARMS") are pass-through mortgage
securities collateralized by mortgages with adjustable rather than fixed rates.
Generally, ARMS have a specified maturity date and amortize principal over
their life. In periods of declining interest rates, there is a reasonable
likelihood that ARMS will experience increased rates of prepayment of
principal. However, the major difference between ARMS and fixed rate mortgage
securities is that the interest rate and the rate of amortization of principal
of ARMS can and do change in accordance with movements in a particular,
pre-specified, published interest rate index. The amount of interest on ARMS is
calculated by adding a specified amount, the "margin," to the index subject to
limitations on the maximum and minimum interest that can be charged to the
mortgagor during the life of the mortgage or to maximum and minimum changes to
that interest rate during a given period. Because the interest rates on ARMS
generally move in the same direction as market interest rates, the market value
of ARMS tends to be more stable than that of long-term fixed rate securities.

There are two main categories of indices which serve as benchmarks for periodic
adjustments to coupon rates on ARMS: those based on U.S. Treasury securities
and those derived from a calculated measure such as a cost of funds index or a
moving average of mortgage rates. Commonly utilized indices include the
one-year and five-year constant maturity Treasury Note rates, the three-month
Treasury Bill rate, the 180-day Treasury Bill rate, rates on longer-term
Treasury securities, the 11th District Federal Home Loan Bank Cost of Funds,
the National Median Cost of Funds, the one-month or three-month London
Interbank Offered Rate ("LIBOR"), the prime rate of a specific bank, or
commercial paper rates. Some indices, such as the one-year constant maturity
Treasury Note rate, closely mirror changes in market interest rate levels.
Others, such as the 11th District Home Loan Bank Cost of Funds index (often
related to ARMS issued by the Federal National Mortgage Association ("FNMA")),
tend to lag changes in market rate levels and tend to be somewhat less volatile.

Asset-Backed Securities (Non-Mortgage)

Asset-backed securities represent individual interests in pools of consumer
loans, home equity loans, trade receivables, credit card receivables, and other
debt and are similar in structure to mortgage-backed securities. The assets are
securitized either in a pass-through structure (similar to a mortgage
pass-through structure) or in a pay-through structure (similar to a
Collateralized Mortgage Obligations structure). Asset-backed securities may be
subject to more rapid repayment than their stated maturity date would indicate
as a result of the pass-through of prepayments of principal on the underlying
loans. During periods of declining interest rates, prepayment of certain types
of loans underlying asset-backed securities can be expected to accelerate.
Accordingly, the Fund's ability to maintain positions in these securities will
be affected by reductions in the principal amount of the securities resulting
from prepayments and the Fund must reinvest the returned principal at
prevailing interest rates, which may be lower. Asset-backed securities may also
be subject to

                                      13



extension risk during periods of rising interest rates.

Asset-backed securities entail certain risks not presented by mortgage-backed
securities. The collateral underlying asset-backed securities may be less
effective as security for payments than real estate collateral. Debtors may
have the right to set off certain amounts owed on the credit cards or other
obligations underlying the asset-backed security or the debt holder may not
have a first (or proper) security interest in all of the obligations backing
the receivable because of the nature of the receivable or state or federal laws
protecting the debtor. Certain collateral may be difficult to locate in the
event of default and recoveries on depreciated or damaged collateral may not
fully cover payments due on these securities.

The collateral behind certain asset-backed securities tend to have prepayment
rates that do not vary with interest rates and the short-term nature of the
loans may also tend to reduce the impact of any change in prepayment level.
Other asset-backed securities, such as home equity asset-backed securities,
have prepayment rates that are sensitive to interest rates. Faster prepayments
will shorten the average life and slower prepayments will lengthen it.
Asset-backed securities may be pass-through, representing actual equity
ownership of the underlying assets or pay-through, representing debt
instruments supported by cash flows from the underlying assets.

The coupon rate of interest on mortgage-related and asset-backed securities is
lower than the interest rates paid on the mortgages included in the underlying
pool by the amount of the fees paid to the mortgage pooler, issuer, and/or
guarantor. Actual yield may vary from the coupon rate except if such securities
are purchased at a premium or discount, traded in the secondary market at a
premium or discount, or to the extent that the underlying assets are prepaid as
noted above.

Banking Industry Obligations/Short-Term Investments

Banking industry obligations include certificates of deposit bankers'
acceptances and fixed time deposits. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank
meaning in effect that the bank unconditionally agrees to pay the face value of
the instrument on maturity. Certificates of deposit and bankers' acceptances
acquired by the Fund will be dollar-denominated obligations of domestic or
foreign banks or financial institutions which at the time of purchase have
capital, surplus and undivided profits in excess of $100 million (including
assets of both domestic and foreign branches) based on latest published
reports, or less than $100 million if the principal amount of such bank
obligations are fully insured by the U.S. government.

When the Fund holds instruments of foreign banks or financial institutions it
may be subject to additional investment risks that are different in some
respects from those incurred by the Fund which invests only in debt obligations
of U.S. domestic issuers. Domestic banks and foreign banks are subject to
different governmental regulations with respect to the amount and types of
loans which may be made and interest rates which may be charged. In addition,
the profitability of the banking industry depends largely upon the availability
and cost of funds for the purpose of financing lending operations under
prevailing money market conditions. General economic conditions as well as
exposure to credit losses arising from possible financial difficulties of
borrowers plays an important part in the operations of the banking industry.
Federal and state laws and regulations require domestic banks to maintain
specified levels of reserves, limited in the amount which they can loan to a
single borrower, and subject to other regulations designed to promote financial
soundness. However, such laws and regulations do not necessarily apply to
foreign bank obligations that the Fund may acquire.

For foreign banks there is a possibility that liquidity could be impaired
because of future political and economic developments; the obligations may be
less marketable than comparable obligations of U.S. banks; a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations; foreign

                                      14



deposits may be seized or nationalized; foreign governmental restrictions (such
as foreign exchange controls) may be adopted which might adversely affect the
payment of principal and interest on those obligations; and the selection of
those obligations may be more difficult because there may be less publicly
available information concerning foreign banks. In addition, the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to U.S. banks. In
that connection, foreign banks are not subject to examination by any U.S.
government agency or instrumentality.

In addition to purchasing certificates of deposit and bankers' acceptances, to
the extent permitted under its investment objectives and policies stated above
and in its Prospectus, the Fund may make interest-bearing time or other
interest-bearing deposits in commercial or savings banks. Time deposits are
non-negotiable deposits maintained at a banking institution for a specified
period of time at a specified interest rate.

Corporate Debt Securities

Corporate debt securities include corporate bonds, debentures, notes and other
similar corporate debt instruments including convertible securities. The
investment return on a corporate debt security reflects interest earnings and
changes in the market value of the security. The market value of a corporate
debt security will generally increase when interest rates decline and decrease
when interest rates rise. There is also the risk that the issuer of a debt
security will be unable to pay interest or principal at the time called for by
the instrument. Investments in corporate debt securities that are rated below
investment grade are described in "High-Yield Securities."

Debt obligations that are deemed investment grade carry a rating of at least
Baa- from Moody's or BBB- from Standard and Poor's, or a comparable rating from
another rating agency or, if not rated by an agency, are determined by the
adviser or sub-adviser to be of comparable quality. Bonds rated Baa- or BBB-
have speculative characteristics and changes in economic circumstances are more
likely to lead to a weakened capacity to make interest and principal payments
than higher rated bonds.

Credit-Linked Notes

A credit-linked note ("CLN") is generally issued by one party with a credit
option or risk linked to a second party. The embedded credit option allows the
first party to shift a specific credit risk to the CLN holder or the Fund in
this case. The CLN is issued by a trust, a special purpose vehicle,
collateralized by AAA-rated securities. The CLN's price or coupon is linked to
the performance of the reference asset of the second party. Generally, the CLN
holder receives either fixed or floating coupon rate during the life of the CLN
and par at maturity. The cash flows are dependent on specific credit-related
events. Should the second party default or declare bankruptcy, the CLN holder
will receive an amount equivalent to the recovery rate. The CLN holder bears
the risk of default by the second party and any unforeseen movements in the
reference asset which could lead to loss of principal and receipt of interest
payments. In return for these risks, the CLN holder receives a higher yield. As
with most derivative instruments, valuation of a CLN is difficult due to the
complexity of the security (i.e., the embedded option is not easily priced).
The Fund cannot assure that it can implement a successful strategy regarding
this type of investments.

Debt Securities

The Fund may invest in debt securities. The value of fixed-income or debt
securities may be affected by changes in general interest rates and in the
creditworthiness of the issuer. Debt securities with longer maturities (for
example, over ten years) are more affected by changes in interest rates and
provide less price stability than securities with short-term maturities (for
example, one to ten years). Also, for each debt security, there is a risk of
principal and interest default which will be greater with higher-yielding,
lower-grade securities.


                                      15



Floating or Variable Rate Instruments

Variable rate demand instruments held by the Fund may have maturities of more
than one year, provided: (i) the Fund is entitled to the payment of principal
at any time, or during specified intervals not exceeding one year, upon giving
the prescribed notice (which may not exceed 30 days); and (ii) the rate of
interest on such instruments is adjusted at periodic intervals not to exceed
one year. In determining whether a variable rate demand instrument has a
remaining maturity of one year or less, each instrument will be deemed to have
a maturity equal to the longer of the period remaining until its next interest
rate adjustment or the period remaining until the principal amount can be
recovered through demand. The Fund will be able (at any time or during
specified periods not exceeding one year depending upon the note involved) to
demand payment of the principal of a note. If an issuer of a variable rate
demand note defaulted on its payment obligation, the Fund might be unable to
dispose of the note and a loss would be incurred to the extent of the default.
The Fund may invest in variable rate demand notes only when the investment is
deemed to involve minimal credit risk. The continuing creditworthiness of
issuers of variable rate demand notes held by the Fund will also be monitored
to determine whether such notes should continue to be held. Variable and
floating rate instruments with demand periods in excess of seven days, which
cannot be disposed of promptly within seven business days in the usual course
of business without taking a reduced price, will be treated as illiquid
securities.

Guaranteed Investment Contracts

Guaranteed Investment Contracts ("GICs") are issued by insurance companies.
Pursuant to such contracts, the Fund makes cash contributions to a deposit fund
of the insurance company's general account. The insurance company then credits
to the Fund on a monthly basis guaranteed interest which is based on an index.
The GICs provide that this guaranteed interest will not be less than a certain
minimum rate. The insurance company may assess periodic charges against a GIC
for expense and service costs allocable to it and the charges will be deducted
from the value of the deposit fund. In addition, because the Fund may not
receive the principal amount of a GIC from the insurance company on seven days'
notice or less, the GIC is considered an illiquid investment and, together with
other instruments invested in by the Fund which are not readily marketable,
will not exceed 15% of the Fund's net assets. The term of a GIC will be one
year or less. In determining average weighted portfolio maturity, a GIC will be
deemed to have a maturity equal to the period of time remaining until the next
readjustment of the guaranteed interest rate.

Government Trust Certificates

Government Trust Certificates represent an interest in a government trust, the
property of which consists of: (i) a promissory note of a foreign government no
less than 90% of which is backed by the full faith and credit guaranty issued
by the Federal Government of the United States (issued pursuant to Title III of
the Foreign Operations, Export, Financing and Related Borrowers Programs
Appropriations Act of 1998); and (ii) a security interest in obligations of the
U.S. Treasury backed by the full faith and credit of the United States
sufficient to support the remaining balance (no more than 10%) of all payments
of principal and interest on such promissory note provided that such
obligations shall not be rated less than AAA or less by a nationally recognized
statistical rating organization ("NRSRO").

Government National Mortgage Association Certificates

Government National Mortgage Association ("GNMA") Certificates are
mortgage-backed securities representing part ownership of a pool of mortgage
loans. GNMA is a U.S. government corporation within the Department of Housing
and Urban Development. Such loans are initially made by lenders such as
mortgage bankers, commercial banks and savings and loan associations and are
either insured by the Federal Housing Administration ("FHA") or Farmers' Home
Administration ("FMHA") or guaranteed by the Veterans Administration ("VA"). A
GNMA Certificate represents an interest in a specific pool of such mortgages
which, after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and principal on
each certificate is guaranteed by the full faith and

                                      16



credit of the U.S. government.

GNMA Certificates differ from bonds in that principal is scheduled to be paid
back by the borrower over the length of the loan rather than returned in a lump
sum at maturity. "Modified pass through" type GNMA Certificates entitle the
holder to receive all interest and principal payments owed on the mortgages in
the pool (net of issuers' and GNMA fees) whether or not the mortgagor has made
such payment.

GNMA Certificates are created by an "issuer" which is an FHA approved mortgage
banker who also meets criteria imposed by GNMA. The issuer assembles a pool of
FHA, FMHA, or VA insured or guaranteed mortgages with the same interest rate,
maturity and type of dwelling. Upon application by the issuer and after
approval by GNMA of the pool, GNMA provides its commitment to guarantee timely
payment of principal and interest on the GNMA Certificates backed by the
mortgages included in the pool. The GNMA Certificates, endorsed by GNMA, are
then sold by the issuer through securities dealers.

GNMA is authorized under the Federal National Housing Act to guarantee timely
payment of principal and interest on GNMA Certificates. This guarantee is
backed by the full faith and credit of the United States. GNMA may borrow U.S.
Treasury funds to the extent needed to make payments under its guarantee. When
mortgages in the pool underlying GNMA Certificates are prepaid by mortgagors or
by result of foreclosure such principal payments are passed through to the
certificate holders. Accordingly, the life of the GNMA Certificate is likely to
be substantially shorter than the stated maturity of the mortgages in the
underlying pool. Because of such variation in prepayment rates, it is not
possible to predict the life of a particular GNMA Certificate but FHA
statistics indicate that 25 to 30 year single family dwelling mortgages have an
average life of approximately 12 years. The majority of GNMA Certificates are
backed by mortgages of this type and accordingly, the generally accepted
practice has developed to treat GNMA Certificates as 30-year securities which
prepay fully in the 12th year.

GNMA Certificates bear a nominal "coupon rate" which represents the effective
FHA-VA mortgage rate at the time of issuance, less 0.5%, which constitutes the
GNMA and issuer's fees. For providing its guarantees, GNMA receives an annual
fee of 0.06% of the outstanding principal on certificates backed by single
family dwelling mortgages and the issuer receives an annual fee of 0.44% for
assembling the pool and for passing through monthly payments of interest and
principal.

Payments to holders of GNMA Certificates consist of the monthly distributions
of interest and principal less the GNMA and issuer's fees. The actual yield to
be earned by a holder of a GNMA Certificate is calculated by dividing such
payments by the purchase price paid for the GNMA Certificate (which may be at a
premium or a discount from the face value of the certificate). Monthly
distributions of interest, as contrasted to semi-annual distributions which are
common for other fixed interest investments, have the effect of compounding and
thereby raising the effective annual yield earned on GNMA Certificates. Because
of the variation in the life of the pools of mortgages which back various GNMA
Certificates and because it is impossible to anticipate the rate of interest at
which future principal payments may be reinvested, the actual yield earned from
a portfolio of GNMA Certificates, such as that in which the Fund may invest,
will differ significantly from the yield estimated by using an assumption of a
12 year life for each GNMA Certificate included in such a portfolio as
described.

The actual rate of prepayment for any GNMA Certificate does not lend itself to
advance determination although regional and other characteristics of a given
mortgage pool may provide some guidance for investment analysis. Also,
secondary-market trading of outstanding GNMA Certificates tends to be
concentrated in issues bearing the current coupon rate.

Construction loan securities are issued to finance building costs. The funds
are disbursed as needed or in accordance with a prearranged plan. The
securities provide for the timely payment to the registered holder of interest
at the specified rate plus scheduled installments of principal. Upon completion
of the construction phase, the construction loan securities are terminated and
project loan securities are issued. It is the Fund's

                                      17



policy to record these GNMA Certificates on trade date and to segregate assets
to cover its commitments on trade date as well.

GNMA Certificates -- When-Issued And Delayed Delivery Transactions

GNMA Certificates may at times be purchased or sold on a delayed-delivery basis
or on a when-issued basis. These transactions arise when GNMA Certificates are
purchased or sold by the Fund with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price and
yield to the Fund. No payment is made until delivery is due, often a month or
more after the purchase. The settlement date on such transactions will take
place no more than 120 days from the trade date. When the Fund engages in
when-issued and delayed-delivery transactions, the Fund relies on the buyer or
seller, as the case may be, to consummate the sale. Failure of the buyer or
seller to do so may result in the Fund missing the opportunity of obtaining a
price considered to be advantageous. While when-issued GNMA Certificates may be
sold prior to the settlement date, the Fund intends to purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a
GNMA Certificate on a when-issued basis, it will record the transaction and
reflect the value of the security in determining its net asset value ("NAV").
ING Investments, LLC ("ING Investments"), the Fund's investment adviser, and
the sub-adviser each do not believe that the Fund's NAV or income will be
adversely affected by the purchase of GNMA Certificates on a when-issued basis.
The Fund may invest in when-issued securities without other conditions. Such
securities either will mature or be sold on or about the settlement date. The
Fund may earn interest on such account or securities for the benefit of
shareholders.

High-Yield Securities

High-yield securities are debt securities that are rated lower than "Baa-" by
Moody's, "BBB-" by S&P, or of comparable quality if unrated.

High-yield securities often are referred to as "junk bonds" and include certain
corporate debt obligations, higher yielding preferred stock and
mortgage-related securities, and securities convertible into the foregoing.
Investments in high-yield securities generally provide greater income and
increased opportunity for capital appreciation than investments in higher
quality debt securities but they also typically entail greater potential price
volatility and principal and income risk.

High-yield securities are not considered to be investment grade. They are
regarded as predominantly speculative with respect to the issuing company's
continuing ability to meet principal and interest payments. Also, their yields
and market values tend to fluctuate more than higher-rated securities.
Fluctuations in value do not affect the cash income from the securities but are
reflected in the Fund's NAV. The greater risks and fluctuations in yield and
value occur, in part, because investors generally perceive issuers of
lower-rated and unrated securities to be less creditworthy.

The yields earned on high-yield securities generally are related to the quality
ratings assigned by recognized rating agencies. The following are excerpts from
Moody's description of its bond ratings: Ba -- judged to have speculative
elements; their future cannot be considered as well assured. B -- generally
lack characteristics of a desirable investment. Caa -- are of poor standing;
such issues may be in default or there may be present elements of danger with
respect to principal or interest. Ca -- speculative in a high degree; often in
default. C -- lowest rate class of bonds; regarded as having extremely poor
prospects. Moody's also applies numerical indicators 1, 2 and 3 to rating
categories. The modifier 1 indicates that the security is in the higher end of
its rating category; 2 indicates a mid-range ranking; and 3 indicates a ranking
towards the lower end of the category. The following are excerpts from S&P's
description of its bond ratings: BB, B, CCC, CC, C -- predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
terms of the obligation; BB indicates the lowest degree of speculation and C
the highest. D -- in payment default. S&P applies indicators "+," no character,
and "-" to its rating categories. The indicators show relative standing

                                      18



within the major rating categories.

Certain securities held by the Fund may permit the issuer at its option to call
or redeem its securities. If an issuer were to redeem securities held by the
Fund during a time of declining interest rates, the Fund may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.

Risks Associated with High-Yield Securities. The medium- to lower-rated and
unrated securities in which the Fund invests tend to offer higher yields than
those of other securities with the same maturities because of the additional
risks associated with them. These risks include:

High-Yield Bond Market. A severe economic downturn or increase in interest
rates might increase defaults in high-yield securities issued by highly
leveraged companies. An increase in the number of defaults could adversely
affect the value of all outstanding high-yield securities thus disrupting the
market for such securities.

Sensitivity to Interest Rate and Economic Changes. High-yield bonds are more
sensitive to adverse economic changes or individual corporate developments but
generally less sensitive to interest rate changes than are investment grade
bonds. As a result, when interest rates rise causing bond prices to fall, the
value of these securities may not fall as much as investment grade corporate
bonds. Conversely, when interest rates fall, these securities may underperform
investment grade corporate bonds.

Also, the financial stress resulting from an economic downturn or adverse
corporate developments could have a greater negative effect on the ability of
issuers of these securities to service their principal and interest payments,
to meet projected business goals, and to obtain additional financing than on
more creditworthy issuers. In addition, periods of economic uncertainty and
changes can be expected to result in increased volatility of market prices of
these securities and the Fund's NAV. Furthermore, in the case of high-yield
bonds structured as zero-coupon or pay-in-kind securities, their market prices
are affected to a greater extent by interest rate changes and thereby tend to
be more speculative and volatile than securities which pay interest
periodically and in cash.

Payment Expectations. High-yield bonds present risks based on payment
expectations. For example, these securities may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest
rate market, the Fund may have to replace the securities with a lower yielding
security resulting in a decreased return for investors. In addition, there is a
higher risk of non-payment of interest and/or principal by issuers of these
securities than in the case of investment-grade bonds.

Liquidity and Valuation Risks. Some issues of high-yield bonds may be traded
among a limited number of broker-dealers rather than in a broad secondary
market. Many of these securities may not be as liquid as investment grade
bonds. The ability to value or sell these securities will be adversely affected
to the extent that such securities are thinly traded or illiquid. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease or increase the value and liquidity of these securities
more than other securities, especially in a thinly-traded market.

Taxation. Special tax considerations are associated with investing in
high-yield securities structured as zero-coupon or pay-in-kind securities. The
Fund reports the interest on these securities as income even though it receives
no cash interest until the security's maturity or payment date.

Limitations of Credit Ratings. The credit ratings assigned to high-yield
securities may not accurately reflect the true risks of an investment. Credit
ratings typically evaluate the safety of principal and interest payments rather
than the market value risk of high-yield securities. In addition, credit
agencies may fail to adjust credit ratings to reflect rapid changes in economic
or company conditions that affect a security's market value. Although the
ratings of recognized rating services such as Moody's and S&P are considered,
the sub-adviser primarily relies on its own credit analysis which includes a
study of existing debt, capital structure, ability to service debts and to pay
dividends, the issuer's sensitivity to economic conditions, its operating
history and the

                                      19



current trend of earnings. Thus, the achievement of the Fund's investment
objective may be more dependent on the adviser's or sub-adviser's own credit
analysis than might be the case for the Fund which does not invest in these
securities.

Mortgage-Related Securities

The Fund may invest in mortgage-related debt securities, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"). Federal mortgage-related securities include obligations issued or
guaranteed by GNMA, FNMA, and the Federal Home Loan Mortgage Corporation
("FHLMC"). GNMA is a wholly-owned corporate instrumentality of the United
States, the securities and guarantees of which are backed by the full faith and
credit of the U.S. government. FNMA, a federally chartered and privately owned
corporation, and FHLMC, a federal corporation, are instrumentalities of the
United States with Presidentially appointed board members. The obligations of
FNMA and FHLMC are not explicitly guaranteed by the full faith and credit of
the federal government. See "U.S. Government Securities."

Pass-through mortgage-related securities are characterized by monthly payments
to the holder reflecting the monthly payments made by the borrowers who
received the underlying mortgage loans. The payments to the security holders,
like the payments on the underlying loans, represent both principal and
interest. Although the underlying mortgage loans are for specified periods of
time, often twenty or thirty years, the borrowers can, and typically do, repay
such loans sooner. Thus, the security holders frequently receive repayments of
principal in addition to the principal that is part of the regular monthly
payment. A borrower is more likely to repay a mortgage bearing a relatively
high rate of interest. This means that in times of declining interest rates,
some higher yielding securities held by the Fund might be converted to cash and
the Fund could be expected to reinvest such cash at the then prevailing lower
rates. The increased likelihood of prepayment when interest rates decline also
limits market price appreciation of mortgage-related securities. If the Fund
buys mortgage-related securities at a premium, mortgage foreclosures or
mortgage prepayments may result in losses of up to the amount of the premium
paid since only timely payment of principal and interest is guaranteed.

CMOs and REMICs are securities which are collateralized by mortgage
pass-through securities. Cash flows from underlying mortgages are allocated to
various classes or tranches in a predetermined, specified order. Each
sequential tranche has a "stated maturity"--the latest date by which the
tranche can be completely repaid assuming no repayments--and has an "average
life"--the average time to receipt of a principal payment weighted by the size
of the principal payment. The average life is typically used as a proxy for
maturity because the debt is amortized rather than being paid off entirely at
maturity as would be the case in a straight debt instrument.

CMOs and REMICs are typically structured as "pass-through" securities. In these
arrangements, the underlying mortgages are held by the issuer, which then
issues debt collateralized by the underlying mortgage assets. The security
holder thus owns an obligation of the issuer and payment of interest and
principal on such obligations is made from payments generated by the underlying
mortgage assets. The underlying mortgages may or may not be guaranteed as to
payment of principal and interest by an agency or instrumentality of the U.S.
government, such as GNMA, or otherwise backed by FNMA or FHLMC. Alternatively,
such securities may be backed by mortgage insurance, letters of credit or other
credit enhancing features. Both CMOs and REMICs are issued by private entities.
They are not directly guaranteed by any government agency and are secured by
the collateral held by the issuer. CMOs and REMICs are subject to the type of
prepayment risk described above due to the possibility that prepayments on the
underlying assets will alter their cash flows.

Risks of Mortgage Related Investment. Investments in mortgage-related
securities involve certain risks. In periods of declining interest rates,
prices of fixed-income securities tend to rise. However, during such periods,
the rate of prepayment of mortgages underlying mortgage-related securities
tends to increase with the result that such prepayments must be reinvested by
the issuer at lower rates. The rate of prepayments on underlying mortgages will
affect the price and volatility of a mortgage-related security and may have the
effect of shortening or extending the effective maturity of the security beyond
what was anticipated at the time of the

                                      20



purchase. Unanticipated rates of prepayment on underlying mortgages can be
expected to increase the volatility of such securities. In addition, the value
of these securities may fluctuate in response to the market's perception of the
creditworthiness of the issuers of mortgage-related securities owned by the
Fund. Because investments in mortgage-related securities are interest rate
sensitive, the ability of the issuer to reinvest favorably in underlying
mortgages may be limited by government regulation or tax policy. For example,
action by the Board of Governors of the Federal Reserve System to limit the
growth of the nation's money supply may cause interest rates to rise and
thereby reduce the volume of new residential mortgages. Additionally, although
mortgages and mortgage-related securities are generally supported by some form
of government or private guarantees and/or insurance, there is no assurance
that private guarantors or insurers will be able to meet their obligations.
Further, stripped mortgage-backed securities are likely to experience greater
price volatility than other types of mortgage securities. The yield to maturity
on the interest-only class is extremely sensitive, both to changes in
prevailing interest rates and to the rate of principal payments (including
prepayments) on the underlying mortgage assets. Similarly, the yield to
maturity on CMO residuals is extremely sensitive to prepayments on the related
underlying mortgage assets. In addition, if a series of a CMO includes a class
that bears interest at an adjustable rate, the yield to maturity on the related
CMO residual will also be extremely sensitive to changes in the level of the
index upon which interest rate adjustments are made. The Fund could fail to
fully recover its initial investment in a CMO residual or a stripped
mortgage-backed security.

Municipal Securities

Municipal securities are debt obligations issued by state and local
governments, territories and possessions of the United States, regional
government authorities, and their agencies and instrumentalities ("municipal
securities"). Municipal securities include both notes (which have maturities of
less than one year) and bonds (which have maturities of one year or more) that
bear fixed or variable rates of interest.

In general, "municipal securities" debt obligations are issued to obtain funds
for a variety of public purposes such as the construction, repair, or
improvement of public facilities including airports, bridges, housing,
hospitals, mass transportation, schools, streets, water and sewer works.
Municipal securities may be issued to refinance outstanding obligations and to
raise funds for general operating expenses and lending to other public
institutions and facilities.

The two principal classifications of municipal securities are "general
obligation" securities and "revenue" securities. General obligation securities
are secured by the issuer's pledge of its full faith, credit, and taxing power
for the payment of principal and interest. Characteristics and methods of
enforcement of general obligation bonds vary according to the law applicable to
a particular issuer and the taxes that can be levied for the payment of debt
securities may be limited or unlimited as to rates or amounts of special
assessments. Revenue securities are payable only from the revenues derived from
a particular facility, a class of facilities or, in some cases, from the
proceeds of a special excise tax. Revenue bonds are issued to finance a wide
variety of capital projects including electric, gas, water and sewer systems;
highways, bridges, and tunnels; port and airport facilities; colleges and
universities; and hospitals. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service
reserve fund the assets of which may be used to make principal and interest
payments on the issuer's obligations. Housing finance authorities have a wide
range of security, including partially or fully insured mortgages, rent
subsidized and collateralized mortgages, and the net revenues from housing or
other public projects. Some authorities are provided further security in the
form of a state's assistance (although without obligation) to make up
deficiencies in the debt service reserve fund.

Insured municipal debt involves scheduled payments of interest and principal
guaranteed by a private, non-governmental or governmental insurance company.
The insurance does not guarantee the market value of the municipal debt or the
value of the shares of the Fund.

Securities of issuers of municipal obligations are subject to the provisions of
bankruptcy, insolvency and other

                                      21



laws affecting the rights and remedies of creditors such as the Bankruptcy
Reform Act of 1978. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislatures or
referenda extending the time for payment of principal or interest, or imposing
other constraints upon enforcement of such obligations or upon the ability of
municipalities to levy taxes. Furthermore, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its municipal obligations may be materially affected.

Moral Obligation Securities. Municipal securities may include moral obligation
securities which are usually issued by special purpose public authorities. If
the issuer of moral obligation bonds cannot fulfill its financial
responsibilities from current revenues, it may draw upon a reserve fund, the
restoration of which is moral commitment but not a legal obligation of the
state or municipality which created the issuer.

Industrial Development and Pollution Control Bonds. These are revenue bonds and
generally are not payable from the unrestricted revenues of an issuer. They are
issued by or on behalf of public authorities to raise money to finance
privately operated facilities for business, manufacturing, housing, sport
complexes, and pollution control. Consequently, the credit quality of these
securities is dependent upon the ability of the user of the facilities financed
by the bonds and any guarantor to meet its financial obligations.

Municipal Lease Obligations. These are lease obligations or installment
purchase contract obligations of municipal authorities or entities. Although
lease obligations do not constitute general obligations of the municipality for
which its taxing power is pledged, a lease obligation is ordinarily backed by
the municipality's covenant to budget for, appropriate and make the payment due
under the lease obligation. The Fund may also purchase certificates of
participation which are securities issued by a particular municipality or
municipal authority to evidence a proportionate interest in base rental or
lease payments relating to a specific project to be made by the municipality,
agency or authority. However, certain lease obligations contain
non-appropriation clauses which provide that the municipality has no obligation
to make lease or installment purchase payments in any year unless money is
appropriated for such purpose for such year. Although non-appropriation lease
obligations are secured by the leased property, disposition of the property in
the event of default and foreclosure might prove difficult. In addition, these
securities represent a relatively new type of financing and certain lease
obligations may therefore be considered to be illiquid securities.

The Fund will attempt to minimize the special risks inherent in municipal lease
obligations and certificates of participation by purchasing only lease
obligations which meet the following criteria: (1) rated A or better by at
least one NRSRO; (2) secured by payments from a governmental lessee which has
actively traded debt obligations; (3) determined by the adviser or sub-adviser
to be critical to the lessee's ability to deliver essential services; and
(4) contain legal features which the adviser or sub-adviser deems appropriate
such as covenants to make lease payments without the right of offset or
counterclaim, requirements for insurance policies, and adequate debt service
reserve funds.

Short-Term Municipal Obligations. These securities include the following:

Tax Anticipation Notes are used to finance working capital needs of
municipalities and are issued in anticipation of various seasonal tax revenues
to be payable from these specific future taxes. They are usually general
obligations of the issuer secured by the taxing power of the municipality for
the payment of principal and interest when due.

Revenue Anticipation Notes are issued in expectation of receipt of other kinds
of revenue such as federal revenues available under the Federal Revenue Sharing
Program. They also are usually general obligations of the issuer.

Bond Anticipation Notes normally are issued to provide interim financing until
long-term financing can be arranged. The long-term bonds then provide the money
for the repayment of the notes.


                                      22



Construction Loan Notes are sold to provide construction financing for specific
projects. After successful completion and acceptance, many projects receive
permanent financing through the FNMA or the GNMA.

Short-Term Discount Notes (tax-exempt commercial paper) are short-term (365
days or less) promissory notes issued by municipalities to supplement their
cash flow.

Savings Association Obligations

The certificates of deposit (interest-bearing time deposits) in which the Fund
may invest are issued by savings banks or savings and loan associations that
have capital, surplus and undivided profits in excess of $100 million based on
latest published reports, or less than $100 million if the principal amount of
such obligations is fully insured by the U.S. government.

Interest/Principal Only Stripped Mortgage-Backed Securities

The Fund may invest in Interest/Principal Only Stripped Mortgage-Backed
Securities ("SMBS"). SMBS are created by the Federal Reserve Bank by separating
the interest and principal components of an outstanding U.S. Treasury or agency
bond and selling them as individual securities. The market prices of SMBS are
generally more volatile than the market prices of securities with similar
maturities that pay interest periodically and are likely to respond to changes
in interest rates to a greater degree than do non-zero-coupon securities having
similar maturities and credit quality.

U.S. Government Securities

Investments in U.S. government securities include instruments issued by the
U.S. Treasury such as bills, notes and bonds. These instruments are direct
obligations of the U.S. government and, as such, are backed by the full faith
and credit of the United States. They differ primarily in their interest rates,
the length of their maturities and the dates of issuance. In addition, U.S.
government securities include securities issued by instrumentalities of the
U.S. government such as GNMA, which are also backed by the full faith and
credit of the United States. Also included in the category of U.S. government
securities are instruments issued by instrumentalities established or sponsored
by the U.S. government such as the Student Loan Marketing Association ("SLMA"),
the FNMA and the FHLMC. While these securities are issued, in general, under
the authority of an Act of Congress, the U.S. government is not obligated to
provide financial support to the issuing instrumentalities although, under
certain conditions certain of these authorities may borrow from the U.S.
Treasury. In case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment
and may not be able to assert a claim against the United States itself if the
agency or instrumentality does not meet its commitment. The Fund will invest in
securities of such agencies or instrumentalities only when the adviser or
sub-adviser is satisfied that the credit risk with respect to any
instrumentality is comparable to the credit risk of U.S. government securities
that are backed by the full faith and credit of the United States.

Zero-Coupon and Pay-In-Kind Securities

Zero-coupon and deferred interest securities are debt obligations that do not
entitle the holder to any periodic payment of interest prior to maturity or a
specified date when the securities begin paying current interest (the "cash
payment date") and therefore are issued and traded at a discount from their
face amounts or par value. The discount varies depending on the time remaining
until maturity or cash payment date, prevailing interest rates, liquidity of
the security and the perceived credit quality of the issuer. The discount, in
the absence of financial difficulties of the issuer, decreases as the final
maturity or cash payment date of the security approaches. A pay-in-kind bond
pays interest during the initial few years in additional bonds rather than in
cash. Later the bond may pay cash interest. Pay-in-kind bonds are typically
callable at about the time they begin paying cash interest. The market prices
of zero-coupon and deferred interest securities generally are

                                      23



more volatile than the market prices of securities with similar maturities that
pay interest periodically and are likely to respond to changes in interest
rates to a greater degree than do non-zero-coupon securities having similar
maturities and credit quality.

The risks associated with lower-rated debt securities apply to these
securities. Zero-coupon and pay-in-kind securities are also subject to the risk
that in the event of a default, the Fund may realize no return on its
investment because these securities do not pay cash interest.

Subordinated Mortgage Securities

Subordinated mortgage securities have certain characteristics and certain
associated risks. In general, the subordinated mortgage securities in which the
Fund may invest consist of a series of certificates issued in multiple classes
with a stated maturity or final distribution date. One or more classes of each
series may be entitled to receive distributions allocable only to principal,
principal payments, interest or any combination thereof to one or more other
classes or only after the occurrence of certain events and may be subordinated
in the right to receive such distributions on such certificates to one or more
senior classes of certificates. The rights associated with each class of
certificates are set forth in the applicable pooling and servicing agreement,
form of certificate and offering documents for the certificates.

The subordination terms are usually designed to decrease the likelihood that
the holders of senior certificates will experience losses or delays in the
receipt of their distributions and to increase the likelihood that the senior
certificate holders will receive aggregate distributions of principal and
interest in the amounts anticipated. Generally, pursuant to such subordination
terms, distributions arising out of scheduled principal, principal prepayments,
interest or any combination thereof that otherwise would be payable to one or
more other classes of certificates of such series (i.e., the subordinated
certificates) are paid instead to holders of the senior certificates. Delays in
receipt of scheduled payments on mortgage loans and losses on defaulted
mortgage loans are typically borne first by the various classes of subordinated
certificates and then by the holders of senior certificates.

In some cases, the aggregate losses in respect of defaulted mortgage loans that
must be borne by the subordinated certificates and the amount of the
distributions otherwise distributable on the subordinated certificates that
would, under certain circumstances, be distributable to senior certificate
holders may be limited to a specified amount. All or any portion of
distributions otherwise payable to holders of subordinated certificates may, in
certain circumstances, be deposited into one or more reserve accounts for the
benefit of the senior certificate holders. Since a greater risk of loss is
borne by the subordinated certificate holders, such certificates generally have
a higher stated yield than the senior certificates.

A series of certificates may consist of one or more classes as to which
distributions allocable to principal will be allocated. The method by which the
amount of principal to be distributed on the certificates on each distribution
date is calculated and the manner in which such amount could be allocated among
classes varies and could be effected pursuant to a fixed schedule in relation
to the occurrence of certain events or otherwise. Special distributions are
also possible if distributions are received with respect to the mortgage assets
such as is the case when underlying mortgage loans are prepaid.

A mortgage-related security that is senior to a subordinated residential
mortgage security will not bear a loss resulting from the occurrence of a
default on an underlying mortgage until all credit enhancements protecting such
senior holder is exhausted. For example, the senior holder will only suffer a
credit loss after all subordinated interests have been exhausted pursuant to
the terms of the subordinated residential mortgage security. The primary credit
risk of investing in subordinated residential mortgage securities is potential
losses resulting from defaults by the borrowers under the underlying mortgages.
The Fund would generally realize such a loss in connection with a subordinated
residential mortgage security only if the subsequent foreclosure sale of the
property securing a mortgage loan does not produce an amount at least equal to
the sum of the unpaid principal balance of the loan as of the date the borrower
went into default, the interest that was not paid

                                      24



during the foreclosure period and all foreclosure expenses.

The adviser or sub-adviser will seek to limit the risks presented by
subordinated residential mortgage securities by reviewing and analyzing the
characteristics of the mortgage loans that underlie the pool of mortgages
securing both the senior and subordinated residential mortgage securities. The
adviser or sub-adviser has developed a set of guidelines to assist in the
analysis of the mortgage loans underlying subordinated residential mortgage
securities. Each pool purchase is reviewed against the guidelines. The Fund
seeks opportunities to acquire subordinated residential mortgage securities
when, in the view of the adviser or sub-adviser, the potential for a higher
yield on such instruments outweighs any additional risk presented by the
instruments. The adviser will seek to increase yield to shareholders by taking
advantage of perceived inefficiencies in the market for subordinated
residential mortgage securities.

OTHER INVESTMENTS

Generally, derivatives can be characterized as financial instruments whose
performance is derived, at least in part, from the performance of an underlying
asset or assets. Types of derivatives include options, futures contracts,
options on futures and forward contracts. Derivative instruments may be used
for a variety of reasons including to enhance return, hedge certain market
risks, or to provide a substitute for purchasing or selling particular
securities. Derivatives may provide a cheaper, quicker or more specifically
focused way for the Fund to invest than "traditional" securities would.

Derivatives can be volatile and involve various types and degrees of risk
depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.

Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily payment system (i.e., margin requirements) operated by
the clearing agency in order to reduce overall credit risk. As a result, unless
the clearing agency defaults, there is relatively little counterparty credit
risk associated with derivatives purchased on an exchange. By contrast, no
clearing agency guarantees over-the-counter derivatives. Therefore, each party
to an over-the-counter derivative bears the risk that the counterparty will
default. Accordingly, the Fund will consider the creditworthiness of
counterparties to over-the-counter derivatives in the same manner as they would
review the credit quality of a security to be purchased by the Fund.
Over-the-counter derivatives are less liquid than exchange-traded derivatives
since the other party to the transaction may be the only investor with
sufficient understanding of the derivative to be interested in bidding for it.

The value of some derivative instruments in which the Fund invests may be
particularly sensitive to changes in prevailing interest rates and, like the
other investments of the Fund, the ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the adviser or
sub-adviser to forecast interest rates and other economic factors correctly. If
the adviser or sub-adviser incorrectly forecasts such factors and has taken
positions in derivative instruments contrary to prevailing market trends, the
Fund could be exposed to the risk of loss.

The Fund might not employ any of the strategies described below and no
assurance can be given that any strategy used will succeed. If the adviser or
sub-adviser incorrectly forecasts interest rates, market values or other
economic factors in utilizing a derivatives strategy for the Fund, the Fund
might have been in a better position if it had not entered into transaction at
all. Also, suitable derivative transactions may not be available in all
circumstances. The use of these strategies involves certain special risks
including a possible imperfect correlation, or even no correlation, between
price movements of derivative instruments and price movements of relates
investments. While some strategies involving derivative instruments can reduce
the risk of loss, they

                                      25



can also reduce the opportunity for gain or even result in losses by offsetting
favorable price movements in related investments or otherwise due to the
possible inability of the Fund to purchase or sell a portfolio security at a
time that otherwise would be favorable or the possible need to sell a portfolio
security at a disadvantageous time because the Fund is required to maintain
asset coverage or offsetting positions in connection with transactions in
derivative instruments and the possible inability of the Fund to close out or
to liquidate its derivatives positions. In addition, the Fund's use of such
instruments may cause the Fund to realize higher amounts of short-term capital
gains (generally taxed at ordinary income tax rates) than if it had not used
such instruments.

Financial Futures Contracts and Related Options

The Fund may enter into futures contracts or options thereon that are traded on
national futures exchanges and are standardized as to maturity date and
underlying financial instrument. The futures exchanges and trading in the
United States are regulated under the Commodity Exchange Act ("CEA") by the
Commodity Futures Trading Commission ("CFTC").

A futures contract provides for the future sale by one party and purchase by
another party of a specified amount of a financial instrument or a specific
stock market index for a specified price at a designated date, time, and place.
Brokerage fees are incurred when a futures contract is bought or sold and at
expiration and margin deposits must be maintained.

Although interest rate futures contracts typically require actual future
delivery of and payment for the underlying instruments, those contracts are
usually closed out before the delivery date. Stock index futures contracts do
not contemplate actual future delivery and will be settled in cash at
expiration or closed out prior to expiration. Closing out an open futures
contract sale or purchase is effected by entering into an offsetting futures
contract purchase or sale, respectively, for the same aggregate amount of the
identical type of underlying instrument and the same delivery date. However,
there can be no assurance that the Fund will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Fund is not able to enter into an offsetting transaction, it will
continue to be required to maintain the margin deposits on the contract.

The prices of futures contracts are volatile and are influenced by, among other
things, actual and anticipated changes in interest rates and equity prices
which in turn are affected by fiscal and monetary policies and national and
international political and economic events. Small price movements in futures
contracts may result in immediate and potentially unlimited loss or gain to the
Fund relative to the size of the margin commitment. A purchase or sale of a
futures contract may result in losses in excess of the amount initially
invested in the futures contract.

When using futures contracts as a hedging technique, at best, the correlation
between changes in prices of futures contracts and of the securities being
hedged can be only approximate. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative market demand for
futures and for securities including technical influences in futures trading;
and differences between the financial instruments being hedged and the
instruments underlying the standard futures contracts available for trading.
Even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or stock market or interest rate trends (as well as
expenses associated with creating the hedge). If the values of the assets being
hedged do not move in the same amount or direction as the underlying security
or index, the hedging strategy for the Fund might not be successful and the
Fund could sustain losses on its hedging transactions which would not be offset
by gains on its portfolio. It is also possible that there may be a negative
correlation between the security underlying a futures or option contract and
the portfolio securities being hedged which could result in losses both on the
hedging transaction and the portfolio securities. In such instances, the Fund's
overall return could be less than if the hedging transactions had not been
undertaken.

Investments in futures contracts on fixed-income securities involve the risk
that if the adviser's or sub-

                                      26



adviser's judgment concerning the general direction of interest rates is
incorrect, the Fund's overall performance may be poorer than if it had not
entered into any such contract. For example, if the Fund has been hedged
against the possibility of an increase in interest rates which would adversely
affect the price of bonds held in its portfolio and interest rates decrease
instead, the Fund will lose part or all of the benefit of the increased value
of its bonds which have been hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if the Fund has
insufficient cash it may have to sell bonds from its portfolio to meet daily
variation margin requirements, possibly at a time when it may be
disadvantageous to do so. Such sale of bonds may be, but will not necessarily
be, at increased prices which reflect the rising market.

Most U.S. futures exchanges limit the amount of fluctuation permitted in
interest rate futures contract prices during a single trading day and temporary
regulations limiting price fluctuations for stock index futures contracts are
also now in effect. The daily limit establishes the maximum amount that the
price of a futures contract may vary either up or down from the previous day's
settlement price at the end of a trading session. Once the daily limit has been
reached in a particular type of contract, no trades may be made on that day at
a price beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses because
the limit may prevent the liquidation of unfavorable positions. Futures
contract prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading thereby preventing prompt
liquidation of futures positions and subjecting some persons engaging in
futures transactions to substantial losses.

Sales of futures contracts which are intended to hedge against a change in the
value of securities held by the Fund may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such securities
upon disposition.

"Margin" is the amount of funds that must be deposited by the Fund with a
commodities broker in a custodian account in order to initiate futures trading
and to maintain open positions in the Fund's futures contracts. A margin
deposit is intended to assure the Fund's performance of the futures contract.
The margin required for a particular futures contract is set by the exchange on
which the contract is traded and may be significantly modified from time to
time by the exchange during the term of the contract.

If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy the
margin requirement, the broker will require an increase in the margin. However,
if the value of a position increases because of favorable price changes in the
futures contract so that the margin deposit exceeds the required margin, the
broker will promptly pay the excess to the Fund. These daily payments to and
from the Fund are called variation margin. At times of extreme price
volatility, intra-day variation margin payments may be required. In computing
daily NAV, the Fund will mark-to-market the current value of its open futures
contracts. The Fund expects to earn interest income on its initial margin
deposits.

When the Fund buys or sells a futures contract, unless it already owns an
offsetting position, it will designate cash and/or liquid securities having an
aggregate value at least equal to the full notional value of the futures
contract thereby insuring that the leveraging effect of such futures contract
is minimized in accordance with regulatory requirements.

The Fund can buy and write (sell) options on futures contracts.

Potential Lack of a Liquid Secondary Market. Prior to exercise or expiration, a
futures or option position may be terminated only by entering into a closing
purchase or sale transaction which requires a secondary market on the exchange
on which the position was originally established. While the Fund will establish
a futures or option position only if there appears to be a liquid secondary
market, there can be no assurance that such a market will exist for any
particular futures or option contract at any specific time. In such event, it
may not be possible to close out a position held by the Fund which could
require the Fund to purchase or sell the instrument underlying the position,
make or receive a cash settlement, or meet ongoing variation margin

                                      27



requirements. The inability to close out futures or option positions also could
have an adverse impact on the Fund's ability to effectively hedge its portfolio
or the relevant portion thereof.

The trading of futures and options contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of the brokerage firm or clearing house or
other disruptions of normal trading activity which could, at times, make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.

Forward Currency Contracts

The Fund may purchase and write puts and calls on foreign currencies that are
traded on a securities or commodities exchange or quoted by major recognized
dealers in such options for the purpose of protecting against declines in the
dollar value of foreign securities and against increases in the dollar cost of
foreign securities to be acquired. If a rise is anticipated in the dollar value
of a foreign currency in which securities to be acquired are denominated, the
increased cost of such securities may be partially offset by purchasing calls
or writing puts on that foreign currency. If a decline in the dollar value of a
foreign currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. In such circumstances, the Fund
collateralizes the position by designating cash and/or liquid securities in an
amount not less than the value of the underlying foreign currency in U.S.
dollars marked-to-market daily. In the event of rate fluctuations adverse to
the Fund's position, it would lose the premium it paid and transactions costs.
A call written on a foreign currency by the Fund is covered if the Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration specially designated) upon
conversion or exchange of other foreign currency held in its portfolio.

Foreign Futures Contracts and Foreign Options

Participation in foreign futures contracts and foreign options transactions
involves the execution and clearing of trades on, or subject to, the rules of a
foreign board of trade. Neither the CFTC, the National Futures Association
("NFA") nor any domestic exchange regulates activities of any foreign boards of
trade including the execution, delivery and clearing of transactions or has the
power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign laws. Generally, the foreign transaction will be governed by
applicable foreign law. This is true even if the exchange is formally linked to
a domestic market so that a position taken on the market may be liquidated by a
transaction on another market. Moreover, such laws or regulations will vary
depending on the foreign country in which the foreign futures contracts or
foreign options transaction occurs. Investors that trade foreign futures
contracts or foreign options contracts may not be afforded certain of the
protective measures provided by domestic exchanges including the right to use
reparations proceedings before the CFTC and arbitration proceedings provided by
the NFA. In particular, funds received from customers for foreign futures
contracts or foreign options transactions may not be provided the same
protections as funds received for transactions on a U.S. futures exchange. The
price of any foreign futures contracts or foreign options contract and
therefore, the potential profit and loss thereon, may be affected by any
variance in the foreign exchange rate between the time an order is placed and
the time it is liquidated, offset or exercised.

Additional Restrictions on the Use of Futures and Option Contracts. CFTC
regulations require that to prevent the Fund from being a commodity pool, the
Fund enters into all short futures for the purpose of hedging the value of
securities held and that all long futures positions either constitute bona fide
hedging transactions, as defined in such regulations, or have a total value not
in excess of an amount determined by reference to certain cash and securities
positions maintained, and accrued profits on such positions. As evidence of its
hedging intent, the Fund expects that at least 75% of futures contract
purchases will be completed meaning that upon the sale of these long contracts,
equivalent amounts of related securities will have been or are then being
purchased by the Fund in the cash market. With respect to futures contracts or
related options that are entered into for purposes that may be considered
speculative, the aggregate initial margin for futures contracts and

                                      28



premiums for options will not exceed 5% of the Fund's net assets after taking
into account realized profits and unrealized losses on such futures contracts.

Forward exchange contracts may be used to protect against uncertainty in the
level of future exchange rates. The use of forward exchange contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund owns
or intends to acquire but it does fix a rate of exchange in advance. In
addition, although forward exchange contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies increase.

The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the forward
contract is entered into and the date it is sold. Accordingly, it may be
necessary for the Fund to purchase additional foreign currency on the spot
(i.e., cash) market (and bear the expense of such purchase) if the market value
of the security is less than the amount of foreign currency the Fund is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult and the successful execution of a short-term
hedging strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately predicted causing the
Fund to sustain losses on these contracts and transactions costs.

At or before the maturity of a forward exchange contract requiring the Fund to
sell a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the
same currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting forward
contract under either circumstance to the extent the exchange rate(s) between
the currencies involved moved between the execution dates of the first contract
and the offsetting contract.

The cost of engaging in forward exchange contracts varies with factors such as
the currencies involved, the length of the contract period, and the market
conditions then prevailing. Because forward contracts are usually entered into
on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, the adviser or sub-adviser must
evaluate the credit and performance risk of each particular counterparty under
a forward contract.

Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert their holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund may convert foreign currency from time to time. Foreign
exchange dealers do not charge a fee for conversion but they do seek to realize
a profit based on the difference between the prices at which they buy and sell
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.

Foreign Currency Options

The Fund may buy or sell put and call options on foreign currencies either on
exchanges or in the over-the-counter market. A put and call option on a foreign
currency gives the purchaser of the option the right to purchase the currency
at the exercise price until the option expires. Currency options traded on U.S.
or other exchanges may be subject to position limits which may limit the
ability of the Fund to reduce foreign currency risk using such options.
Over-the-counter options differ from traded options in that they are two-party
contracts with price and other terms negotiated between buyer and seller, and
generally do not have as much

                                      29



market liquidity as exchange-traded options.

Swap Transactions

The interest rate swaps, currency swaps and other types of swap agreements
including swaps on securities and indices in which the Fund may invest are
described in the Prospectus. The Fund will enter into swap transactions with
appropriate counterparties pursuant to master netting agreements. A master
netting agreement provides that all swaps done between the Fund and that
counterparty under that master agreement shall be regarded as parts of an
integral agreement. If on any date amounts are payable in the same currency in
respect of one or more swap transactions, the net amount payable on that date
in that currency shall be paid. In addition, the master netting agreement may
provide that if one party defaults generally or on one swap, the counterparty
may terminate the swaps with that party. Under such agreements, if there is a
default resulting in a loss to one party, the measure of that party's damages
is calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then netted
and the result is the counterparty's gain or loss on termination. The
termination of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation."

Risks of Investing in Options. There are several risks associated with
transactions in options on securities and indices. Options may be more volatile
than the underlying instruments and therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than an investment
in the underlying instruments themselves. There are also significant
differences between the securities and options markets that could result in an
imperfect correlation between these markets causing a given transaction not to
achieve its objective. In addition, a liquid secondary market for particular
options may be absent for reasons which include the following: there may be
insufficient trading interest in certain options; restrictions may be imposed
by an exchange on opening transactions or closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of option of underlying securities; unusual or
unforeseen circumstances may interrupt normal operations on an exchange; the
facilities of an exchange or clearing corporation may not at all times be
adequate to handle current trading volume; or one or more exchanges could, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist, although outstanding options
that had been issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.

A decision as to whether, when and how to use options involves the exercise of
skill and judgment and even a well-conceived transaction may be unsuccessful to
some degree because of market behavior or unexpected events. The extent to
which the Fund may enter into options transactions may be limited by the Code
requirements for qualification of the Fund as a RIC. See "Dividends,
Distributions and Taxes."

In addition, foreign option exchanges do not afford to participants many of the
protections available in U.S. option exchanges. For example, there may be no
daily price fluctuation limits in such exchanges or markets and adverse market
movements could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than the amount of
the premium plus related transaction costs, this entire amount could be lost.
Moreover, the Fund as an option writer could lose amounts substantially in
excess of its initial investment due to the margin and collateral requirements
typically associated with such option writing. See "OTC Options."

Forward Foreign Currency Contracts

Forward contracts for foreign currency (forward exchange contracts) obligate
the seller to deliver and the purchaser to take a specific amount of a
specified foreign currency at a future date at a price set at the time of the
contract. These contracts are generally traded in the interbank market
conducted directly between currency

                                      30



traders and their customers. The Fund may enter into a forward exchange
contract in order to lock in the U.S. dollar price of a security denominated in
a foreign currency which it has purchased or sold but which has not yet settled
(a transaction hedge); or to lock in the value of an existing portfolio
security (a position hedge); or to protect against a possible loss resulting
from an adverse change in the relationship between the U.S. dollar and a
foreign currency. Forward exchange contracts include standardized foreign
currency futures contracts which are traded on exchanges and are subject to
procedures and regulations applicable to futures. The Fund may also enter into
a forward exchange contract to sell a foreign currency that differs from the
currency in which the underlying security is denominated. This is done in the
expectation that there is a greater correlation between the foreign currency of
the forward exchange contract and the foreign currency of the underlying
investment than between the U.S. dollar and the foreign currency of the
underlying investment. This technique is referred to as "cross hedging." The
success of cross hedging is dependent on many factors including the ability of
the adviser or sub-adviser to correctly identify and monitor the correlation
between foreign currencies and the U.S. dollar. To the extent that the
correlation is not identical, the Fund may experience losses or gains on both
the underlying security and the cross currency hedge.

Forward exchange contracts may be used to protect against uncertainty in the
level of future exchange rates. The use of forward exchange contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund owns
or intends to acquire but it does fix a rate of exchange in advance. In
addition, although forward exchange contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies increase.

The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the forward
contract is entered into and the date it is sold. Accordingly, it may be
necessary for the Fund to purchase additional foreign currency on the spot
(i.e., cash) market (and bear the expense of such purchase) if the market value
of the security is less than the amount of foreign currency the Fund is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult and the successful execution of a short-term
hedging strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately predicted causing the
Fund to sustain losses on these contracts and transactions costs.

At or before the maturity of a forward exchange contract requiring the Fund to
sell a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the
same currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting forward
contract under either circumstance to the extent the exchange rate(s) between
the currencies involved moved between the execution dates of the first contract
and the offsetting contract.

The cost of engaging in forward exchange contracts varies with factors such as
the currencies involved, the length of the contract period and the market
conditions then prevailing. Because forward contracts are usually entered into
on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, the adviser or sub-adviser must
evaluate the credit and performance risk of each particular counterparty under
a forward contract.

Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert their holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund may convert foreign currency from time to time. Foreign
exchange dealers do not charge a fee for conversion, but they do seek to
realize a profit based on

                                      31



the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.

Index-, Currency- and Equity-Linked Securities

Index-linked notes are debt securities of companies that call for interest
payments and/or payment at maturity in different terms than the typical note
where the borrower agrees to make fixed interest payments and to pay a fixed
sum at maturity. Principal and/or interest payments on an index-linked note
depend on the performance of one or more market indices such as the S&P 500(R)
Composite Stock Price ("S&P 500(R)") Index. At maturity, the principal amount
of an equity-linked debt security is exchanged for common stock of the issuer
or is payable in an amount based on the issuer's common stock price at the time
of maturity. Currency-linked debt securities are short-term or
intermediate-term instruments having a value at maturity and/or an interest
rate determined by reference to one or more foreign currencies. Payment of
principal or periodic interest may be calculated as a multiple of the movement
of one currency against another currency or against an index.

Index- and currency-linked securities are derivative instruments that may
entail substantial risks. Such instruments may be subject to significant price
volatility. The company issuing the instrument may fail to pay the amount due
on maturity. The underlying investment or security may not perform as expected
by the adviser or sub-adviser. Markets, underlying securities and indexes may
move in a direction that was not anticipated by the adviser or sub-adviser.
Performance of the derivatives may be influenced by interest rate and other
market changes in the United States and abroad. Certain derivative instruments
may be illiquid.

Options on Futures

A futures option gives the purchaser the right but not the obligation, in
return for the premium paid, to assume a long position (in the case of a call)
or short position (in the case of a put) in a futures contract at a specified
exercise price prior to the expiration of the option. Upon exercise of a call
option, the purchaser acquires a long position in the futures contract and the
writer of the option is assigned the opposite short position. In the case of a
put option, the converse is true. A futures option may be closed out (before
exercise or expiration) by an offsetting purchase or sale of a futures option
by the Fund.

Over-the-Counter Options

The staff of the SEC has taken the position that purchased over-the-counter
options ("OTC Options") and the assets used as cover for written OTC Options
are illiquid securities. In connection with these special arrangements, the
Fund intends to establish standards for the creditworthiness of the dealers
with which it may enter into OTC Option contracts and those standards, as
modified from time to time, will be implemented and monitored by the adviser.
Under these special arrangements, the Fund will enter into contracts with
dealers that provide that the Fund has the absolute right to repurchase an
option it writes at any time at a repurchase price which represents the fair
market value, as determined in good faith through negotiation between the
parties, but that in no event will exceed a price determined pursuant to a
formula contained in the contract. Although the specific details of the formula
may vary between contracts with different dealers, the formula will generally
be based on a multiple of the premium received by the Fund for writing the
option plus the amount, if any, by which the option is in-the-money. The
formula will also include a factor to account for the difference between the
price of the security and the strike price of the option if the option is
written out-of-the-money. Strike price refers to the price at which an option
will be exercised. Cover assets refers to the amount of cash or liquid assets
that must be segregated to collateralize the value of the futures contracts
written by the Fund. Under such circumstances, the Fund will treat as illiquid
that amount of the cover assets equal to the amount by which the formula price
for the repurchase of the option is greater than the amount by which the market
value of the security subject to the option exceeds the exercise price of the
option (the amount by which the option is in-the-money). Although each
agreement will provide that the Fund's repurchase price shall be determined in
good faith (and that it shall not exceed the maximum determined

                                      32



pursuant to the formula), the formula price will not necessarily reflect the
market value of the option written. Therefore, the Fund might pay more to
repurchase the OTC Option contract than the Fund would pay to close out a
similar exchange traded option.

Put and Call Options

A call option gives the holder (buyer) the right to buy and to obligate the
writer (seller) to sell a security or financial instrument at a stated price
(strike price) at any time until a designated future date when the option
expires (expiration date). A put option gives the holder the right to sell and
to obligate the writer to purchase a security or financial instrument at a
stated price at any time until the expiration date. The Fund may write or
purchase put or call options listed on national securities exchanges in
standard contracts or may write or purchase put or call options with or
directly from investment dealers meeting the creditworthiness criteria of the
adviser or sub-adviser.

The Fund will not write call options on when-issued securities. The Fund
purchases call options primarily as a temporary substitute for taking positions
in certain securities or in the securities that comprise a relevant index. The
Fund may also purchase call options on an index to protect against increases in
the price of securities underlying that index that the Fund intends to purchase
pending its ability to invest in such securities in an orderly manner.

So long as the obligation of the writer of a call option continues, the writer
may be assigned an exercise notice by the broker-dealer through which such
option was settled, requiring the writer to deliver the underlying security
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, by the exercise of the call option, or by
entering into an offsetting transaction.

When writing a call option, in return for the premium, the writer gives up the
opportunity to profit from the price increase in the underlying security above
the exercise price but conversely, retains the risk of loss should the price of
the security decline. If a call option expires unexercised, the writer will
realize a gain in the amount of the premium. However, such gain may be offset
by a decline in the market value of the underlying security during the option
period. If the call option is exercised, the writer would realize a gain or
loss from the transaction depending on what it received from the call and what
it paid for the underlying security.

An option on an index (or a particular security) is a contract that gives the
purchaser of the option, in return for the premium paid, the right to receive
from the writer of the option cash equal to the difference between the closing
price of the index (or security) and the exercise price of the option,
expressed in dollars, times a specified multiple (the multiplier).

The Fund may write calls on and futures contracts provided that it enters into
an appropriate offsetting position or that it designates liquid assets in an
amount sufficient to cover the underlying obligation in accordance with
regulatory requirements. The risk involved in writing call options on futures
contracts or market indices is that the Fund would not benefit from any
increase in value above the exercise price. Usually, this risk can be
eliminated by entering into an offsetting transaction. However, the cost to do
an offsetting transaction and terminate the Fund's obligation might be more or
less than the premium received when it originally wrote the option. Further,
the Fund might occasionally not be able to close the option because of
insufficient activity in the options market.

In the case of a put option, as long as the obligation of the put writer
continues, it may be assigned an exercise notice by the broker-dealer through
which such option was sold, requiring the writer to take delivery of the
underlying security against payment of the exercise price. A writer has no
control over when it may be required to purchase the underlying security since
it may be assigned an exercise notice at any time prior to the expiration date.
This obligation terminates earlier if the writer effects a closing purchase
transaction by purchasing a put of the same series as that previously sold.


                                      33



If a put option is sold by the Fund, the Fund will designate liquid securities
with a value equal to the exercise price or else will hold an offsetting
position in accordance with regulatory requirements. In writing puts, there is
the risk that a writer may be required to buy the underlying security at a
disadvantageous price. The premium the writer receives from writing a put
option represents a profit as long as the price of the underlying instrument
remains above the exercise price. However, if the put is exercised the writer
is obligated during the option period to buy the underlying instrument from the
buyer of the put at the exercise price even though the value of the investment
may have fallen below the exercise price. If the put lapses unexercised the
writer realizes a gain in the amount of the premium. If the put is exercised
the writer may incur a loss equal to the difference between the exercise price
and the current market value of the underlying instrument.

The purchase of put options may be used to protect the Fund's holdings in an
underlying security against a substantial decline in market value. Such
protection is, of course, only provided during the life of the put option when
the Fund, as the holder of the put option, is able to sell the underlying
security at the put exercise price regardless of any decline in the underlying
security's market price. By using put options in this manner, the Fund will
reduce any profit it might otherwise have realized in its underlying security
by the premium paid for the put option and by transaction costs. The purchase
of put options may also be used by the Fund when it does not hold the
underlying security.

The premium received from writing a call or put option, or paid for purchasing
a call or put option will reflect, among other things, the current market price
of the underlying security, the relationship of the exercise price to such
market price, the historical price volatility of the underlying security, the
length of the option period, and the general interest rate environment. The
premium received by the Fund for writing call options will be recorded as a
liability in the statement of assets and liabilities of the Fund. This
liability will be adjusted daily to the option's current market value. The
liability will be extinguished upon expiration of the option, by the exercise
of the option, or by entering into an offsetting transaction. Similarly, the
premium paid by the Fund when purchasing a put option will be recorded as an
asset in the statement of assets and liabilities of the Fund. This asset will
be adjusted daily to the option's current market value. The asset will be
extinguished upon expiration of the option, by selling an identical option in a
closing transaction, or by exercising the option.

Closing transactions will be effected in order to realize a profit on an
outstanding call or put option, to prevent an underlying security from being
called or put, or to permit the exchange or tender of the underlying security.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option, or purchase another put option, on the underlying security
with either a different exercise price or expiration date or both. If the Fund
desires to sell a particular security from its portfolio on which it has
written a call option, or purchased a put option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security.
There is, of course, no assurance that the Fund will be able to effect a
closing transaction at a favorable price. If the Fund cannot enter into such a
transaction, it may be required to hold a security that it might otherwise have
sold, in which case it would continue to be at market risk on the security. The
Fund will pay brokerage commissions in connection with the sale or purchase of
options to close out previously established option positions. These brokerage
commissions are normally higher as a percentage of underlying asset values than
those applicable to purchases and sales of portfolio securities.

Stock Index Options

Stock index options include put and call options with respect to the S&P 500(R)
Index and other stock indices. These may be purchased as a hedge against
changes in the values of portfolio securities or securities which it intends to
purchase or sell or to reduce risks inherent in the ongoing management of the
Fund.

The distinctive characteristics of options on stock indices create certain
risks not found in stock options generally. Because the value of an index
option depends upon movements in the level of the index rather than the price
of a particular stock, whether the Fund will realize a gain or loss on the
purchase or sale of an option on an index depends upon movements in the level
of stock prices in the stock market generally rather than movements in the
price of a particular stock. Accordingly, successful use by the Fund of options
on a stock

                                      34



index depends on the adviser's or sub-adviser's ability to predict correctly
movements in the direction of the stock market generally. This requires
different skills and techniques than predicting changes in the price of
individual stocks.

Index prices may be distorted if circumstances disrupt trading of certain
stocks included in the index such as if trading were halted in a substantial
number of stocks included in the index. If this happens, the Fund could be
unable to close out options which it had purchased and if restrictions on
exercise were imposed, the Fund might be unable to exercise an option it holds
which could result in substantial losses to the Fund. The Fund purchase put or
call options only with respect to an index which the adviser or sub-adviser
believes includes a sufficient number of stocks to minimize the likelihood of a
trading halt in the index.

Straddles

A Straddle, which may be used for hedging purposes, is a combination of put and
call options on the same underlying security used for hedging purposes to
adjust the risk and return characteristics of the Fund's overall position. A
possible combined position would involve writing a covered call option at one
strike price and buying a call option at a lower price in order to reduce the
risk of the written covered call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.

Warrants

A warrant gives the holder a right to purchase at any time during a specified
period a predetermined number of shares of common stock at a fixed price.
Unlike convertible debt securities or preferred stock, warrants do not pay a
fixed dividend. Investments in warrants involve certain risks including the
possible lack of a liquid market for resale of the warrants, potential price
fluctuations as a result of speculation or other factors, and failure of the
price of the underlying security to reach or have reasonable prospects of
reaching a level at which the warrant can be prudently exercised (in which
event the warrant may expire without being exercised, resulting in a loss of
the Fund's entire investment therein).

Other Investment Companies

An investment company is a company engaged in the business of pooling
investors' money and trading in securities for them. Examples include
face-amount certificate companies, unit investment trusts and management
companies. When the Fund invests in other investment companies, shareholders of
the Fund bear their proportionate share of the underlying investment companies'
fees and expenses.

Exchange-Traded Funds ("ETFs") are investment companies whose goal it is to
track or replicate a desired index such as a sector, market or global segment.
ETFs are traded on exchanges similar to a publicly traded company. Similarly,
the risks and costs are similar to that of a publicly traded company. The goal
of an ETF is to correspond generally to the price and yield performance before
fees and expenses of its underlying index. The risk of not correlating to the
index is an additional risk to the investors of ETFs. Because ETFs trade on an
exchange, they may not trade at NAV. Sometimes, the prices of ETFs may vary
significantly from the NAVs of the ETF's underlying securities. Additionally,
if the Fund elects to redeem its ETF shares rather than selling them on the
secondary market, the Fund may receive the underlying securities which it must
then sell in order to obtain cash. Additionally, when the Fund invests in ETFs,
shareholders of the Fund bear their proportionate share of the underlying ETF's
fees and expenses.

Holding Company Depositary Receipts ("HOLDRs") are trust-issued receipts that
represent the Fund's beneficial ownership of a specific group of stocks. HOLDRs
involve risks similar to the risks of investing in common stock. For example,
the Fund's investments will decline in value if the underlying stocks decline
in value. Because HOLDRs are not subject to concentration limits, the relative
weight of an individual stock may increase substantially causing the HOLDRs to
be less diverse and creating more risk.


                                      35



Private Funds

U.S. or foreign private limited partnerships or other investment funds, which
are referred to as Private Funds. Investments in Private Funds may be highly
speculative and volatile. Because Private Funds generally are investment
companies for purposes of the 1940 Act, or would be but for the exemptions
provided in sections 3(c)(1) or 3(c)(7) of the 1940 Act, the Fund's ability to
invest in them will be limited. In addition, Fund shareholders will remain
subject to the Fund's expenses while also bearing their pro rata share of the
operating expenses of the Private Funds. The ability of the Fund to dispose of
interests in Private Funds is very limited and involves risks including loss of
the Fund's entire investment in the Private Fund.

Private Funds include a variety of pooled investments. Generally, these pooled
investments are structured as a trust, a special purpose vehicle, and are
exempted from registration under the 1940 Act. As an investor, the Fund owns a
proportionate share of the trust. Typically, the trust does not employ a
professional investment manager. Instead, the pooled investment tracks some
index by investing in the issuers or securities that comprise the index. The
Fund receives a stream of cash flows in the form of interest payments from the
underlying assets or the proceeds from the sale of the underlying assets in the
event those underlying assets are sold. However, some pooled investments may
not dispose of the underlying securities regardless of the adverse events
affecting the issuers depending on the investment strategy utilized. In this
type of strategy, the pooled investment continues to hold the underlying
securities as long as the issuers or securities remain members of the tracked
index.

The pooled investments allow the Fund to synchronize the receipt of interest
and principal payments and also diversify some of the risks involved with
investing in fixed-income securities. Because the trust holds securities of
many issuers, the default of a few issuers would not impact the Fund
significantly. However, the Fund bears any expenses incurred by the trust. In
addition, the Fund assumes the liquidity risks generally associated the
privately offered pooled investments.

Pooled investments that are structured as a trust contain many similarities to
Private Funds that are structured as limited partnerships. The primary
difference between the trust and the limited partnership structure is the
redemption of the ownership interests. Typically, the ownership interests in a
typical Private Fund are redeemable only by the general partners and thus, are
restricted from transferring from one party to another. Conversely, the
ownership interests in the trust are generally not redeemable by the trust
except under certain circumstances and are transferable among the general
public for publicly offered securities and "qualified purchasers" or "qualified
institutional buyers" for privately offered securities.

The Fund cannot assure that it can achieve better results by investing in a
pooled investment versus investing directly in the individual underlying assets.

Private Funds also include investments in certain structured securities.
Structured securities include notes, bonds or debentures that provide for the
payment of principal of, and/or interest in, amounts determined by reference to
changes in the value of specific currencies, interest rates, commodities,
indices or other financial indicators (the "Reference") or the relative change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or decreased depending upon
changes in the applicable Reference. The terms of structured securities may
provide that under certain circumstances no principal is due at maturity and
therefore may result in the loss of the Fund's investment. Structured
securities may be positively or negatively indexed so that appreciation of the
Reference may produce an increase or decrease in the interest rate or value of
the security at maturity. In addition, the change in interest rate or the value
of the security at maturity may be a multiple of the change in the value of the
Reference. Consequently, leveraged structured securities entail a greater
degree of market risk than other types of debt obligations. Structured
securities may also be more volatile, less liquid, and more difficult to
accurately price than less complex fixed-income investments.


                                      36



Real Estate Securities

Investments in real estate securities include interests in real estate
investment trusts ("REITs"), real estate development, real estate operating
companies, ("REOCs") and companies engaged in other real estate related
businesses. REITs are trusts that sell securities to investors and use the
proceeds to invest in real estate or interests in real estate. A REIT may focus
on a particular project such as apartment complexes or geographic region such
as the northeastern United States or both. A REOC is a company that derives at
least 50% of its gross revenues or net profits from either: (1) the ownership,
development, construction, financing, management or sale of commercial,
industrial or residential real estate; or (2) products or services related to
the real estate industry, such as building supplies or mortgage servicing.

Risks of real estate securities include those risks that are more closely
associated with investing in real estate directly than with investing in the
stock market generally. Those risks include: periodic declines in the value of
real estate generally or in the rents and other income generated by real
estate; periodic over-building which creates gluts in the market as well as
changes in laws (such as zoning laws) that impair the property rights of real
estate owners; and adverse developments in the real estate industry.

Restricted and Illiquid Securities

The Fund may invest in a restricted security or an illiquid security if the
adviser or sub-adviser believes that it presents an attractive opportunity.
Generally, a security is considered illiquid if it cannot be disposed of within
seven days. Its illiquidity might prevent the sale of such a security at a time
when the adviser or sub-adviser might wish to sell and these securities could
have the effect of decreasing the overall level of the Fund's liquidity.
Further, the lack of an established secondary market may make it more difficult
to value illiquid securities requiring the Fund to rely on judgments that may
be somewhat subjective in determining value which could vary from the amount
that the Fund could realize upon disposition.

Because of the nature of these securities, a considerable period of time may
elapse between the Fund's decision to dispose of these securities and the time
when the Fund is able to dispose of them, during which time the value of the
securities could decline. The expenses of registering restricted securities
(excluding securities that may be resold by pursuant to Rule 144A under the
1933 Act) may be negotiated at the time such securities are purchased by the
Fund. When registration is required before the securities may be resold, a
considerable period may elapse between the decision to sell the securities and
the time when the Fund would be permitted to sell them. Thus, the Fund may not
be able to obtain as favorable a price as that prevailing at the time of the
decision to sell. The Fund may also acquire securities through private
placements. Such securities may have contractual restrictions on their resale
which might prevent their resale by the Fund at a time when such resale would
be desirable. Securities that are not readily marketable will be valued by the
Fund in good faith pursuant to procedures adopted by the Company's Board.

Restricted securities, including private placements, are subject to legal or
contractual restrictions on resale. They can be eligible for purchase without
SEC registration by certain institutional investors known as qualified
institutional buyers and under the Fund's procedures, restricted securities
could be treated as liquid. However, some restricted securities may be illiquid
and restricted securities that are treated as liquid could be less liquid than
registered securities traded on established secondary markets.

To Be Announced Sale Commitments

The Fund may enter into To Be Announced ("TBA") sale commitments wherein the
unit price and the estimated principal amount are established upon entering
into the contract with the actual principal amount being within a specified
range of the estimate. The Fund will enter into TBA sale commitments to hedge
its portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time a TBA sale
commitment is outstanding, the Fund will maintain, in a segregated account,
cash or marketable

                                      37



securities in an amount sufficient to meet the purchase price. Unsettled TBA
sale commitments are valued at current market value of the underlying
securities. If the TBA sale commitment is closed through the acquisition of an
offsetting purchase commitment, the Fund realizes a gain or loss on the
commitment without regard to any unrealized gain or loss on the underlying
security. If the Fund delivers securities under the commitment, the Fund
realizes a gain or loss from the sale of the securities based upon the unit
price established at the date the commitment was entered into.

Foreign Currency Options

The Fund may purchase and write puts and calls on foreign currencies that are
traded on a securities or commodities exchange or quoted by major recognized
dealers in such options for the purpose of protecting against declines in the
dollar value of foreign securities and against increases in the dollar cost of
foreign securities to be acquired. If a rise is anticipated in the dollar value
of a foreign currency in which securities to be acquired are denominated, the
increased cost of such securities may be partially offset by purchasing calls
or writing puts on that foreign currency. If a decline in the dollar value of a
foreign currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. In such circumstances, the Fund
collateralizes the position by designating cash and/or liquid securities in an
amount not less than the value of the underlying foreign currency in U.S.
dollars marked-to-market daily. In the event of rate fluctuations adverse to
the Fund's position it would lose the premium it paid and transactions costs. A
call written on a foreign currency by the Fund is covered if the Fund owns the
underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration specially designated) upon
conversion or exchange of other foreign currency held in its portfolio.

INVESTMENT TECHNIQUES

Borrowing

The Fund may borrow from banks. If the Fund borrows money, its share price may
be subject to greater fluctuation until the borrowing is paid off. If the Fund
makes additional investments while borrowings are outstanding, this may be
considered a form of leverage. Under the 1940 Act, the Fund is required to
maintain continuous asset coverage of 300% with respect to such borrowings and
to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% due to market fluctuations or
otherwise even if such liquidations of the Fund's holdings may be
disadvantageous from an investment standpoint.

Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities or the Fund's NAV and money
borrowed will be subject to interest and other costs (which may include
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the income received from the securities purchased with
borrowed funds.

Lending of Fund Securities

In order to generate additional income, the Fund may lend portfolio securities
to broker-dealers, major banks, or other recognized domestic institutional
borrowers of securities provided that the value of the loaned securities does
not exceed 33 1/3% of the Fund's total assets. No lending may be made with any
companies affiliated with the adviser. These loans earn income for the Fund and
are collateralized by cash, securities or letters of credit. The Fund might
experience a loss if the financial institution defaults on the loan. The Fund
seek to mitigate this risk through contracted indemnification upon default.

The borrower at all times during the loan must maintain with the Fund cash or
cash equivalent collateral or provide to the Fund an irrevocable letter of
credit equal in value to at least 100% of the value of the securities loaned.
During the time portfolio securities are on loan, the borrower pays the Fund
any interest paid on such

                                      38



securities and the Fund may invest the cash collateral and earn additional
income, or it may receive an agreed-upon amount of interest income from the
borrower who has delivered equivalent collateral or a letter of credit. Loans
are subject to termination at the option of the Fund or the borrower at any
time. The Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the income earned on
the cash to the borrower or placing broker. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower fail financially. There is the risk that when lending
portfolio securities, the securities may not be available to the Fund on a
timely basis and the Fund may therefore lose the opportunity to sell the
securities at a desirable price. Engaging in securities lending could have a
leveraging effect which may intensify the market risk, credit risk and other
risks associated with investments in the Fund. When the Fund lends its
securities, it is responsible for investing the cash collateral it receives
from the borrower of the securities. The Fund could incur losses in connection
with the investment of such cash collateral.

Repurchase Agreements

Repurchase agreements may be considered to be loans by the Fund for purposes of
the 1940 Act. Each repurchase agreement must be collateraltized fully, in
accordance with the provisions of Rule 5b-3 under the 1940 Act, at all times.
Pursuant to such repurchase agreements, the Fund acquires securities from
financial institutions such as brokers, dealers and banks subject to the
seller's agreement to repurchase and the Fund's agreement to resell such
securities at a mutually agreed upon date and price. The term of such an
agreement is generally quite short, possibly overnight or for a few days
although it may extend over a number of months (up to one year) from the date
of delivery. The repurchase price generally equals the price paid by the Fund
plus interest negotiated on the basis of current short-term rates (which may be
more or less than the rate on the underlying portfolio security). The
securities underlying a repurchase agreement will be marked-to-market every
business day so that the value of the collateral is at least equal to the value
of the loan, including the accrued interest thereon, and the adviser or
sub-adviser will monitor the value of the collateral. Securities subject to
repurchase agreements will be held by the custodian or in the Federal
Reserve/Treasury Book-Entry System or an equivalent foreign system. If the
seller defaults on its repurchase obligation, the Fund holding the repurchase
agreement will suffer a loss to the extent that the proceeds from a sale of the
underlying securities is less than the repurchase price under the agreement.
Bankruptcy or insolvency of such a defaulting seller may cause the Fund's
rights with respect to such securities to be delayed or limited. Repurchase
agreements maturing in more than seven days will not exceed 10% of the total
assets of the Fund.

Reverse Repurchase Agreements and Dollar Roll Transactions

Reverse repurchase agreement transactions involve the sale of U.S. government
securities held by the Fund with an agreement that the Fund will repurchase
such securities at an agreed upon price and date. The Fund will employ reverse
repurchase agreements when necessary to meet unanticipated net redemptions so
as to avoid liquidating other portfolio investments during unfavorable market
conditions. At the time it enters into a reverse repurchase agreement, the Fund
will place in a segregated custodial account cash and/or liquid assets having a
dollar value equal to the repurchase price. Reverse repurchase agreements are
considered to be borrowings under the 1940 Act. Reverse repurchase agreements,
together with other permitted borrowings, may constitute up to 33 1/3% of the
Fund's total assets. Under the 1940 Act, the Fund is required to maintain
continuous asset coverage of 300% with respect to borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if
it should decline to less than 300% due to market fluctuations or otherwise
even if such liquidations of the Fund's holdings may be disadvantageous from an
investment standpoint. Leveraging by means of borrowing may exaggerate the
effect of any increase or decrease in the value of portfolio securities or the
Fund's NAV and money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income received from the
securities purchased with borrowed funds.

In order to enhance portfolio returns and manage prepayment risks, the Fund may
engage in dollar roll transactions. In a dollar roll transaction, the Fund
sells a mortgage security held in the portfolio to a financial

                                      39



institutional such as a bank or broker-dealer and simultaneously agrees to
repurchase a substantially similar security (same type, coupon and maturity)
from the institution at a later date at an agreed upon price. The mortgage
securities that are repurchased will bear the same interest rate as those sold
but generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities sold. Proceeds of the sale will be invested in
short-term instruments and the income from these investments, together with any
additional fee income received on the sale, could generate income for the Fund
exceeding the yield on the sold security. When the Fund enters into a dollar
roll transaction, cash and/or liquid assets of the Fund, in a dollar amount
sufficient to make payment for the obligations to be repurchased, are
segregated with its custodian at the trade date. These securities are
marked-to-market daily and are maintained until the transaction is settled.

Whether a reverse repurchase agreement or dollar-roll transaction produces a
gain for the Fund depends upon the costs of the agreements (e.g., a function of
the difference between the amount received upon the sale of its securities and
the amount to be spent upon the purchase of the same or substantially the same
security) and the income and gains of the securities purchased with the
proceeds received from the sale of the mortgage security. If the income and
gains on the securities purchased with the proceeds of the agreements exceed
the costs of the agreements then the Fund's NAV will increase faster than
otherwise would be the case. Conversely, if the income and gains on such
securities purchased fail to exceed the costs of the structure, the Fund's NAV
will decline faster than otherwise would be the case. Reverse repurchase
agreements and dollar roll transactions, as leveraging techniques, may increase
the Fund's yield in the manner described above. However, such transactions also
increase the Fund's risk to capital and may result in a shareholder's loss of
principal.

Securities, Interest Rate and Currency Swaps

Interest rate swaps, currency swaps and other types of swap agreements
including swaps on securities and indices in which the Fund may invest are
described in the Prospectus. The Fund will enter into swap transactions with
appropriate counterparties pursuant to master netting agreements. A master
netting agreement provides that all swaps done between the Fund and that
counterparty under that master agreement shall be regarded as parts of an
integral agreement. If on any date amounts are payable in the same currency in
respect of one or more swap transactions, the net amount payable on that date
in that currency shall be paid. In addition, the master netting agreement may
provide that if one party defaults generally or on one swap, the counterparty
may terminate the swaps with that party. Under such agreements, if there is a
default resulting in a loss to one party, the measure of that party's damages
is calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the marked-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then netted
and the result is the counterparty's gain or loss on termination. The
termination of all swaps and the netting of gains and losses on termination is
generally referred to as aggregation.

Short Sales

The Fund may make short sales of securities it already owns or has the right to
acquire at no added cost through conversion or exchange of other securities it
owns (referred to as short sales "against the box"). In a short sale that is
not against the box, the Fund sells a security which it does not own in
anticipation of a decline in the market value of the security. To complete the
sale, the Fund must borrow the security (generally from the broker through
which the short sale is made) in order to make delivery to the buyer. The Fund
must replace the security borrowed by purchasing it at the market price at the
time of replacement. The Fund is said to have a short position in the
securities sold until it delivers them to the broker. The period during which
the Fund has a short position can range from one day to more than a year. Until
the Fund replaces the security, the proceeds of the short sale are retained by
the broker and the Fund must pay to the broker a negotiated portion of any
dividends or interest which accrues during the period of the loan. To meet
current margin requirements, the Fund must deposit with the broker additional
cash or securities so that it maintains with the broker a total deposit equal
to 150% of the current market value of the securities sold short (100% of the
current market

                                      40



value if a security is held in the account that is convertible or exchangeable
into the security sold short within ninety (90) days without restriction other
than the payment of money).

Short sales by the Fund that are not made against the box create opportunities
to increase the Fund's return but, at the same time, involve specific risk
considerations and may be considered a speculative technique. Since the Fund,
in effect, profits from a decline in the price of the securities sold short
without the need to invest the full purchase price of the securities on the
date of the short sale, the Fund's NAV per share tends to increase more when
the securities it has sold short decrease in value and to decrease more when
the securities it has sold short increase in value than would otherwise be the
case if it had not engaged in such short sales. The amount of any gain will be
decreased and the amount of any loss increased by the amount of any premium,
dividends or interest the Fund may be required to pay in connection with the
short sale. Short sales theoretically involve unlimited loss potential as the
market price of securities sold short may continually increase, although the
Fund may mitigate such losses by replacing the securities sold short before the
market price has increased significantly. Under adverse market conditions the
Fund might have difficulty purchasing securities to meet its short sale
delivery obligations and might have to sell portfolio securities to raise the
capital necessary to meet its short sale obligations at a time when fundamental
investment considerations would not favor such sales.

If the Fund makes a short sale against the box, the Fund would not immediately
deliver the securities sold and would not receive the proceeds from the sale.
The seller is said to have a short position in the securities sold until it
delivers the securities sold at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, the Fund will
deposit in escrow in a separate account with the custodian an equal amount of
the securities sold short or securities convertible into or exchangeable for
such securities. The Fund can close out its short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund might want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.

The Fund's decision to make a short sale against the box may be a technique to
hedge against market risks when the adviser or sub-adviser believes that the
price of a security may decline causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for such
security. In such case, any future losses in the Fund's long position would be
reduced by a gain in the short position. The extent to which such gains or
losses in the long position are reduced will depend upon the amount of
securities sold short relative to the amount of the securities the Fund owns,
either directly or indirectly and, in the case where the Fund owns convertible
securities, changes in the investment values or conversion premiums of such
securities.

In the view of the SEC, a short sale involves the creation of a "senior
security" as such term is defined in the 1940 Act unless the sale is against
the box and the securities sold short are placed in a segregated account (not
with the broker) or unless the Fund's obligation to deliver the securities sold
short is "covered" by placing in a segregated account (not with the broker)
cash, U.S. government securities or other liquid debt or equity securities in
an amount equal to the difference between the market value of the securities
sold short at the time of the short sale and any such collateral required to be
deposited with a broker in connection with the sale (not including the proceeds
from the short sale) which difference is adjusted daily for changes in the
value of the securities sold short. The total value of the cash, U.S.
government securities or other liquid debt or equity securities deposited with
the broker and otherwise segregated may not at any time be less than the market
value of the securities sold short at the time of the short sale. The Fund will
comply with these requirements. In addition, as a matter of policy, the Fund's
Board has determined that the Fund will not make short sales of securities or
maintain a short position if to do so could create liabilities or require
collateral deposits and segregation of assets aggregating more than 25% of the
Fund's total assets taken at market value.

The extent to which the Fund may enter into short sales transactions may be
limited by the Code requirements for qualification of the Fund as a RIC. See
"Dividends, Distributions and Taxes."


                                      41



Temporary Defensive Positions

The Fund may invest in short-term, high-quality debt instruments and in U.S.
government securities for the following purposes: (i) to meet anticipated
day-to-day operating expenses; (ii) to invest cash flow pending the adviser's
or the sub-adviser's determination to do so within the investment guidelines
and policies of the Fund; (iii) to permit the Fund to meet redemption requests;
and (iv) to take a temporary defensive position.

Although it is expected that the Fund will normally be invested consistent with
its investment objectives and policies, the short-term instruments in which the
Fund may invest for temporary defensive purposes include: (i) short-term
obligations of the U.S. government and its agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities;
(iii) commercial paper including master notes; (iv) bank obligations including
certificates of deposit, time deposits and bankers' acceptances; and
(v) repurchase agreements. The Fund will invest in short-term instruments that
do not have a maturity of greater than one year.

When-Issued Securities and Delayed-Delivery Transactions

In order to secure prices or yields deemed advantageous at the time the Fund
may purchase or sell securities on a when-issued or a delayed-delivery basis
generally 15 to 45 days after the commitment is made. The Fund may also enter
into forward commitments. The Fund will enter into a when-issued transaction
for the purpose of acquiring portfolio securities and not for the purpose of
leverage. In such transactions, delivery of the securities occurs beyond the
normal settlement periods but no payment or delivery is made by, and no
interest accrues to, the Fund prior to the actual delivery or payment by the
other party to the transaction. Due to fluctuations in the value of securities
purchased on a when-issued or a delayed-delivery basis, the yields obtained on
such securities may be higher or lower than the yields available in the market
on the dates when the investments are actually delivered to the buyers.
Similarly, the sale of securities for delayed-delivery can involve the risk
that the prices available in the market when delivery is made may actually be
higher than those obtained in the transaction itself. The Fund will establish a
segregated account with the custodian consisting of cash and/or liquid assets
in an amount equal to the amount of its when-issued and delayed-delivery
commitments which will be marked-to-market daily. The Fund will only make
commitments to purchase such securities with the intention of actually
acquiring the securities but the Fund may sell these securities before the
settlement date if deemed an advisable investment strategy. In these cases, the
Fund may realize a capital gain or loss. When the Fund engages in when-issued,
forward commitment, and delayed delivery transactions, it relies on the other
party to consummate the trade. Failure to do so may result in the Fund's
incurring a loss or missing an opportunity to obtain a price credited to be
advantageous.

When the time comes to pay for the securities acquired on a delayed delivery
basis, the Fund will meet its obligations from the available cash flow, sale of
the securities held in the segregated account, sale of other securities or,
although it would not normally expect to do so, from sale of the when-issued
securities themselves (which may have a market value greater or less than the
Fund's payment obligation). Depending on market conditions, the Fund could
experience fluctuations in share price as a result of delayed-delivery or
when-issued purchases.

FUNDAMENTAL INVESTMENT RESTRICTIONS AND POLICIES

All percentage limitations set forth below apply immediately after a purchase
or initial investment and any subsequent change in any applicable percentage
resulting from market fluctuations will not require elimination of any security
from the relevant portfolio.

The investment objective of the Fund is not fundamental and may be changed
without a shareholder vote. The Fund has adopted the following investment
restrictions as fundamental policies which means they cannot be changed without
approval of the holders of a "majority" of the Fund's outstanding voting
securities as that term is defined in the 1940 Act. The term "majority" is
defined in the 1940 Act as the lesser of: (1) 67% or

                                      42



more of the Fund's voting securities present at a meeting of shareholders at
which the holders of more than 50% of the outstanding shares of the Fund are
present in person or by proxy; or (2) more than 50% of the Fund's outstanding
voting securities.

As a matter of fundamental policy the Fund may not:

    1. purchase securities of any issuer if, as a result, with respect to 75%
       of the Fund's total assets, more than 5% of the value of its total
       assets would be invested in the securities of any one issuer or the
       Fund's ownership would be more than 10% of the outstanding voting
       securities of any issuer, provided that this restriction does not limit
       the Fund's investments in securities issued or guaranteed by the U.S.
       government, its agencies and instrumentalities, or investments in
       securities of other registered management investment companies;

    2. purchase any securities which would cause 25% or more of the value of
       its total assets at the time of purchase to be invested in securities of
       one or more issuers conducting their principal business activities in
       the same industry, provided that: (a) there is no limitation with
       respect to obligations issued or guaranteed by the U.S. government, or
       tax exempt securities issued by any state or territory of the United
       States, or any of their agencies, instrumentalities or political
       subdivisions; and (b) notwithstanding this limitation or any other
       fundamental investment limitation, assets may be invested in the
       securities of one or more registered management investment companies to
       the extent permitted by the 1940 Act, the rules and regulations
       thereunder and any exemptive relief obtained by the Fund;

    3. borrow money, except to the extent permitted under the 1940 Act,
       including the rules, regulations, interpretations thereunder and any
       exemptive relief obtained by the Fund;

    4. make loans, except to the extent permitted under the 1940 Act, including
       the rules, regulations, interpretations and any exemptive relief
       obtained by the Fund;

    5. underwrite any issue of securities within the meaning of the 1933 Act
       except when it might technically be deemed to be an underwriter either:
       (a) in connection with the disposition of a portfolio security; or
       (b) in connection with the purchase of securities directly from the
       issuer thereof in accordance with its investment objective. This
       restriction shall not limit the Fund's ability to invest in securities
       issued by other registered management investment companies;

    6. purchase or sell real estate, except that the Fund may: (i) acquire or
       lease office space for its own use; (ii) invest in securities of issuers
       that invest in real estate or interests therein; (iii) invest in
       mortgage-related securities and other securities that are secured by
       real estate or interests therein; or (iv) hold and sell real estate
       acquired by the Fund as a result of the ownership of securities;

    7. issue senior securities, except to the extent permitted by the 1940 Act,
       the rules and regulations thereunder and any exemptive relief obtained
       by the Fund; or

    8. purchase or sell physical commodities, unless acquired as a result of
       ownership of securities or other instruments (but this shall not prevent
       the Fund from purchasing or selling options and futures contracts or
       from investing in securities or other instruments backed by physical
       commodities). This limitation does not apply to foreign currency
       transactions, including, without limitation, forward currency contracts.

With respect to fundamental policy number (2), industry classifications are
determined in accordance with the classifications established by Global
Industrial Classification Standards ("GIC") or Standard Industrial
Classification ("SIC"). The adviser or sub-adviser believes that the industry
characteristics selected are reasonable and not so broad that the primary
economic characteristics of the companies in a single class are materially
different. Industry classifications may be changed from time to time to reflect
changes in the

                                      43



market place.

                              PORTFOLIO TURNOVER

A change in securities held in the portfolio of the Fund is known as portfolio
turnover and may involve the payment by the Fund of dealer mark-ups or
brokerage or underwriting commissions and other transaction costs on the sale
of securities as well as on the reinvestment of the proceeds in other
securities. Portfolio turnover rate for a fiscal year is the percentage
determined by dividing the lesser of the cost of purchases or proceeds from
sales of portfolio securities by the average value of portfolio securities
during such year, all excluding securities whose maturities at acquisition were
one year or less. The Fund cannot accurately predict its turnover rate.
However, the rate will be higher when the Fund finds it necessary to change
significantly its portfolio to adopt a temporary defensive position or respond
to economic or market events. A high turnover rate would increase commission
expenses and may involve realization of capital gains by the Fund.

                 DISCLOSURE OF THE FUND'S PORTFOLIO SECURITIES

The Fund is required to file its complete portfolio holdings schedule with the
SEC on a quarterly basis. This schedule is filed with the Fund's annual and
semi-annual shareholder reports on Form N-CSR for the second and fourth fiscal
quarters and on Form N-Q for the first and third fiscal quarters.

In addition, the Fund posts its portfolio holdings schedule on ING's website on
a calendar-quarter basis and it is available on the first day of the second
month of the next quarter. The portfolio holdings schedule is as of the last
day of the preceding quarter-end (e.g., the Fund will post the quarter-ending
June 30 holdings on August 1).

The Fund also compiles a list composed of its ten largest holdings ("Top Ten").
This information is produced monthly and is made available on ING's website on
the tenth day of each month. The Top Ten holdings information is as of the last
day of the previous month.

Investors (both individual and institutional), financial intermediaries that
distribute the Fund's shares and most third parties may receive the Fund's
annual or semi-annual shareholder reports, or view on ING's website, the Fund's
portfolio holdings schedule. The Top Ten list also is provided in quarterly
Fund descriptions that are included in the offering materials of variable life
insurance products and variable annuity contracts.

Other than in regulatory filings or on ING's website, the Fund may provide its
complete portfolio holdings to certain unaffiliated third parties and
affiliates when the Fund has a legitimate business purpose for doing so. Unless
otherwise noted below, the Fund's disclosure of its portfolio holdings will be
on an as-needed basis, with no lag time between the date of which information
is requested and the date the information is provided. Specifically, the Fund's
disclosure of its portfolio holdings may include disclosure:

.  To the Fund's independent registered public accounting firm, named herein,
   for use in providing audit opinions;
.  To financial printers for the purpose of preparing Fund regulatory filings;
.  For the purpose of due diligence regarding a merger or acquisition;
.  To a new adviser or sub-adviser prior to the commencement of its management
   of the Fund;
.  To rating and ranking agencies such as Bloomberg, Morningstar, Lipper and
   S&P, such agencies may receive more data from the Fund than is posted on the
   Fund's website;
.  To consultants for use in providing asset allocation advice in connection
   with investments by affiliated funds-of-funds in the Fund;
.  To service providers, such as proxy voting and class action services
   providers, on a daily basis, in connection with their providing services
   benefiting the Fund; or
.  To a third party for purposes of effecting in-kind redemptions of securities
   to facilitate orderly

                                      44



   redemption of portfolio assets and minimal impact on remaining Fund
   shareholders.

In all instances of such disclosure the receiving party, by agreement, is
subject to a duty of confidentiality, including a duty not to trade on such
information.

The Board has adopted policies and procedures ("Policies") designed to ensure
that disclosure of information regarding the Fund's portfolio securities is in
the best interests of Fund shareholders, including procedures to address
conflicts between the interests of the Fund's shareholders on the one hand, and
those of the Fund's adviser, sub-adviser, principal underwriter or any
affiliated person of the Fund, its adviser, or its principal underwriter on the
other. Such Policies authorize the Fund's administrator to implement the
Board's Policies and direct the administrator to document the expected benefit
to shareholders. Among other considerations, the administrator is directed to
consider whether such disclosure may create an advantage for the recipient or
its affiliates or their clients over that of the Fund's shareholders.
Similarly, the administrator is directed to consider, among other things,
whether the disclosure of portfolio holdings creates a conflict between the
interests of shareholders and the interests of the adviser, sub-adviser,
principal underwriter and their affiliates. The Board has authorized the senior
officers of the Fund's administrator to authorize the release of the Fund's
portfolio holdings, as necessary, in conformity with the foregoing principles
and to monitor for compliance with the Policies. The Fund's administrator
reports quarterly to the Board regarding the implementation of the Policies.

The Fund has the following ongoing arrangements with certain third parties to
provide the Fund's portfolio holdings:

                                                                                        Time Lag Between Date of
                                                                                          Information and Date
Party                                                 Purpose                 Frequency   Information Released
-----                                  -------------------------------------  --------- ------------------------

Institutional Shareholder Services,
  Inc.................................
                                       Proxy Voting & Class Action Services     Daily             None

Charles River Development.............
                                       Compliance                               Daily             None

All of the arrangements in the table above are subject to the Policies adopted
by the Board to ensure such disclosure is for a legitimate business purpose and
is in the best interests of the Fund and its shareholders. The Board must
approve any material change to the Policies. The Policies may not be waived, or
exceptions made, without the consent of ING's Legal Department. All waivers and
exceptions involving the Fund will be disclosed to the Board no later than its
next regularly scheduled quarterly meeting. No compensation or other
consideration may be received by the Fund, the adviser, or any other party in
connection with the disclosure of portfolio holdings in accordance with the
Policies.


                                      45



MANAGEMENT OF THE COMPANY

Set forth in the table below is information about each Director of the Company.

                                                                                             Number of
                                                                                              Funds in
                                                                                                Fund
                                       Position(s) Term of Office                             Complex
                                        Held with   and Length of   Principal Occupation(s) Overseen by   Other Board Memberships
Name, Address and Age                  the Company Time Served/(1)/ During the Past 5 Years Director/(2)/    held by Director
---------------------                  ----------- ---------------  ----------------------- ------------  -----------------------
Directors who are not "Interested Persons"
------------------------------------------

Albert E. DePrince, Jr.                 Director     June 1998 -    Professor of Economics       30       Academy of
7337 East Doubletree Ranch Rd.                       Present        and Finance, Middle                   Economics and
Scottsdale, Arizona 85258                                           Tennessee State                       Finance (February
Age: 66                                                             University (August                    2002 - Present);
                                                                    1991 - Present).                      Tennessee Tax
                                                                    Formerly, Director of                 Structure Commission
                                                                    Business and Economic                 (December 2002-
                                                                    Research Center,                      December 2004); and
                                                                    Middle Tennessee State                Business and
                                                                    University (August                    Economic Research
                                                                    1994-August 2003).                    Center (August 1999-
                                                                                                          August 2003).

Maria Teresa Fighetti                   Director     April 1994     Retired. Formerly,           30       None.
7337 East Doubletree Ranch Rd.                       - Present      Associate
Scottsdale, Arizona 85258                                           Commissioner/
Age: 64                                                             Attorney, New York
                                                                    City Department of
                                                                    Mental Health (June
                                                                    1973 - October 2002).

Sidney Koch                             Director     April 1994     Self-Employed                30       None.
7337 East Doubletree Ranch Rd.                       - Present      Consultant (June 2000 -
Scottsdale, Arizona 85258                                           present).
Age: 72

Corine T. Norgaard                      Director     June 1991 -    Retired. Formerly,           30       Mass Mutual
7337 East Doubletree Ranch Rd.                       Present        President, Thompson                   Corporate and
Scottsdale, Arizona 85258                                           Enterprises (September                Participation Investors
Age: 70                                                             2004 - September                      (April 1997 -
                                                                    2005); and Dean of the                Present); Mass Mutual
                                                                    Barney School of                      Premier Series
                                                                    Business, University of               (December 2004 -
                                                                    Hartford (August 1996                 Present); and Mass
                                                                    - June 2004).                         Mutual MML Series II
                                                                                                          (December 2005 -
                                                                                                          Present).

Edward T. O'Dell                        Director     June 2002 -    Retired. Formerly,           30       None.
7337 East Doubletree Ranch Rd.                       Present        Partner of Goodwin
Scottsdale, Arizona 85258                                           Procter LLP (June 1966
Age: 72                                                             - September 2000).

Joseph E. Obermeyer                     Director     January        President, Obermeyer &       30       None.
7337 East Doubletree Ranch Rd.                       2003 -         Associates, Inc.
Scottsdale, Arizona 85258                            Present        (November 1999 -
Age: 50                                                             Present).

Russell Jones                           Director     December       Senior Vice President,       30       None.
7337 East Doubletree Ranch Rd.                       2007 -         Chief Investment
Scottsdale, Arizona 85258                            Present        Officer and Treasurer
Age: 63                                                             Kaman Corporation
                                                                    (1973-Present).

Directors who are "Interested Persons"

                                      46



                                                                                             Number of
                                                                                              Funds in
                                                                                                Fund
                                       Position(s) Term of Office                             Complex
                                        Held with   and Length of   Principal Occupation(s) Overseen by   Other Board Memberships
Name, Address and Age                  the Company Time Served/(1)/ During the Past 5 Years Director/(2)/    held by Director
---------------------                  ----------- ---------------  ----------------------- ------------  -----------------------
Directors who are not "Interested Persons"
------------------------------------------

Shaun Mathews/(3)(4)/                   Director      December      President and Chief          30       Mark Twain House &
7337 East Doubletree Ranch Rd.                        2007 -        Executive Officer ING                 Museum (September
Scottsdale, Arizona 85258                             Present       Investments, LLC                      2002-Present;
Age: 52                                                             (December 2006-                       Connecticut Forum
                                                                    Present) and Head of                  (May 2002-Present);
                                                                    ING USFS Mutual                       Capital Community
                                                                    Funds and Investment                  College Foundation
                                                                    Products (October                     (February 2002-
                                                                    2004-Present). CMO of                 Present); ING Services
                                                                    ING USFS (April 2002-                 Holding Company,
                                                                    October 2004) and                     Inc. (May 2000-
                                                                    Head of Rollover/                     Present); Southland
                                                                    Payout (October 2001-                 Life Insurance
                                                                    December 2003).                       Company (June 2002-
                                                                                                          Present); and ING
                                                                                                          Capital Corporation,
                                                                                                          LLC, ING Funds
                                                                                                          Distributor, LLC, ING
                                                                                                          Funds Services, LLC,
                                                                                                          ING Investments,
                                                                                                          LLC, and ING Pilgrim
                                                                                                          Funding, Inc. (March
                                                                                                          2006-Present).

Fredric (Rick) A. Nelson III/(3)/       Director      December      Vice Chairman and            30       None.
7337 East Doubletree Ranch Rd.                        2007 -        Chief Investment
Scottsdale, Arizona 85258                             Present       Officer, ING
Age: 51                                                             Investment
                                                                    Management Americas.
                                                                    Formerly, head of the
                                                                    U.S. Equity Group as
                                                                    well as a member of the
                                                                    Global and U.S.
                                                                    Executive Committees
                                                                    at JPMorgan Fleming
                                                                    Investment
                                                                    Management, Inc. until
                                                                    2003.
(1)Directors serve until their successors are duly elected and qualified.
(2)For the purposes of this table, "Fund Complex" mean the following investment
   companies: ING GET Fund; ING Series Fund, Inc.; ING Strategic Allocation
   Portfolios, Inc.; ING Variable Funds; ING VP Balanced Portfolio, Inc.; ING
   VP Intermediate Bond Portfolio; ING VP Money Market Portfolio. The number of
   Funds in the Fund Complex is as of January 31, 2008.
(3)"Interested person" of the Company, as defined in the 1940 Act, is such
   because of a relationship with ING Groep N.V., the parent corporation of the
   adviser of the Fund, ING Investments, LLC, and the Distributor, ING Funds
   Distributor, LLC.
(4)Shaun Mathews, President, ING USFS Mutual Funds and Investment Products, has
   held a seat on the Board of Directors of The Mark Twain House & Museum since
   September 19, 2002. ING Groep N.V. affiliates make non-material, charitable
   contributions to The Mark Twain House & Museum.

Officers

Information about the Fund's Officers is set forth in the table below:

                                                                              Term of Office and Length
Name, Address and Age                     Position Held with the Company         Of Time Served/(1)/
---------------------                  -------------------------------------  -------------------------

Shaun P. Mathews                       President and Chief Executive Officer   December 2006 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 52











Michael J. Roland                      Executive Vice President                April 2002 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 49














                                                                              Principal Occupation(s) During
Name, Address and Age                     Position Held with the Company           the Last Five Years
---------------------                  -------------------------------------  ------------------------------

Shaun P. Mathews                       President and Chief Executive Officer   President and Chief
7337 East Doubletree Ranch Rd.                                                 Executive Officer, ING
Scottsdale, Arizona 85258                                                      Investments, LLC/(2)/ and
Age: 52                                                                        ING Fund Services/(3)
                                                                               /(December 2006 - Present)
                                                                               and Head of ING USFS
                                                                               Mutual Funds and
                                                                               Investment Products
                                                                               (October 2004 - Present).
                                                                               Formerly, CMO, ING USFS
                                                                               (April 2002 - October
                                                                               2004) and Head of
                                                                               Rollover/Payout (October
                                                                               2001 - December 2003).

Michael J. Roland                      Executive Vice President                Head of Mutual Fund
7337 East Doubletree Ranch Rd.                                                 Platform (February 2007 -
Scottsdale, Arizona 85258                                                      Present) and Executive Vice
Age: 49                                                                        President, ING Investments,
                                                                               LLC/(2)/ (December 2001 -
                                                                               Present). Formerly, Head of
                                                                               Product Management
                                                                               (January 2005 - January
                                                                               2007); Chief Compliance
                                                                               Officer, ING Investments,
                                                                               LLC/(2) /and Directed
                                                                               Services, LLC/(5)/ (October
                                                                               2004 - December 2005);
                                                                               and Chief Financial Officer
                                                                               and Treasurer, ING
                                                                               Investments, LLC/(2)/
                                                                               (December 2001- March
                                                                               2005).


                                      47



                                                                              Term of Office and Length
Name, Address and Age                     Position Held with the Company         Of Time Served/(1)/
---------------------                  -------------------------------------  -------------------------

Stanley D. Vyner                       Executive Vice President               March 2002 - Present
230 Park Avenue
New York, NY 10169
Age: 57








Joseph M. O'Donnell                    Executive Vice President               March 2006 - Present
7337 East Doubletree Ranch Rd.         Chief Compliance Officer               November 2004 - Present
Scottsdale, Arizona 85258
Age: 53



















Todd Modic                             Senior Vice President,                 March 2005 - Present
7337 East Doubletree Ranch Rd.         Chief/Principal Financial Officer and
Scottsdale, Arizona 85258              Assistant Secretary
Age: 40







Kimberly A. Anderson                   Senior Vice President                  December 2003 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 43





Ernest J. C'DeBaca                     Senior Vice President                  June 2006 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 38











Robert Terris                          Senior Vice President                  June 2006 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 37








Robyn L. Ichilov                       Vice President and Treasurer           March 2002 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 40



Lauren D. Bensinger                    Vice President                         March 2003 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 54











Maria M. Anderson                      Vice President                         September 2004 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 49









William Evans                          Vice President                         December 2007 - Present
10 State House Square
Hartford, CT 06103
Age: 35






                                                                              Principal Occupation(s) During
Name, Address and Age                     Position Held with the Company           the Last Five Years
---------------------                  -------------------------------------  ------------------------------

Stanley D. Vyner                       Executive Vice President               Executive Vice President,
230 Park Avenue                                                               ING Investments, LLC/(2)/
New York, NY 10169                                                            (July 2000 - Present); and
Age: 57                                                                       Chief Investment Risk
                                                                              Officer, ING Investments,
                                                                              LLC/(2)/ (January 2003 -
                                                                              Present). Formerly, Chief
                                                                              Investment Officer of the
                                                                              International Investments
                                                                              (August 2000 - January
                                                                              2003).

Joseph M. O'Donnell                    Executive Vice President               Chief Compliance Officer
7337 East Doubletree Ranch Rd.         Chief Compliance Officer               of the ING Funds
Scottsdale, Arizona 85258                                                     (November 2004 - Present),
Age: 53                                                                       ING Investments, LLC/(2)/
                                                                              and Directed Services,
                                                                              LLC/(5)/ (March 2006 -
                                                                              Present); and Executive
                                                                              Vice President of the ING
                                                                              Funds (March 2006 -
                                                                              Present). Formerly, Chief
                                                                              Compliance Officer of ING
                                                                              Life Insurance and Annuity
                                                                              Company (March 2006 -
                                                                              December 2006); Vice
                                                                              President, Chief Legal
                                                                              Counsel, Chief Compliance
                                                                              Officer and Secretary of
                                                                              Atlas Securities, Inc., Atlas
                                                                              Advisers, Inc. and Atlas
                                                                              Funds (October 2001 -
                                                                              October 2004).


Todd Modic                             Senior Vice President,                 Senior Vice President, ING
7337 East Doubletree Ranch Rd.         Chief/Principal Financial Officer and  Funds Services, LLC/(3)/
Scottsdale, Arizona 85258              Assistant Secretary                    (April 2005 - Present).
Age: 40                                                                       Formerly, Vice President,
                                                                              ING Funds Services, LLC/(3)/
                                                                              (September 2002 - March
                                                                              2005); and Director of
                                                                              Financial Reporting, ING
                                                                              Investments, LLC/(2) /(March
                                                                              2001- September 2002).

Kimberly A. Anderson                   Senior Vice President                  Senior Vice President, ING
7337 East Doubletree Ranch Rd.                                                Investments, LLC/(2)/
Scottsdale, Arizona 85258                                                     (October 2003 - Present).
Age: 43                                                                       Formerly, Vice President
                                                                              and Assistant Secretary,
                                                                              ING Investments, LLC/(2)/
                                                                              (January 2001 - October
                                                                              2003).

Ernest J. C'DeBaca                     Senior Vice President                  Senior Vice President, ING
7337 East Doubletree Ranch Rd.                                                Investments, LLC/(2)/
Scottsdale, Arizona 85258                                                     (December 2006 - Present),
Age: 38                                                                       and ING Funds Services,
                                                                              LLC/(3)/ (April 2006 -
                                                                              Present). Formerly,
                                                                              Counsel, ING Americas,
                                                                              U.S. Legal Services
                                                                              (January 2004 - March
                                                                              2006); and Attorney-
                                                                              Adviser, U.S. Securities and
                                                                              Exchange Commission
                                                                              (May 2001 - December
                                                                              2003).

Robert Terris                          Senior Vice President                  Senior Vice President, Head
7337 East Doubletree Ranch Rd.                                                of Division Operations, ING
Scottsdale, Arizona 85258                                                     Funds (May 2006 ? Present)
Age: 37                                                                       and Vice President, Head of
                                                                              Division Operations, ING
                                                                              Funds Services, LLC/(3)/
                                                                              (March 2006 - Present).
                                                                              Formerly, Vice President of
                                                                              Administration, ING Funds
                                                                              Services, LLC/(3)/ (October
                                                                              2001 - March 2006).

Robyn L. Ichilov                       Vice President and Treasurer           Vice President and
7337 East Doubletree Ranch Rd.                                                Treasurer, ING Funds
Scottsdale, Arizona 85258                                                     Services, LLC/(3)/ (October
Age: 40                                                                       2001 - Present) and ING
                                                                              Investments, LLC/(2)/ (August
                                                                              1997 - Present).

Lauren D. Bensinger                    Vice President                         Vice President and Chief
7337 East Doubletree Ranch Rd.                                                Compliance Officer, ING
Scottsdale, Arizona 85258                                                     Funds Distributor, LLC/(4)/
Age: 54                                                                       (July 1995 ? Present); and
                                                                              Vice President (February
                                                                              1996 - Present); and
                                                                              Director of Compliance,
                                                                              ING Investments, LLC/(2)/
                                                                              (October 2004 - Present).
                                                                              Formerly, Chief
                                                                              Compliance Officer, ING
                                                                              Investments, LLC/(2)/
                                                                              (October 2001 ? October
                                                                              2004).

Maria M. Anderson                      Vice President                         Vice President, ING Funds
7337 East Doubletree Ranch Rd.                                                Services, LLC/(3)/ (September
Scottsdale, Arizona 85258                                                     2004 - Present). Formerly,
Age: 49                                                                       Assistant Vice President,
                                                                              ING Funds Services, LLC/(3)/
                                                                              (October 2001 - September
                                                                              2004); and Manager of
                                                                              Fund Accounting and Fund
                                                                              Compliance, ING
                                                                              Investments, LLC/(2)/
                                                                              (September 1999 - October
                                                                              2001).

William Evans                          Vice President                         Vice President, Head of
10 State House Square                                                         Mutual Fund Advisory
Hartford, CT 06103                                                            Group (April 2007-present),
Age: 35                                                                       Vice President, U.S. Mutual
                                                                              Funds and Investment
                                                                              Products (May 2005-April
                                                                              2007), Senior Fund Analyst,
                                                                              U.S. Mutual Funds and
                                                                              Investment Products (May
                                                                              2002-May 2005).

                                      48



                                                                              Term of Office and Length
Name, Address and Age                     Position Held with the Company         Of Time Served/(1)/
---------------------                  -------------------------------------  -------------------------

Denise Lewis                           Vice President                         April 2007 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 44








Kimberly K. Palmer                     Vice President                         March 2006 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 50















Susan P. Kinens                        Assistant Vice President               March 2003 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 31




Theresa K. Kelety                      Secretary                              September 2003 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 45




Huey P. Falgout, Jr.                   Assistant Secretary                    September 2003 - Present
7337 East Doubletree Ranch Rd.
Scottsdale, Arizona 85258
Age: 45








                                                                              Principal Occupation(s) During
Name, Address and Age                     Position Held with the Company           the Last Five Years
---------------------                  -------------------------------------  ------------------------------

Denise Lewis                           Vice President                          Vice President, ING Funds
7337 East Doubletree Ranch Rd.                                                 Services, LLC/(3)/ (December
Scottsdale, Arizona 85258                                                      2006 - Present). Formerly,
Age: 44                                                                        Senior Vice President,
                                                                               UMB Investment Services
                                                                               Group, LLC (November
                                                                               2003 - December 2006);
                                                                               and Vice President, Wells
                                                                               Fargo Funds Management,
                                                                               LLC (December 2000 -
                                                                               August 2003).

Kimberly K. Palmer                     Vice President                          Vice President, ING Funds
7337 East Doubletree Ranch Rd.                                                 Services, LLC/(3)/ (March
Scottsdale, Arizona 85258                                                      2006 - Present). Formerly,
Age: 50                                                                        Assistant Vice President,
                                                                               ING Funds Services, LLC/(3)/
                                                                               (August 2004 - March
                                                                               2006); Manager,
                                                                               Registration Statements,
                                                                               ING Funds Services, LLC/(3)/
                                                                               (May 2003 - August 2004);
                                                                               Associate Partner,
                                                                               AMVESCAP PLC (October
                                                                               2000 - May 2003); and
                                                                               Director of Federal Filings
                                                                               and Blue Sky Filings,
                                                                               INVESCO Funds Group,
                                                                               Inc. (March 1994 - May
                                                                               2003).

Susan P. Kinens                        Assistant Vice President                Assistant Vice President,
7337 East Doubletree Ranch Rd.                                                 ING Funds Services, LLC/(3)/
Scottsdale, Arizona 85258                                                      (December 2002 - Present);
Age: 31                                                                        and has held various other
                                                                               positions with ING Funds
                                                                               Services, LLC/(3)/ for more
                                                                               than the last five years.

Theresa K. Kelety                      Secretary                               Counsel, ING Americas,
7337 East Doubletree Ranch Rd.                                                 U.S. Legal Services (April
Scottsdale, Arizona 85258                                                      2003 - Present). Formerly,
Age: 45                                                                        Senior Associate with
                                                                               Shearman & Sterling
                                                                               (February 2000 - April
                                                                               2003).

Huey P. Falgout, Jr.                   Assistant Secretary                     Chief Counsel, ING
7337 East Doubletree Ranch Rd.                                                 Americas, U.S. Legal
Scottsdale, Arizona 85258                                                      Services (September 2003 -
Age: 45                                                                        Present). Formerly,
                                                                               Counsel, ING Americas,
                                                                               U.S. Legal Services
                                                                               (November 2002 -
                                                                               September 2003); and
                                                                               Associate General Counsel,
                                                                               AIG American General
                                                                               (January 1999 - November
                                                                               2002).

(1)The officers hold office until the next annual meeting of Directors and
   until their successors shall have been elected and qualified.
(2)ING Investments, LLC was previously named ING Pilgrim Investments, LLC. ING
   Pilgrim Investments, LLC is the successor in interest to ING Pilgrim
   Investments, Inc. which was previously known as Pilgrim Investments, Inc.
   and before that was known as Pilgrim America Investments, Inc.
(3)ING Funds Services, LLC was previously named ING Pilgrim Group, LLC. ING
   Pilgrim Group, LLC is the successor in interest to ING Pilgrim Group, Inc.
   which was previously known as Pilgrim Group, Inc. and before that was known
   as Pilgrim America Group, Inc.
(4)ING Funds Distributor, LLC is the successor in interest to ING Funds
   Distributor, Inc. which was previously known as ING Pilgrim Securities, Inc.
   and before that was known as Pilgrim America Securities, Inc.
(5)Directed Services, LLC is successor in interest to Directed Services, Inc.


                                      49



Board

The Board governs the Fund and is responsible for protecting the interests of
shareholders. The Directors are experienced executives who oversee the Fund's
activities, review contractual arrangements with companies that provide
services to the Fund and review the Fund's performance.

Frequency of Meetings

The Board currently conducts regular meetings four (4) times a year. The Audit
Committee also meets regularly four (4) times per year, and the remaining
Committees meet as needed. In addition, the Board or the Committees may hold
special meetings by telephone or in person to discuss specific matters that may
require action prior to the next regular meeting. Each Committee listed below
operates pursuant to a Charter approved by the Board.

Committees

The Board has established an Audit Committee whose function includes, among
others, to meet with the independent registered public accounting firm of the
Fund to review the scope of the Fund's audit, its financial statements and
interim accounting controls, and to meet with management concerning these
matters. The Audit Committee currently consists of Dr. DePrince, Ms. Fighetti,
Mr. Koch, Dr. Norgaard, Mr. O'Dell, Mr. Obermeyer and Mr. Jones (collectively,
the "Independent Directors"). Mr. Obermeyer currently serves as Chairperson and
Dr. Norgaard currently serves as Vice Chairperson of the Audit Committee. The
Audit Committee held four (4) meetings during the fiscal year ended May 31,
2007.

The Board has established a Contracts Committee whose function is to consider,
evaluate and make recommendations to the full Board concerning contractual
arrangements with service providers to the Fund and all other matters in which
the investment adviser or any affiliated entity has an actual or potential
conflict of interest with the Fund or its shareholders. The Contracts Committee
currently consists of Dr. DePrince, Ms. Fighetti, Mr. Koch, Dr. Norgaard,
Mr. O'Dell, Mr. Obermeyer and Mr. Jones. Mr. Koch currently serves as
Chairperson and Dr. DePrince currently serves as Vice Chairperson of the
Contracts Committee. The Contracts Committee held five (5) meetings during the
fiscal year ended May 31, 2007.

The Board has established a Nominating Committee for the purpose of considering
and presenting to the Board candidates it proposes for nomination to fill
Independent Director vacancies on the Board. The Nominating Committee currently
consists of Dr. DePrince, Ms. Fighetti, Mr. Koch, Dr. Norgaard, Mr. O'Dell,
Mr. Obermeyer and Mr. Jones. The Nominating Committee is willing to consider
nominations for vacancies received from shareholders in the same manner as it
reviews its own nominees. Shareholders wishing to submit a nomination for
Director at an annual or special meeting of shareholders must provide such
recommendation in a sufficiently timely manner (and in any event no later than
the date specified for receipt of shareholder proposals in any applicable proxy
statement with respect to the Fund) in writing to the Nominating Committee, c/o
the Secretary of the Fund, ING Series Fund, Inc., 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258. Any such recommendation made by such
shareholder should include sufficient information for the Nominating Committee
to make an assessment of the candidate's suitability for the position of
Independent Director. The Nominating Committee held three (3) meetings during
the fiscal year ended May 31, 2007.

The Board has established a Valuation Committee for the purpose of approving
fair value determinations at the time they are being considered by management.
The Valuation Committee currently consists of Dr. DePrince, Ms. Fighetti,
Mr. Koch, Dr. Norgaard, Mr. O'Dell, Mr. Obermeyer and Mr. Jones. The Valuation
Committee held no meetings during the fiscal year ended May 31, 2007.

The Board has established a Compliance Committee for the purposes of
(1) providing oversight with respect to compliance by the Fund and their
service providers with applicable laws, regulations and internal policies and

                                      50



procedures affecting the operations of the Fund and (2) to serve as a
committee, and in such capacity to receive, retain and act upon reports of
evidence of possible material violations of applicable U.S. federal or state
securities laws and breaches of fiduciary duty arising under U.S. federal or
state laws. The Compliance Committee currently consists of Dr. DePrince,
Ms. Fighetti, Mr. Koch, Dr. Norgaard, Mr. O'Dell, Mr. Obermeyer and Mr. Jones.
Dr. Norgaard currently serves as Chairperson of the Compliance Committee and
Mr. O'Dell currently serves as Vice Chairperson. The Compliance Committee meets
as needed. The Compliance Committee held four (4) meetings during the fiscal
year ended May 31, 2007.

Director Ownership of Securities

Set forth in the table below is the dollar range of equity securities owned by
each Director for the calendar year ended December 31, 2007.

                                                                              Aggregate Dollar Range of Securities in all
                                                                               Registered Investment Companies Overseen
                                                                                  by Director in Family of Investment
Name of Director                        Dollar Range of shares in the Fund                     Companies
----------------                       -------------------------------------  -------------------------------------------
Independent Directors
---------------------
Albert E. DePrince, Jr.                                None                               Over $100,000/(1)/
-----------------------                -------------------------------------  -------------------------------------------
Maria T. Fighetti                                      None                               Over $100,000/(1)/
-----------------                      -------------------------------------  -------------------------------------------
Sidney Koch                                            None                                  Over $100,000
-----------                            -------------------------------------  -------------------------------------------
Edward T. O'Dell                                       None                               Over $100,000/(1)/
----------------                       -------------------------------------  -------------------------------------------
Joseph E. Obermeyer                                    None                               Over $100,000/(1)/
-------------------                    -------------------------------------  -------------------------------------------
Corine T. Norgaard                                     None                                  Over $100,000
------------------                     -------------------------------------  -------------------------------------------
Russell Jones/(2)/                                     None                              $10,000-$50,000/(1)/
------------------                     -------------------------------------  -------------------------------------------
Interested Directors
--------------------
Shaun Mathews/(2)/                                     None                               Over $100,000/(1)/
------------------                     -------------------------------------  -------------------------------------------
Rick Nelson/(2)/                                       None                               Over $100,000/(1)/
----------------                       -------------------------------------  -------------------------------------------
(1)Includes the value of shares in which a Director has an indirect interest
   through a deferred compensation plan.
(2)Messrs. Jones, Mathews and Nelson commenced services as Directors effective
   December 2007.

Independent Director Ownership of Securities

Set forth in the table below is information regarding each Independent
Director's (and his or her immediate family members) share ownership in
securities of the Fund's adviser or principal underwriter and the ownership of
securities in an entity controlling, controlled by or under common control with
the adviser or principal underwriter of the Fund (not including registered
investment companies) as of December 31, 2007.

                              Name of
                             Owners and          Title
                            Relationship          of    Value of  Percentage
    Name of Director        to Director  Company Class Securities  of Class
    ----------------        ------------ ------- ----- ---------- ----------
    Albert E. DePrince, Jr.     N/A        N/A    N/A     $---       N/A
    ----------------------- ------------ ------- ----- ---------- ----------
    Maria T. Fighetti           N/A        N/A    N/A     $---       N/A
    -----------------       ------------ ------- ----- ---------- ----------
    Sidney Koch                 N/A        N/A    N/A     $---       N/A
    -----------             ------------ ------- ----- ---------- ----------
    Corine T. Norgaard          N/A        N/A    N/A     $---       N/A
    ------------------      ------------ ------- ----- ---------- ----------
    Edward T. O'Dell            N/A        N/A    N/A     $---       N/A
    ----------------        ------------ ------- ----- ---------- ----------
    Joseph Obermeyer            N/A        N/A    N/A     $---       N/A
    ----------------        ------------ ------- ----- ---------- ----------
    Russell Jones               N/A        N/A    N/A     $---       N/A
    -------------           ------------ ------- ----- ---------- ----------
    Interested Directors
    --------------------
    Shaun Mathews               N/A        N/A    N/A     $---       N/A
    -------------           ------------ ------- ----- ---------- ----------
    Rick Nelson                 N/A        N/A    N/A     $---       N/A
    -----------             ------------ ------- ----- ---------- ----------

Compensation of Directors

For service on the Board and the boards of other investment companies in the
ING Board Complex, each Independent Director who is not an "interested person"
of ING is entitled to receive (i) an annual retainer of $60,000, payable in
equal quarterly installments; (ii) $7,500 per meeting for each Board meeting in
which the Independent Director participates in person; (iii) $7,500 per meeting
for each Contracts Committee meeting in

                                      51



which the Independent Director participates in person; (iv) $3,500 per meeting
for each committee meeting, other than for a Contracts Committee meeting, held
in conjunction with a Board meeting in which the Independent Director
participates in person, and $5,000 per meeting for each committee meeting,
other than for Contracts Committee meeting, not held in conjunction with a
Board meeting, in which the Independent Director participates in person;
(v) $2,500 per meeting for each meeting of the Board or an committee in which
the Independent Director participates by telephone (including via video
conference); (vi) $35,000 per annum for serving as Chairperson of the Contracts
Committee, payable in equal quarterly installments; (vii) $15,000 per annum for
serving as Chairperson of the Audit Committee, payable in equal quarterly
installments; (viii) $15,000 per annum for serving as Chairperson of the
Compliance Committee, payable in equal quarterly installments; (ix) $5,000 per
annum for serving as Chairperson of the Nominating Committee (in periods in
which the Committee has operated), payable in equal quarterly installments;
(x) $20,000, $7,500 and $7,500 per annum for serving as Committee Vice
Chairperson of the Contracts, Compliance and Audit Committees, respectively,
payable in equal quarterly installments. In addition, each Independent Director
is entitled to reimbursement for out-of-pocket expenses incurred in attending
Board and Committee meetings. All such fees and expense reimbursements are
allocated among all funds within the ING Board Complex pro rata based upon the
average net assets of all the funds within the ING Board Complex as of the date
the payment is due. None of the Independent Directors is entitled to receive
pension or retirement benefits.

The following table sets forth information provided by the Fund's adviser
regarding estimated future compensation of Directors by the Fund as of the
fiscal year end on May 31, 2008 and actual compensation for other funds managed
by the adviser and its affiliates for the fiscal year ended May 31, 2007.
Officers of the Company and Directors who are interested persons of the Company
do not receive any compensation from the Company or any other funds managed by
the adviser or its affiliates.

Compensation Table

                                              Pension or       Total
                                              Retirement   Compensation
                                               Benefits        From
                                  Aggregate   Accrued as    Registrant
                                 Compensation  Part of       and Fund
                                   from the      Fund      Complex Paid
     Name of Person and Position     Fund      Expenses  to Directors/ (1)/
     --------------------------- ------------ ---------- -----------------
     Albert E. DePrince, Jr.
     Director                       $64.52       None        $197,500
     -----------------------     ------------ ---------- -----------------
     Maria T. Fighetti
     Director                       $57.44       None        $177,500
     -----------------           ------------ ---------- -----------------
     Sidney Koch
     Director                       $69.58       None        $212,500
     -----------                 ------------ ---------- -----------------
     Edward T. O'Dell
     Director                       $60.07       None        $185,000
     ----------------            ------------ ---------- -----------------
     Joseph E. Obermeyer
     Director                       $62.50       None        $192,500
     -------------------         ------------ ---------- -----------------
     Corine T. Norgaard
     Director                       $64.72       None        $200,000
     ------------------          ------------ ---------- -----------------
     Russell Jones/(2)/
     Director                        N/A         None           N/A
     -----------------           ------------ ---------- -----------------
     Shaun Mathews/(2)/
     Director                        N/A         None           N/A
     -----------------           ------------ ---------- -----------------
     Rick Nelson/(2)/
     Director                        N/A         None           N/A
     ---------------             ------------ ---------- -----------------

(1)Represents compensation from 33 funds (total in complex as of the fiscal
   year ended May 31, 2007).
       (2)Messrs. Jones, Mathews and Mr. Nelson commenced services as Directors
          effective December 2007.

The Board has adopted a retirement policy under with each Independent Director
is subject to mandatory retirement as of the later of (i) the March 31 next
occurring after he or she attains the age of 72 and (ii) the date his or her
successor is elected or appointed to the Board, provided that each Independent
Director under the age of 72 as of March 31, 2002 who held office as of that
date may, upon the vote of the other Independent Directors, be granted up to
three one-year extensions commencing as of the March 31 next occurring after he

                                      52



or she attains the age of 72.

                                CODE OF ETHICS

The Fund, the adviser, the sub-adviser and the Distributor have adopted a code
of ethics ("Code of Ethics" or written supervisory procedures) governing
personal trading activities of all Directors, Officers of the Fund and persons
who, in connection with their regular functions, play a role in the
recommendation of any purchase or sale of a security by the Fund or obtain
information pertaining to such purchase or sale. The Code of Ethics is intended
to prohibit fraud against the Fund that may arise from personal trading of
securities that may be purchased or held by the Fund or of the Fund's shares.
The Code of Ethics also prohibits short-term trading of the Fund by persons
subject to the Code of Ethics. Personal trading is permitted by such persons
subject to certain restrictions; however such persons are generally required to
pre-clear all security transactions with the Fund's Compliance Department and
to report all transactions on a regular basis. The sub-adviser has adopted its
own Code of Ethics to govern the personal trading activities of its personnel.

                            PROXY VOTING PROCEDURES

The Board has adopted proxy voting procedures and guidelines to govern the
voting of proxies relating to the Fund's portfolio securities. The procedures
delegate to the adviser the authority to vote proxies relating to portfolio
securities, and provide a method for responding to potential conflicts of
interest. In delegating voting authority to the adviser, the Board has also
approved the adviser's proxy voting procedures, which require the adviser to
vote proxies in accordance with the Fund's proxy voting procedures and
guidelines. An independent proxy voting service has been retained to assist in
the voting of Fund proxies through the provision of vote analysis,
implementation and recordkeeping and disclosure services. A copy of the proxy
voting procedures and guidelines of the Fund, including procedures of ING
Investments, is attached hereto as Appendix A. No later than August 31st of
each year, information regarding how the Fund voted proxies relating to
portfolio securities for the one-year period ending June 30th is available
through the ING Funds' website (www.ingfunds.com) or by accessing the SEC's
EDGAR database (www.sec.gov).

                  CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS

Control is defined by the 1940 Act as the beneficial ownership, either directly
or through one or more controlled companies, of more than 25% of the voting
securities of a company. A control person may be able to take action regarding
the Fund without the consent or approval of shareholders.

As of the date of this SAI, no officers and Directors owned any shares of the
Fund. As the Fund had not commenced operations as of the date of this SAI, the
only outstanding shares of the Fund are held by the adviser as the Fund's sole
shareholder.

                                    ADVISER

The investment adviser for the Fund is ING Investments, LLC ("ING Investments"
or "Adviser"), which is registered with the SEC as an investment adviser and
serves as an investment adviser to registered investment companies (or series
thereof), as well as structured finance vehicles. ING Investments, subject to
the authority of the Directors of the Fund, has the overall responsibility for
the management of the Fund's portfolio subject to delegation of certain
responsibilities to other investment advisers. ING Investment Management Co.
("ING IM" or "Sub-Adviser") serves as Sub-Adviser to the Fund, ING Investments
and ING IM are indirect, wholly-owned subsidiaries of ING Groep N.V. ("ING
Groep") (NYSE: ING). ING Groep is one of the largest financial services
organizations in the world with approximately 120,000 employees. Based in
Amsterdam, ING Groep offers an array of banking, insurance and asset management
services to both individual and institutional investors. The principal
executive offices of ING Groep are located at Amstelveensesweg 500, 1081 KL
Amsterdam, P.O. Box 810, 1000 AV Amsterdam, the Netherlands.


                                      53



On February 26, 2001 the name of the Adviser changed from "ING Pilgrim
Investments, Inc." to "ING Pilgrim Investments, LLC." On March 1, 2002 the name
of the Adviser was changed from "ING Pilgrim Investments, LLC," to "ING
Investments, LLC." Prior to March 1, 2002 ING IM served as Adviser to the Fund.

ING Investments serves pursuant to an investment management agreement
("Investment Advisory Agreement") between ING Investments and the Company, on
behalf of the Fund. The Investment Advisory Agreement requires ING Investments
to oversee the provision of all investment advisory and portfolio management
services for the Fund. Pursuant to a sub-advisory agreement (the "Sub-Advisory
Agreement") ING Investments has delegated certain management responsibilities
to ING IM for the Fund. ING Investments oversees the investment management of
the ING IM for the Fund.

The Investment Advisory Agreement requires ING Investments to provide, subject
to the supervision of the Board, investment advice and investment services to
the Fund and to furnish advice and recommendations with respect to investment
of the Fund's assets and the purchase or sale of its portfolio securities. ING
Investments also provides investment research and analysis. The Investment
Advisory Agreement provides that ING Investments is not subject to liability to
the Fund for any act or omission in the course of, or connected with, rendering
services under the Agreement, except by reason of willful misfeasance, bad
faith, negligence or reckless disregard of its obligations and duties under the
Investment Advisory Agreement.

After an initial term of two years, the Investment Advisory Agreement and
Sub-Advisory Agreement continues in effect from year to year so long as such
continuance is specifically approved at least annually by: (a) the Board; or
(b) the vote of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding shares voting as a single class; provided, that in either event the
continuance is also approved by at least a majority of the Board who are not
"interested persons" (as defined in the 1940 Act) of ING Investments or ING IM
by vote cast in person at a meeting called for the purpose of voting on such
approval.

Please see the Fund's annual shareholder report to be dated May 31, 2008 for
information regarding the basis of the Board's approval of the investment
advisory and investment sub-advisory relationships.

The Investment Advisory Agreement may be terminated without penalty with not
less than 60 days' notice by the Board or by a vote of the holders of a
majority of the Fund's outstanding shares voting as a single class, or upon not
less than 60 days' notice by ING Investments. The Investment Advisory Agreement
will terminate automatically in the event of its "assignment" (as defined in
the 1940 Act).

Advisory Fees

ING Investments bears the expense of providing its services and pays the fees
of the Sub-Adviser. For its services, the Fund pays ING Investments, expressed
as an annual rate, a monthly fee in arrears equal to 0.45% of the Fund's
average daily net assets during the month. To seek to achieve a return on
uninvested cash or for other reasons, the Fund may invest its assets in ING
Institutional Prime Market Fund and/or one or more other money market funds
advised by ING affiliates ("ING Money Market Funds"). The Fund's purchase of
shares of an ING Money Market Fund will result in the Fund paying a
proportionate share of the expenses of the ING Money Market Fund. The Fund's
Adviser will waive its fee in an amount equal to the advisory fee received by
the adviser of the ING Money Market Fund in which the Fund invests resulting
from the Fund's investment into the ING Money Market Fund.

Total Advisory Fees Paid by the Fund

Because the Fund had not commenced operations as of the date of this SAI, no
Advisory Fees were paid by the Fund as of the fiscal year ended May 31, 2007.


                                      54



                         EXPENSE LIMITATION AGREEMENT

ING Investments has entered into an expense limitation agreement with the Fund
pursuant to which ING Investments has agreed to waive or limit its fees. In
connection with this agreement and certain U.S. tax requirements, ING
Investments will assume other expenses so that the total annual ordinary
operating expenses of the Fund which exclude interest, taxes, brokerage
commissions, other investment related costs, acquired fund fees and expenses,
extraordinary expenses such as litigation, other expenses not incurred in the
normal course of the Fund's business, and expenses of any counsel or other
persons or services retained by the Fund's Directors who are not "interested
persons" (as defined in the 1940 Act) of ING Investments do not exceed the
following expense limitations:

                                                       Class
                    Fund                                 I
                    ----                               -----
                    ING Tactical Asset Allocation Fund 0.70%
                    ---------------------------------- -----

The Fund may at a later date reimburse ING Investments for management fees
waived and other expenses assumed by ING Investments during the previous
thirty-six (36) months but only if after such reimbursement, the Fund's expense
ratio does not exceed the percentage described above. ING Investments will only
be reimbursed for fees waived or expenses assumed after the effective date of
the expense limitation agreements.

The expense limitation agreement provides that the expense limitation shall
continue until October 1, 2009. The expense limitation is contractual and will
automatically renew for one-year terms unless ING Investments provides written
notice of the termination of the expense limitation agreement to the lead
Independent Director of the Company within ninety (90) days prior to the end of
the then-current term or upon termination of the Investment Advisory Agreement.
The expense limitation agreement may also be terminated by the Company, without
payment of any penalty, upon ninety (90) days' prior written notice to ING
Investments at its principal place of business.

                                  SUB-ADVISER

The Investment Advisory Agreement for the Fund provides that ING Investments,
with the approval of the Board, may select and employs an investment adviser to
serve as sub-adviser for the Fund, and shall monitor the sub-adviser's
investment programs and results, and coordinate the investment activities of
the sub-adviser to ensure compliance with regulatory restrictions. ING
Investments pays all of its expenses arising from the performance of its
obligations under the Investment Advisory Agreement, including all fees payable
to the ING IM, executive salaries and expenses of the Directors and Officers of
the Company who are employees of ING Investments or its affiliates. ING IM pays
all of its expenses arising from the performance of its obligations under the
Sub-Advisory Agreement.

Subject to the expense reimbursement provisions described in this SAI, other
expenses incurred in the operation of the Company are borne by the Fund,
including, without limitation, investment advisory fees; brokerage commissions;
interest; legal fees and expenses of attorneys; fees of independent registered
public accounting firms, transfer agents and dividend disbursing agents,
shareholder servicing agents, and custodians; the expense of obtaining
quotations for calculating the Fund's NAV; taxes, if any, and the preparation
of the Fund's tax returns; cost of stock certificates and any other expenses
(including clerical expenses) of issue, sale, repurchase or redemption of
shares; fees and expenses of registering and maintaining the registration of
shares of the Fund under federal and state laws and regulations; expenses of
disposition or offering any of the portfolio securities held by the Fund;
expenses of printing and distributing annual and semi-annual shareholder
reports, notices and proxy materials to existing shareholders; expenses of
printing and filing annual and semi-annual shareholder reports and other
documents filed with governmental agencies; expenses of annual and special
shareholder and director meetings; expenses of printing and distributing
prospectus and statements of additional information to existing shareholders;
fees and expenses of Directors of the Company who are not employees of ING
Investments or the ING IM, or their affiliates; membership dues in trade
associations; insurance premiums; and extraordinary expenses such as litigation
expenses.


                                      55



The Sub-Advisory Agreement may be terminated without payment of any penalties
by ING Investments, the Board, on behalf of the Fund, or the shareholders of
such Fund upon 60 days' prior written notice. Otherwise, after an initial term,
the Sub-Advisory Agreement will remain in effect from year to year, subject to
the annual approval of the Board, on behalf of the Fund, or the vote of a
majority of the outstanding voting securities, and the vote, cast in person at
a meeting duly called and held, of a majority of the Directors, on behalf of
the Fund, who are not parties to the sub-advisory agreement or "interested
persons" (as defined in the 1940 Act) of any such party.

On May 24, 2002, the SEC issued an Exemptive Relief Order permitting ING
Investments to enter into new investment sub-advisory contracts with a
non-affiliated sub-adviser or materially amend an existing sub-advisory
agreement, subject to approval by the Board (including a majority of
Independent Directors) but without obtaining shareholder approval. The Fund
operates in this manner ("manager-of-managers"). ING Investments may rely on
this exemptive order only if, among other things, a fund's shareholders have
approved the arrangement. The sole shareholders of the Fund approved this
"manager-of-managers" arrangements on March 18, 2008. This authority is subject
to certain conditions, including the requirement that the Directors (including
a majority of disinterested Directors) of the Fund must approve any new or
amended Sub-Advisory Agreements with sub-adviser on behalf of the Fund. In
accordance with the exemptive order received from the SEC, an information
statement describing any sub-adviser changes will be provided to shareholders
within ninety (90) days of the change. ING Investments remains responsible for
providing general management services to the manager-of-manager Fund, including
overall supervisory responsibility for the general management and investment of
the manager-of-manager Fund's assets and, subject to the review and approval of
the Board, will among other things: (i) set the manager-of-manager Fund's
overall investment strategies; (ii) evaluate, select and recommend sub-advisers
to manage all or part of the manager-of-manager Fund's assets; (iii) when
appropriate, allocate and reallocate the manager-of-manager Fund's assets among
multiple sub-advisers; (iv) monitor and evaluate the investment performance of
sub-advisers; and (v) implement procedures reasonably designed to ensure that
the sub-advisers comply with the manager-of-manager Fund's investment
objectives, policies, and restrictions.

Pursuant to the Sub-Advisory Agreement between ING Investments and ING IM, ING
IM acts as Sub-Adviser to the Fund. In this capacity, ING IM, subject to the
supervision and control of ING Investments and the Board, on behalf of the
Fund, manages the Fund's portfolio investments consistently with the Fund's
investment objective and executes any of the Fund's investment policies that it
deems appropriate to utilize from time to time. Fees payable under the
Sub-Advisory Agreement accrue daily and are paid monthly by ING Investments.
ING IM's principal address is 230 Park Avenue, New York, New York 10169. ING IM
is an affiliate of ING Investments and an indirect, wholly-owned subsidiary of
ING Groep.

The Sub-Advisory Agreement may be terminated without payment of any penalties
by the Adviser, the Directors, on behalf of the Fund, or the shareholders of
the Fund upon 60 days prior written notice.

Sub-Advisory Fees

As compensation to ING IM for its services, ING Investments pays ING IM a
monthly fee in arrears equal to 0.2025% of the Fund's average daily net assets
managed during the month. To seek to achieve a return on uninvested cash or for
other reasons, the Fund may invest its assets in ING Institutional Prime Money
Market Fund and/or one or more other money market funds advised by ING
affiliates ("ING Money Market Funds"). The Fund's purchase of shares of an ING
Money Market Fund will result in the Fund paying a proportionate share of the
expenses of the ING Money Market Fund. The Fund's Sub-Adviser will waive its
fee in an amount equal to the sub-advisory fee received by the Sub-Adviser of
the ING Money Market Fund in which the Fund invests resulting from the Fund's
investment into the ING Money Market Fund.


                                      56



Sub-Advisory Fees Paid

Because the Fund had not commenced operations as of the date of this SAI, no
sub-advisory fees were paid by the Fund as of the fiscal year ended May 31,
2007.

PORTFOLIO MANAGERS

Other Accounts Managed

The following table shows the number of accounts and total assets in the
accounts managed by the portfolio manager as of the fiscal year ended May 31,
2007.

                                           Other Pooled
                   Registered Investment    Investment
                         Companies           Vehicles          Other Accts
                   ---------------------- --------------- ---------------------
                    Number                 Number          Number
 Portfolio Manager    of                     of    Total     of
 ----------------- Accounts Total Assets  Accounts Assets Accounts Total Assets
 Paul Zemsky          39    5,189,394,019    0       $0    2/(1)/  $626,897,342
 -----------       -------- ------------- -------- ------ -------- ------------

(1) 1 account with total assets of $580,410,328 has an advisory fee that is
also based on the performance of the account.

Potential Material Conflicts of Interest

The portfolio manager may be subject to potential conflicts of interest because
the portfolio manager is responsible for other accounts in addition to the
Fund. These other accounts may include, among others, other mutual funds,
separately managed advisory accounts, commingled trust accounts, insurance
separate accounts, wrap fee programs and hedge funds. Potential conflicts may
arise out of the implementation of differing investment strategies for the
portfolio manager's various accounts, the allocation of investment
opportunities among those accounts or differences in the advisory fees paid by
the portfolio manager's accounts.

The potential conflict of interest may arise as a result of the portfolio
manager's responsibility for multiple accounts with similar investment
guidelines. Under these circumstances, a potential investment may be suitable
for more than one of the portfolio manager's accounts, but the quantity of the
investment available for purchase is less than the aggregate amount the
accounts would ideally devote to the opportunity. Similar conflicts may arise
when multiple accounts seek to dispose of the same investment.

The portfolio manager may also manage accounts whose objectives and policies
differ from that of the portfolio. These differences may be such that under
certain circumstances, trading activity appropriate for one account managed by
the portfolio manager may not be appropriate for Fund. For example, if an
account were to sell a significant position in a security, which could cause
the market price of that security to decrease, while the Fund maintained its
position in that security.

A potential conflict may arise when a portfolio manager is responsible for
accounts that have different advisory fees - the difference in the fees may
create an incentive for the portfolio manager to favor one account over
another, for example, in terms of access to particularly appealing investment
opportunities. This conflict may be heightened where an account is subject to a
performance-based fee.

As part of its compliance program, ING IM has adopted policies and procedures
reasonably designed to address the potential conflicts of interest described
above.

Finally, a potential conflict of interest may arise because the investment
mandates for certain other accounts, such as hedge funds, may allow extensive
use of short sales, which, in theory, could allow them to enter into short
positions in securities where other accounts hold long positions. ING IM has
policies and procedures reasonably designed to limit and monitor short sales by
the other accounts to avoid harm to the Fund.


                                      57



Compensation

For the portfolio managers ("Portfolio Manager") for the Fund, compensation
consists of: (a) fixed base salary; (b) bonus which is based on ING IM
performance, one and three year pre-tax performance of the accounts the
portfolio managers are primarily and jointly responsible for relative to
account benchmarks and peer universe performance, and revenue growth of the
accounts they are responsible for; and (c) long-term equity awards tied to the
performance of our parent company, ING Groep.

The Portfolio Manager for the Fund is also eligible to participate in an annual
cash incentive plan. The overall design of the annual incentive plan was
developed to tie pay to both performance and cash flows, structured in such a
way as to drive performance and promote retention of top talent. As with base
salary compensation, individual target awards are determined and set based on
external market data and internal comparators. Investment performance is
measured on both relative and absolute performance in all areas. ING IM has
defined indices (the S&P 500(R) Index) and set performance goals to
appropriately reflect requirements for the investment team. The measures for
the team are outlined on a "scorecard" that is reviewed on an annual basis.
These scorecards measure investment performance versus peer groups over one-
and three-year periods and year-to-date net cash flow (changes in the accounts'
net assets not attributable to changes in the value of the accounts'
investments) for all accounts managed by the team. The results for overall ING
IM scorecards are calculated on an asset weighted performance basis of the
individual team scorecards.

Investment professionals' performance measures for bonus determinations are
weighted by 25% being attributable to the overall ING IM performance and 75%
attributable to their specific team results (60% investment performance and 15%
net cash flow).

Based on job function, internal comparators and external market data, portfolio
managers participate in the ING Long-Term Incentive Plan. Plan awards are based
on the current year's performance as defined by the ING IM component of the
annual incentive plan. The awards vest in three years and are paid in a
combination of ING restricted stock, stock options and restricted performance
units.

If the Portfolio Manager's fixed base salary compensation exceeds a particular
threshold, he may participate in ING's deferred compensation plan. The plan
provides an opportunity to invest deferred amounts of compensation in mutual
funds, ING stock or at an annual fixed interest rate. Deferral elections are
done on an annual basis and the amount of compensation deferred is irrevocable.

Portfolio Manager Ownership of Securities

Because the Fund had not commenced operations as of the date of this SAI, the
Portfolio Manager, including investments by his immediate family members and
amounts invested through retirement and deferred compensation plans, did not
own shares of the Fund.

                               RULE 12b-1 PLANS

There are no 12b-1 fees for Class I shares of the Fund.

                                 ADMINISTRATOR

ING Funds Services, LLC ("Administrator") serves as administrator for the Fund
pursuant to an Administration Agreement with the Company. The Administrator is
an affiliate of ING Investments. The address of the Administrator is 7337 East
Doubletree Ranch Road, Scottsdale, AZ 85258. Subject to the supervision of the
Board, the Administrator provides the overall business management and
administrative services necessary to the proper conduct of the Fund's business,
except for those services performed by ING Investments under the Investment
Advisory Agreement, the Sub-Adviser under the Sub-Advisory Agreement, the
custodian for the Fund under the Custodian Agreement, the transfer agent for
the Fund under the Transfer

                                      58



Agency Agreement, and such other service providers as may be retained by the
Fund from time to time. The Administrator acts as a liaison among these service
providers to the Fund. The Administrator is also responsible for ensuring that
the Fund operate in compliance with applicable legal requirements and for
monitoring ING Investments for compliance with requirements under applicable
law and with the investment policies and restrictions of the Fund.

The Administration Agreement may be cancelled by the Board, without payment of
any penalty, by a vote of a majority of the Directors upon sixty (60) days'
written notice to the Administrator, or by the Administrator at any time,
without the payment of any penalty, upon sixty (60) days' written notice to the
Company.

Administrative Fees Paid

For its services, the Administrator is entitled to receive from the Fund a fee
at an annual rate of 0.10% of the Fund's average daily net assets.

Because the Fund had not commenced operations as of the date of this SAI, no
administrative fees were paid by the Fund as of the fiscal year ended May 31,
2007.

                                   CUSTODIAN

The Bank of New York Mellon Corporation (formerly, The Bank of New York), One
Wall Street, New York, New York 10286, serves as custodian of the Fund. The
custodian does not participate in determining the investment policies of the
Fund or in deciding which securities are purchased or sold by the Fund. The
Fund may, however, invest in obligations of the custodian and may purchase or
sell securities from or to the custodian. For portfolio securities that are
purchased and held outside the United States, The Bank of New York Mellon
Corporation has entered into sub-custodian arrangements (which are designed to
comply with Rule 17f-5 under the 1940 Act) with certain foreign banks and
clearing agencies.

                                 LEGAL COUNSEL

Legal matters for the Company are passed upon by Goodwin Procter LLP, Exchange
Place, 53 State Street, Boston, MA 02109.

                 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP serves as the independent registered public accounting firm for the
Fund. KPMG LLP provides audit services, tax return preparation and assistance
and consultation in connection with the review of SEC filings. KPMG LLP is
located at 99 High Street, Boston Massachusetts 02110.

                                TRANSFER AGENT

DST Systems, Inc, 330 West 9/th/ Street, Kansas City, Missouri 64105-1514
serves as the transfer agent and dividend-paying agent to the Fund.

                   BROKERAGE ALLOCATION AND TRADING POLICIES

Portfolio Transactions

The Sub-Adviser for the Fund places orders for the purchase and sale of
investment securities for the Fund pursuant to authority granted in the
relevant Investment Sub-Advisory Agreement. Subject to policies and procedures
approved by the Company's Board, the Sub-Adviser has discretion to make
decisions relating to placing these orders including, where applicable,
selecting the brokers or dealers that will execute the purchase and sale of
investment securities, negotiating the commission or other compensation paid to
the broker or

                                      59



dealer executing the trade, or using an electronic trading network ("ECN") or
alternative trading system ("ATS").

In situations where the Sub-Adviser resigns or ING Investments otherwise
assumes day to day management of the Fund pursuant to its Investment Advisory
Agreement with the Fund, ING Investments will perform the services described
herein as being performed by the Sub-Adviser.

How Securities Transactions are Effected

Purchases and sales of securities on a securities exchange (which include most
equity securities) are effected through brokers who charge a commission for
their services. In transactions on securities exchanges in the United States,
these commissions are negotiated, while on many foreign securities exchanges
commissions are fixed. Securities traded in the over-the-counter markets (such
as fixed income securities and some equity securities) are generally traded on
a "net" basis with market makers acting as dealers; in these transactions, the
dealers act as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer.
Transactions in certain over-the counter securities also may be effected on an
agency basis when, in the Sub-Adviser's opinion, the total price paid
(including commission) is equal to or better than the best total price
available from a market maker. In underwritten offerings, securities are
usually purchased at a fixed price, which includes an amount of compensation to
the underwriter, generally referred to as the underwriter's concession or
discount. On occasion, certain money market instruments may be purchased
directly from an issuer, in which case no commissions or discounts are paid.
The Sub-Adviser may also place trades using an ECN or ATS.

How the Sub-Adviser Selects Broker Dealers

The Sub-Adviser has a duty to seek to obtain best execution of the Fund's
orders, taking into consideration a full range of factors designed to produce
the most favorable overall terms reasonably available under the circumstances.
In selecting brokers and dealers to execute trades, the Sub-Adviser may
consider both the characteristics of the trade and the full range and quality
of the brokerage services available from eligible broker dealers. This
consideration often involves qualitative as well as quantitative judgments.
Factors relevant to the nature of the trade may include, among others, price
(including the applicable brokerage commission or dollar spread), the size of
the order, the nature and characteristics (including liquidity) of the market
for the security, the difficulty of execution, the timing of the order,
potential market impact, and the need for confidentiality, speed, and certainty
of execution. Factors relevant to the range and quality of brokerage services
available from eligible brokers and dealers may include, among others, the
firms' execution, clearance, settlement, and other operational facilities;
willingness and ability to commit capital or take risk in positioning a block
of securities, where necessary; special expertise in particular securities or
markets; ability to provide liquidity, speed and anonymity; the nature and
quality of other brokerage and research services provided to the Sub-Adviser
(consistent with the "safe harbor" described below); and the firms' general
reputation, financial condition and responsiveness to the Sub-Adviser, as
demonstrated in the particular transaction or other transactions. Subject to
its duty to seek best execution of the Fund's orders, the Sub-Adviser may
select broker-dealers that participate in commission recapture programs that
have been established for the benefit of the Fund. Under these programs, the
participating broker-dealers will return to the Fund (in the form of a credit
to the Fund) a portion of the brokerage commissions paid to the broker-dealers
by the Fund. Theses credits are used to pay certain expenses of the Fund. These
commission recapture payments benefit the Fund and not the Sub-Adviser.

The Safe Harbor for Soft Dollar Practices

In selecting broker dealers to execute a trade for the Fund, the Sub-Adviser
may consider the nature and quality of brokerage and research services provided
to the Sub-Adviser as a factor in evaluating the most favorable overall terms
reasonably available under the circumstances. As permitted by Section 28(e) of
the 1934 Act, the Sub-Adviser may cause the Fund to pay a broker-dealer a
commission for effecting a securities

                                      60



transaction for the Fund that is in excess of the commission which another
broker-dealer would have charged for effecting the transaction, if the
Sub-Adviser makes a good faith determination that the broker's commission paid
by the Fund is reasonable in relation to the value of the brokerage and
research services provided by the broker-dealer, viewed in terms of either the
particular transaction or the Sub-Adviser's overall responsibilities to the
Fund and its other investment advisory clients. The practice of using a portion
of the Fund's commission dollars to pay for brokerage and research services
provided to the Sub-Adviser is sometimes referred to as "soft dollars."
Section 28(e) is sometimes referred to as a "safe harbor," because it permits
this practice, subject to a number of restrictions, including the Sub-Adviser's
compliance with certain procedural requirements and limitations on the type of
brokerage and research services that qualify for the safe harbor.

      Brokerage and Research Products and Services Under the Safe Harbor -
   Research products and services may include, but are not limited to, general
   economic, political, business and market information and reviews, industry
   and company information and reviews, evaluations of securities and
   recommendations as to the purchase and sale of securities, financial data on
   a company or companies, performance and risk measuring services and
   analysis, stock price quotation services, computerized historical financial
   databases and related software, credit rating services, analysis of
   corporate responsibility issues, brokerage analysts' earning estimates,
   computerized links to current market data, software dedicated to research,
   and portfolio modeling. Research services may be provided in the form of
   reports, computer-generated data feeds and other services, telephone
   contacts, and personal meetings with securities analysts, as well as in the
   form of meetings arranged with corporate officers and industry
   spokespersons, economists, academics and governmental representatives.
   Brokerage products and services assist in the execution, clearance and
   settlement of securities transactions, as well as functions incidental
   thereto, including but not limited to, related communication and
   connectivity services and equipment, software related to order routing,
   market access, algorithmic trading, and other trading activities. On
   occasion, a broker-dealer may furnish the Sub-Adviser with a service that
   has a mixed use (that is, the service is used both for brokerage and
   research activities that are within the safe harbor and for other
   activities). In this case, the Sub-Adviser is required to reasonably
   allocate the cost of the service so that any portion of the service that
   does not qualify for the safe harbor is paid for by the Sub-Adviser from its
   own funds, and not by portfolio commissions paid by the Fund.

      Benefits to the Sub-Adviser--Research products and services provided to
   the Sub-Adviser by broker dealers that effect securities transactions for
   the Fund may be used by the Sub-Adviser in servicing all of its accounts.
   Accordingly, not all of these services may be used by the Sub-Adviser in
   connection with the Fund. Some of these products and services are also
   available to the Sub-Adviser for cash and some do not have an explicit cost
   or determinable value. The research received does not reduce the
   sub-advisory fees payable to the Sub-Adviser for services provided to the
   Fund. The Sub-Adviser's expenses would likely increase if the Sub-Adviser
   had to generate these research products and services through its own efforts
   or if it paid for these products or services itself.

Broker Dealers that are Affiliated with ING Investments or a Sub-Adviser

Portfolio transactions may be executed by brokers affiliated with the ING
Groep, ING Investments, or the Sub-Adviser, so long as the commission paid to
the affiliated broker is reasonable and fair compared to the commission that
would be charged by an unaffiliated broker in a comparable transaction.

Prohibition on Use of Brokerage Commissions for Sales or Promotional Activities

The placement of portfolio brokerage with broker-dealers who have sold shares
of the Fund is subject to rules adopted by the Securities and Exchange
Commission and the Financial Industry Regulatory Authority ("FINRA"). Under
these rules, the Sub-Adviser may not consider a broker's promotional or sales
efforts on behalf of the Fund when selecting a broker dealer for Fund portfolio
transactions and neither the Fund, nor a Sub-Adviser, may enter into an
agreement under which the Fund directs brokerage transactions (or revenue

                                      61



generated from such transactions) to a broker dealer to pay for distribution of
Fund shares. The Fund has adopted policies and procedures, approved by the
Board, that are designed to attain compliance with these prohibitions.

Principal Trades and Research

Purchases of securities for the Fund also may be made directly from issuers or
from underwriters. Purchase and sale transactions may be effected through
dealers which specialize in the types of securities which the Fund will be
holding. Dealers and underwriters usually act as principals for their own
account. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the asked price. If the execution and price offered by more
than one dealer or underwriter are comparable, the order may be allocated to a
dealer or underwriter which has provided such research or other services as
mentioned above.

More Information about trading in Fixed Income Securities

Purchases and sales of fixed-income securities will usually be principal
transactions. Such securities often will be purchased or sold from or to
dealers serving as market makers for the securities at a net price. The Fund
may also purchase such securities in underwritten offerings and will, on
occasion, purchase securities directly from the issuer. Generally, fixed income
securities are traded on a net basis and do not involve brokerage commissions.
The cost of executing fixed income securities transactions consists primarily
of dealer spreads and underwriting commissions.

In purchasing and selling fixed income securities, it is the policy of the Fund
to obtain the best results while taking into account the dealer's general
execution and operational facilities, the type of transaction involved and
other factors, such as the dealer's risk in positioning the securities
involved. While the Sub-Adviser generally seeks reasonably competitive spreads
or commissions, the Fund will not necessarily pay the lowest spread or
commission available.

Transition Management

Changes in the Sub-Adviser, investment personnel, reorganizations or mergers of
the Fund may result in the sale of a significant portion or even all of the
Fund's portfolio securities. This type of change generally will increase
trading costs and the portfolio turnover for the Fund. The Fund, ING
Investments, or the Sub-Adviser may engage a broker-dealer to provide
transition management services in connection with a change in Sub-Adviser, a
reorganization, or other changes.

Allocation of Trades

Some securities considered for investment by the Fund may also be appropriate
for other clients served by the Fund's Sub-Adviser. If the purchase or sale of
securities consistent with the investment policies of the Fund and one or more
of these other clients is considered at or about the same time, transactions in
such securities will be placed on an aggregate basis and allocated among the
Fund and such other clients in a manner deemed fair and equitable, over time,
by the Sub-Adviser and consistent with the Sub-Adviser's written policies and
procedures. The Sub-Adviser may use different methods of allocating the results
aggregated trades. The Sub-Adviser's relevant policies and procedures and the
results of aggregated trades in which the Fund participated are subject to
periodic review by the Board. To the extent the Fund seeks to acquire (or
dispose of) the same security at the same time, the Fund may not be able to
acquire (or dispose of) as large a position in such security as it desires, or
it may have to pay a higher (or receive a lower) price for such security. It is
recognized that in some cases, this system could have a detrimental effect on
the price or value of the security insofar as the Fund is concerned. However,
over time, the Fund's ability to participate in aggregate trades is expected to
provide better execution for the Fund.


                                      62



Cross-Transactions

The Board has adopted a policy allowing trades to be made between affiliated
registered investment companies or series thereof provided they meet the
condition of Rule 17a-7 under the 1940 Act and conditions of the policy.

Because the Fund had not commenced operations as of the date of this SAI, no
brokerage commissions were paid as of the fiscal year ended May 31, 2007.

Because the Fund had not commenced operations as of the date of this SAI, no
brokerage commissions were paid to firms that also provided research,
statistical, or other services to the Adviser as of the fiscal year ended
May 31, 2007.

Because the Fund had not commenced operations as of the date of this SAI, the
Fund did not use affiliated brokers to execute portfolio transactions as of the
fiscal year ended May 31, 2007.

                       PURCHASE AND REDEMPTION OF SHARES

A complete description of the manner in which the shares may be purchased,
redeemed or exchanged appears in the Prospectus under "Shareholder Guide."

Class I shares of the Company are purchased and redeemed at the applicable NAV
next determined after a purchase or redemption order is received, as described
in the Prospectus.

Except as provided below, payment for shares redeemed will be made within seven
days (or the maximum period allowed by law, if shorter) after the redemption
request is received in proper form by the transfer agent. The right to redeem
shares may be suspended or payment therefore postponed for any period during
which: (a) trading on the New York Stock Exchange ("NYSE") is restricted as
determined by the SEC or the NYSE is closed for other than weekends and
holidays; (b) an emergency exists, as determined by the SEC, as a result of
which: (i) disposal by the Fund of securities owned by it is not reasonably
practicable, or (ii) it is not reasonably practicable for the Fund to determine
fairly the value of its net assets; or (c) the SEC by order so permits for the
protection of shareholders of the Fund.

Certain brokers or other designated intermediaries such as third party
administrators or plan trustees may accept purchase and redemption orders on
behalf of the Fund. The transfer agent will be deemed to have received such an
order when the broker or the designee has accepted the order. Customer orders
are priced at the NAV next computed after such acceptance. Such order may be
transmitted to the Fund or their agents several hours after the time of the
acceptance and pricing.

If you invest in the Fund through a financial intermediary, you may be charged
a commission or transaction fee by the financial intermediary for the purchase
and sale of Fund shares.

Any written request to redeem shares in amounts in excess of $100,000 must bear
the signatures of all the registered holders of those shares. The signatures
must be guaranteed by a national or state bank, trust company or a member of a
national securities exchange. Information about any additional requirements for
shares held in the name of a corporation, partnership, trustee, guardian or in
any other representative capacity can be obtained from the transfer agent.

The Fund has the right to satisfy redemption requests by delivering securities
from its investment portfolio rather than cash when it decides that
distributing cash would not be in the best interests of shareholders. However,
the Fund is obligated to redeem its shares solely in cash up to an amount equal
to the lesser of $250,000 or 1% of its net assets for any one shareholder of
the Fund in any 90-day period. To the extent possible, the Fund will distribute
readily marketable securities, in conformity with applicable rules of the SEC.

                                      63



In the event such redemption is requested by institutional investors, the Fund
will weigh the effects on nonredeeming shareholders in applying this policy.
Securities distributed to shareholders may be difficult to sell and may result
in additional costs to the shareholders.

Purchases and exchanges should be made for investment purposes only. The Fund
reserves the right to reject any specific purchase or exchange request. In the
event the Fund rejects an exchange request, neither the redemption nor the
purchase side of the exchange will be processed until the Fund receives further
redemption instructions.

                       SHAREHOLDER ACCOUNTS AND SERVICES

Shareholder Accounts and Services Systematic Investment

The Systematic Investment feature, using the Electronic Funds Transfer ("EFT")
capability, allows you to make automatic monthly investments in the Fund. On
the application, you may select the amount of money to be moved. In order to
elect EFT, you must first have established an account, subject to the minimum
amount specified in the Prospectus. Thereafter, the minimum monthly Systematic
Investment is currently $50 and we reserve the right to increase that amount.
EFT transactions will be effective 15 days following the receipt by the
Transfer Agent of your application. The Systematic Investment feature and EFT
capability will be terminated upon total redemption of your shares. Payment of
redemption proceeds will be held until a Systematic Investment has cleared
which may take up to 12 calendar days.

Shareholder Information

The Fund's transfer agent will maintain your account information. Account
statements will be sent at least quarterly. A Form 1099 generally will also be
sent each year by January 31. Annual and semiannual shareholder reports will
also be sent to shareholders. The transfer agent may charge you a fee for
special requests such as historical transcripts of your account and copies of
cancelled checks.

Consolidated statements reflecting current values, share balances and
year-to-date transactions generally will be sent to you each quarter. All
accounts identified by the same social security number and address will be
consolidated. For example, you could receive a consolidated statement showing
your individual and IRA accounts. With the prior permission of the other
shareholders involved, you have the option of requesting that accounts
controlled by other shareholders be shown on one consolidated statement. For
example, information on your individual account, your IRA, your spouse's
individual account and your spouse's IRA may be shown on one consolidated
statement.

Cross Investing

Cross investing may only be made in the Fund that has been previously
established with the minimum investment. To request information or to initiate
a transaction under either or both of these features, please call
1-866-BUY-FUND (866-289-3863).

Dividend Investing. You may elect to have dividend and/or capital gains
distributions automatically invested in the same class of one other Fund.

Systematic Exchange. You may establish an automatic exchange of shares from one
Fund to another. The exchange will occur on or about the 15th day of each month
and must be for a minimum of $50 per month. Because this transaction is treated
as an exchange, the policies related to the exchange privilege apply. There may
be tax consequences associated with these exchanges. Please consult your tax
adviser.


                                      64



Signature Guarantee

A signature guarantee is verification of the authenticity of the signature
given by certain authorized institutions. The Company requires a medallion
signature guarantee for redemption requests in amounts in excess of $100,000.
In addition, if you wish to have your redemption proceeds transferred by wire
to your designated bank account, paid to someone other than the shareholder of
record, or sent somewhere other than the shareholder address of record, you
must provide a medallion signature guarantee with your written redemption
instructions regardless of the amount of redemption.

A medallion signature guarantee may be obtained from a domestic bank or trust
company, broker, dealer, clearing agency, savings association, or other
financial institution which is participating in a medallion program recognized
by the Securities Transfer Association. The three recognized medallion programs
are Securities Transfer Agents Medallion Program ("STAMP"), Stock Exchanges
Medallion Program ("SEMP") and New York Stock Exchange, Inc. Medallion
Signature Program ("NYSE MSP"). Signature guarantees from financial
institutions which are not participating in one of these programs will not be
accepted. Please note that signature guarantees are not provided by notaries
public. The Company reserves the right to amend or discontinue this policy at
any time and establish other criteria for verifying the authenticity of any
redemption request.

                                NET ASSET VALUE

As noted in the Prospectus, the NAV and offering price of each class of the
Fund's shares will be determined once daily as of the close of regular trading
("Market Close") on the NYSE (normally 4:00 p.m. Eastern time unless otherwise
designated by the NYSE) during each day on which the NYSE is open for trading.
As of the date of this SAI, the NYSE is closed on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Portfolio securities listed or traded on a national securities exchange will be
valued at the last reported sale price on the valuation day. Securities traded
on an exchange for which there has been no sale that day and other securities
traded in the over-the-counter market will be valued at the mean between the
last reported bid and asked prices on the valuation day. Portfolio securities
reported by NASDAQ will be valued at the NASDAQ Official Closing Price on the
valuation day. In cases in which securities are traded on more than one
exchange, the securities are valued on the exchange that is normally the
primary market. Short-term obligations maturing in 60 days or less will
generally be valued at amortized cost. This involves valuing a security at cost
on the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Fund would receive if it sold the instrument. See "Net Asset Value" in the
shareholder guide of the Prospectus. The long-term debt obligations held in the
Fund's portfolio will be valued at the mean between the most recent bid and
asked prices as obtained from one or more dealers that make markets in the
securities when over-the counter market quotations are readily available.

Securities and assets for which market quotations are not readily available
(which may include certain restricted securities which are subject to
limitations as to their sale) or are deemed unreliable are valued at their fair
values as determined in good faith by or under the supervision of the Fund's
Board, in accordance with methods that are specifically authorized by the
Board. Securities traded on exchanges, including foreign exchanges, which close
earlier than the time that the Fund calculates its NAV, may also be valued at
their fair values as determined in good faith by or under the supervision of
the Fund's Board, in accordance with methods that are specifically authorized
by the Board. The valuation procedures applied in any specific instance may
vary from case to case. With respect to a restricted security, for example,
consideration is generally given to the cost of the investment, the market
value of any unrestricted securities of the same class

                                      65



at the time of valuation, the potential expiration of restrictions on the
security, the existence of any registration rights, the costs to the Fund
related to registration of the security, as well as factors relevant to the
issuer itself. Consideration may also be given to the price and extent of any
public trading in similar securities of the issuer or comparable companies'
securities.

The value of a foreign security traded on an exchange outside the United States
is generally based on the price of a foreign security on the principal foreign
exchange where it trades as of the time the Fund determines its NAV or if the
foreign exchange closes prior to the time the Fund determines its NAV, the most
recent closing price of the foreign security on its principal exchange. Trading
in certain non-U.S. securities may not take place on all days on which the NYSE
is open. Further, trading takes place in various foreign markets on days on
which the NYSE is not open. Consequently, the calculation of the Fund's NAV may
not take place contemporaneously with the determination of the prices of
securities held by the Fund in foreign securities markets. Further, the value
of the Fund's assets may be significantly affected by foreign trading on days
when a shareholder cannot purchase or redeem shares of the Fund. In calculating
the Fund's NAV, foreign securities in foreign currency are converted to U.S.
dollar equivalents.

If an event occurs after the time at which the market for foreign securities
held by the Fund closes but before the time that the Fund's NAV is calculated,
such event may cause the closing price on the foreign exchange to not represent
a readily available reliable market value quotation for such securities at the
time the Fund determines its NAV. In such a case, the Fund will use the fair
value of such securities as determined under the Fund's valuation procedures.
Events after the close of trading on a foreign market that could require the
Fund to fair value some or all of its foreign securities include, among others,
securities trading in the United States and other markets, corporate
announcements, natural and other disasters, and political and other events.
Among other elements of analysis in the determination of a security's fair
value, the Board has authorized the use of one or more independent research
services to assist with such determinations. An independent research service
may use statistical analyses and quantitative models to help determine fair
value as of the time the Fund calculates its NAV. There can be no assurance
that such models accurately reflect the behavior of the applicable markets or
the effect of the behavior of such markets on the fair value of securities, nor
that such markets will continue to behave in a fashion that is consistent with
such models. Unlike the closing price of a security on an exchange, fair value
determinations employ elements of judgment. Consequently, the fair value
assigned to a security may not represent the actual value that the Fund could
obtain if it were to sell the security at the time of the close of the NYSE.
Pursuant to procedures adopted by the Board, the Fund is not obligated to use
the fair valuations suggested by any research service, and valuation
recommendations provided by such research services may be overridden if other
events have occurred, or if other fair valuations are determined in good faith
to be more accurate. Unless an event is such that it causes the Fund to
determine that the closing prices for one or more securities do not represent
readily available reliable market value quotations at the time the Fund
determines its NAV, events that occur between the time of the close of the
foreign market on which they are traded and the close of regular trading on the
NYSE will not be reflected in the Fund's NAV.

Options on securities, currencies, futures, and other financial instruments
purchased by the Fund are valued at their last bid price in the case of listed
options or at the average of the last bid prices obtained from dealers in the
case of OTC Options.

The price of silver and gold bullion is determined by measuring the mean
between the closing bid and asked quotations of silver and gold bullion set at
the time of the close of the NYSE, as supplied by the applicable Fund's
custodian bank or other broker-dealers or banks approved by the Fund, on each
date that the NYSE is open for business.

The fair value of other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearest cent, is the NAV per
share.


                                      66



In computing the NAV for a class of shares of the Fund, all class-specific
liabilities incurred or accrued are deducted from the class' net assets. The
resulting net assets are divided by the number of shares of the class
outstanding at the time of the valuation and the result (adjusted to the
nearest cent) is the NAV per share.

Orders received by dealers prior to Market Close will be confirmed at the
offering price computed as of the close of regular trading on the NYSE provided
the order is received by the Transfer Agent prior to its Market Close that same
day. It is the responsibility of the dealer to insure that all orders are
transmitted timely to the Fund. Orders received by dealers after Market Close
will be confirmed at the next computed offering price as described in the
Prospectus.

                              TAX CONSIDERATIONS

The following discussion summarizes certain U.S. federal income tax
considerations generally affecting the Fund and their shareholders. This
discussion does not provide a detailed explanation of all tax consequences, and
shareholders are advised to consult their own tax advisers with respect to the
particular federal, state, local and foreign tax consequences to them of an
investment in the Fund. This discussion is based on the Code, Treasury
Regulations issued thereunder, and judicial and administrative authorities as
in effect on the date of this SAI, all of which are subject to change, which
change may be retroactive.

The Fund intends to qualify annually as a RIC under the provisions of
Subchapter M of the Code. To so qualify and to be taxed as a RIC, the Fund
must, among other things: (a) derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock or securities and
gains from the sale of other disposition of foreign currencies, net income
dividend from an interest in a qualified publicly traded partnership, or other
income (including gains from options, futures contracts and forward contracts)
derived with respect to the Fund's business of investing in stocks, securities
or currencies; (b) diversify its holdings so that, at the end of each quarter
of the taxable year, (i) at least 50% of the value of the Fund's total assets
is represented by cash and cash items, U.S. government securities, securities
of other RICs, and other securities, with such other securities limited in
respect of any one issuer to an amount not greater in value than 5% of the
Fund's total assets and to not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the
Fund's total assets is invested in the securities (other than U.S. government
securities or securities of other RICs) of any one issuer, of any two or more
issuers that the Fund controls and that are determined to be engaged in the
same business or similar or related businesses or of our more qualified
publicly traded partnerships; and (c) distribute at least 90% of its investment
company taxable income (which includes, among other items, dividends, interest
and net short-term capital gains in excess of net long-term capital losses)
each taxable year.

The U.S. Treasury Department is authorized to issue regulations providing that
foreign currency gains that are not directly related to the Fund's principal
business of investing in stock or securities (or options and futures with
respect to stock or securities) will be excluded from the income which
qualifies for purposes of the 90% gross income requirement described above. To
date, however, no such regulations have been issued.

As a RIC, the Fund generally will be relieved of liability for U.S. federal
income tax on that portion of its investment company taxable income and net
realized capital gains which it distributes to its shareholders. Amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement also are subject to a nondeductible 4% excise tax. To prevent
application of the excise tax, the Fund currently intends to make distributions
in accordance with the calendar year distribution requirement.

If, in any taxable year, the Fund fails to qualify as a RIC under the Code or
fails to meet the distribution requirement, it would be taxed in the same
manner as an ordinary corporation and distributions to its shareholders would
not be deductible by the Fund in computing its taxable income. In addition, the
Fund's distributions, to the extent derived from its current or accumulated
earnings and profits, would constitute dividends (which may be

                                      67



eligible for the corporate dividends-received deduction) which are taxable to
shareholders as ordinary income or as qualifying dividends eligible for a
reduced rate of tax as discussed below. If the Fund fails to qualify as a RIC
in any year, it must pay out its earnings and profits accumulated in that year
in order to qualify again as a RIC. Moreover, if the Fund failed to qualify as
a RIC for a period greater than one taxable year, the Fund may be required to
recognize any net built-in gains with respect to certain of its assets (the
excess of the aggregate gains, including items of income, over aggregate losses
that would have been realized if the Fund had been liquidated) in order to
qualify as a RIC in a subsequent year.

Distributions

Dividends of investment company taxable income (including short-term capital
gains) are generally taxable to shareholders as ordinary income. Distributions
of investment company taxable income may be eligible for the corporate
dividends-received deduction to the extent that such distributions are
attributable to the Fund's dividend income from U.S. corporations, and if other
applicable requirements are met. However, the alternative minimum tax
applicable to corporations may reduce the benefit of the dividends-received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses) designated by the Fund as
capital gain dividends are not eligible for the dividends-received deduction
and will generally be taxable to shareholders as long-term capital gains,
regardless of the length of time the Fund's shares have been held by a
shareholder. Net capital gains from assets held for one year or less will be
taxed as ordinary income. Generally, dividends and distributions are taxable to
shareholders, whether received in cash or reinvested in shares of the Fund. Any
distributions that are not from the Fund's investment company taxable income or
net capital gain may be characterized as a return of capital to shareholders
or, in some cases, as capital gain. Shareholders will be notified annually as
to the federal tax status of dividends and distributions they receive and any
tax withheld thereon.

Current tax law generally provides for a maximum tax rate for individual
taxpayers of 15% on long-term capital gains and on certain qualifying dividends
on corporate stock. The rate reductions do not apply to corporate taxpayers.
The Fund will be able to separately designate distributions of any qualifying
long-term capital gains or qualifying dividends earned by the Fund that would
be eligible for the lower maximum rate. A shareholder would also have to
satisfy a more than 60-day holding period with respect to any distributions of
qualifying dividends in order to obtain the benefit of the lower rate.
Distributions from Fund investing in bonds and other debt instruments will not
generally qualify for the lower rates. Note that distributions of earnings from
dividends paid by "qualified foreign corporations" can also qualify for the
lower tax rates on qualifying dividends. Qualified foreign corporations are
corporations incorporated in a U.S. possession, corporations whose stock is
readily tradable on an established securities market in the United States, and
corporations eligible for the benefits of a comprehensive income tax treaty
with the United States which satisfy certain other requirements. Foreign
personal holding companies, foreign investment companies and passive foreign
investment companies are not treated as "qualified foreign corporations." The
lower rates on long-term capital gains and qualifying dividends are currently
scheduled to apply through 2010. In the absence of further Congressional
action, for the calendar years after 2010, the maximum rate on long-term
capital gains for individual taxpayers would increase to 20% and income from
dividends would be taxed at the rates applicable to ordinary income.

Dividends, including capital gain dividends, declared in October, November, or
December with a record date in such month and paid during the following January
will be treated as having been paid by the Fund and received by shareholders on
December 31 of the calendar year in which declared, rather than the calendar
year in which the dividends are actually received.

Distributions by the Fund reduce the NAV of the Fund shares. Should a
distribution reduce the NAV below a shareholder's cost basis, the distribution
nevertheless may be taxable to the shareholder as ordinary income or capital
gain as described above, even though, from an investment standpoint, it may
constitute a partial return of capital. In particular, investors should be
careful to consider the tax implication of buying shares just prior to a
distribution by the Fund. The price of shares purchased at that time includes
the amount of the

                                      68



forthcoming distribution, but the distribution will generally be taxable to
them.

Original Issue Discount and Market Discount

Certain debt securities acquired by the Fund may be treated as debt securities
that were originally issued at a discount. Original issue discount can
generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Fund, original issue discount that accrues on a
debt security in a given year generally is treated for federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code.

Some of the debt securities may be purchased by the Fund at a discount which
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount generally will be treated as ordinary income to the extent it does not
exceed the accrued market discount on such debt security. If the amount of
market discount is more than a de minimis amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which such Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to the portion of the market discount on
the debt security that has accrued but has not previously been included in
income. In general the amount of market discount that must be included for each
period is equal to the lesser of (i) the amount of market discount accruing
during such period (plus any accrued market discount for prior periods not
previously taken into account) or (ii) the amount of the principal payment with
respect to such period. Generally, market discount accrues on a daily basis for
each day the debt security is held by the Fund at a constant rate over the time
remaining to the debt security's maturity or, at the election of the Fund, at a
constant yield to maturity which takes into account the semi-annual compounding
of interest.

Foreign Currency Transactions

Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time the Fund accrues income or
other receivable or accrues expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects such receivable or
pays such liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in a foreign
currency and on disposition of certain financial contracts and options, gains
or losses attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security or contract and the date of disposition
also are treated as ordinary gain or loss. These gains and losses, referred to
under the Code as "Section 988" gains and losses, may increase or decrease the
amount of the Fund's net investment income to be distributed to its
shareholders as ordinary income.

Passive Foreign Investment Companies

The Fund may invest in stocks of foreign companies that are classified under
the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Fund held the PFIC stock. The Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in
such prior taxable years) even though the Fund distributes the corresponding
income to shareholders. Gain from the sale of PFIC stock as well as certain
distributions from a PFIC are treated as excess distributions. All excess
distributions are taxable as ordinary income.

The Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that

                                      69



currently may be available, the Fund generally would be required to include in
its gross income its share of the earnings of a PFIC on a current basis,
regardless of whether any distributions are received from the PFIC. If this
election is made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. Alternatively, another election may
be available that involves marking to market the Fund's PFIC stock at the end
of each taxable year with the result that unrealized gains are treated as
though they were realized and are reported as ordinary income; any
mark-to-market losses, as well as loss from an actual disposition of PFIC
stock, are reported as ordinary loss to the extent of any net mark-to-market
gains included in income in prior years.

Because the application of the PFIC rules may affect, among other things, the
character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject the Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to the Fund that did not invest in PFIC stock. Note
that distributions from a PFIC are not eligible for the reduced rate of tax on
"qualifying dividends."

Foreign Withholding Taxes

Income received by the Fund from sources within foreign countries may be
subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible and may elect to "pass through" to the Fund's
shareholders the amount of foreign income and similar taxes paid by the Fund.
Pursuant to this election, a shareholder will be required to include in gross
income (in addition to taxable dividends actually received) his/her pro rata
share of the foreign taxes paid by the Fund, and will be entitled either to
deduct (as an itemized deduction) his/her pro rata share of foreign income and
similar taxes in computing his/her taxable income or to use it as a foreign tax
credit against his/her U.S. federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions, but such a shareholder may be eligible to claim
the foreign tax credit (see below). Each shareholder will be notified within
sixty (60) days after the close of the relevant Fund's taxable year whether the
foreign taxes paid by the Fund will "pass through" for that year. Furthermore,
the amount of the foreign tax credit that is available may be limited to the
extent that dividends from a foreign corporation qualify for the lower tax rate
on "qualifying dividends."

Generally, a credit for foreign taxes is subject to the limitations that it may
not exceed the shareholder's U.S. tax attributable to his foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Fund's income flows through to its shareholders. With respect to
the Fund, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains, including fluctuation
gains from foreign currency denominated debt securities, receivables and
payables, will be treated as ordinary income derived from U.S. sources. The
limitation on foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax credit), including
the foreign source passive income passed through by the Fund. Shareholders may
be unable to claim a credit for the full amount of their proportionate share of
the foreign taxes paid by the Fund. The foreign tax credit limitation rules do
not apply to certain electing individual taxpayers who have limited creditable
foreign taxes and no foreign source income other than passive investment-type
income. The foreign tax credit is eliminated with respect to foreign taxes
withheld on dividends if the dividend-paying shares or the shares of the Fund
are held by the Fund or the shareholders, as the case may be, for less than
sixteen (16) days (forty-six (46) days in the case of preferred shares) during
the thirty-one (31) day period (ninety-one (91) day period for preferred
shares) beginning fifteen (15) days (forty-five (45) days for preferred shares)
before the shares become ex-dividend. If the Fund is not eligible to make the
election to "pass-through" to its shareholders its foreign taxes, the foreign
income taxes it pays generally will reduce investment company taxable income
and the distributions by the Fund will be treated as U.S. source income.

The taxation of equity options (including options on narrow-based stock
indices) and over-the-counter options

                                      70



on debt securities is governed by Code Section 1234. Pursuant to Code
Section 1234, with respect to a put or call option that is purchased by the
Fund, if the option is sold, any resulting gain or loss will be a capital gain
or loss, and will be short-term or long term, depending upon the holding period
of the option. If the option expires, the resulting loss is a capital loss and
is short-term or long-term, depending upon the holding period of the option. If
the option is exercised, the cost of the option, in the case of a call option,
is added to the basis of the purchased security and, in the case of a put
option, reduces the amount realized on the underlying security in determining
gain or loss.

Certain options and financial contracts in which the Fund may invest are
"Section 1256 contracts." Gains or losses on Section 1256 contracts generally
are considered 60% long-term and 40% short-term capital gains or losses
("60/40"); however, foreign currency gains or losses (as discussed below)
arising from certain Section 1256 contracts may be treated as ordinary income
or loss. Also, Section 1256 contracts held by the Fund at the end of each
taxable year (and on certain other dates as prescribed under the Code) are
"marked-to-market" with the result that unrealized gains or losses are treated
as though they were realized.

Generally, the hedging transactions undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of the straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by the Fund which is taxed as ordinary income when
distributed to shareholders.

The Fund may make one or more of the elections available under the Code which
are applicable to straddles. If the Fund makes any of the elections, the
amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
may operate to accelerate the recognition of gains or losses from the affected
straddle positions.

Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to shareholders as ordinary income or
long-term capital gain may be increased or decreased as compared to the Fund
that did not engage in such hedging transactions.

Notwithstanding any of the foregoing, the Fund may recognize gain (but not
loss) from a constructive sale of certain "appreciated financial positions" if
the Fund enters into a short sale, notional principal contract, futures or
forward contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options, futures and
forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt instruments. Constructive
sale treatment does not apply to certain transactions if such transaction is
closed before the end of the 30/th/ day after the close of the Fund's taxable
year and the Fund holds the appreciated financial position throughout the sixty
(60) day period beginning on the day such transaction was closed, if certain
conditions were met.

Under recently enacted tax law, certain hedging activities may cause a dividend
that would otherwise be subject to the lower tax rate applicable to "qualifying
dividend," to instead be taxed at the tax rate of tax applicable to ordinary
income.

Requirements relating to the Fund's tax status as a RIC may limit the extent to
which the Fund will be able to engage in transactions in options and foreign
currency forward contracts.


                                      71



Short Sales and Short Sales Against the Box

If the Fund sells securities short against the box, unless certain constructive
sale rules (discussed above) apply, it may realize a capital gain or loss upon
the closing of the sale. Such gain or loss generally will be long- or
short-term depending upon the length of time the Fund held the security which
it sold short. In some circumstances, short sales may have the effect of
reducing an otherwise applicable holding period of a security in the portfolio.
The constructive sale rule, however, alters this treatment by treating certain
short sales against the box and other transactions as a constructive sale of
the underlying security held by the Fund, thereby requiring current recognition
of gain, as described more fully under "Options and Hedging Transactions"
above. Similarly, if the Fund enters into a short sale of property that becomes
substantially worthless, the Fund will recognize gain at that time as though it
had closed the short sale. Future Treasury regulations may apply similar
treatment to other transactions with respect to property that becomes
substantially worthless.

Other Investment Companies

It is possible that by investing in other investment companies, the Fund may
not be able to meet the calendar year distribution requirement and may be
subject to federal income and excise tax. The diversification and distribution
requirements applicable to the Fund may limit the extent to which the Fund will
be able to invest in other investment companies. When the Fund invests in other
investment companies, shareholders of the Fund bear their proportionate share
of the underlying investment companies' fees and expenses.

Sale or Other Disposition of Shares

Upon the sale or exchange of Fund shares, a shareholder will realize a taxable
gain or loss depending upon such shareholder's basis in the shares. Such gain
or loss will be treated as capital gain or loss if the shares are capital
assets in the shareholder's hand, which generally may be eligible for reduced
federal tax rates, depending on the shareholder's holding period for the
shares. Any loss realized on a sale or exchange will be disallowed to the
extent that the shares disposed of are replaced (including replacement through
the reinvesting of dividends and capital gain distributions in the Fund) within
a period of sixty-one (61) days beginning thirty (30) days before and ending
thirty (30) days after the disposition of the shares. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss. Any
loss realized by a shareholder on the sale of the Fund's shares held by the
shareholder for six (6) months or less will be treated for federal income tax
purposes as a long-term capital loss to the extent of any distributions of
capital gain dividends received by the shareholder with respect to such shares.
As noted above, the maximum tax rate for individual taxpayers is 15% on
long-term capital gains.

In some cases, shareholders will not be permitted to take sales charges into
account for purposes of determining the amount of gain or loss realized on the
disposition of their shares. This prohibition generally applies where (1) the
shareholder incurs a sales charge in acquiring the stock of a RIC, (2) the
stock is disposed of before the 91st day after the date on which it was
acquired, and (3) the shareholder subsequently acquires shares of the same or
another RIC and the otherwise applicable sales charge is reduced or eliminated
under a "reinvestment right" received upon the initial purchase of shares of
stock. In that case, the gain or loss recognized will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales charge with respect to the newly
acquired shares is reduced as a result of having incurred a sales charge
initially. Sales charges affected by this rule are treated as if they were
incurred with respect to the stock acquired under the reinvestment right. This
provision may be applied to successive acquisitions of stock.

Backup Withholding

The Fund generally will be required to withhold federal income tax at a rate
equal to the fourth lowest tax rate applicable to unmarried individuals
(currently 28%) ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to shareholders if (1) the shareholder
fails to furnish the Fund with the

                                      72



shareholder's correct taxpayer identification number or social security number
and to make such certifications as the Fund may require, (2) the IRS notifies
the shareholder or the Fund that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to certify
that he or she is not subject to backup withholding. Any amounts withheld may
be credited against the shareholder's federal income tax liability.

Foreign Shareholders

Taxation of a shareholder who, as to the United States, is a nonresident alien
individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder. If the income from the Fund is not effectively connected with
a U.S. trade or business carried on by a foreign shareholder, ordinary income
dividends (including distributions of any net short-term capital gains) will
generally be subject to U.S. withholding tax at the rate of 30% (or lower
treaty rate) upon the gross amount of the dividend. Note that the 15% rate of
tax applicable to certain dividends (discussed above) does not apply to
dividends paid to foreign shareholders. Such a foreign shareholder would
generally be exempt from U.S. federal income tax on gains realized on the sale
of shares of the Fund, and distributions of net long-term capital gains that
are designated as capital gain dividends. If the income from the Fund is
effectively connected with a U.S. trade or business carried on by a foreign
shareholder, then ordinary income dividends, capital gain dividends and any
gains realized upon the sale of shares of the Fund will be subject to U.S.
federal income tax at the rates applicable to U.S. citizens or domestic
corporations.

The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund, including the
applicability of foreign taxes.

Other Taxes

Distributions also may be subject to state, local and foreign taxes. U.S. tax
rules applicable to foreign investors may differ significantly from those
outlined above. This discussion does not purport to deal with all of the tax
consequences applicable to individual shareholders. Shareholders are advised to
consult their own tax advisers for details with respect to the particular tax
consequences to them of an investment in the Fund.

                                  DISTRIBUTOR

Shares of the Fund are distributed by the Distributor pursuant to an
underwriting agreement between the Company on behalf of the Fund and the
Distributor ("Underwriting Agreement"). The Underwriting Agreement requires the
Distributor to use its best efforts on a continuing basis to solicit purchases
of shares of the Fund. The Company and the Distributor have agreed to indemnify
each other against certain liabilities. At the direction of the Distributor,
all sales charges may at times be reallowed to an authorized dealer
("Authorized Dealer"). If 90% or more of the sales commission is reallowed,
such Authorized dealer may be deemed to be an "underwriter" as that term is
defined under the 1933 Act. After an initial term, the Underwriting Agreement
will remain in effect for two years from its inception date and from year to
year thereafter only if its continuance is approved annually by a majority of
the Board who are not parties to such agreement or "interested persons" of any
such party and must be approved either by votes of a majority of the Directors
or a majority of the outstanding voting securities of the Fund. See the
Prospectus for information on how to purchase and sell shares of the Fund, and
the charges and expenses associated with an investment. The sales charge
retained by the Distributor is not an expense of the Fund and has no effect on
the NAV of the Fund. The Distributor's address is 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258. The Distributor is a Delaware corporation and
is an affiliate of ING Investments and an indirect wholly-owned subsidiary of
ING Groep.


                                      73



The Distributor may, at its discretion, pay additional cash compensation to its
employee sales staff for sales by certain broker-dealers or "focus firms." The
Distributor may pay up to an additional 0.10% to its employee sales staff for
sales that are made by registered representatives of these focus firms. As of
the date of this SAI, the focus firms are: A.G. Edwards & Sons, Inc.; Advantage
Capital Corporation; AIG Financial Advisors, Inc.; American General Securities,
Inc.; Banc of America Investment Services, Inc.; Banc of America Securities
LLC; Banc One Securities Corporation; Chase Investment Services; Citigroup
Global Markets, Inc; Citistreet Equities LLC; Financial Network Investment
Corporation; FSC Securities Corporation; H & R Block Financial Advisors LLC;
ING Financial Partners, Inc.; JP Morgan Investment, LLC; JP Morgan Securities,
Inc.; Linsco Private Ledger Financial Services; Merrill Lynch, Morgan Stanley &
Co. Inc.; Morgan Stanley Dean Witter; Multi-Financial Securities Corporation;
PrimeVest Financial Services, Inc.; Prudential Investment Management Services,
LLC; Prudential Retirement Brokerage Services, Inc.; Prudential Securities;
Raymond James & Associates, Inc.; Raymond James Financial Services, Inc.; RBC
Dain Rauscher, Inc.; Royal Alliance Associates, Inc.; UBS Financial Services,
Inc.; Wachovia Bank; Wachovia Brokerage Services, Inc.; Wachovia Securities
Financial Network, Inc.; Wachovia Securities LLC; Wells Fargo Bank; Wells Fargo
Bank N.A.; and Wells Fargo Investments LLC.

Because the Fund had not commenced operations as of the date of this SAI, the
Distributor recovered no amounts in sales charges in connection with the sale
of shares as of the fiscal year ended May 31, 2007.

Because the Fund had not commenced operations as of the date of this SAI, the
Distributor recovered no sales charges in connection with the sale of shares of
the Fund as of the fiscal year ended May 31, 2007.

Because the Fund had not commenced operations as of the date of this SAI, no
commissions or other compensation was received by each principal underwriter
who is an affiliated person of the Fund or an affiliated person of that
affiliated person, directly or indirectly, as of the fiscal year ended May 31,
2007.

                        CALCULATION OF PERFORMANCE DATA

Average Annual Total Return Quotation

The Fund may, from time to time, include "total return" in advertisements or
reports to shareholders or prospective investors. Quotations of average annual
total return will be expressed in terms of the average annual compounded rate
of return of a hypothetical investment in the Fund over periods of one (1),
five (5) and ten (10) years (up to the life of the Fund), calculated pursuant
to the following formula which is prescribed by the SEC:

                              P (1 + T)/n/ = ERV

Where: P   =a hypothetical initial payment of $1,000,
       T   =the average annual total return,
       n   =the number of years, and
       ERV =the ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period.

All total return figures assume that all dividends are reinvested when paid.

From time to time, the Fund may advertise its average annual total return over
various periods of time. These total return figures show the average percentage
change in value of an investment in the Fund from the beginning date of the
measuring period. These figures reflect changes in the price of the Fund's
shares and assume that any income dividends and/or capital gains distributions
made by the Fund during the period were reinvested in shares of the Fund.
Figures will be given for one-, five- and ten- year periods (if applicable) and
may be given for other periods as well (such as from commencement of the Fund's
operations, or on a year-by-year basis).


                                      74



Average Annual Total Return (After Taxes On Distributions) Quotation

The Fund may, from time to time, include "total return after taxes on
distributions" in advertisements or reports to shareholders or prospective
investors. Quotations of average annual total return after taxes on
distributions will be expressed in terms of the average annual compounded rate
of return of a hypothetical investment in the Fund over periods of one (1),
five (5) and ten (10) years (up to the life of the Fund), calculated pursuant
to the following formula which is prescribed by the SEC:

                           P (1 + T) /n/ = ATV\\D\\

Where: P        =a hypothetical initial payment of $1,000,
       T        =the average annual total return (after taxes on distributions),
       n        =the number of years, and
       ATV\\D\\ =ending value of a hypothetical $1,000 payment made at the beginning of the one-, five-, or ten-year periods (or
                 fractional portion), after taxes on Fund distributions but not after taxes on redemptions.

All total return figures assume that all dividends are reinvested when paid.
Taxes are calculated using the highest individual marginal federal income tax
rates in effect on the reinvestment date. The rates used correspond to the
character of each component of the distributions (e.g., ordinary income rate
for ordinary income distributions, short-term capital gain rate for short-term
capital gain distributions, and long-term capital gain rate for long-term
capital gain distributions). The calculations do not consider any potential tax
liabilities other than federal tax liability.

From time to time, the Fund may advertise its average annual total return over
various periods of time. These total return figures show the average percentage
change in value of an investment in the Fund from the beginning date of the
measuring period. These figures reflect changes in the price of the Fund's
shares and assume that any income dividends and/or capital gains distributions
made by the Fund during the period were reinvested in shares of the Fund.
Figures will be given for one-, five- and ten- year periods (if applicable) and
may be given for other periods as well (such as from commencement of the Fund's
operations, or on a year-by-year basis).

Average Annual Total Return (After Taxes on Distributions and Redemption)
Quotation

The Fund may, from time to time, include "total return after taxes on
distributions and redemption" in advertisements or reports to shareholders or
prospective investors. Quotations of average annual total return after taxes on
distributions and redemption will be expressed in terms of the average annual
compounded rate of return of a hypothetical investment in the Fund over periods
of one (1), five (5) and ten (10) years (up to the life of the Fund),
calculated pursuant to the following formula which is prescribed by the SEC:

                           P (1 + T) /n/ = ATV\\DR\\

Where: P         =a hypothetical initial payment of $1,000,
       T         =the average annual total return (after taxes on distributions),
       n         =the number of years, and
       ATV\\DR\\ =ending value of a hypothetical $1,000 payment made at the beginning of the one-, five-, or ten-year periods
                  (or fractional portion), after taxes on Fund distributions and redemption.

All total return figures assume that all dividends are reinvested when paid.
Taxes are calculated using the highest individual marginal federal income tax
rates in effect on the reinvestment date. The rates used correspond to the
character of each component of the distributions (e.g., ordinary income rate
for ordinary income distributions, short-term capital gain rate for short-term
capital gain distributions, and long-term capital gain rate for long-term
capital gain distributions). The ending value is determined by subtracting
capital gain taxes resulting from the redemption and adding the tax benefit
from capital losses resulting from the

                                      75



redemption. The calculations do not consider any potential tax liabilities
other than federal tax liability.

From time to time, the Fund may advertise its average annual total return over
various periods of time. These total return figures show the average percentage
change in value of an investment in the Fund from the beginning date of the
measuring period. These figures reflect changes in the price of the Fund's
shares and assume that any income dividends and/or capital gains distributions
made by the Fund during the period were reinvested in shares of the Fund.
Figures will be given for one-, five- and ten- year periods (if applicable) and
may be given for other periods as well (such as from commencement of the Fund's
operations, or on a year-by-year basis).

Dividend Yield

The Fund may also publish a distribution rate in sales literature and in
investor communications preceded or accompanied by a copy of the current
Prospectus. The current distribution rate for the Fund is the annualization of
the Fund's distribution per share divided by the maximum offering price per
share of the Fund at the respective month-end. The current distribution rate
may differ from current yield because the distribution rate may contain items
of capital gain and other items of income, while yield reflects only earned net
investment income. In each case, the yield, distribution rates and total return
figures will reflect all recurring charges against Fund income and will assume
the payment of the maximum sales load.

Additional Performance Quotations

Advertisements of total return will always show a calculation that includes the
effect of the maximum sales charge but may also show total return without
giving effect to that charge. Because these additional quotations will not
reflect the maximum sales charge payable, these performance quotations will be
higher than the performance quotations that reflect the maximum sales charge.

Total returns and yields are based on past results and are not necessarily a
prediction of future performance.

                            PERFORMANCE COMPARISONS

In reports or other communications to shareholders or in advertising material,
the Fund may compare the performance of its Class I shares with that of other
mutual funds as listed in the rankings prepared by Lipper Analytical Services,
Inc., Morningstar, Inc., CDA Technologies, Inc., Value Line, Inc. or similar
independent services that monitor the performance of mutual funds or with other
appropriate indices of investment securities. In addition, certain indices may
be used to illustrate historic performance of select asset classes. The
performance information may also include evaluations of the Fund published by
nationally recognized ranking services and by financial publications that are
nationally recognized, such as Business Week, Forbes, Fortune, Institutional
Investor, Money and The Wall Street Journal. If the Fund compares its
performance to other funds or to relevant indices, the Fund's performance will
be stated in the same terms in which such comparative data and indices are
stated, which is normally total return rather than yield. For these purposes
the performance of the Fund, as well as the performance of such investment
companies or indices, may not reflect sales charges, which, if reflected, would
reduce performance results.

                             FINANCIAL STATEMENTS

The Fund's annual and semi-annual shareholder reports may be obtained, when
available, without charge by contacting ING Funds at 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258, (800) 992-0180.


                                      76



                                  APPENDIX A


ING FUNDS

PROXY VOTING PROCEDURES AND GUIDELINES

Effective Date: July 29, 2003

Revision Date: March 13, 2008

 

I. INTRODUCTION

The following are the Proxy Voting Procedures and Guidelines (the “Procedures and Guidelines”) of the ING Funds set forth on Exhibit 1 attached hereto and each portfolio or series thereof (each a “Fund” and collectively, the “Funds”). The purpose of these Procedures and Guidelines is to set forth the process by which each Fund will vote proxies related to the equity assets in its investment portfolio (the “portfolio securities”). The Procedures and Guidelines have been approved by the Funds’ Boards of Trustees/Directors1 (each a “Board” and collectively, the “Boards”), including a majority of the independent Trustees/Directors2 of the Board. Only the Board may amend these Procedures and Guidelines. The Board shall review these Procedures and Guidelines at its discretion, and make any revisions thereto as deemed appropriate by the Board.

 

II. DELEGATION OF VOTING AUTHORITY

The Board hereby delegates to ING Investments, LLC (the “Adviser”) the authority and responsibility to vote all proxies with respect to all portfolio securities of the Fund, in accordance with the then-current Procedures and Guidelines approved by the Board. The Board may revoke such delegation with respect to any proxy or proposal, and assume the responsibility of voting any Fund proxy or proxies, as it deems appropriate. The President or Chief Financial Officer of a Fund may approve non-material amendments to the Procedures and Guidelines for immediate implementation, subject to ratification at the next regularly scheduled meeting of the Board.

When a Fund participates in the lending of its securities and the securities are on loan at record date, proxies related to such securities will not be forwarded to the Adviser by the Fund’s custodian and therefore will not be voted. However, the Adviser shall use best efforts to recall or restrict specific securities from loan for the purpose of facilitating a “material” vote as described in the Adviser’s proxy voting procedures (the “Adviser Procedures”).

 

1

Reference in these Procedures to one or more Funds shall, as applicable, mean those Funds that are under the jurisdiction of the particular Board at issue. No provision in these Procedures is intended to impose any duty upon the particular Board with respect to any other Fund.

 

2

The independent Trustees/Directors are those Board members who are not “interested persons” of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940.

 

A-1


Funds that are “funds-of-funds” will “echo” vote their interests in underlying mutual funds, which may include ING Funds (or portfolios or series thereof) other than those set forth on Exhibit 1 attached hereto. This means that, if the fund-of-funds must vote on a proposal with respect to an underlying investment company, the fund-of-funds will vote its interest in that underlying fund in the same proportion all other shareholders in the investment company voted their interests.

 

III. APPROVAL AND REVIEW OF PROCEDURES

The Adviser has adopted proxy voting procedures in connection with the voting of portfolio securities for the Funds as attached hereto in Exhibit 3. The Board hereby approves such procedures.

Any material changes to the Adviser Procedures must be approved by the Board prior to voting any Fund proxies in accordance with such amended procedures. The President or Chief Financial Officer of the Adviser may approve non-material amendments to the Procedures and Guidelines for immediate implementation, subject to ratification at the next regularly scheduled meeting of the Board of the Fund.

 

IV. VOTING PROCEDURES AND GUIDELINES

The Guidelines that are set forth in Exhibit 4 hereto specify the manner in which the Funds generally will vote with respect to the proposals discussed therein.

Unless otherwise noted, the defined terms used hereafter shall have the same meaning as defined in the Adviser Procedures.

 

  A. Routine Matters

The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear “For,” “Against,” “Withhold” or “Abstain” on a proposal. However, the Agent shall be directed to refer any proxy proposal to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional (as such term is defined for purposes of the Adviser Procedures) recommends a vote contrary to the Guidelines.

 

  B. Matters Requiring Case-by-Case Consideration

The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted “case-by-case” consideration.

 

A-2


Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.

Except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation, the Proxy Coordinator will forward the Agent’s analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.

The Proxy Coordinator shall use best efforts to convene the Proxy Group with respect to all matters requiring its consideration. In the event quorum requirements cannot be timely met in connection with a voting deadline, it shall be the policy of the Funds to vote in accordance with the Agent’s recommendation, unless the Agent’s recommendation is deemed to be conflicted as provided for under the Adviser Procedures, in which case no action shall be taken on such matter (i.e., a “Non-Vote”).

 

  1. Within-Guidelines Votes: Votes in Accordance with a Fund’s Guidelines and/or, where applicable, Agent Recommendation

In the event the Proxy Group, and where applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in this manner. Except as provided for herein, no Conflicts Report (as such term is defined for purposes of the Adviser Procedures) is required in connection with Within-Guidelines Votes.

 

  2. Non-Votes: Votes in Which No Action is Taken

The Proxy Group may recommend that a Fund refrain from voting under circumstances including, but not limited to, the following: (1) if the economic effect on shareholders’ interests or the value of the portfolio holding is indeterminable or insignificant, e.g., proxies in connection with fractional shares securities no longer held in the portfolio of an ING Fund or proxies being considered on behalf of a Fund that is no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g., certain international proxies, particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security. In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy. The Proxy Group may provide the Proxy Coordinator with standing instructions on parameters that would dictate a Non-Vote without the Proxy Group’s review of a specific proxy. It is noted a Non-Vote determination would generally not be made in connection with voting rights received pursuant to class action participation; while a Fund may no longer hold the security, a continuing economic effect on shareholders’ interests is likely.

 

A-3


Reasonable efforts shall be made to secure and vote all other proxies for the Funds, but, particularly in markets in which shareholders’ rights are limited, Non-Votes may also occur in connection with a Fund’s related inability to timely access ballots or other proxy information in connection with its portfolio securities.

Non-Votes may also result in certain cases in which the Agent’s recommendation has been deemed to be conflicted, as described in Section IV.B. above and Section V. below.

 

  3. Out-of-Guidelines Votes: Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, Where No Recommendation is Provided by Agent, or Where Agent’s Recommendation is Conflicted

If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, if the Agent has made no recommendation on a matter requiring case-by-case consideration and the Procedures and Guidelines are silent, or the Agent’s recommendation on a matter requiring case-by-case consideration is deemed to be conflicted as provided for under the Adviser Procedures, the Proxy Coordinator will then request that all members of the Proxy Group, including any members not in attendance at the meeting at which the relevant proxy is being considered, and each Investment Professional participating in the voting process complete a Conflicts Report (as such term is defined for purposes of the Adviser Procedures), in substantially the form attached hereto as Exhibit 2. As provided for in the Adviser Procedures, the Proxy Coordinator shall be responsible for identifying to Counsel potential conflicts of interest with respect to the Agent.

If Counsel determines that a conflict of interest appears to exist with respect to the Agent, any member of the Proxy Group or the participating Investment Professional(s), the Proxy Coordinator will instruct the Agent to vote the proxy as directed by the Guidelines, or in accordance with the recommendation of the Agent, where applicable. Cases in which any member of the Proxy Group or a participating Investment Professional has failed to complete and return a Conflicts Report shall be treated as if a conflict of interest appears to exist, except that, upon Counsel’s finding that a conflict of interest exists with respect to one or more members of the Proxy Group or the Advisers generally, the remaining members of the Proxy Group shall not be required to complete a Conflicts Report in connection with the proxy.

If Counsel determines that each member of the Proxy Group has completed and returned a Conflicts Report and there does not appear to be a conflict of interest with respect to the Agent, any member of the Proxy Group or the participating Investment Professional(s), the Proxy Coordinator will instruct the Agent to vote the proxy as recommended by the Proxy Group.

 

A-4


V. CONFLICTS OF INTEREST

In any case in which there appears to be a conflict of interest with respect to the Agent’s recommendation on a matter requiring case-by-case consideration, no action shall be taken on such matter (i.e., a “Non-Vote”). In any case in which a member of the Proxy Group has failed to complete and return a Conflicts Report when so required, or in which there appears to be a conflict of interest with respect to any member of the Proxy Group or any Investment Professional participating in the voting process, the Agent will be directed to vote Within Guidelines so that the Adviser shall have no opportunity to vote a Fund’s proxy in a situation in which the Adviser or certain other related parties may be deemed to have a conflict of interest.

 

VI. REPORTING AND RECORD RETENTION

 

  A. Reporting by the Funds

Annually in August, each Fund will post its proxy voting record or a link thereto for the prior one-year period ending on June 30th on the ING Funds website. The proxy voting record for each Fund will also be available in the EDGAR database on the SEC’s website.

 

  B. Reporting to the Boards

At each regularly scheduled meeting, the Board will receive a report from the Adviser’s Proxy Coordinator indicating each proxy proposal, or a summary of such proposals, (1) that was voted Out-of-Guidelines; and (2) for which the Proxy Group initially recommended a vote Out-of-Guidelines, but which was ultimately voted Within Guidelines in accordance with Section V hereof. Such report shall indicate the name of the issuer, the substance of the proposal, and the reasons for voting, or recommending, an Out-of-Guidelines Vote.

 

A-5


EXHIBIT 1

to the

ING Funds

Proxy Voting Procedures

ING VP BALANCED PORTFOLIO, INC.

ING STRATEGIC ALLOCATION PORTFOLIOS, INC.

ING GET FUNDS

ING VP BOND PORTFOLIO

ING VP MONEY MARKET PORTFOLIO

ING VARIABLE FUNDS

ING VARIABLE PORTFOLIOS, INC.

ING SERIES FUND, INC.

 

A-6


EXHIBIT 2

to the

ING Funds

Proxy Voting Procedures

FORM OF CONFLICTS REPORT

 

A-7


FORM OF CONFLICT OF INTEREST REPORT – PROXY GROUP MEMBERS

PROXY VOTING OF THE ING FUNDS

 

Issuer:

  

Meeting Date:

  

1.

  

To your knowledge, do you, or anyone in your immediate household, have a personal relationship of any sort with the Issuer, its officers, directors, or employees, or might you, or anyone in your immediate household, be affected by the outcome of the proxy proposal? This does not include former business relationships with which you have had no communication for at least one year and have no expectation of future or ongoing communication.

Explanation:

           YES   NO

¨      ¨ 

2.

  

To your knowledge, (1) does any ING Entity have a Material Business Relationship with the Issuer or (2) is any ING Entity actively seeking to have a Material Business Relationship with the Issuer?

Explanation:

           YES  NO

¨      ¨ 

3.

  

Have you, or, to your knowledge, anyone else employed by an ING Entity, been contacted by any person or organization, including another ING employee or affiliate, with a recommendation or request that a proxy be voted for (or against) a particular proposal with respect to the Issuer? This includes communications from the Issuer or its Affiliates, from a shareholder, or from a commercial, union or any other special interest group, but would not include routine communications from proxy solicitors.

Explanation:

           YES  NO

¨      ¨ 

4.

  

Are you aware of any other information that might lead a reasonable person to conclude that an ING Entity appears to have a conflict of interest with respect to the proxy proposal?

Explanation:

           YES  NO

¨      ¨ 

Name:

   Date:   

Certification: As a member of the Proxy Group, I understand that I have a fiduciary duty to vote Fund proxies solely in the best interests of the Fund(s) and its (their) shareholders. I certify that my recommendation with respect to the vote on the proxy proposal relating to the Issuer noted above is based solely on this criterion.

Definitions:

Affiliate means (A) any company directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the Issuer; (B) any company 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the issuer; (C) any company directly or indirectly controlling, controlled by, or under common control with, the Issuer; (D) any officer, director, partner, copartner, or employee of the Issuer; (E) if the Issuer is an investment company, any investment adviser thereof or any member of an advisory board thereof; and (F) if the Issuer is an unincorporated investment company not having a board of directors, the depositor thereof.

ING Entity means all direct and indirect subsidiaries, joint ventures and business units of ING Groep N.V., including, but not limited to, ING Investments, LLC, ING Funds Distributor, LLC, ING Investment Management Co., ING Investment Management Americas, Directed Services, LLC and ING Financial Advisers, LLC.

Issuer includes the company with respect to which the proxy is solicited, and any other entity which you know to be affiliated therewith, such as a pension plan, joint venture, merger partner, subsidiary or parent, or company under common control, but does not include entities associated with the Issuer solely through the provision of consulting, advisory or other professional services.

Material Business Relationship means, but, subject to review by Counsel, may not be limited to, a relationship which you know to constitute (1) participation in a joint venture, (2) revenues to ING of $1 million or more per year, or (3) ownership by ING of more than 5% of the outstanding securities of the Issuer (“5% Issuer”) (except that an Issuer’s affiliation with a 5% Issuer shall not constitute a de facto conflict of interest for ING with the first Issuer).

** Please return to ING Funds Proxy Coordinator at 480-477-2786 or proxycoordinator@ingfunds.com **

 

A-8


EXHIBIT 3

to the

ING Funds

Proxy Voting Procedures

ING INVESTMENTS, LLC,

ING INVESTMENT MANAGEMENT CO.

AND

DIRECTED SERVICES, LLC

PROXY VOTING PROCEDURES

 

I. INTRODUCTION

ING Investments, LLC, ING Investment Management Co. and Directed Services, LLC (each an “Adviser” and collectively, the “Advisers”) are the investment advisers for the registered investment companies and each series or portfolio thereof (each a “Fund” and collectively, the “Funds”) comprising the ING family of funds. As such, the Advisers have been delegated the authority to vote proxies with respect to securities for certain Funds over which they have day-to-day portfolio management responsibility.

The Advisers will abide by the proxy voting guidelines adopted by a Fund’s respective Board of Directors or Trustees (each a “Board” and collectively, the “Boards”) with regard to the voting of proxies unless otherwise provided in the proxy voting procedures adopted by a Fund’s Board.

In voting proxies, the Advisers are guided by general fiduciary principles. Each must act prudently, solely in the interest of the beneficial owners of the Funds it manages. The Advisers will not subordinate the interest of beneficial owners to unrelated objectives. Each Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.

The following are the Proxy Voting Procedures of ING Investments, LLC, ING Investment Management Co. and Directed Services, LLC (the “Adviser Procedures”) with respect to the voting of proxies on behalf of their client Funds as approved by the respective Board of each Fund.

Unless otherwise noted, best efforts shall be used to vote proxies in all instances.

 

A-9


II. ROLES AND RESPONSIBILITIES

 

  A. Proxy Coordinator

The Proxy Coordinator identified in Appendix 1 will assist in the coordination of the voting of each Fund’s proxies in accordance with the ING Funds Proxy Voting Procedures and Guidelines (the “Procedures” or “Guidelines” and collectively the “Procedures and Guidelines”). The Proxy Coordinator is authorized to direct the Agent to vote a Fund’s proxy in accordance with the Procedures and Guidelines unless the Proxy Coordinator receives a recommendation from an Investment Professional (as described below) to vote contrary to the Procedures and Guidelines. In such event, and in connection with proxy proposals requiring case-by-case consideration (except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation), the Proxy Coordinator will call a meeting of the Proxy Group (as described below).

Responsibilities assigned herein to the Proxy Coordinator, or activities in support thereof, may be performed by such members of the Proxy Group or employees of the Advisers’ affiliates as are deemed appropriate by the Proxy Group.

Unless specified otherwise, information provided to the Proxy Coordinator in connection with duties of the parties described herein shall be deemed delivered to the Advisers.

 

  B. Agent

An independent proxy voting service (the “Agent”), as approved by the Board of each Fund, shall be engaged to assist in the voting of Fund proxies for publicly traded securities through the provision of vote analysis, implementation, recordkeeping and disclosure services. The Agent is ISS Governance Services, a unit of RiskMetrics Group, Inc. The Agent is responsible for coordinating with the Funds’ custodians to ensure that all proxy materials received by the custodians relating to the portfolio securities are processed in a timely fashion. To the extent applicable, the Agent is required to vote and/or refer all proxies in accordance with these Adviser Procedures. The Agent will retain a record of all proxy votes handled by the Agent. Such record must reflect all the information required to be disclosed in a Fund’s Form N-PX pursuant to Rule 30b1-4 under the Investment Company Act. In addition, the Agent is responsible for maintaining copies of all proxy statements received by issuers and to promptly provide such materials to the Adviser upon request.

The Agent shall be instructed to vote all proxies in accordance with a Fund’s Guidelines, except as otherwise instructed through the Proxy Coordinator by the Adviser’s Proxy Group, or a Fund’s Compliance Committee (“Committee”).

The Agent shall be instructed to obtain all proxies from the Funds’ custodians and to review each proxy proposal against the Guidelines. The Agent also shall be requested to call the Proxy Coordinator’s attention to specific proxy proposals that although governed by the Guidelines appear to involve unusual or controversial issues.

 

A-10


Subject to the oversight of the Advisers, the Agent shall establish and maintain adequate internal controls and policies in connection with the provision of proxy voting services voting to the Advisers, including methods to reasonably ensure that its analysis and recommendations are not influenced by conflict of interest, and shall disclose such controls and policies to the Advisers when and as provided for herein. Unless otherwise specified, references herein to recommendations of the Agent shall refer to those in which no conflict of interest has been identified.

 

  C. Proxy Group

The Adviser shall establish a Proxy Group (the “Group” or “Proxy Group”) which shall assist in the review of the Agent’s recommendations when a proxy voting issue is referred to the Group through the Proxy Coordinator. The members of the Proxy Group, which may include employees of the Advisers’ affiliates, are identified in Appendix 1, as may be amended from time at the Advisers’ discretion.

A minimum of four (4) members of the Proxy Group (or three (3) if one member of the quorum is either the Fund’s Chief Investment Risk Officer or Chief Financial Officer) shall constitute a quorum for purposes of taking action at any meeting of the Group. The vote of a simple majority of the members present and voting shall determine any matter submitted to a vote. Tie votes shall be broken by securing the vote of members not present at the meeting; provided, however, that the Proxy Coordinator shall ensure compliance with all applicable voting and conflict of interest procedures and shall use best efforts to secure votes from all or as many absent members as may reasonably be accomplished. The Proxy Group may meet in person or by telephone. The Proxy Group also may take action via electronic mail in lieu of a meeting, provided that each Group member has received a copy of any relevant electronic mail transmissions circulated by each other participating Group member prior to voting and provided that the Proxy Coordinator follows the directions of a majority of a quorum (as defined above) responding via electronic mail. For all votes taken in person or by telephone or teleconference, the vote shall be taken outside the presence of any person other than the members of the Proxy Group and such other persons whose attendance may be deemed appropriate by the Proxy Group from time to time in furtherance of its duties or the day-to-day administration of the Funds. In its discretion, the Proxy Group may provide the Proxy Coordinator with standing instructions to perform responsibilities assigned herein to the Proxy Group, or activities in support thereof, on its behalf, provided that such instructions do not contravene any requirements of these Adviser Procedures or a Fund’s Procedures and Guidelines.

A meeting of the Proxy Group will be held whenever (1) the Proxy Coordinator receives a recommendation from an Investment Professional to vote a Fund’s proxy contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, (2) the Agent has made no recommendation with respect to a vote on a proposal, or (3) a matter requires case-by-case consideration, including those in which the Agent’s recommendation is deemed to be conflicted as provided for under these Adviser Procedures, provided that, if the Proxy Group has previously provided the Proxy

 

A-11


Coordinator with standing instructions to vote in accordance with the Agent’s recommendation and no issue of conflict must be considered, the Proxy Coordinator may implement the instructions without calling a meeting of the Proxy Group.

For each proposal referred to the Proxy Group, it will review (1) the relevant Procedures and Guidelines, (2) the recommendation of the Agent, if any, (3) the recommendation of the Investment Professional(s), if any, and (4) any other resources that any member of the Proxy Group deems appropriate to aid in a determination of a recommendation.

If the Proxy Group recommends that a Fund vote in accordance with the Procedures and Guidelines, or the recommendation of the Agent, where applicable, it shall instruct the Proxy Coordinator to so advise the Agent.

If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, or if the Agent’s recommendation on a matter requiring case-by-case consideration is deemed to be conflicted, it shall follow the procedures for such voting as established by a Fund’s Board.

The Proxy Coordinator shall use best efforts to convene the Proxy Group with respect to all matters requiring its consideration. In the event quorum requirements cannot be timely met in connection with to a voting deadline, the Proxy Coordinator shall follow the procedures for such voting as established by a Fund’s Board.

 

  D. Investment Professionals

The Funds’ Advisers, sub-advisers and/or portfolio managers (each referred to herein as an “Investment Professional” and collectively, “Investment Professionals”) may submit, or be asked to submit, a recommendation to the Proxy Group regarding the voting of proxies related to the portfolio securities over which they have day-to-day portfolio management responsibility. The Investment Professionals may accompany their recommendation with any other research materials that they deem appropriate or with a request the vote be deemed “material” in the context of the portfolio(s) they manage, such that that lending activity on behalf of such portfolio(s) with respect to the relevant security should be reviewed by the Proxy Group and considered for recall and/or restriction. Input from the relevant sub-advisers and/or portfolio managers shall be given primary consideration in the Proxy Group’s determination of whether a given proxy vote is to be deemed material and the associated security accordingly restricted from lending. The determination that a vote is material in the context of a Fund’s portfolio shall not mean that such vote is considered material across all Funds voting that meeting. In order to recall or restrict shares timely for material voting purposes, the Proxy Group shall use best efforts to consider, and when deemed appropriate, to act upon, such requests timely, and requests to review lending activity in connection with a potentially material vote may be initiated by any relevant Investment Professional and submitted for the Proxy Group’s consideration at any time.

 

A-12


III. VOTING PROCEDURES

 

  A. In all cases, the Adviser shall follow the voting procedures as set forth in the Procedures and Guidelines of the Fund on whose behalf the Adviser is exercising delegated authority to vote.

 

  B. Routine Matters

The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear “For”, “Against,” “Withhold” or “Abstain” on a proposal. However, the Agent shall be directed to refer any proxy proposal to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional recommends a vote contrary to the Guidelines.

 

  C. Matters Requiring Case-by-Case Consideration

The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted “case-by-case” consideration.

Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.

Except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation, the Proxy Coordinator will forward the Agent’s analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.

 

  1. Within-Guidelines Votes: Votes in Accordance with a Fund’s Guidelines and/or, where applicable, Agent Recommendation

In the event the Proxy Group, and where applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in this manner. Except as provided for herein, no Conflicts Report (as such term is defined herein) is required in connection with Within-Guidelines Votes.

 

  2. Non-Votes: Votes in Which No Action is Taken

The Proxy Group may recommend that a Fund refrain from voting under circumstances including, but not limited to, the following: (1) if the economic effect on shareholders’ interests or the value of the portfolio holding is

 

A-13


indeterminable or insignificant, e.g., proxies in connection with fractional shares, securities no longer held in the portfolio of an ING Fund or proxies being considered on behalf of a Fund that is no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g., certain international proxies, particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security. In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy. The Proxy Group may provide the Proxy Coordinator with standing instructions on parameters that would dictate a Non-Vote without the Proxy Group’s review of a specific proxy. It is noted a Non-Vote determination would generally not be made in connection with voting rights received pursuant to class action participation; while a Fund may no longer hold the security, a continuing economic effect on shareholders’ interests is likely.

Reasonable efforts shall be made to secure and vote all other proxies for the Funds, but, particularly in markets in which shareholders’ rights are limited, Non-Votes may also occur in connection with a Fund’s related inability to timely access ballots or other proxy information in connection with its portfolio securities.

Non-Votes may also result in certain cases in which the Agent’s recommendation has been deemed to be conflicted, as provided for in the Funds’ Procedures.

 

  3. Out-of-Guidelines Votes: Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, Where No Recommendation is Provided by Agent, or Where Agent’s Recommendation is Conflicted

If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, if the Agent has made no recommendation on a matter requiring case-by-case consideration and the Procedures and Guidelines are silent, or the Agent’s recommendation on a matter requiring case-by-case consideration is deemed to be conflicted as provided for under these Adviser Procedures, the Proxy Coordinator will then implement the procedures for handling such votes as adopted by the Fund’s Board.

 

  4. The Proxy Coordinator will maintain a record of all proxy questions that have been referred to a Fund’s Compliance Committee, all applicable recommendations, analysis, research and Conflicts Reports.

 

IV. ASSESSMENT OF THE AGENT AND CONFLICTS OF INTEREST

In furtherance of the Advisers’ fiduciary duty to the Funds and their beneficial owners, the Advisers shall establish the following:

 

  A. Assessment of the Agent

 

A-14


The Advisers shall establish that the Agent (1) is independent from the Advisers, (2) has resources that indicate it can competently provide analysis of proxy issues and (3) can make recommendations in an impartial manner and in the best interests of the Funds and their beneficial owners. The Advisers shall utilize, and the Agent shall comply with, such methods for establishing the foregoing as the Advisers may deem reasonably appropriate and shall do not less than annually as well as prior to engaging the services of any new proxy service. The Agent shall also notify the Advisers in writing within fifteen (15) calendar days of any material change to information previously provided to an Adviser in connection with establishing the Agent’s independence, competence or impartiality.

Information provided in connection with assessment of the Agent shall be forwarded to a member of the mutual funds practice group of ING US Legal Services (“Counsel”) for review. Counsel shall review such information and advise the Proxy Coordinator as to whether a material concern exists and if so, determine the most appropriate course of action to eliminate such concern.

 

  B. Conflicts of Interest

The Advisers shall establish and maintain procedures to identify and address conflicts that may arise from time to time concerning the Agent. Upon the Advisers’ request, which shall be not less than annually, and within fifteen (15) calendar days of any material change to such information previously provided to an Adviser, the Agent shall provide the Advisers with such information as the Advisers deem reasonable and appropriate for use in determining material relationships of the Agent that may pose a conflict of interest with respect to the Agent’s proxy analysis or recommendations. The Proxy Coordinator shall forward all such information to Counsel for review. Counsel shall review such information and provide the Proxy Coordinator with a brief statement regarding whether or not a material conflict of interest is present. Matters as to which a material conflict of interest is deemed to be present shall be handled as provided in the Fund’s Procedures and Guidelines.

In connection with their participation in the voting process for portfolio securities, each member of the Proxy Group, and each Investment Professional participating in the voting process, must act solely in the best interests of the beneficial owners of the applicable Fund. The members of the Proxy Group may not subordinate the interests of the Fund’s beneficial owners to unrelated objectives, including taking steps to reasonably insulate the voting process from any conflict of interest that may exist in connection with the Agent’s services or utilization thereof.

For all matters for which the Proxy Group recommends an Out-of-Guidelines Vote, or for which a recommendation contrary to that of the Agent has been received from an Investment Professional and is to be utilized, the Proxy Coordinator will implement the procedures for handling such votes as adopted by the Fund’s Board, including completion of such Conflicts Reports as may be required under the Fund’s Procedures. Completed Conflicts Reports shall be provided to the Proxy Coordinator within two (2) business days. Such Conflicts Report should describe any known conflicts of either a business or personal nature, and set forth any contacts

 

A-15


with respect to the referral item with non-investment personnel in its organization or with outside parties (except for routine communications from proxy solicitors). The Conflicts Report should also include written confirmation that any recommendation from an Investment Professional provided in connection with an Out-of-Guidelines Vote or under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

The Proxy Coordinator shall forward all Conflicts Reports to Counsel for review. Counsel shall review each report and provide the Proxy Coordinator with a brief statement regarding whether or not a material conflict of interest is present. Matters as to which a material conflict of interest is deemed to be present shall be handled as provided in the Fund’s Procedures and Guidelines.

 

V. REPORTING AND RECORD RETENTION

The Adviser shall maintain the records required by Rule 204-2(c)(2), as may be amended from time to time, including the following: (1) A copy of each proxy statement received regarding a Fund’s portfolio securities. Such proxy statements received from issuers are available either in the SEC’s EDGAR database or are kept by the Agent and are available upon request. (2) A record of each vote cast on behalf of a Fund. (3) A copy of any document created by the Adviser that was material to making a decision how to vote a proxy, or that memorializes the basis for that decision. (4) A copy of written requests for Fund proxy voting information and any written response thereto or to any oral request for information on how the Adviser voted proxies on behalf of a Fund. All proxy voting materials and supporting documentation will be retained for a minimum of six (6) years.

 

A-16


APPENDIX 1

to the

Advisers’ Proxy Voting Procedures

Proxy Group for registered investment company clients of ING Investments, LLC, ING Investment Management Co. and Directed Services, LLC:

 

Name

 

Title or Affiliation

Stanley D. Vyner

  Chief Investment Risk Officer and Executive Vice President, ING Investments, LLC

Todd Modic

  Senior Vice President, ING Funds Services, LLC and ING Investments, LLC; and Chief Financial Officer of the ING Funds

Maria Anderson

  Vice President of Fund Compliance, ING Funds Services, LLC

Karla J. Bos

  Proxy Coordinator for the ING Funds and Assistant Vice President – Special Projects, ING Funds Services, LLC

Julius A. Drelick III, CFA

  Vice President, Platform Product Management and Project Management, ING Funds Services, LLC

Harley Eisner

  Vice President of Financial Analysis, ING Funds Services, LLC

Theresa K. Kelety, Esq.

  Counsel, ING Americas US Legal Services

Effective as of January 1, 2008

 

A-17


EXHIBIT 4

to the

ING Funds

Proxy Voting Procedures

 

 

PROXY VOTING GUIDELINES OF THE ING FUNDS

 

 

 

 

I. INTRODUCTION

The following is a statement of the Proxy Voting Guidelines (“Guidelines”) that have been adopted by the respective Boards of Directors or Trustees of each Fund. Unless otherwise provided for herein, any defined term used herein shall have the meaning assigned to it in the Funds’ and Advisers’ Proxy Voting Procedures (the “Procedures”).

Proxies must be voted in the best interest of the Fund(s). The Guidelines summarize the Funds’ positions on various issues of concern to investors, and give a general indication of how Fund portfolio securities will be voted on proposals dealing with particular issues. The Guidelines are not exhaustive and do not include all potential voting issues.

The Adviser, in exercising its delegated authority, will abide by the Guidelines as outlined below with regard to the voting of proxies except as otherwise provided in the Procedures. In voting proxies, the Adviser is guided by general fiduciary principles. It must act prudently, solely in the interest of the beneficial owners of the Funds it manages. The Adviser will not subordinate the interest of beneficial owners to unrelated objectives. The Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.

 

II. GUIDELINES

The following Guidelines are grouped according to the types of proposals generally presented to shareholders of U.S. issuers: Board of Directors, Proxy Contests, Auditors, Proxy Contest Defenses, Tender Offer Defenses, Miscellaneous, Capital Structure, Executive and Director Compensation, State of Incorporation, Mergers and Corporate Restructurings, Mutual Fund Proxies, and Social and Environmental Issues. An additional section addresses proposals most frequently found in global proxies.

General Policies

These Guidelines apply to securities of publicly traded companies and to those of privately held companies if publicly available disclosure permits such application. All matters for which such disclosure is not available shall be considered CASE-BY-CASE.

 

A-18


It shall generally be the policy of the Funds to take no action on a proxy for which no Fund holds a position or otherwise maintains an economic interest in the relevant security at the time the vote is to be cast.

In all cases receiving CASE-BY-CASE consideration, including cases not specifically provided for under these Guidelines, unless otherwise provided for under these Guidelines, it shall generally be the policy of the Funds to vote in accordance with the recommendation provided by the Funds’ Agent, Institutional Shareholder Services, Inc.

Unless otherwise provided for herein, it shall generally be the policy of the Funds to vote in accordance with the Agent’s recommendation in cases in which such recommendation aligns with the recommendation of the relevant issuer’s management or management has made no recommendation. However, this policy shall not apply to CASE-BY-CASE proposals for which a contrary recommendation from the Investment Professional for the relevant Fund has been received and is to be utilized, provided that incorporation of any such recommendation shall be subject to the conflict of interest review process required under the Procedures.

Recommendations from the Investment Professionals, while not required under the Procedures, are likely to be considered with respect to proxies for private equity securities and/or proposals related to merger transactions/corporate restructurings, proxy contests, or unusual or controversial issues. Such input shall be given primary consideration with respect to CASE-BY-CASE proposals being considered on behalf of the relevant Fund.

Except as otherwise provided for herein, it shall generally be the policy of the Funds not to support proposals that would impose a negative impact on existing rights of the Funds to the extent that any positive impact would not be deemed sufficient to outweigh removal or diminution of such rights.

The foregoing policies may be overridden in any case as provided for in the Procedures. Similarly, the Procedures provide that proposals whose Guidelines prescribe a firm voting position may instead be considered on a CASE-BY-CASE basis in cases in which unusual or controversial circumstances so dictate.

Interpretation and application of these Guidelines is not intended to supersede any law, regulation, binding agreement or other legal requirement to which an issuer may be or become subject. No proposal shall be supported whose implementation would contravene such requirements.

 

PROPOSAL

  

Guidelines

THE BOARD OF DIRECTORS

  
Unless otherwise provided for herein, the Agent’s standards with respect to determining director independence shall apply. These standards generally provide that, to be considered completely independent, a director shall have no material connection to the company other than the board seat. Agreement with the Agent’s independence standards shall not dictate that a   

 

A-19


PROPOSAL

  

Guidelines

Fund’s vote shall be cast according to the Agent’s corresponding recommendation. Where applicable and except as otherwise provided for herein, it shall be the policy of the Funds to lodge disagreement with an issuer’s policies or practices by withholding support from a proposal for the relevant policy or practice rather than the director nominee(s) to which the Agent assigns a correlation. Support shall be withheld from culpable nominees as appropriate, but if they are not standing for election (e.g., the board is classified), support shall generally not be withheld from others in their stead. Withholding support from a nominee shall be effected by withholding support from, or voting against, the candidate, pursuant to the applicable election standard.   
Voting on director nominees in uncontested elections not subject to specific policies described herein    Case-by-Case
Voting on independent outside director nominees if application of the policies described herein is likely to result in withholding support from the majority of independent outside directors sitting on a board, or removal of such directors would negatively impact majority board independence, unless the concerns identified are of such grave nature as to merit removal of the independent directors.    Do Not Withhold
Where applicable and except as otherwise provided for herein, support in connection with issues raised by the Agent if the nominee did not serve on the board or relevant committee during the majority of the time period relevant to the concerns cited by the Agent.    Do Not Withhold
Support from a nominee who, during both of the most recent two years, attended less than 75 percent of the board and committee meetings without a valid reason for the absences. Do not withhold support in connection with attendance issues for nominees who have served on the board for less than the two most recent years.    Withhold
Support from a nominee in connection with poison pill or anti-takeover considerations (e.g., furtherance of measures serving to disenfranchise shareholders or failure to remove restrictive pill features or ensure pill expiration or submission to shareholders for vote) in cases for which culpability for implementation or renewal of the pill in such form can be specifically attributed to the nominee    Withhold
Provided that a nominee served on the board during the relevant time period, support from a nominee who has failed to implement a shareholder proposal that was approved by (1) a majority of the issuer’s shares outstanding (most recent annual meeting) or (2) a majority of the votes cast for two consecutive years. However, in the case of shareholder proposals seeking shareholder ratification of a poison pill, generally do not withhold support from a nominee in such cases if the company has already implemented a policy that should reasonably prevent abusive use of the pill.    Withhold

 

A-20


PROPOSAL

  

Guidelines

Voting on a nominee who has not acted upon negative votes (withhold or against, as applicable based on the issuer’s election standard) representing a majority of the votes cast at the previous annual meeting    Case-by-Case

•        Such nominees when (1) the issue relevant to the majority negative vote has been adequately addressed or cured or (2) the Funds’ Guidelines or voting record do not support the relevant issue.

   For
Support from inside directors or affiliated outside directors who sit on the audit committee    Withhold
Support from inside directors or affiliated outside directors who sit on the nominating or compensation committee, provided that such committee meets the applicable independence requirements of the relevant listing exchange.    Do Not Withhold
Support from inside directors or affiliated outside directors if the full board serves as the compensation or nominating committee OR has not created one or both committees, provided that the issuer is in compliance with all provisions of the listing exchange in connection with performance of relevant functions (e.g., performance of relevant functions by a majority of independent directors in lieu of the formation of a separate committee).    Do Not Withhold
Compensation Practices   
It shall generally be the policy of the Funds that matters of compensation are best determined by an independent board and compensation committee. Generally:   

(1)    Where applicable and except as otherwise provided for herein, support for nominees who did not serve on the compensation committee, or board, as applicable based on the Agent’s analysis, during the majority of the time period relevant to the concerns cited by the Agent.

   Do Not Withhold

(2)    In cases in which the Agent has identified a “pay for performance” disconnect or internal pay disparity, as such issues are defined by the Agent, support for director nominees.

   Do Not Withhold

(3)    If the Agent recommends withholding support from nominees in connection with executive compensation or perquisites related to retention or recruitment, including severance or termination arrangements, votes on such nominees if the issuer has provided adequate rationale and/or disclosure.

   For

(4)    If the Agent has raised issues of options backdating, consideration of members of the compensation committee, or board, as applicable, as well as company executives nominated as directors.

   Case-by-Case

(5)    Nominees if the Agent has raised other considerations regarding “poor compensation practices.

   Case-by-Case

 

A-21


PROPOSAL

  

Guidelines

Accounting Practices   

(1)    Independent outside director nominees serving on the audit committee.

   For

(2)    Where applicable and except as otherwise provided for herein, support for nominees serving on the audit committee who did not serve on that committee during the majority of the time period relevant to the concerns cited by the Agent.

   Do Not Withhold

(3)    If the Agent has raised concerns regarding poor accounting practices, consideration of the company’s CEO and CFO, if nominated as directors, and nominees serving on the audit committee.

   Case-by-Case

(4)    If total non-audit fees exceed the total of audit fees, audit-related fees and tax compliance and preparation fees, the provisions under AUDITORS below shall apply.

  
Board Independence   
It shall generally be the policy of the Funds that a board should be majority independent. Inside director or affiliated outside director nominees in cases in which the full board is not majority independent.    Case-by-Case

(1)    Support from the fewest directors whose removal would achieve majority independence across the remaining board, except that support may be withheld from additional nominees whose relative level of independence cannot be differentiated.

   Withhold

(2)    Support from all non-independent nominees, including the founder, chairman or CEO, if the number required to achieve majority independence is equal to or greater than the number of non-independent nominees.

   Withhold

(3)    Except as provided above, support for non-independent nominees in the role of CEO, and when appropriate, founder or chairman. Determine support for other non-independent nominees based on the qualifications and contributions of the nominee as well as the Funds’ voting precedent for assessing relative independence to management, e.g., insiders holding senior executive positions are deemed less independent than affiliated outsiders with a transactional or advisory relationship to the company, and affiliated outsiders with a material transactional or advisory relationship are deemed less independent than those with lesser relationships.

   For

(4)    Non-voting directors (e.g., director emeritus or advisory director) shall be excluded from calculations with respect to majority board independence.

  

 

A-22


PROPOSAL

  

Guidelines

(5)    When conditions contributing to a lack of majority independence remain substantially similar to those in the previous year, it shall generally be the policy of the Funds to vote on nominees in a manner consistent with votes cast by the Fund(s) in the previous year.

  
Nominees without regard to “over-boarding” issues raised by the Agent, unless other concerns requiring case-by-case consideration have been raised    For
Consideration of nominees when the Agent recommends withholding support due to assessment that a nominee acted in bad faith or against shareholder interests in connection with a major transaction, such as a merger or acquisition, factoring in the merits of the nominee’s performance and rationale and disclosure provided    Case-by-Case
Performance Test for Directors   

•        Support on nominees failing the Agent’s performance test, which includes market-based and operating performance measures, provided that input from the Investment Professional(s) for a given Fund shall be given primary consideration with respect to such proposals.

   Case-by-Case
Proposals Regarding Board Composition or Board Service   

•        Except as otherwise provided for herein, shareholder proposals to impose new board structures or policies, including those requiring that the positions of Chairman and CEO be held separately, except support proposals in connection with a binding agreement or other legal requirement to which an issuer has or reasonably may expect to become subject, and consider such proposals on a case-by-case basis if the board is not majority independent or pervasive corporate governance concerns have been identified.

   Against

•        Management proposals to adopt or amend board structures or policies, except consider such proposals on a case-by-case basis if the board is not majority independent, pervasive corporate governance concerns have been identified, or the proposal may result in a material reduction in shareholders’ rights.

   For

•        Shareholder proposals seeking more than a simple majority of independent directors.

   Against

•        Shareholder proposals asking that board compensation and/or nominating committees be composed exclusively of independent directors.

   Against

•        Shareholder proposals to limit the number of public company boards on which a director may serve.

   Against

 

A-23


PROPOSAL

   Guidelines

•        Shareholder proposals that seek to redefine director independence or directors’ specific roles (e.g., responsibilities of the lead director)

   Against

•        Shareholder proposals requesting creation of additional board committees or offices, except as otherwise provided for herein

   Against

•        Shareholder proposals that seek creation of an audit, compensation or nominating committee of the board, unless the committee in question is already in existence or the issuer has availed itself of an applicable exemption of the listing exchange (e.g., performance of relevant functions by a majority of independent directors in lieu of the formation of a separate committee)

   For

•        Shareholder proposals to limit the tenure of outside directors

   Against

•        Shareholder proposals to impose a mandatory retirement age for outside directors unless the proposal seeks to relax existing standards, but generally do not vote against management proposals seeking to establish a retirement age for directors

   Against
Shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a
director or to remain on the board
   Against
Director and Officer Indemnification and Liability Protection    Case-by-Case

•        Limit or eliminate entirely directors’ and officers’ liability for monetary damages for violating the duty of care

   Against

•        Proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness

   Against

•        Proposals providing such expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if:

  

(1)    The director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and

 

(2)    Only if the director’s legal expenses would be covered

   For
PROXY CONTESTS     
Input from the Investment Professional(s) for a given Fund shall be given primary consideration with respect to proposals in connection with proxy contests being considered on behalf of that Fund.   
Voting for director nominees in contested elections    Case-by-Case
Reimburse proxy solicitation expenses    Case-by-Case

 

A-24


PROPOSAL

  

Guidelines

AUDITORS     
Management proposals to ratify auditors, except in cases of poor accounting practices or high non-audit fees. Consider
management proposals to ratify auditors on a case-by-case basis if the Agent cites poor accounting practices.
   For
Non-Audit Services   

•        Approval of auditors when fees for non-audit services exceed 50 percent of total auditor fees as described below. Vote against management proposals to ratify auditors only in cases in which concerns exist that remuneration for the non-audit work is so lucrative as to taint the auditor’s independence. For purposes of this review, fees deemed to be reasonable, generally non-recurring, exceptions to the non-audit fee category (e.g., those related to an IPO) shall be excluded. If concerns exist or an issuer has a history of questionable accounting practices, also vote for shareholder proposals asking the issuer to present its auditor annually for ratification, but in other cases generally vote against.

   Case-by-Case
Auditor Independence   

•        Shareholder proposals asking companies to prohibit their auditors from engaging in non-audit services or capping the level of non-audit services

   Case-by-Case
Audit Firm Rotation   

•        Shareholder proposals asking for mandatory audit firm rotation

   Against
PROXY CONTEST DEFENSES   
Board Structure: Staggered vs. Annual Elections   

•        Proposals to classify or otherwise restrict shareholders’ ability to vote upon directors

   Against

•        Proposals to repeal classified boards and to elect all directors annually

   For
Shareholder Ability to Remove Directors   

•        Proposals that provide that directors may be removed only for cause

   Against

•        Proposals to restore shareholder ability to remove directors with or without cause

   For

•        Proposals that provide that only continuing directors may elect replacement to fill board vacancies

   Against

 

A-25


PROPOSAL

  

Guidelines

•        Proposals that permit shareholders to elect directors to fill board vacancies

   For
Cumulative Voting   

•        Management proposals to eliminate cumulative voting, when the company maintains a classified board of directors, except that such proposals may be supported irrespective of classification in furtherance of an issuer’s plan to adopt a majority voting standard

   Against

•        Shareholder proposals to restore or permit cumulative voting, in cases in which the company maintains a classified board of directors

   For
Time-Phased Voting   

•        Proposals to implement time-phased or other forms of voting that do not promote a one share, one vote standard

   Against

•        Proposals to eliminate such forms of voting

   For
Shareholder Ability to Call Special Meetings   

•        Proposals to restrict or prohibit shareholder ability to call special meetings

   Against

•        Proposals that remove restrictions on the right of shareholders to act independently of management

   For
Shareholder Ability to Act by Written Consent   

•        Proposals to restrict or prohibit shareholder ability to take action by written consent

   Against

•        Proposals to allow or make easier shareholder action by written consent

   For
Shareholder Ability to Alter the Size of the Board   

•        Proposals that seek to fix the size of the board or designate a range for its size

   For

•        Proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval

   Against
TENDER OFFER DEFENSES   
Poison Pills   

•        Proposals that ask a company to submit its poison pill for shareholder ratification, or to redeem its pill in lieu thereof, unless:

   For

(1)    shareholders have approved adoption of the plan,

 

(2)    a policy has already been implemented by the company that should reasonably prevent abusive use of the pill, or

   Against

 

A-26


PROPOSAL

  

Guidelines

(3)    the board had determined that it was in the best interest of shareholders to adopt a pill without delay, provided that such plan would be put to shareholder vote within twelve months of adoption or expire, and if not approved by a majority of the votes cast, would immediately terminate

  

•        Shareholder proposals to redeem a company’s poison pill

   Case-by-Case

•        Management proposals to approve or ratify a poison pill or any plan that can reasonably be construed as an anti-takeover measure, with voting decisions generally based on the Agent’s approach to evaluating such proposals, considering factors such as rationale, trigger level and sunset provisions. Votes will generally be cast in a manner that seeks to preserve shareholder value and the right to consider a valid offer.

   Case-by-Case

•        Management proposals in connection with poison pills or anti-takeover activities that do not meet the Agent’s standards

   Against
Fair Price Provisions   

•        Proposals to adopt fair price provisions

   Case-by-Case

•        Fair price provisions with shareholder vote requirements greater than a majority of disinterested shares

   Against
Greenmail   

•        Proposals to adopt antigreenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments

   For

•        Antigreenmail proposals when they are bundled with other charter or bylaw amendments

   Case-by-Case
Pale Greenmail    Case-by-Case
Unequal Voting Rights   

•        Dual-class exchange offers

   Against

•        Dual-class recapitalizations

   Against
Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws   

•        Management proposals to require a supermajority shareholder to approve charter and bylaw amendments or other key proposals

   Against

•        Shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw amendments, unless the proposal also asks the issuer to mount a solicitation campaign or similar form of comprehensive commitment to obtain passage of the proposal

   For

 

A-27


PROPOSAL

  

Guidelines

Supermajority Shareholder Vote Requirement to Approve Mergers     

•        Management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations

   Against

•        Shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations

   For
White Squire Replacements    For
MISCELLANEOUS     
Amendments to Corporate Documents   

•        Except to align with legislative or regulatory changes or when support is recommended by the Agent or Investment Professional (including, for example, as a condition to a major transaction such as a merger), proposals seeking to remove shareholder approval requirements or otherwise remove or diminish shareholder rights, e.g., by:

 

(1)    adding restrictive provisions,

 

(2)    removing article provisions or moving them to portions of the charter not requiring shareholder approval or

 

(3)    in corporate structures such as holding companies, removing provisions in an active subsidiary’s charter that provide voting rights to parent company shareholders. This policy would also generally apply to proposals seeking approval of corporate agreements or amendments to such agreements that the Agent recommends against because a similar reduction in shareholder rights is requested.

   Against

•        Proposals for charter amendments that may support board entrenchment or may be used as an anti-takeover device, particularly if the proposal is bundled or the board is classified

   Against

•        Proposals seeking charter or bylaw amendments to remove anti-takeover provisions

   For

•        Proposals seeking charter or bylaw amendments not addressed under these Guidelines

   Case-by-Case
Shareholder proposals to adopt confidential voting, use independent tabulators, and use independent inspectors of election    For
Management proposals to adopt confidential voting    For
Proxy Access   

•        Shareholder proposals seeking open access to management’s proxy material in order to nominate their own candidates to the board

   Case-by-Case

 

A-28


PROPOSAL

  

Guidelines

Majority Voting Standard   
Except as otherwise provided for herein, it shall generally be the policy of the Funds to extend discretion to issuers to determine when it may be appropriate to adopt a majority voting standard.   

•        Management proposals, irrespective of whether the proposal contains a plurality carve-out for contested elections, and shareholder proposals also supported by management, seeking election of directors by the affirmative vote of the majority of votes cast in connection with a meeting of shareholders, including amendments to corporate documents or other actions in furtherance of such standard, and provided such standard when supported does not conflict with state law in which the company is incorporated

   For

•        Shareholder proposals not otherwise supported by management seeking adoption of the majority voting standard or related amendments or actions

   Against

•        Proposals seeking adoption of the majority voting standard for issuers with a history of board malfeasance or pervasive corporate governance concerns

   Case-by-Case
Bundled or “Conditioned” Proxy Proposals    Case-by-Case

•        Proposals containing one or more items not supported under these Guidelines if the Agent or an Investment Professional deems the negative impact, on balance, to outweigh any positive impact

   Against
Shareholder Advisory Committees    Case-by-Case
Reimburse Shareholder for Expenses Incurred   

•        Proposals to reimburse expenses incurred in connection with shareholder proposals, with voting decisions determined based on the Agent’s criteria, considering whether the related proposal received the requisite support for approval and was adopted for the benefit of the company and its shareholders

   Case-by-Case
Management proposals for Other Business, in connection with proxies of U.S. issuers, except in connection with a proxy contest in which a Fund is not voting in support of management    For
Proposals to lower quorum requirements for shareholder meetings below a majority of the shares outstanding    Case-by-Case
Advance Notice for Shareholder Proposals   

•        Management proposals related to advance notice period requirements, provided that the period requested is in accordance with applicable law and no material governance concerns have been identified in connection with the issuer

   For

 

A-29


PROPOSAL

  

Guidelines

CAPITAL STRUCTURE     
Common Stock Authorization   

•        Proposals to increase the number of shares of common stock, taking into consideration whether intention exists to significantly dilute shareholders proportionate interest or to be unduly dilutive to shareholders’ proportionate interest. Except where otherwise indicated, the Agent’s proprietary approach, utilizing quantitative criteria (e.g., dilution, peer group comparison, company performance and history) to determine appropriate thresholds and, for requests marginally above such allowable threshold, a qualitative review (e.g., rationale and prudent historical usage), will generally be utilized in evaluating such proposals.

   Case-by-Case

•        Proposals to authorize capital increases within the Agent’s allowable thresholds or those in excess but meeting Agent’s qualitative standards. Consider on a case-by-case basis those requests failing the Agent’s review for proposals in connection with which a contrary recommendation from the Investment Professional(s) has been received and is to be utilized (e.g., in support of a merger or acquisition proposal).

   For

•        Proposals to authorize capital increases within the Agent’s allowable thresholds or those in excess but meeting Agent’s qualitative standards, unless the company states that the stock may be used as a takeover defense. In those cases, consider on a case-by-case basis if a contrary recommendation from the Investment Professional(s) has been received and is to be utilized.

   For

•        Proposals to authorize capital increases exceeding the Agent’s thresholds when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain.

   For

•        Proposals to increase the number of authorized shares of a class of stock if the issuance which the increase is intended to service is not supported under these Guidelines.

   Against
Dual Class Capital Structures   

•        Proposals to increase the number of authorized shares of the class of stock that has superior voting rights in companies that have dual class capital structures, but consider case-by-case if (1) bundled with favorable proposal(s),(2) approval of such proposal(s) is a condition of such favorable proposal(s), or (3) part of a recapitalization for which support is recommended by the Agent or an Investment Professional

   Against

 

A-30


PROPOSAL

  

Guidelines

•        Management proposals to create or perpetuate dual class capital structures with unequal voting rights in cases in which the relevant Fund owns the class with inferior voting rights (except consider case-by-case if bundled with favorable proposal(s) or if approval of such proposal(s) is a condition of such favorable proposal(s)), but generally vote for such proposals if the relevant Fund owns the class with superior voting rights

   Against

•        Shareholder proposals to eliminate dual class capital structures with unequal voting rights in cases in which the relevant Fund owns the class with inferior voting rights, but generally vote against such proposals if the relevant Fund owns the class with superior voting rights, and consider case-by-case if (1) bundled with favorable proposal(s),(2) approval of such proposal(s) is a condition of such favorable proposal(s), or (3) part of a recapitalization for which support is recommended by the Agent or an Investment Professional

   For

•        Management proposals to eliminate dual class capital structures, generally voting with the Agent’s recommendation unless a contrary recommendation has been received from the Investment Professional for the relevant Fund and is to be utilized

   Case-by-Case
Stock Distributions: Splits and Dividends   

•        Management proposals to increase common share authorization for a stock split, provided that the increase in authorized shares falls within the Agent’s allowable thresholds, but consider on a case-by-case basis those proposals exceeding the Agent’s threshold for proposals in connection with which a contrary recommendation from the Investment Professional(s) has been received and is to be utilized

   For
Reverse Stock Splits   

•        Management proposals to implement a reverse stock split when the number of shares authorized for issue is proportionately reduced

   For

•        Proposals to implement a reverse stock split that do not proportionately reduce the number of shares of authorized for issue

   Case-by-Case

•        Requests that do not proportionately reduce the number of shares authorized and effectively exceed the Agent’s allowable threshold for capital increase if the Agent otherwise supports management’s rationale

   For

 

A-31


PROPOSAL

  

Guidelines

Preferred Stock   

•        Proposals authorizing the issuance of preferred stock or creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (“blank check” preferred stock), but vote for if the Agent or an Investment Professional so recommends because the issuance is required to effect a merger or acquisition proposal

   Against

•        Proposals to issue or create blank check preferred stock in cases where the company expressly states that the stock will not be used as a takeover defense. Generally vote against in cases where the company expressly states that, or fails to disclose whether, the stock may be used as a takeover defense, but vote for if the Agent or an Investment Professional so recommends because the issuance is required to effect a merger or acquisition proposal

   For

•        Proposals to issue or authorize preferred stock in cases where the company specified the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable

   For

•        Proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company’s industry performance in terms of shareholder returns

   Case-by-Case
Shareholder proposals to have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in the normal course of business, submitted for shareholder ratification    For
Management Proposals to Reduce the Par Value of Common Stock    For
Shareholder Proposals that Seek Preemptive Rights or Management Proposals that Seek to Eliminate Them    Case-by-Case
Debt Restructuring    Case-by-Case
Share Repurchase Programs   

•        Proposals for open-market share repurchase plans in which all shareholders may participate on equal terms

   For

•        Proposals for programs with terms favoring selected, non-Fund parties

   Against

•        Proposals for share repurchase methods lacking adequate risk mitigation as assessed by the Agent

   Against
Management Proposals to Cancel Repurchased Shares    For

 

A-32


PROPOSAL

  

Guidelines

Tracking Stock    Case-by-Case
EXECUTIVE AND DIRECTOR COMPENSATION     
Votes with respect to compensation and employee benefit plans, except as otherwise provided for herein, with voting
decisions generally based on the Agent’s approach to evaluating such plans, which includes determination of costs and
comparison to an allowable cap.
   Case-by-Case

•        Generally vote in accordance with the Agent’s recommendations for equity-based plans with costs within such cap and against those with costs in excess of it, except that plans above the cap may be supported if so recommended by the Agent or Investment Professional as a condition to a major transaction such as a merger

  

•        Proposals seeking approval of plans for which the Agent suggests cost or dilution assessment may not be possible due to the method of disclosing shares allocated to the plan(s), except that such concerns arising in connection with evergreen provisions shall be considered case-by-case

   Against

•        Proposals for plans with costs within the cap if the primary considerations raised by the Agent pertain to matters that would not result in a negative vote under these Guidelines for the relevant board or committee member(s), or equity compensation burn rate or pay for performance as defined by the Agent

   For

•        Proposals for plans administered by potential grant recipients

   Against

•        Proposals to eliminate existing shareholder approval requirements for plan changes assessed as material by the Agent, unless the company has provided a reasonable rationale and/or adequate disclosure regarding the requested changes

   Against

•        Proposals for plans for which the Agent raises other considerations not otherwise provided for herein

   Case-by-Case
Restricted Stock or Stock Option Plans   

•        Proposals for restricted stock or stock option plans, or the issuance of shares in connection with such plans, considering factors such as level of disclosure and adequacy of vesting or performance requirements. Proposals for plans that do not meet the Agent’s criteria in this regard may be supported, but vote against if no disclosure is provided regarding either vesting or performance requirements.

   Case-by-Case
Management Proposals Seeking Approval to Reprice, Replace or Exchange Options, considering factors such as rationale, historic trading patterns, value-for-value exchange, vesting periods and replacement option terms    Case-by-Case

 

A-33


PROPOSAL

  

Guidelines

•        Proposals that meet the Agent’s criteria for acceptable repricing, replacement or exchange transactions, except that considerations raised by the Agent regarding burn rate or executive participation shall not be grounds for withholding support

   For

•        Management proposals seeking approval of compensation plans that:

 

(1)    permit or may permit (e.g., history of repricing and no express prohibition against future repricing) repricing of stock options, or any form or alternative to repricing, without shareholder approval,

 

(2)    include provisions that permit repricing, replacement or exchange transactions that do not meet the Agent’s criteria (except regarding burn rate or executive participation as noted above), or

 

(3)    give the board sole discretion to approve option repricing, replacement or exchange programs

   Against
Director Compensation, with voting decisions generally based on the Agent’s quantitative approach described above
as well as a review of qualitative features of the plan in cases in which costs exceed the Agent’s threshold. Do not
vote against
plans for which burn rate is the sole consideration raised by the Agent.
   Case-by-Case
Employee Stock Purchase Plans, and capital issuances in support of such plans, with voting decisions generally based
on the Agent’s approach to evaluating such plans, except that negative recommendations by the Agent due to
evergreen provisions will be reviewed case-by-case.
   Case-by-Case
OBRA-Related Compensation Proposals   
Votes on plans intended to qualify for favorable tax treatment under the provisions of Section 162(m) of OBRA should be evaluated irrespective of the Agent’s assessment of board independence, provided that the board meets the independence requirements of the relevant listing exchange.   

•        Amendments that Place a Cap on Annual Grants or Amend Administrative Features

   For

•        Amendments to Add Performance-Based Goals

   For

•        Amendments to Increase Shares and Retain Tax Deductions Under OBRA

   Case-by-Case

•        Approval of Cash or Cash-and-Stock Bonus Plan, with primary consideration given to management’s assessment that such plan meets the requirements for exemption of performance-based compensation

   For

 

A-34


PROPOSAL

  

Guidelines

Shareholder Proposals Regarding Executive and Director Pay

 

•        Regarding the remuneration of individuals other than senior executives and directors, proposals that seek to expand or restrict disclosure or require shareholder approval beyond regulatory requirements and market practice, or proposals seeking disclosure of executive and director compensation if providing it would be out of step with market practice and potentially disruptive to the business

   Against

•        Proposals that seek to impose new compensation structures or policies, such as “claw back” recoupments or advisory votes, unless evidence exists of abuse in historical compensation practices, and except as otherwise provided for herein

   Against
Severance and Termination Payments   

•        Shareholder proposals to have parachute arrangements submitted for shareholder ratification, (with “parachutes” defined as compensation arrangements related to termination that specify change-in-control events), and provided that the proposal does not include unduly restrictive or arbitrary provisions such as advance approval requirements

   For

•        Shareholder proposals to submit executive severance agreements for shareholder ratification, unless such proposals do not specify change-in-control events; Supplemental Executive Retirement Plans; or deferred executive compensation plans; or ratification is required by the listing exchange

   Against

•        All proposals to approve, ratify or cancel executive severance or termination arrangements, including those related to executive recruitment or retention, generally voting FOR such compensation arrangements if the issuer has provided adequate rationale and/or disclosure or support is recommended by the Agent or Investment Professional (e.g., as a condition to a major transaction such as a merger).

   Case-by-Case
Employee Stock Ownership Plans (ESOPs)    For
401(k) Employee Benefit Plans    For
Shareholder proposals requiring mandatory periods for officers and directors to hold company stock    Against
Advisory Votes on Executive Compensation   

•        Management proposals seeking ratification of the company’s compensation program, unless the program includes practices or features not supported under these Guidelines and the proposal receives a negative recommendation from the Agent

   For

 

A-35


PROPOSAL

  

Guidelines

•        Unless otherwise provided for herein, reports not receiving the Agent’s support due to concerns regarding severance/termination payments, incentive structures or vesting or performance criteria not otherwise supported by these Guidelines, generally voting for if the company has provided a reasonable rationale and/or adequate disclosure regarding the matter(s) under consideration

   Case-by-Case
STATE OF INCORPORATION     
Voting on State Takeover Statutes    Case-by-Case
Voting on Reincorporation Proposals, generally supporting management proposals not assessed by the Agent as a
potential takeover defense, but if so assessed, weighing management’s rationale for the change
   Case-by-Case

•        Management reincorporation proposals upon which another key proposal, such as a merger transaction, is contingent if the other key proposal is also supported

   For

•        Shareholder reincorporation proposals not also supported by the company

   Against

MERGERS AND CORPORATE RESTRUCTURINGS

  
Input from the Investment Professional(s) for a given Fund shall be given primary consideration with respect to proposals regarding business combinations, particularly those between otherwise unaffiliated parties, or other corporate restructurings being considered on behalf of that Fund.   
Proposals not typically supported under these Guidelines, if a key proposal, such as a merger transaction, is contingent upon its support and a vote for is accordingly recommended by the Agent or an Investment Professional    For
Mergers and Acquisitions    Case-by-Case
Corporate Restructuring, including demergers, minority squeezeouts, leveraged buyouts, spinoffs, liquidations, dispositions, divestitures and asset sales, with voting decisions generally based on the Agent’s approach to evaluating such proposals    Case-by-Case
Appraisal Rights    For
Changing Corporate Name    For
Adjournment of Meeting   

•        Proposals to adjourn a meeting when the primary proposal is also voted FOR

   For

 

A-36


PROPOSAL

   Guidelines
MUTUAL FUND PROXIES     
Election of Directors    Case-by-Case
Converting Closed-end Fund to Open-end Fund    Case-by-Case
Proxy Contests    Case-by-Case
Investment Advisory Agreements    Case-by-Case
Approving New Classes or Series of Shares    For
Preferred Stock Proposals    Case-by-Case
1940 Act Policies    Case-by-Case
Changing a Fundamental Restriction to Nonfundamental Restriction    Case-by-Case
Change Fundamental Investment Objective to Nonfundamental    Case-by-Case
Name Rule Proposals    Case-by-Case
Disposition of Assets/Termination/Liquidation    Case-by-Case
Changes to the Charter Document    Case-by-Case
Changing the Domicile of a Fund    Case-by-Case
Change in Fund’s Subclassification    Case-by-Case
Authorizing the Board to Hire and Terminate Subadvisors Without Shareholder Approval    For
Distribution Agreements    Case-by-Case
Master-Feeder Structure    For
Mergers    Case-by-Case
Shareholder Proposals to Establish Director Ownership Requirement    Against
Reimburse Shareholder for Expenses Incurred    Case-by-Case
Terminate the Investment Advisor    Case-by-Case
SOCIAL AND ENVIRONMENTAL ISSUES     
Unless otherwise specified herein. While a wide variety of factors may go into each analysis, the overall principle guiding all vote recommendations focuses on how or whether the proposal will enhance the economic value of the company. Because a company’s board is likely to have access to relevant, non-public information regarding a company’s business, such proposals will generally be voted in a manner intended to give the board (rather than shareholders) latitude to set corporate policy and oversee management.    Case-by-Case

 

A-37


PROPOSAL

  

Guidelines

 

Shareholder proposals seeking to dictate corporate conduct, apply existing law, duplicate policies already substantially in place and/or addressed by the issuer or release information that would not help a shareholder evaluate an investment in the corporation as an economic matter, absent concurring support from the issuer, compelling evidence of abuse, significant public controversy or litigation, the issuer’s significant history of relevant violations; or activities not in step with market practice or regulatory requirements, or unless provided for otherwise herein.

 

•        Such proposals would generally include those seeking preparation of reports and/or implementation or additional disclosure of corporate policies related to issues such as:

 

•        consumer and public safety

 

•        environment and energy

 

•        labor standards and human rights

 

•        military business and political concerns

 

•        workplace diversity and non-discrimination

 

•        sustainability

 

•        social issues

 

•        vendor activities

 

•        economic risk, or

 

•        matters of science and engineering

   Against

 

A-38


PROPOSAL

   Guidelines

 

GLOBAL PROXIES

    

 

The foregoing Guidelines provided in connection with proxies of U.S. issuers shall also be applied to global proxies where applicable and not provided for otherwise herein. The following provide for differing regulatory and legal requirements, market practices and political and economic systems existing in various global markets.

 

  

Proposals in cases in which the Agent recommends voting against such proposal because relevant disclosure by the issuer, or the time provided for consideration of such disclosure, is inadequate, unless otherwise provided for herein. For purposes of these global Guidelines, “against” shall mean withholding of support for a proposal, resulting in submission of a vote of against or abstain, as appropriate for the given market and level of concern raised by the Agent regarding the issue or lack of disclosure or time provided.

 

   Against

Proposals for which the Agent recommends support of practices described herein as associated with a firm against vote:

 

(1)    as the issuer or market transitions to better practices (e.g., having committed to new regulations or governance codes) or

 

(2)    as the more favorable choice in cases in which shareholders must choose between alternate proposals

 

   Case-by-Case

Routine Management Proposals

 

   For

•        The opening of the shareholder meeting

 

   For

•        That the meeting has been convened under local regulatory requirements

 

   For

•        The presence of quorum

 

   For

•        The agenda for the shareholder meeting

 

   For

•        The election of the chair of the meeting

 

   For

•        The appointment of shareholders to co-sign the minutes of the meeting

 

   For

•        Regulatory filings (e.g., to effect approved share issuances)

 

   For

•        The designation of inspector or shareholder representative(s) of minutes of meeting

 

   For

•        The designation of two shareholders to approve and sign minutes of meeting

 

   For

•        The allowance of questions

 

   For

•        The publication of minutes

   For

 

A-39


PROPOSAL

   Guidelines

•        The closing of the shareholder meeting

   For

•        Other similar routine management proposals

   For

Discharge of Management/Supervisory Board Members

 

  

•        Management proposals seeking the discharge of management and supervisory board members, unless the Agent recommends against due to concern about the past actions of the company’s auditors or directors or legal action is being taken against the board by other shareholders, including when the proposal is bundled

   For

Director Elections

 

  

•        Votes on director nominees in uncontested elections not otherwise subject to policies described herein. Unless otherwise provided for herein, the Agent’s standards with respect to determining director independence shall apply. These standards generally provide that, to be considered completely independent, a director shall have no material connection to the company other than the board seat. Agreement with the Agent’s independence standards shall not dictate that a Fund’s vote shall be cast according to the Agent’s corresponding recommendation. Further, unless otherwise provided for herein, the application of Guidelines in connection with such standards shall apply only in cases in which the nominee’s level of independence can be ascertained based on available disclosure.

 

   Case-by-Case

•        Votes in contested elections, with primary consideration given to input from the Investment Professional(s) for a given Fund

 

   Case-by-Case

•        For issuers domiciled in Canada, Finland, France, Ireland, the Netherlands, Sweden or tax haven markets, non-independent directors in cases in which the full board serves as the audit committee, or the company does not have an audit committee

 

   Against

•        For issuers in all markets, including those in tax haven markets and those in Japan that have adopted the U.S.-style board-with-committees structure, non-independent nominees to the audit committee, or, if the slate of nominees is bundled, the slate. However, if the slate is bundled and audit committee membership is unclear or proposed as a separate agenda item, vote for if the Agent otherwise recommends support. For Canadian issuers, the Funds’ U.S. Guidelines with respect to audit committees shall apply.

 

   Against

•        In tax haven markets, non-independent directors in cases in which the full board serves as the compensation committee, or the company does not have a compensation committee

 

   Do Not Vote
Against

•        Non-independent directors who sit on the compensation or nominating committees, provided that such committees meet the applicable independence requirements of the relevant listing exchange

   Do Not Vote
Against

 

A-40


PROPOSAL

   Guidelines

•        In cases in which committee membership is unclear, non-independent director nominees if no other issues have been raised in connection with his/her nomination

   Case-by-Case

•        Individuals nominated as outside/non-executive directors who do not meet the Agent’s standard for independence, unless the slate of nominees is bundled, in which case the proposal(s) to elect board members shall be considered on a case-by-case basis

   Against

•        For issuers in tax haven markets, votes on bundled slates of nominees if the board is non-majority independent. For issuers in Canada and other global markets, generally follow the Agent’s standards for withholding support from bundled slates or non-independent directors (typically excluding the CEO), as applicable, if the board does not meet the Agent’s independence standards or the board’s independence cannot be ascertained due to inadequate disclosure.

   Against

•        Nominees or slates of nominees presented in a manner not aligned with market practice and/or legislation, including:

 

•        Bundled slates of nominees (e.g., France, Hong Kong or Spain);

 

•        Simultaneous reappointment of retiring directors (e.g., South Africa);

 

•        In markets with term lengths capped by legislation or market practice, nominees whose terms exceed the caps or are not disclosed (except that bundled slates with such lack of disclosure shall be considered on a case-by-case basis); or

 

•        Nominees whose names are not disclosed in advance of the meeting (e.g., Austria, Philippines, Hong Kong or South Africa) or far enough in advance relative to voting deadlines (e.g., Italy) to make an informed voting decision

 

•        Such criteria will not generally provide grounds for withholding support in countries in which they may be identified as best practice but such legislation or market practice is not yet applicable, unless specific governance shortfalls identified by the Agent dictate that less latitude should be extended to the issuer.

   Against

•        Nominees in connection with which a recommendation has been made that the position of chairman should be separate from that of CEO or otherwise required to be independent, unless other concerns requiring CASE-BY-CASE consideration have been raised

   For

•        In cases in which cumulative or net voting applies, generally vote with Agent’s recommendation to support nominees asserted by the issuer to be independent, even if independence disclosure or criteria fall short of Agent’s standards.

  

 

A-41


PROPOSAL

   Guidelines

•        Nominees for whom the Agent has raised concerns regarding scandals or internal controls

 

   Case-by-Case

•        Nominees or slates of nominees when (1) the scandal or shortfall in controls took place at the company, or an affiliate, for which the nominee is being considered; (2) culpability can be attributed to the nominee (e.g., nominee manages or audits relevant function), and (3) the nominee has been directly implicated, with resulting arrest and criminal charge or regulatory sanction.

 

   Against

•        For markets such as the tax havens, Australia, Canada, Hong Kong, Japan, Malaysia and South Africa (and for outside directors in South Korea) in which nominees’ attendance records are adequately disclosed, the Funds’ U.S. Guidelines with respect to director attendance shall apply. The same policy shall be applied regarding attendance by statutory auditors of Japanese companies.

 

  

•        Self-nominated director candidates, with voting decisions generally based on the Agent’s approach to evaluating such candidates

 

   Case-by-Case

•        Nominees for whom “over-boarding” issues have been raised by the Agent, unless other concerns require case-by-case consideration

 

   For

•        For companies incorporated in tax haven markets but which trade exclusively in the U.S., the Funds’ U.S. Guidelines with respect to director elections shall apply.

 

  
Board Structure   

•        Proposals to fix board size, but also support proposals seeking a board range if the range is reasonable in the context of market practice and anti-takeover considerations

 

   For

•        Proposed article amendments in this regard, with voting decisions generally based on the Agent’s approach to evaluating such proposals

 

   Case-by-Case

Director and Officer Indemnification and Liability Protection, voting in accordance with the Agent’s standards

 

   Case-by-Case

•        Proposals seeking approval of overly broad provisions

 

   Against

Independent Statutory Auditors

 

  

•        With respect to Japanese companies that have not adopted the U.S.-style board-with-committees structure, any nominee to the position of “independent statutory auditor” whom the Agent considers affiliated, e.g., if the nominee has worked a significant portion of his

   Against

 

A-42


PROPOSAL

   Guidelines

career for the company, its main bank or one of its top shareholders. Where shareholders are forced to vote on multiple nominees in a single resolution, vote against all nominees. In cases in which multiple slates of statutory auditors are presented, generally vote with the Agent’s recommendation, typically to support nominees deemed to be more independent and/or aligned with interests of minority shareholders.

 

  

•        Incumbent nominees at companies implicated in scandals or exhibiting poor internal controls

 

   Against
Key Committees   

•        Proposals that permit non-board members to serve on the audit, compensation or nominating committee, provided that bundled slates may be supported if no slate nominee serves on the relevant committee(s)

 

   Against

Director and Statutory Auditor Remuneration, with voting decisions generally based on the Agent’s approach to evaluating such proposals, while also factoring in the merits of the rationale and disclosure provided

 

   Case-by-Case

•        Proposals to approve the remuneration of directors and auditors as long as the amount is not excessive (e.g., significant increases should be supported by adequate rationale and disclosure) and there is no evidence of abuse. For Toronto Stock Exchange (TSX) issuers, the Agent’s limits with respect to equity awards to non-employee directors shall apply.

 

   For

Bonus Payments

 

  
With respect to Japanese companies:   

•        Retirement bonus proposals if all payments are for directors and auditors who have served as executives of the company

 

   For

•        Proposals if one or more payments are for non-executive, affiliated directors or statutory auditors; when one or more of the individuals to whom the grants are being proposed (1) has not served in an executive capacity for the company for at least three years or (2) has been designated by the company as an independent statutory auditor, regardless of the length of time he/she has served

 

   Against

•        In all markets, if issues have been raised regarding a scandal or internal controls, bonus proposals for retiring directors or continuing directors or auditors when culpability can be attributed to the nominee (e.g., if a Fund is also voting against the nominee under criteria herein regarding issues of scandal or internal controls), unless bundled with bonuses for a majority of retirees a Fund is voting for

   Against

 

A-43


PROPOSAL

   Guidelines

Stock Option Plans for Independent Internal Statutory Auditors

 

  

•        With respect to Japanese companies, proposals regarding option grants to independent internal statutory auditors, following the Agent’s guidelines

 

   Against

Compensation Plans

 

  

•        Votes with respect to compensation plans, and awards thereunder or capital issuances in support thereof, unless otherwise provided for herein, with voting decisions generally based on the Agent’s approach to evaluating such plans, considering quantitative or qualitative factors as appropriate for the market

 

   Case-by-Case

Amendment Procedures for Equity Compensation Plans and ESPPs

 

  

•        For TSX issuers, votes with respect to amendment procedures for security-based compensation arrangements and employee share purchase plans shall generally be cast in a manner designed to preserve shareholder approval rights, with voting decisions generally based on the Agent’s recommendation.

 

  

Shares Reserved for Equity Compensation Plans

 

  

•        Unless otherwise provided for herein, voting decisions shall generally be based on the Agent’s methodology, including classification of a company’s stage of development as growth or mature and the corresponding determination as to reasonability of the share requests.

 

  

•        Equity compensation plans (e.g., option, warrant, restricted stock or employee share purchase plans or participation in company offerings such as IPOs or private placements), the issuance of shares in connection with such plans, or related management proposals (e.g., article amendments) that:

 

   Against

•        Exceed the Agent’s recommended dilution limits, including cases in which the Agent suggests dilution cannot be fully assessed (e.g., due to inadequate disclosure);

 

•        Provide deep or near-term discounts to executives or directors, unless discounts to executives are deemed by the Agent to be adequately mitigated by other vesting requirements (e.g., Japan) or broad-based employee participation otherwise meeting Agent’s standards (e.g., France);

 

•        Are administered with discretion by potential grant recipients;

 

•        Provide for retirement benefits or equity incentive awards to outside directors if not in line with market practice (e.g., Australia, Belgium, The Netherlands);

  

 

A-44


PROPOSAL

   Guidelines

•        Permit financial assistance in the form of non-recourse (or essentially non-recourse) loans in connection with executive’s participation;

 

•        For matching share plans, do not meet the Agent’s standards, considering holding period, discounts, dilution, participation, purchase price and performance criteria;

 

•        Provide for vesting upon change in control if deemed by the Agent to evidence a conflict of interest or anti-takeover device;

 

•        Provide no disclosure regarding vesting or performance criteria (provided that proposals providing disclosure in one or both areas, without regard to Agent’s criteria for such disclosure, shall be supported provided they otherwise satisfy these Guidelines);

 

•        Permit post-employment vesting if deemed inappropriate by the Agent;

 

•        Allow plan administrators to make material amendments without shareholder approval unless adequate prior disclosure has been provided, with such voting decisions generally based on the Agent’s approach to evaluating such plans; or

 

•        Provide for retesting in connection with achievement of performance hurdles unless the Agent’s analysis indicates that:

 

(1)    Performance targets are adequately increased in proportion to the additional time available,

 

(2)    Retesting is de minimis as a percentage of overall compensation or is acceptable relative to market practice, or

 

(3)    The issuer has committed to cease retesting within a reasonable period of time.

 

  

•        Such plans/awards or the related issuance of shares that:

 

(1)    Do not suffer from the defects noted above; or

 

(2)    Otherwise meet the Agent’s tests if the considerations raised by the Agent pertain primarily to performance hurdles, contract or notice periods, discretionary bonuses, recruitment awards, retention incentives, non-compete payments or vesting upon change in control (other than addressed above), if the company has provided adequate disclosure and/or a reasonable rationale in support of the relevant plan/award, practice or participation. Unless otherwise provided for herein, market practice of the primary country in which a company does business, or in which an employee is serving, as applicable, shall supersede that of the issuer’s domicile.

   For

 

A-45


PROPOSAL

   Guidelines

•        Proposals in connection with such plans or the related issuance of shares in other instances

 

   Case-by-Case

Remuneration Reports

 

  

•        Reports that include compensation plans permitting:

 

(1)    Practices or features not supported under these Guidelines, including financial assistance under the conditions described above;

 

(2)    Retesting deemed by the Agent to be excessive relative to market practice (irrespective of the Agent’s support for the report as a whole);

 

(3)    Equity award valuation triggering a negative recommendation from the Agent; or

 

(4)    Provisions for retirement benefits or equity incentive awards to outside directors if not in line with market practice, except that reports will generally be voted for if contractual components are reasonably aligned with market practices on a going-forward basis (e.g., existing obligations related to retirement benefits or terms contrary to evolving standards would not preclude support for the report)

 

   Against

•        Reports receiving the Agent’s support and not triggering the concerns cited above

 

   For

•        Unless otherwise provided for herein, reports not receiving the Agent’s support due to concerns regarding severance/ termination payments, “leaver” status, incentive structures and vesting or performance criteria not otherwise supported by these Guidelines, generally voted for if the company has provided a reasonable rationale and/or adequate disclosure regarding the matter(s) under consideration. Reports with typically unsupported features may be voted for in cases in which the Agent recommends their initial support as the issuer or market transitions to better practices (e.g., having committed to new regulations or governance codes).

 

   Case-by-Case

Shareholder Proposals Regarding Executive and Director Pay

 

  

•        The Funds’ U.S. Guidelines with respect to such shareholder proposals shall apply.

 

  

General Share Issuances

 

  

•        Unless otherwise provided for herein, voting decisions shall generally be based on the Agent’s practice to determine support for general issuance requests (with or without preemptive rights), or related requests to repurchase and reissue shares, based on their

   For

 

A-46


PROPOSAL

   Guidelines

amount relative to currently issued capital as well as market-specific considerations (e.g., priority right protections in France, reasonable levels of dilution and discount in Hong Kong). Requests to reissue repurchased shares will not be supported unless a related general issuance request is also supported.

  

•        Specific issuance requests, based on the proposed use and the company’s rationale

 

   Case-by-Case

•        Proposals to issue shares (with or without preemptive rights), convertible bonds or warrants, to grant rights to acquire shares, or to amend the corporate charter relative to such issuances or grants in cases in which concerns have been identified by the Agent with respect to inadequate disclosure, inadequate restrictions on discounts, failure to meet the Agent’s standards for general issuance requests, or authority to refresh share issuance amounts without prior shareholder approval

 

   Against

Increases in Authorized Capital

 

  

•        Unless otherwise provided for herein, voting decisions should generally be based on the Agent’s approach.

  

•        Nonspecific proposals, including bundled proposals, to increase authorized capital up to 100 percent over the current authorization unless the increase would leave the company with less than 30 percent of its new authorization outstanding

 

   For

•        Specific proposals to increase authorized capital, unless:

 

   For

•        The specific purpose of the increase (such as a share-based acquisition or merger) does not meet these Guidelines for the purpose being proposed; or

 

•        The increase would leave the company with less than 30 percent of its new authorization outstanding after adjusting for all proposed issuances

 

   Against

•        Proposals to adopt unlimited capital authorizations

 

   Against

•        The Agent’s market-specific exceptions to the above parameters (e.g., The Netherlands, due to hybrid market controls) shall be applied.

 

  

Preferred Stock

 

  

•        Unless otherwise provided for herein, voting decisions should generally be based on the Agent’s approach.

 

  

•        Creation of a new class of preferred stock or issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred stock would adversely affect the rights of existing shareholders

   For

 

A-47


PROPOSAL

   Guidelines

•        Creation/issuance of convertible preferred stock as long as the maximum number of common shares that could be issued upon conversion meets the Agent’s guidelines on equity issuance requests

 

   For

•        Creation of (1) a new class of preference shares that would carry superior voting rights to the common shares or (2) blank check preferred stock unless the board states that the authorization will not be used to thwart a takeover bid

 

   Against

Poison Pills/Protective Preference Shares

 

  

•        Management proposals in connection with poison pills or anti-takeover activities (e.g., disclosure requirements or issuances, transfers or repurchases) that do not meet the Agent’s standards. Generally vote in accordance with Agent’s recommendation to withhold support from a nominee in connection with poison pill or anti-takeover considerations when culpability for the actions can be specifically attributed to the nominee.

 

   Against

•        Director remuneration in connection with poison pill considerations raised by the Agent.

 

   Do Not Vote

Against

Approval of Financial Statements and Director and Auditor Reports

 

  

•        Management proposals seeking approval of financial accounts and reports, unless there is concern about the company’s financial accounts and reporting, which, in the case of related party transactions, would include concerns raised by the Agent regarding consulting agreements with non-executive directors

 

   For

•        Unless otherwise provided for herein, reports not receiving the Agent’s support due to concerns regarding severance/termination payments not otherwise supported by these Guidelines, factoring in the merits of the rationale and disclosure provided

 

   Case-by-Case

•        Board-issued reports receiving a negative recommendation from the Agent due to concerns regarding independence of the board or the presence of non-independent directors on the audit committee

 

   Against

•        Such proposals in connection with remuneration practices otherwise supported under these Guidelines or as a means of expressing disapproval of broader practices of the issuer or its board

 

   Do Not Vote
Against

Remuneration of Auditors

 

  

•        Proposals to authorize the board to determine the remuneration of auditors, unless there is evidence of excessive compensation relative to the size and nature of the company

   For

 

A-48


PROPOSAL

   Guidelines

Indemnification of Auditors

 

   Against

Ratification of Auditors and Approval of Auditors’ Fees, generally following the Agent’s standards for proposals seeking auditor ratification or approval of auditors’ fees, except that for Canadian issuers, the Funds’ U.S. Guidelines with respect to auditors and auditor fees shall apply.

 

  

•        Such proposals for companies in the MSCI EAFE index, provided the level of audit fee disclosure meets the Agent’s standards

 

   For

•        In other cases, such proposals unless there are material concerns raised by the Agent about the auditor’s practices or independence

   For
Allocation of Income and Dividends   

•        Management proposals concerning allocation of income and the distribution of dividends, including adjustments to reserves to make capital available for such purposes. In the event management offers multiple dividend proposals on the same agenda, primary consideration shall be given to input from the relevant Investment Professional(s).

 

   For
Stock (Scrip) Dividend Alternatives    For

•        Stock (scrip) dividend proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value

 

   Against
Debt Instruments   

•        Proposals authorizing excessive discretion, as assessed by the Agent, to a board to issue or set terms for debt instruments (e.g., commercial paper)

 

   Against

Debt Issuance Requests

 

When evaluating a debt issuance request, the issuing company’s present financial situation is examined. The main factor for analysis is the company’s current debt-to-equity ratio, or gearing level. A high gearing level may incline markets and financial analysts to downgrade the company’s bond rating, increasing its investment risk factor in the process. A gearing level up to 100 percent is considered acceptable.

   Case-by-Case

•        Debt issuances for companies when the gearing level is between zero and 100 percent

 

   For

•        Proposals where the issuance of debt will result in the gearing level being greater than 100 percent, or for which inadequate disclosure precludes calculation of the gearing level, comparing any such proposed debt issuance to industry and market standards, and with voting decisions generally based on the Agent’s approach to evaluating such requests

   Case-by-Case

 

A-49


PROPOSAL

   Guidelines

Financing Plans

 

  

•        Adoption of financing plans if they are in the best economic interests of shareholders

 

   For

Related Party Transactions

 

   Case-by-Case

•        Approval of such transactions unless the agreement requests a strategic move outside the company’s charter or contains unfavorable or high risk terms (e.g., deposits without security interest or guaranty)

 

   For

Approval of Donations

 

  

•        Proposals for which adequate, prior disclosure of amounts is not provided

 

   Against

•        Proposals seeking single- or multi-year authorities for which adequate, prior disclosure of amounts is provided

 

   For

Capitalization of Reserves

 

  

•        Proposals to capitalize the company’s reserves for bonus issues of shares or to increase the par value of shares

 

   For
Investment of Company Reserves, with primary consideration for such proposals given to input from the Investment Professional(s) for a given Fund    Case-by-Case
Amendments to Articles of Association    Case-by-Case

•        That are editorial in nature

 

   For

•        Where shareholder rights are protected

 

   For

•        Where there is negligible or positive impact on shareholder value

 

   For

•        For which management provides adequate reasons for the amendments or the Agent otherwise supports management’s position

 

   For

•        That seek to discontinue and/or delist a form of the issuer’s securities in cases in which the relevant Fund does not hold the affected security type

 

   For

•        Which the company is required to do so by law (if applicable)

 

   For

•        That remove or lower quorum requirements for board or shareholder meetings below levels recommended by the Agent

 

   Against

•        That reduce relevant disclosure to shareholders

   Against

 

A-50


PROPOSAL

   Guidelines

•        That seek to align the articles with provisions of another proposal not supported by these Guidelines

 

   Against

•        That are not supported under these Guidelines, are presented within a bundled proposal, and for which the Agent deems the negative impact, on balance, to outweigh any positive impact

 

   Against

•        That impose a negative impact on existing shareholder rights, including rights of the Funds, to the extent that any positive impact would not be deemed by the Agent to be sufficient to outweigh removal or diminution of such rights

 

   Against

•        With respect to article amendments for Japanese companies:

 

  

•        Management proposals to amend a company’s articles to expand its business lines

 

   For

•        Management proposals to amend a company’s articles to provide for an expansion or reduction in the size of the board, unless the expansion/ reduction is clearly disproportionate to the growth/decrease in the scale of the business or raises anti-takeover concerns

 

   For

•        If anti-takeover concerns exist, management proposals, including bundled proposals, to amend a company’s articles to authorize the Board to vary the annual meeting record date or to otherwise align them with provisions of a takeover defense

 

   Against

•        Management proposals regarding amendments to authorize share repurchases at the board’s discretion, unless there is little to no likelihood of a “creeping takeover” (major shareholder owns nearly enough shares to reach a critical control threshold) or constraints on liquidity (free float of shares is low), and where the company is trading at below book value or is facing a real likelihood of substantial share sales; or where this amendment is bundled with other amendments which are clearly in shareholders’ interest (generally following the Agent’s guidelines)

 

   Against

Other Business

 

  

•        Management proposals for Other Business in connection with global proxies, voting in accordance with the Agent’s market-specific recommendations

   Against

 

A-51




                       STATEMENT OF ADDITIONAL INFORMATION

                                 March 24, 2008

                              ING SERIES FUND, INC.
                         7337 East Doubletree Ranch Road
                         Scottsdale, Arizona 85258-2034
                                 (800) 922-0180

                         ING Global Income Builder Fund

              Class A, Class B, Class C, Class I and Class W Shares

This Statement of Additional Information ("SAI") relates to ING Global Income
Builder ("Fund"), a series of ING Series Fund, Inc. ("Company"). A prospectus or
prospectuses (each a "Prospectus" and collectively, the "Prospectuses") for the
Fund dated March 24, 2008, which provide the basic information you should know
before investing in the Fund, may be obtained without charge from the Fund or
the Fund's principal underwriter, ING Funds Distributor, LLC ("Distributor"), at
the address listed above. This SAI is not a prospectus, but is incorporated
therein by reference in and should be read in conjunction with the Prospectuses,
each dated March 24, 2008, which have been filed with the United States
Securities and Exchange Commission ("SEC"). Capitalized terms not defined in
this SAI are used as defined in the Prospectuses.

The information in this SAI expands on the information contained in the
Prospectuses and any supplements thereto. Copies of the Fund's Prospectuses and
annual or semi-annual shareholder reports, when available, may be obtained upon
request and without charge by contacting the Fund at the address and phone
number written above. Terms used in this SAI have the same meaning as in the
Prospectuses, and some additional terms are defined particularly for this SAI.




                                TABLE OF CONTENTS

HISTORY OF THE COMPANY...................................................      3
SUPPLEMENTAL DESCRIPTION OF FUND INVESTMENTS AND RISK....................      4
FUNDAMENTAL INVESTMENT RESTRICTIONS AND POLICIES.........................     53
PORTFOLIO TURNOVER.......................................................     54
DISCLOSURE OF THE FUND'S PORTFOLIO SECURITIES............................     54
MANAGEMENT OF THE COMPANY................................................     56
CODE OF ETHICS...........................................................     62
PROXY VOTING PROCEDURES..................................................     63
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS...............................     63
ADVISER..................................................................     63
EXPENSE LIMITATION AGREEMENTS............................................     65
SUB-ADVISER..............................................................     65
RULE 12(b)-1 PLANS.......................................................     68
ADMINISTRATOR............................................................     69
CUSTODIAN................................................................     70
LEGAL COUNSEL............................................................     70
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM............................     70
TRANSFER AGENT...........................................................     70
BROKERAGE ALLOCATION AND TRADING POLICIES................................     70
PURCHASE AND REDEMPTION OF SHARES........................................     74
SHAREHOLDER ACCOUNTS AND SERVICES........................................     77
NET ASSET VALUE..........................................................     78
TAX CONSIDERATIONS.......................................................     80
DISTRIBUTOR..............................................................     87
CALCULATION OF PERFORMANCE DATA..........................................     88
PERFORMANCE COMPARISONS..................................................     91
FINANCIAL STATEMENTS.....................................................     91
APPENDIX A...............................................................    A-1

                                       2




                             HISTORY OF THE COMPANY

The Company is a Maryland corporation registered as a diversified, open-end
management investment company. The Company was organized in June 1991 and
currently consists of 16 separately managed series.

This SAI pertains only to ING Global Income Builder Fund.

Incorporation. The Company was incorporated under the laws of the state of
Maryland on June 17, 1991.

Series and Classes. The Company currently offers multiple series. Only ING
Global Income Builder is offered through this SAI and the corresponding
Prospectuses.

The Board of Directors ("Board") has the authority to subdivide each series into
classes of shares having different attributes so long as each share of each
class represents a proportionate interest in the series equal to each other
share in that series. Shares of the Fund currently are classified into multiple
classes. Each class of shares has the same rights, privileges and preferences,
except with respect to: (a) the effect of sales charges, if any, for each class;
(b) the distribution fees borne by each class; (c) the expenses allocable
exclusively to each class; (d) voting rights on matters exclusively affecting a
single class; and (e) the exchange privilege of each class. Class A, B, C, I and
W shares are offered through this SAI and the corresponding Prospectuses.

Capital Stock. Fund shares are fully paid and non-assessable when issued. Fund
shares have no preemptive or conversion rights, except that the Fund's Class B
shares automatically convert to Class A shares after 8 years. A shareholder's
Class B shares will automatically convert to Class A shares in the Fund on the
second calendar day of the following month in which the eighth anniversary of
the issuance of the Class B shares occurs, together with the pro rata portion of
all Class B shares representing dividends and other distributions paid in
additional Class B shares, except that Class B shares acquired initially through
funds that were a part of the Nicholas-Applegate Mutual Funds at the time of
purchase will convert after seven years from the date of original purchase.

Each share of the Fund has the same rights to share in dividends declared by the
Fund for that share class. Upon liquidation of the Fund, shareholders in the
Fund are entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.

Voting Rights. Shareholders of each class are entitled to one vote for each full
share held (and fractional votes for fractional shares held) and will vote on
the election of Directors and on other matters submitted to the vote of
shareholders. Generally, all shareholders have voting rights on all matters
except matters affecting only the interests of one Fund or one class of shares.
Voting rights are not cumulative, so that the holders of more than 50% of the
shares voting in the election of Directors can, if they choose to do so, elect
all the Directors, in which event the holders of the remaining shares will be
unable to elect any person as a Director.

Shareholder Meetings. The Company is not required, and does not intend, to hold
annual shareholder meetings. The Articles of Incorporation provide for meetings
of shareholders to elect Directors at such times as may be determined by the
Directors or as required by the Investment Company Act of 1940, as amended
("1940 Act"). If requested by the holders of at least 10% of the Company's
outstanding shares, the Company will hold a shareholder meeting for the purpose
of voting on the removal of one or more Directors and will assist with
communication concerning that shareholder meeting.

1940 Act Classification. The Company is a diversified, open-end management
investment company, as those terms are defined under the 1940 Act. The 1940 Act
generally requires, among other things, that with respect to 75% of its total
assets, a diversified company may not invest more than 5% of its total assets in
the securities of any one issuer.

                                       3




             SUPPLEMENTAL DESCRIPTION OF FUND INVESTMENTS AND RISKS

Diversification

The Fund is "diversified" within the meaning of the 1940 Act. In order to
qualify as diversified, the Fund must diversify its holdings so that at all
times at least 75% of the value of its total assets is represented by cash and
cash items (including receivables), securities issued or guaranteed as to
principal or interest by the United States or its agencies or instrumentalities,
securities of other investment companies, and other securities (for this
purpose, other securities of any one issuer are limited to an amount not greater
than 5% of the value of the total assets of the Fund and to not more than 10% of
the outstanding voting securities of the issuer).

Investments, Investment Strategies and Risks

The Fund invests in a combination of Underlying Funds that in turn invest in
fixed income and/or equity securities of issuers located in a number of
different countries, one of which may the United States. The Fund also expects
to employ a strategy of writing (selling) call options on equity indices,
baskets of securities and exchange-traded funds in an attempt to generate gains
from option premiums as a means of enhancing distributions paid to shareholders
as described in the Prospectuses. Underlying Funds must be approved by the Board
before becoming eligible investments for the Fund. The investment techniques
described below may be pursued directly by the Underlying Funds. As a general
matter, the Fund does not invest directly in securities. However, the Fund is
subject to the risks described below indirectly through its investment in the
Underlying Funds. The Underlying Funds may use any or all of these techniques at
any one time, and the fact that an Underlying Fund may use a technique does not
mean that the technique will be used. An Underlying Fund's transactions in a
particular type of security or use of a particular technique is subject to
limitations imposed by the Underlying Fund's investment objective, policies and
restrictions described in the Underlying Fund's Prospectus and/or SAI, as well
as the federal securities laws. There can be no assurance that any of the Funds
will achieve their respective investment objectives. The Fund's policies,
investment strategies and practices are non-fundamental unless otherwise
indicated. The descriptions of the securities and investment techniques in this
section supplement the discussion of principal investment strategies contained
in the Fund's Prospectus.

EQUITY INVESTMENTS

Common Stock, Preferred Stock, Convertible Securities and Other Equity
Securities

Common stocks represent an equity (ownership) interest in a company. This
ownership interest generally gives an Underlying Fund the right to vote on
issues affecting the company's organization and operations. Except for
Underlying Funds that are non-diversified, such investments may be diversified
over a cross-section of industries and individual companies. Some of these
companies will be organizations with market capitalizations of $500 million or
less or companies that have limited product lines, markets and financial
resources and are dependent upon a limited management group. Examples of
possible investments include emerging growth companies employing new technology,
cyclical companies, initial public offerings of companies offering high growth
potential, or other corporations offering good potential for high growth in
market value. The securities of such companies may be subject to more abrupt or
erratic market movements than larger, more established companies both because
the securities typically are traded in lower volume and because the issuers
typically are subject to a greater degree to changes in earnings and prospects.

Other types of equity securities may also be purchased, such as preferred stock,
convertible securities, or other securities that are exchangeable for shares of
common stock. Preferred stock, unlike common stock, offers a stated dividend
rate payable from a corporation's earnings. Such preferred stock dividends may
be cumulative or non-cumulative, participating, or auction rate. If interest
rates rise, the fixed dividend on preferred stocks may be less attractive,
causing the price of preferred stocks to decline. Preferred stock may have
mandatory sinking fund provisions, as well as call/redemption provisions prior
to maturity, a negative feature when interest rates decline. Dividends on some
preferred stock may be "cumulative," requiring all or a portion of

                                       4




prior unpaid dividends to be paid before dividends are paid on the issuer's
common stock. Preferred stock also generally has a preference over common stock
on the distribution of a corporation's assets in the event of liquidation of the
corporation, and may be "participating," which means that it may be entitled to
a dividend exceeding the stated dividend in certain cases. The rights of
preferred stocks on the distribution of a corporation's assets in the event of a
liquidation are generally subordinate to the rights associated with a
corporation's debt securities.

A convertible security is a security that may be converted either at a stated
price or rate within a specified period of time into a specified number of
shares of common stock. By investing in convertible securities, an Underlying
Fund seeks the opportunity, through the conversion feature, to participate in
the capital appreciation of the common stock into which the securities are
convertible, while investing at a better price than may be available on the
common stock or obtaining a higher fixed-rate of return than is available on
common stocks. The value of a convertible security is a function of its
"investment value" (determined by its yield in comparison with the yields of
other securities of comparable maturity and quality that do not have a
conversion privilege) and its "conversion value" (the security's worth, at
market value, if converted into the underlying common stock). The credit
standing of the issuer and other factors may also affect the investment value of
a convertible security. The conversion value of a convertible security is
determined by the market price of the underlying common stock. If the conversion
value is low relative to the investment value, the price of the convertible
security is governed principally by its investment value. To the extent the
market price of the underlying common stock approaches or exceeds the conversion
price, the price of the convertible security will be increasingly influenced by
its conversion value.

The market value of convertible debt securities tends to vary inversely with the
level of interest rates. The value of the security declines as interest rates
increase and increases as interest rates decline. Although under normal market
conditions longer term debt securities have greater yields than do shorter-term
debt securities of similar quality, they are subject to greater price
fluctuations. A convertible security may be subject to redemption at the option
of the issuer at a price established in the instrument governing the convertible
security. If a convertible security held by an Underlying Fund is called for
redemption, the Underlying Fund must permit the issuer to redeem the security,
convert it into the underlying common stock or sell it to a third party. Rating
requirements do not apply to convertible debt securities purchased by the
Underlying Fund because the Underlying Funds purchase such securities for their
equity characteristics.

"Synthetic" convertible securities are derivative positions composed of two or
more different securities whose investment characteristics, taken together,
resemble those of convertible securities. For example, an Underlying Fund may
purchase a non-convertible debt security and a warrant or option, which enables
the Underlying Fund to have a convertible-like position with respect to a
company, group of companies or stock index. Synthetic convertible securities are
typically offered by financial institutions and investment banks in private
placement transactions. Upon conversion, an Underlying Fund generally receives
an amount in cash equal to the difference between the conversion price and the
then current value of the underlying security. Unlike a true convertible
security, a synthetic convertible comprises two or more separate securities,
each with its own market value. Therefore, the market value of a synthetic
convertible is the sum of the values of its fixed-income component and its
convertible component. For this reason, the values of a synthetic convertible
and a true convertible security may respond differently to market fluctuations.

FOREIGN AND EMERGING MARKET SECURITIES

American Depositary Receipts, European Depositary Receipts and Global Depositary
Receipts American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs") and European Depositary Receipts ("EDRs") or other similar securities
represent securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities they represent. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying foreign securities. EDRs are receipts issued by a European
financial institution evidencing a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets, and EDRs,
in bearer form, are designed for

                                        5




use in European securities markets. GDRs are similar to EDRs although they may
be held through foreign clearing agents such as Euroclear and other foreign
depositories. Depositary receipts denominated in U.S. dollars will not be
considered foreign securities for purposes of the investment limitation
concerning investment in foreign securities.

Emerging Markets

Although the Underlying Funds will use reasonable efforts to obtain the best
available price and the most favorable execution with respect to all
transactions, and the adviser or sub-adviser will consider the full range and
quality of services offered by the executing broker or dealer when making these
determinations, fixed commissions on many foreign stock exchanges are generally
higher than negotiated commissions on U.S. exchanges. Certain foreign
governments levy withholding taxes against dividend and interest income, or may
impose other taxes. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received by the Underlying Funds on these investments. However, these
foreign withholding taxes are not expected to have a significant impact on the
Underlying Funds and any income earned by the Underlying Fund should be
considered incidental. The risks of investing in foreign securities may be
intensified for investments in issuers domiciled or doing substantial business
in emerging markets or countries with limited or developing capital markets.
Security prices in emerging markets can be significantly more volatile than in
the more developed nations of the world, reflecting the greater uncertainties of
investing in less established markets and economies. In particular, countries
with emerging markets may have relatively unstable governments, present the risk
of sudden adverse government action and even nationalization of businesses,
restrictions on foreign ownership, or prohibitions of repatriation of assets,
and may have less protection of property rights than more developed countries.
The economies of countries with emerging markets may be predominantly based on
only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. Transaction settlement and dividend collection procedures
may be less reliable in emerging markets than in developed markets. Securities
of issuers located in countries with emerging markets may have limited
marketability and may be subject to more abrupt or erratic price movements.

Eurodollar and Yankee Dollar Instruments

Eurodollar instruments are bonds that pay interest and principal in U.S. dollars
held in banks outside the United States, primarily in Europe. Eurodollar
instruments are usually issued on behalf of multinational companies and foreign
governments by large underwriting groups composed of banks and issuing houses
from many countries. Yankee Dollar instruments are U.S. dollar denominated bonds
issued in the United States by foreign banks and corporations. These investments
involve risks that are different from investments in securities issued by U.S.
issuers, and may carry the same risks as investing in foreign securities.

Eurodollar Convertible Securities

Eurodollar convertible securities are fixed-income securities of a U.S. issuer
or a foreign issuer that are issued outside the United States and are
convertible into equity securities of the same or a different issuer. Interest
and dividends on Eurodollar securities are payable in U.S. dollars outside of
the United States. Underlying Funds may invest without limitation in Eurodollar
convertible securities that are convertible into foreign equity securities
listed, or represented by ADRs listed, on the New York Stock Exchange ("NYSE")
or the American Stock Exchange or convertible into publicly traded common stock
of U.S. companies. The Underlying Funds may also invest up to 15% of their total
assets invested in convertible securities, taken at market value, in Eurodollar
convertible securities that are convertible into foreign equity securities which
are not listed, or represented by ADRs listed, on such exchanges.

                                        6




Foreign Bank Obligations

Obligations of foreign banks and foreign branches of U.S. banks involve somewhat
different investment risks from those affecting obligations of U.S. banks,
including the possibilities that liquidity could be impaired because of future
political and economic developments; the obligations may be less marketable than
comparable obligations of U.S. banks; a foreign jurisdiction might impose
withholding taxes on interest income payable on those obligations; foreign
deposits may be seized or nationalized; foreign governmental restrictions (such
as foreign exchange controls) may be adopted which might adversely affect the
payment of principal and interest on those obligations; and the selection of
those obligations may be more difficult because there may be less publicly
available information concerning foreign banks. In addition, the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to U.S. banks. In
that connection, foreign banks are not subject to examination by any U.S.
government agency or instrumentality.

Foreign Currency Exchange Transactions

Because the Underlying Funds that invest in foreign securities may buy and sell
securities denominated in currencies other than the U.S. dollar, and receive
interest, dividends and sale proceeds in currencies other than the U.S. dollar,
the Underlying Funds may enter into foreign currency exchange transactions to
convert to and from different foreign currencies and to convert foreign
currencies to and from the U.S. dollar. The Underlying Funds either enter into
these transactions on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or use forward foreign currency contracts
to purchase or sell foreign currencies. A forward foreign currency exchange
contract is an agreement to exchange one currency for another- for example, to
exchange a certain amount of U.S. dollars for a certain amount of Korean Won at
a future date. Forward foreign currency exchange contracts are included in the
group of instruments that can be characterized as derivatives. Neither spot
transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Underlying Fund's portfolio securities or in
foreign exchange rates, or prevent loss if the prices of these securities should
decline.

Although these transactions tend to minimize the risk of loss due to a decline
in the value of the hedged currency, at the same time they tend to limit any
potential gain that might be realized should the value of the hedged currency
increase. The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of these securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of currency market
movements is extremely difficult, and the successful execution of a hedging
strategy is highly uncertain. Use of currency hedging techniques may also be
limited by management's need to protect the status of the Underlying Fund as a
regulated investment company under the Internal Revenue Code of 1986, as amended
("Code").

Foreign Mortgage Related Securities

Foreign mortgage-related securities are interests in pools of mortgage loans
made to residential homebuyers domiciled in a foreign country. These include
mortgage loans made by trust and mortgage loan companies, credit unions,
chartered banks, and others. Pools of mortgage loans are assembled as securities
for sale to investors by various governmental, government-related and private
organizations (e.g., Canada Mortgage and Housing Corporation and First
Australian National Mortgage Acceptance Corporation Limited). The mechanics of
these mortgage-related securities are generally the same as those issued in the
United States. However, foreign mortgage markets may differ materially from the
U.S. mortgage market with respect to matters such as the sizes of loan pools,
pre-payment experience, and maturities of loans.

International Debt Securities

Certain of the Underlying Funds may invest in debt obligations (which may be
denominated in U.S. dollar or

                                       7




in non-U.S. currencies) of any rating issued or guaranteed by foreign
corporations, certain supranational entities (such as the World Bank) and
foreign governments (including political subdivisions having taxing authority)
or their agencies or instrumentalities, including ADRs consistent with each
Underlying Fund's policies. These investments may include debt obligations such
as bonds (including sinking fund and callable bonds), debentures and notes,
together with preferred stocks, pay-in-kind securities and zero-coupon
securities.

In determining whether to invest in debt obligations of foreign issuers, an
Underlying Fund would consider the relative yields of foreign and domestic debt
securities, the economies of foreign countries, the condition of such countries'
financial markets, the interest rate climate of such countries and the
relationship of such countries' currency to the U.S. dollar. These factors are
judged on the basis of fundamental economic criteria (e.g., relative inflation
levels and trends, growth rate forecasts, balance of payments status and
economic policies) as well as technical and political data. Subsequent foreign
currency losses may result in the Underlying Funds having previously distributed
more income in a particular period than was available from investment income,
which could result in a return of capital to shareholders. An Underlying Fund's
portfolio of foreign securities may include those of a number of foreign
countries, or, depending upon market conditions, those of a single country.
Investments in securities of issuers in non-industrialized countries generally
involve more risk and may be considered highly speculative. Although a portion
of the Underlying Funds' investment income may be received or realized in
foreign currencies, the Underlying Funds would be required to compute and
distribute its income in U.S. dollars and absorb the cost of currency
fluctuations and the cost of currency conversions. Investment in foreign
securities involves considerations and risks not associated with investment in
securities of U.S. issuers. For example, foreign issuers are not required to use
generally accepted accounting principles. If foreign securities are not
registered under the Securities Act of 1933 ("1933 Act"), the issuer does not
have to comply with the disclosure requirements of the Securities Exchange Act
of 1934, as amended ("1934 Act"). The values of foreign securities investments
will be affected by incomplete or inaccurate information available to the
adviser or sub-adviser as to foreign issuers, changes in currency rates,
exchange control regulations or currency blockage, expropriation or
nationalization of assets, application of foreign tax laws (including
withholding taxes), changes in governmental administration or economic or
monetary policy. In addition, it is generally more difficult to obtain court
judgments outside the United States.

Securities of Foreign Issuers

Securities of foreign issuers traded outside of the United States have certain
common characteristics and risks. Foreign financial markets, while growing in
volume, have, for the most part, substantially less volume than U.S. markets,
and securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable domestic companies. The foreign markets
also have different clearance and settlement procedures, and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct such
transactions. Delivery of securities may not occur at the same time as payment
in some foreign markets. Delays in settlement could result in temporary periods
when a portion of the assets of an Underlying Fund is uninvested and no return
is earned thereon. The inability of the Underlying Funds to make intended
security purchases due to settlement problems could cause the Underlying Funds
to miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Underlying Funds due to subsequent declines in value of the portfolio security
or, if the Underlying Funds have entered into a contract to sell the security,
could result in possible liability to the purchaser.

As foreign companies are not generally subject to uniform accounting, auditing
and financial reporting standards and practices comparable to those applicable
to domestic companies, there may be less publicly available information about
certain foreign companies than about domestic companies. There is generally less
government supervision and regulation of exchanges, financial institutions and
issuers in foreign countries than there is in the United States. A foreign
government may impose exchange control regulations that may have an impact on
currency exchange rates, and there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments that could affect U.S. investments in those countries.

                                       8




Although the Underlying Funds will use reasonable efforts to obtain the best
available price and the most favorable execution with respect to all
transactions and the adviser or sub-adviser will consider the full range and
quality of services offered by the executing broker or dealer when making these
determinations, fixed commissions on many foreign stock exchanges are generally
higher than negotiated commissions on U.S. exchanges. Certain foreign
governments levy withholding taxes against dividend and interest income, or may
impose other taxes. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received by the Underlying Funds on these investments. However, these
foreign withholding taxes are not expected to have a significant impact on a
fund with an investment objective of long-term capital appreciation because any
income earned by the Underlying Fund should be considered incidental.

Restrictions on Foreign Investments. Some developing countries prohibit or
impose substantial restrictions on investments in their capital markets,
particularly their equity markets, by foreign entities such as an Underlying
Fund. As illustrations, certain countries may require governmental approval
prior to investments by foreign persons or limit the amount of investment by
foreign persons in a particular company or limit the investment by foreign
persons to only a specific class of securities of a company that may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. Certain countries may restrict investment
opportunities in issuers or industries deemed important to national interests.

The manner in which foreign investors may invest in companies in certain
developing countries, as well as limitations on such investments, also may have
an adverse impact on the operations of an Underlying Fund that invests in such
countries. For example, an Underlying Fund may be required in certain countries
to invest initially through a local broker or other entity and then have the
shares purchased re-registered in the name of an Underlying Fund.
Re-registration may in some instances not be able to occur on timely basis,
resulting in a delay during which an Underlying Fund may be denied certain of
its rights as an investor, including rights as to dividends or to be made aware
of certain corporate actions. There also may be instances where an Underlying
Fund places a purchase order but is subsequently informed, at the time of
re-registration, that the permissible allocation of the investment to foreign
investors has been filled, depriving an Underlying Fund of the ability to make
its desired investment at that time.

Substantial limitations may exist in certain countries with respect to an
Underlying Fund's ability to repatriate investment income, capital or the
proceeds of sales of securities by foreign investors. An Underlying Fund could
be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to an Underlying Fund of any restrictions on investments. Even where there is no
outright restriction on repatriation of capital, the mechanics of repatriation
may affect certain aspects of the operations of the Underlying Fund.

In certain countries, banks or other financial institutions may be among the
leading companies or have actively traded securities. The 1940 Act restricts
each Underlying Funds' investments in any equity securities of an issuer that,
in its most recent fiscal year, derived more than 15% of its revenues from
"securities related activities," as defined by the rules thereunder. The
provisions may restrict the Underlying Funds' investments in certain foreign
banks and other financial institutions.

Foreign Currency Risks. Currency risk is the risk that changes in foreign
exchange rates will affect, favorably or unfavorably, the U.S. dollar value of
foreign securities. In a period when the U.S. dollar generally rises against
foreign currencies, the returns on foreign stocks for a U.S. investor will be
diminished. By contrast, in a period when the U.S. dollar generally declines,
the returns on foreign securities will be enhanced. Unfavorable changes in the
relationship between the U.S. dollar and the relevant foreign currencies,
therefore, will adversely affect the value of an Underlying Fund's shares.

Risks of Investing in Foreign Securities. Investments in foreign securities
-----------------------------------------
involve certain inherent risks, including the following:

                                        9




Market Characteristics. Settlement practices for transactions in foreign markets
may differ from those in U.S. markets, and may include delays beyond periods
customary in the United States. Foreign security trading practices, including
those involving securities settlement where an Underlying Fund's assets may be
released prior to receipt of payment or securities, may expose the Underlying
Fund to increased risk in the event of a failed trade or the insolvency of a
foreign broker-dealer. Transactions in options on securities, futures contracts,
futures options and currency contracts may not be regulated as effectively on
foreign exchanges as similar transactions in the United States, and may not
involve clearing mechanisms and related guarantees. The value of such positions
also could be adversely affected by the imposition of different exercise terms
and procedures and margin requirements than in the United States. The value of
an Underlying Fund's positions may also be adversely impacted by delays in its
ability to act upon economic events occurring in foreign markets during
non-business hours in the United States.

Legal and Regulatory Matters. In addition to nationalization, foreign
governments may take other actions that could have a significant effect on
market prices of securities and payment of interest, including restrictions on
foreign investment, expropriation of goods and imposition of taxes, currency
restrictions and exchange control regulations.

Taxes. The interest payable on certain of the Underlying Funds' foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount of income available for distribution to the Underlying Funds'
shareholders. A shareholder otherwise subject to U.S. federal income taxes may,
subject to certain limitations, be entitled to claim a credit or deduction of
U.S. federal income tax purposes for his proportionate share of such foreign
taxes paid by an Underlying Fund.

Costs. The expense ratios of an Underlying Fund that invests in foreign
securities is likely to be higher than those of investment companies investing
in domestic securities, since the cost of maintaining the custody of foreign
securities is higher. In considering whether to invest in the securities of a
foreign company, the adviser or sub-adviser considers such factors as the
characteristics of the particular company, differences between economic trends
and the performance of securities markets within the United States and those
within other countries, and also factors relating to the general economic,
governmental and social conditions of the country or countries where the company
is located. The extent to which an Underlying Fund will be invested in foreign
companies and countries and depositary receipts will fluctuate from time to time
within the limitations described in the Underlying Fund's prospectuses,
depending on the adviser's or sub-adviser's assessment of prevailing market,
economic and other conditions.

Sovereign Debt Securities

Sovereign debt securities issued by governments of foreign countries. The
sovereign debt in which the Underlying Funds may invest may be rated below
investment grade. These securities usually offer higher yields than higher rated
securities but are also subject to greater risk than higher rated securities.
Brady Bonds represent a type of sovereign debt. These obligations were created
under a debt restructuring plan introduced by former U.S. Secretary of the
Treasury, Nicholas F. Brady, in which foreign entities issued these obligations
in exchange for their existing commercial bank loans. Brady Bonds have been
issued by Argentina, Brazil, Bulgaria, Costa Rica, Dominican Republic, Ecuador,
Mexico, Morocco, Nigeria, Philippines, Poland, and Uruguay and may be issued by
other emerging countries.

Supranational Agencies

Securities of supranational agencies are not considered government securities
and are not supported directly or indirectly by the U.S. government. Examples of
supranational agencies include, but are not limited to, the International Bank
for Reconstruction and Development (commonly referred to as the World Bank),
which was chartered to finance development projects in developing member
countries; the European Union, which is a 27-nation organization engaged in
cooperative economic activities; and the Asian Development Bank, which

                                       10




is an international development bank established to lend funds, promote
investment and provide technical assistance to member nations in the Asian and
Pacific regions.

FIXED-INCOME INVESTMENTS

Adjustable Rate Mortgage Securities

Adjustable rate mortgage securities ("ARMS") are pass-through mortgage
securities collateralized by mortgages with adjustable rather than fixed rates.
Generally, ARMS have a specified maturity date and amortize principal over their
life. In periods of declining interest rates, there is a reasonable likelihood
that ARMS will experience increased rates of prepayment of principal. However,
the major difference between ARMS and fixed rate mortgage securities is that the
interest rate and the rate of amortization of principal of ARMS can and do
change in accordance with movements in a particular, pre-specified, published
interest rate index.

The amount of interest on ARMS is calculated by adding a specified amount, the
"margin," to the index, subject to limitations on the maximum and minimum
interest that can be charged to the mortgagor during the life of the mortgage or
to maximum and minimum changes to that interest rate during a given period.
Because the interest rates on ARMS generally move in the same direction as
market interest rates, the market value of ARMS tends to be more stable than
that of long-term fixed rate securities.

There are two main categories of indices which serve as benchmarks for periodic
adjustments to coupon rates on ARMS: those based on U.S. Treasury securities and
those derived from a calculated measure such as a cost of funds index or a
moving average of mortgage rates. Commonly utilized indices include the one-year
and five-year constant maturity Treasury Note rates, the three-month Treasury
Bill rate, the 180-day Treasury Bill rate, rates on longer-term Treasury
securities, the 11th District Federal Home Loan Bank Cost of Funds, the National
Median Cost of Funds, the one-month or three-month London Interbank Offered Rate
("LIBOR"), the prime rate of a specific bank, or commercial paper rates. Some
indices, such as the one-year constant maturity Treasury Note rate, closely
mirror changes in market interest rate levels. Others, such as the 11th District
Home Loan Bank Cost of Funds index (often related to ARMS issued by Federal
National Mortgage Association ("FNMA")), tend to lag changes in market rate
levels and tend to be somewhat less volatile.

Corporate Debt Securities

Corporate debt securities include investment grade corporate bonds, debentures,
notes and other similar corporate debt instruments, including convertible
securities. The investment return on a corporate debt security reflects interest
earnings and changes in the market value of the security. The market value of a
corporate debt security will generally increase when interest rates decline, and
decrease when interest rates rise. There is also the risk that the issuer of a
debt security will be unable to pay interest or principal at the time called for
by the instrument. Investments in corporate debt securities that are rated below
investment grade are described in "High-Yield Securities" below.

Debt obligations that are deemed investment grade carry a rating of at least Baa
from Moody's Investors Service, Inc. ("Moody's") or BBB from Standard and Poor's
Rating Corporation ("S&P"), or a comparable rating from another rating agency
or, if not rated by an agency, are determined by the adviser or sub-adviser to
be of comparable quality. Bonds rated Baa or BBB have speculative
characteristics and changes in economic circumstances are more likely to lead to
a weakened capacity to make interest and principal payments than higher rated
bonds.

Floating or Variable Rate Instruments

Floating or variable rate bonds normally provide that the holder can demand
payment of the obligation on short notice at par with accrued interest. Such
bonds are frequently secured by letters of credit or other credit

                                       11




support arrangements provided by banks. Floating or variable rate instruments
provide for adjustments in the interest rate at specified intervals (weekly,
monthly, semiannually, etc.). An Underlying Fund would anticipate using these
bonds as cash equivalents, pending longer term investment of its funds. Other
longer term fixed-rate bonds, with a right of the holder to request redemption
at certain times (often annually, after the lapse of an intermediate term), may
also be purchased by an Underlying Fund. These bonds are more defensive than
conventional long-term bonds (protecting to some degree against a rise in
interest rates), while providing greater opportunity than comparable
intermediate term bonds since an Underlying Fund may retain the bond if interest
rates decline. By acquiring these kinds of bonds, an Underlying Fund obtains the
contractual right to require the issuer of the security, or some other person
(other than a broker or dealer), to purchase the security at an agreed upon
price, which right is contained in the obligation itself rather than in a
separate agreement with the seller or some other person.

GNMA Certificates

Certificates issued by the Government National Mortgage Association ("GNMA")
("GNMA Certificates") evidence an undivided interest in a pool of mortgage
loans. GNMA Certificates differ from bonds, in that principal is paid back
monthly as payments of principal, including prepayments, on the mortgages in the
underlying pool are passed through to holders of GNMA Certificates representing
interests in the pool, rather than returned in a lump sum at maturity. The GNMA
Certificates that the Underlying Funds may purchase are the "modified
pass-through" type.

GNMA Guarantee. The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of mortgages
insured by the Federal Housing Administration ("FHA") or the Farmers' Home
Administration ("FMHA") or guaranteed by the Veterans Administration ("VA").
GNMA is also empowered to borrow without limitation from the U.S. Treasury, if
necessary, to make payments required under its guarantee.

Life of GNMA Certificates. The average life of a GNMA Certificate is likely to
be substantially less than the stated maturity of the mortgages underlying the
securities. Prepayments of principal by mortgagors and mortgage foreclosures
will usually result in the return of the greater part of principal investment
long before the maturity of the mortgages in the pool. Foreclosures impose no
risk of loss of the principal balance of a GNMA Certificate, because of the GNMA
guarantee, but foreclosure may impact the yield to shareholders because of the
need to reinvest proceeds of foreclosure. As prepayment rates of individual
mortgage pools vary widely, it is not possible to predict accurately the average
life of a particular issue of GNMA Certificates. However, statistics published
by the FHA indicate that the average life of single family dwelling mortgages
with 25 to 30-year maturities, the type of mortgages backing the vast majority
of GNMA Certificates, is approximately 12 years. Prepayments are likely to
increase in periods of falling interest rates. It is customary to treat GNMA
Certificates as 30-year mortgage-backed securities that prepay fully in the
twelfth year.

Yield Characteristics of GNMA Certificates. The coupon rate of interest of GNMA
Certificates is lower than the interest rate paid on the VA-guaranteed or
FHA-insured mortgages underlying the certificates, by the amount of the fees
paid to GNMA and the issuer. The coupon rate by itself, however, does not
indicate the yield that will be earned on GNMA Certificates. First, GNMA
Certificates may be issued at a premium or discount rather than at par, and,
after issuance, GNMA Certificates may trade in the secondary market at a premium
or discount. Second, interest is earned monthly, rather than semi-annually as
with traditional bonds; monthly compounding raises the effective yield earned.
Finally, the actual yield of a GNMA Certificate is influenced by the prepayment
experience of the mortgage pool underlying it. For example, if interest rates
decline, prepayments may occur faster than had been originally projected and the
yield to maturity and the investment income of the Underlying Fund would be
reduced.

High-Yield Securities

High-yield securities are debt securities that are rated lower than "Baa" by
Moody's or "BBB" by S&P, or of

                                       12




comparable quality if unrated.

High-yield securities often are referred to as "junk bonds" and include certain
corporate debt obligations, higher yielding preferred stock and mortgage-related
securities, and securities convertible into the foregoing. Investments in
high-yield securities generally provide greater income and increased opportunity
for capital appreciation than investments in higher quality debt securities, but
they also typically entail greater potential price volatility and principal and
income risk.

High-yield securities are not considered to be investment grade. They are
regarded as predominantly speculative with respect to the issuing company's
continuing ability to meet principal and interest payments. Also, their yields
and market values tend to fluctuate more than higher-rated securities.
Fluctuations in value do not affect the cash income from the securities, but are
reflected in an Underlying Fund's net asset value ("NAV"). The greater risks and
fluctuations in yield and value occur, in part, because investors generally
perceive issuers of lower-rated and unrated securities to be less creditworthy.

The yields earned on high-yield securities generally are related to the quality
ratings assigned by recognized rating agencies.

Certain securities held by an Underlying Fund may permit the issuer at its
option to call, or redeem, its securities. If an issuer were to redeem
securities held by an Underlying Fund during a time of declining interest rates,
the Underlying Fund may not be able to reinvest the proceeds in securities
providing the same investment return as the securities redeemed.

The medium- to lower-rated and unrated securities in which the Underlying Funds
invest tend to offer higher yields than those of other securities with the same
maturities because of the additional risks associated with them. These risks
include:

High-Yield Bond Market. A severe economic downturn or increase in interest rates
might increase defaults in high yield securities issued by highly leveraged
companies. An increase in the number of defaults could adversely affect the
value of all outstanding high-yield securities, thus disrupting the market for
such securities.

Sensitivity to interest rate and economic changes. High-yield securities are
more sensitive to adverse economic changes or individual corporate developments
but less sensitive to interest rate changes than are Treasury or investment
grade bonds. As a result, when interest rates rise, causing bond prices to fall,
the value of high-yield debt bonds tend not to fall as much as Treasury or
investment grade corporate bonds. Conversely when interest rates fall,
high-yield bonds tend to underperform Treasury and investment grade corporate
bonds because high-yield bond prices tend not to rise as much as the prices of
these bonds.

The financial stress resulting from an economic downturn or adverse corporate
developments could have a greater negative effect on the ability of issuers of
high-yield securities to service their principal and interest payments, to meet
projected business goals and to obtain additional financing than on more
creditworthy issuers. Holders of high-yield securities could also be at greater
risk because high yield securities are generally unsecured and subordinate to
senior debt holders and secured creditors. If the issuer of a high-yield
security owned by the Underlying Funds defaults, the Underlying Funds may incur
additional expenses to seek recovery. In addition, periods of economic
uncertainty and changes can be expected to result in increased volatility of
market prices of high-yield securities and the Underlying Funds' NAV.
Furthermore, in the case of high-yield securities structured as zero-coupon or
pay-in-kind securities, their market prices are affected to a greater extent by
interest rate changes and thereby tend to be more speculative and volatile than
securities which pay in cash.

Payment Expectations. High-yield securities present risks based on payment
expectations. For example, high-yield securities may contain redemption or call
provisions. If an issuer exercises these provisions in a

                                       13




declining interest rate market, the Underlying Funds may have to replace the
security with a lower yielding security, resulting in a decreased return for
investors. Also, the value of high-yield securities may decrease in a rising
interest rate market. In addition, there is a higher risk of non-payment of
interest and/or principal by issuers of high-yield securities than in the case
of investment grade bonds.

Liquidity and Valuation Risks. Lower-rated bonds are typically traded among a
smaller number of broker-dealers rather than in a broad secondary market.
Purchasers of high-yield securities tend to be institutions, rather than
individuals, a factor that further limits the secondary market. To the extent
that no established retail secondary market exists, many high-yield securities
may not be as liquid as Treasury and investment grade bonds. The ability of an
Underlying Fund's Board to value or sell high-yield securities will be adversely
affected to the extent that such securities are thinly-traded or illiquid.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high-yield securities more
than other securities, especially in a thinly-traded market. To the extent the
Underlying Funds own illiquid or restricted high-yield securities, these
securities may involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties. At times of less liquidity, it
may be more difficult to value high-yield securities because this valuation may
require more research, and elements of judgment may play a greater role in the
valuation since there is less reliable, objective data available.

Taxation. Special tax considerations are associated with investing in high-yield
securities structured as zero-coupon or pay-in-kind securities. The Underlying
Funds report the interest on these securities as income even though it receives
no cash interest until the security's maturity or payment date.

Limitations of Credit Ratings. The credit ratings assigned to high-yield
securities may not accurately reflect the true risks of an investment. Credit
ratings typically evaluate the safety of principal and interest payments, rather
than the market value risk of high yield securities. In addition, credit
agencies may fail to adjust credit ratings to reflect rapid changes in economic
or company conditions that affect a security's market value. Although the
ratings of recognized rating services such as Moody's and S&P are considered,
the adviser or sub-adviser primarily relies on its own credit analysis, which
includes a study of existing debt, capital structure, ability to service debts
and to pay dividends, the issuer's sensitivity to economic conditions, its
operating history and the current trend of earnings. Thus, the achievement of
the Underlying Funds' investment objective may be more dependent on the
adviser's or sub-adviser's own credit analysis than might be the case for a fund
which invests in higher quality bonds. The adviser or sub-adviser, where
applicable, continually monitors the investments in the Underlying Funds'
portfolio and carefully evaluates whether to dispose of or retain high-yield
securities whose credit ratings have changed. The Underlying Funds may retain a
security whose rating has been changed.

Mortgage-Related Securities

Mortgage-related securities include U.S. government agency mortgage-backed
securities issued or guaranteed by the U.S. government or one of its agencies or
instrumentalities, including the GNMA, FNMA and the Federal Home Loan Mortgage
Corporagtion ("FHLMC"). These instruments might be considered derivatives. The
primary risks associated with these instruments is the risk that their value
will change with changes in interest rates and prepayment risk. "See , U.S.
Government Securities" below.

One type of mortgage-related security includes certificates that represent pools
of mortgage loans assembled for sale to investors by various governmental and
private organizations. These securities provide a monthly payment, which
consists of both an interest and a principal payment that is in effect a
"pass-through" of the monthly payment made by each individual borrower on his or
her residential mortgage loan, net of any fees paid to the issuer or guarantor
of such securities. Additional payments are caused by repayments of principal
resulting from the sale of the underlying residential property, refinancing, or
foreclosure, net of fees or costs that may be incurred.

"Pass-through" certificates, such as those issued by GNMA, entitle the holder to
receive all interest and

                                       14




principal payments owed on the mortgage pool, net of certain fees, regardless of
whether the mortgagor actually makes the payment. A major governmental guarantor
of pass-through certificates is GNMA. GNMA guarantees, with the full faith and
credit of the U.S. government, the timely payments of principal and interest on
securities issued by institutions approved by GNMA (such as savings and loan
institutions, commercial banks and mortgage bankers). Certificates issued by
GNMA are backed by pools of FHA-insured or VA-guaranteed mortgages. Other
governmental guarantors include FNMA and FHLMC (though these certificates are
not backed by the full faith and credit of the U.S. government). FNMA purchases
residential mortgages from a list of approved seller/services that include state
and federally chartered savings and loan associations, mutual saving banks,
commercial banks, credit unions and mortgage bankers.

The prices of high coupon U.S. Government Agency mortgage-backed securities do
not tend to rise as rapidly as those of traditional fixed-rate securities at
times when interest rates are decreasing, and tend to decline more slowly at
times when interest rates are increasing.

Certain Underlying Funds may also purchase mortgage-backed securities issued by
commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers that also create
pass-through pools of conventional residential mortgage loans. Such issuers may
in addition be the originators of the underlying mortgage loans as well as the
guarantors of the pass-through certificates. Pools created by such
non-governmental issuers generally offer a higher rate of return than
governmental pools because there are no direct or indirect governmental
guarantees of payments in the former pools. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance. The
insurance and guarantees are issued by government entities, private insurers and
the mortgage poolers.

It is expected that governmental or private entities may create mortgage loan
pools offering pass-through investments in addition to those described above. As
new types of pass-through securities are developed and offered to investors, the
adviser or sub-adviser may, consistent with the Underlying Funds' investment
objectives, policies and restrictions, consider making investments in such new
types of securities.

Other types of mortgage-related securities in which the Underlying Funds may
invest include debt securities that are secured, directly or indirectly, by
mortgages on commercial real estate or residential rental properties, or by
first liens on residential manufactured homes (as defined in section 603(6) of
the National Manufactured Housing Construction and Safety Standards Act of
1974), whether such manufactured homes are considered real or personal property
under the laws of the states in which they are located. Securities in this
investment category include, among others, standard mortgage-backed bonds and
newer collateralized mortgage obligations ("CMOs"). Mortgage-backed bonds are
secured by pools of mortgages, but unlike pass-through securities, payments to
bondholders are not determined by payments on the mortgages. The bonds consist
of a single class, with interest payable periodically and principal payable on
the stated date of maturity. CMOs have characteristics of both pass-through
securities and mortgage-backed bonds. CMOs are secured by pools of mortgages,
typically in the form of "guaranteed" pass-through certificates such as GNMA,
FNMA, or FHLMC securities. The payments on the collateral securities determine
the payments to bondholders, but there is not a direct "pass-through" of
payments. CMOs are structured into multiple classes, each bearing a different
date of maturity. Monthly payments of principal received from the pool of
underlying mortgages, including prepayments, is first returned to investors
holding the shortest maturity class. Investors holding the longest maturity
class receive principal only after the shorter maturity classes have been
retired.

CMOs are issued by entities that operate under order from the SEC exempting such
issuers from the provisions of the 1940 Act. Until recently, the staff of the
SEC had taken the position that such issuers were investment companies and that,
accordingly, an investment by an investment company (such as the Underlying
Funds) in the securities of such issuers was subject to the limitations imposed
by Section 12 of the 1940 Act. However, in reliance on SEC staff
interpretations, certain Underlying Funds may invest in securities issued by
certain "exempted issuers" without regard to the limitations of Section 12 of
the 1940 Act. In its interpretation, the SEC staff defined "exempted issuers" as
unmanaged, fixed asset issuers that: (a) invest primarily in

                                       15




mortgage-backed securities; (b) do not issue redeemable securities as defined in
Section 2(a)(32) of the 1940 Act; (c) operate under the general exemptive orders
exempting them from all provisions of the 1940 Act; and (d) are not registered
or regulated under the 1940 Act as investment companies.

Privately Issued CMOs

Privately issued CMOs are arrangements in which the underlying mortgages are
held by the issuer, which then issues debt collateralized by the underlying
mortgage assets. Such securities may be backed by mortgage insurance, letters of
credit or other credit enhancing features. They are, however, not guaranteed by
any government agency and are secured by the collateral held by the issuer.
Privately issued CMOs are subject to prepayment risk due to the possibility that
prepayments on the underlying assets will alter the cash flow.

Interest/Principal Only Stripped Mortgage-Backed Securities

Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities. SMBS may be issued by agencies or instrumentalities of the U.S.
government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.

SMBS are structured with two or more classes of securities that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of SMBS will have at least one class receiving
only a small portion of the interest and a larger portion of the principal from
the mortgage assets, while the other classes will receive primarily interest and
only a small portion of the principal. In the most extreme case, one class will
receive all of the interest (the Interest-Only or "IO" class), while the other
class will receive all of the principal (the Principal-Only or "PO" class). The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
a rapid rate of principal payments may have a material adverse effect on such
security's yield to maturity. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, an Underlying Fund may fail
to recoup fully its initial investment in these securities. The determination of
whether a particular government-issued IO or PO backed by fixed-rate mortgages
is liquid is made by the adviser or a sub-adviser under guidelines and standards
established by an Underlying Fund's Board. Such a security may be deemed liquid
if it can be disposed of promptly in the ordinary course of business at a value
reasonably close to that used in the calculation of NAV per share.

Risks of Investing in Mortgage-Related Securities. Investments in
mortgage-related securities involve certain risks. In periods of declining
interest rates, prices of fixed-income securities tend to rise. However, during
such periods, the rate of prepayment of mortgages underlying mortgage-related
securities tends to increase, with the result that such prepayments must be
reinvested by the issuer at lower rates. The rate of prepayments on underlying
mortgages will affect the price and volatility of a mortgage-related security,
and may have the effect of shortening or extending the effective maturity of the
security beyond what was anticipated at the time of the purchase. Unanticipated
rates of prepayment on underlying mortgages can be expected to increase the
volatility of such securities. In addition, the value of these securities may
fluctuate in response to the market's perception of the creditworthiness of the
issuers of mortgage-related securities owned by an Underlying Fund. Because
investments in mortgage-related securities are interest sensitive, the ability
of the issuer to reinvest favorably in underlying mortgages may be limited by
government regulation or tax policy. For example, action by the Board of
Governors of the Federal Reserve System to limit the growth of the nation's
money supply may cause interest rates to rise and thereby reduce the volume of
new residential mortgages. Additionally, although mortgages and mortgage-related
securities are generally supported by some form of government or private
guarantees and/or insurance, there is no assurance that private guarantors or
insurers will be able to meet their obligations. Further, SMBS are likely to
experience greater price volatility than other types of mortgage securities. The
yield to maturity on the interest only class is extremely sensitive, both to
changes in prevailing interest rates and to the rate of principal payments
(including prepayments) on the underlying mortgage assets. Similarly, the yield
to maturity on CMO residuals is extremely sensitive to

                                       16




prepayments on the related underlying mortgage assets. In addition, if a series
of a CMO includes a class that bears interest at an adjustable rate, the yield
to maturity on the related CMO residual will also be extremely sensitive to
changes in the level of the index upon which interest rate adjustments are made.
An Underlying Fund could fail to fully recover its initial investment in a CMO
residual or a SMBS.

Municipal Securities

Municipal securities are debt obligations issued by state and local governments,
territories and possessions of the United States, regional government
authorities, and their agencies and instrumentalities ("municipal securities").
Municipal securities include both notes (which have maturities of less than one
year) and bonds (which have maturities of one year or more) that bear fixed or
variable rates of interest.

In general, "municipal securities" debt obligations are issued to obtain funds
for a variety of public purposes, such as the construction, repair, or
improvement of public facilities including airports, bridges, housing,
hospitals, mass transportation, schools, streets, water and sewer works.
Municipal securities may be issued to refinance outstanding obligations as well
as to raise funds for general operating expenses and lending to other public
institutions and facilities.

The two principal classifications of municipal securities are "general
obligation" securities and "revenue" securities. General obligation securities
are secured by the issuer's pledge of its full faith, credit, and taxing power
for the payment of principal and interest. Characteristics and methods of
enforcement of general obligation bonds vary according to the law applicable to
a particular issuer, and the taxes that can be levied for the payment of debt
service may be limited or unlimited as to rates or amounts of special
assessments. Revenue securities are payable only from the revenues derived from
a particular facility, a class of facilities or, in some cases, from the
proceeds of a special excise tax. Revenue bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer systems;
highways, bridges, and tunnels; port and airport facilities; colleges and
universities; and hospitals. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service reserve
fund the assets of which may be used to make principal and interest payments on
the issuer's obligations. Housing finance authorities have a wide range of
security including partially or fully insured mortgages, rent subsidized and
collateralized mortgages, and the net revenues from housing or other public
projects. Some authorities are provided further security in the form of a
state's assistance (although without obligation) to make up deficiencies in the
debt service reserve fund.

Insured municipal debt may also be purchased, in which scheduled payments of
interest and principal are guaranteed by a private, non-governmental or
governmental insurance company. The insurance does not guarantee the market
value of the municipal debt or the value of the shares of the Underlying Funds.

Securities of issuers of municipal obligations are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Bankruptcy Reform Act of 1978. In addition, the
obligations of such issuers may become subject to laws enacted in the future by
Congress, state legislatures or referenda extending the time for payment of
principal or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. Furthermore, as
a result of legislation or other conditions, the power or ability of any issuer
to pay, when due, the principal of and interest on its municipal obligations may
be materially affected.

Industrial Development and Pollution Control Bonds. These are revenue bonds and
generally are not payable from the unrestricted revenues of an issuer. They are
issued by or on behalf of public authorities to raise money to finance privately
operated facilities for business, manufacturing, housing, sport complexes and
pollution control. Consequently, the credit quality of these securities is
dependent upon the ability of the user of the facilities financed by the bonds
and any guarantor to meet its financial obligations.

Municipal Lease Obligations. These are lease obligations or installment purchase
contract obligations of

                                       17




municipal authorities or entities ("municipal lease obligations"). Although
lease obligations do not constitute general obligations of the municipality for
which its taxing power is pledged, a lease obligation is ordinarily backed by
the municipality's covenant to budget for, appropriate and make the payment due
under the lease obligation. An Underlying Fund may also purchase "certificates
of participation," which are securities issued by a particular municipality or
municipal authority to evidence a proportionate interest in base rental or lease
payments relating to a specific project to be made by the municipality, agency
or authority. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in any year unless money is appropriated for such
purpose for such year. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
default and foreclosure might prove difficult. In addition, these securities
represent a relatively new type of financing, and certain lease obligations may
therefore be considered to be illiquid securities.

The Underlying Funds will attempt to minimize the special risks inherent in
municipal lease obligations and certificates of participation by purchasing only
lease obligations which meet the following criteria: (1) rated A or better by at
least one nationally recognized securities rating organization; (2) secured by
payments from a governmental lessee which has actively traded debt obligations;
(3) determined by the adviser or sub-adviser to be critical to the lessee's
ability to deliver essential services; and (4) contain legal features which the
adviser or sub-adviser deems appropriate, such as covenants to make lease
payments without the right of offset or counterclaim, requirements for insurance
policies, and adequate debt service reserve funds.

Subordinated Mortgage Securities

Subordinated mortgage securities have certain characteristics and certain
associated risks. In general, the subordinated mortgage securities in which an
Underlying Fund may invest consist of a series of certificates issued in
multiple classes with a stated maturity or final distribution date. One or more
classes of each series may be entitled to receive distributions allocable only
to principal, principal payments, interest or any combination thereof prior to
one or more other classes, or only after the occurrence of certain events, and
may be subordinated in the right to receive such distributions on such
certificates to one or more senior classes of certificates. The rights
associated with each class of certificates are set forth in the applicable
pooling and servicing agreement, form of certificate and offering documents for
the certificates.

The subordination terms are usually designed to decrease the likelihood that the
holders of senior certificates will experience losses or delays in the receipt
of their distributions and to increase the likelihood that the senior
certificate holders will receive aggregate distributions of principal and
interest in the amounts anticipated. Generally, pursuant to such subordination
terms, distributions arising out of scheduled principal, principal prepayments,
interest or any combination thereof that otherwise would be payable to one or
more other classes of certificates of such series (i.e., the subordinated
certificates) are paid instead to holders of the senior certificates. Delays in
receipt of scheduled payments on mortgage loans and losses on defaulted mortgage
loans are typically borne first by the various classes of subordinated
certificates and then by the holders of senior certificates.

In some cases, the aggregate losses in respect of defaulted mortgage loans that
must be borne by the subordinated certificates and the amount of the
distributions otherwise distributable on the subordinated certificates that
would, under certain circumstances, be distributable to senior certificate
holders may be limited to a specified amount. All or any portion of
distributions otherwise payable to holders of subordinated certificates may, in
certain circumstances, be deposited into one or more reserve accounts for the
benefit of the senior certificate holders. Since a greater risk of loss is borne
by the subordinated certificate holders, such certificates generally have a
higher stated yield than the senior certificates.

A series of certificates may consist of one or more classes as to which
distributions allocable to principal will be allocated. The method by which the
amount of principal to be distributed on the certificates on each distribution
date is calculated and the manner in which such amount could be allocated among
classes varies

                                       18




and could be effected pursuant to a fixed schedule, in relation to the
occurrence of certain events or otherwise. Special distributions are also
possible if distributions are received with respect to the mortgage assets, such
as is the case when underlying mortgage loans are prepaid.

A mortgage-related security that is senior to a subordinated residential
mortgage security will not bear a loss resulting from the occurrence of a
default on an underlying mortgage until all credit enhancement protecting such
senior holder is exhausted. For example, the senior holder will only suffer a
credit loss after all subordinated interests have been exhausted pursuant to the
terms of the subordinated residential mortgage security. The primary credit risk
to the Underlying Funds by investing in subordinated residential mortgage
securities is potential losses resulting from defaults by the borrowers under
the underlying mortgages. The Underlying Funds would generally realize such a
loss in connection with a subordinated residential mortgage security only if the
subsequent foreclosure sale of the property securing a mortgage loan does not
produce an amount at least equal to the sum of the unpaid principal balance of
the loan as of the date the borrower went into default, the interest that was
not paid during the foreclosure period and all foreclosure expenses.

An Underlying Fund's adviser or sub-adviser will seek to limit the risks
presented by subordinated residential mortgage securities by reviewing and
analyzing the characteristics of the mortgage loans that underlie the pool of
mortgages securing both the senior and subordinated residential mortgage
securities. An Underlying Fund's adviser or sub-adviser has developed a set of
guidelines to assist in the analysis of the mortgage loans underlying
subordinated residential mortgage securities. Each pool purchase is reviewed
against the guidelines. An Underlying Fund seeks opportunities to acquire
subordinated residential mortgage securities where, in the view of the adviser
or sub-adviser, the potential for a higher yield on such instruments outweighs
any additional risk presented by the instruments. An Underlying Fund's adviser
or sub-adviser will seek to increase yield to shareholders by taking advantage
of perceived inefficiencies in the market for subordinated residential mortgage
securities.

U.S. Government Securities

Investments in U.S. government securities include instruments issued by the U.S.
Treasury, such as bills, notes and bonds. These instruments are direct
obligations of the U.S. government and, as such, are backed by the full faith
and credit of the United States. They differ primarily in their interest rates,
the lengths of their maturities and the dates of their issuances. In addition,
U.S. government securities include securities issued by instrumentalities of the
U.S. government, such as the GNMA, which are also backed by the full faith and
credit of the United States. Also included in the category of U.S. government
securities are instruments issued by instrumentalities established or sponsored
by the U.S. government, such as the Student Loan Marketing Association, the FNMA
and the FHLMC. While these securities are issued, in general, under the
authority of an Act of Congress, the U.S. government is not obligated to provide
financial support to the issuing instrumentalities, although under certain
conditions certain of these authorities may borrow from the U.S. Treasury. In
the case of securities not backed by the full faith and credit of the United
States, the investor must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitment. Certain Underlying Funds will
invest in securities of such agencies or instrumentalities only when the adviser
or sub-adviser is satisfied that the credit risk with respect to any
instrumentality is comparable to the credit risk of U.S. government securities
backed by the full faith and credit of the United States.

OTHER INVESTMENTS

Asset-Backed Securities

Asset-backed securities represent individual interests in pools of consumer
loans, home equity loans, trade receivables, credit card receivables and other
debt and are similar in structure to mortgage-backed securities. The assets are
securitized either in a pass-through structure (similar to a mortgage
pass-through structure) or in

                                       19




a pay-through structure (similar to a CMO structure). Asset-backed securities
may be subject to more rapid repayment than their stated maturity date would
indicate as a result of the pass-through of prepayments of principal on the
underlying loans. During periods of declining interest rates, prepayment of
certain types of loans underlying asset-backed securities can be expected to
accelerate. Accordingly, an Underlying Fund's ability to maintain positions in
these securities will be affected by reductions in the principal amount of the
securities resulting from prepayments, and an Underlying Fund must reinvest the
returned principal at prevailing interest rates, which may be lower.
Asset-backed securities may also be subject to extension risk during periods of
rising interest rates.

Asset-backed securities entail certain risks not presented by mortgage-backed
securities. The collateral underlying asset-backed securities may be less
effective as security for payments than real estate collateral. Debtors may have
the right to set off certain amounts owed on the credit cards or other
obligations underlying the asset-backed security, or the debt holder may not
have a first (or proper) security interest in all of the obligations backing the
receivable because of the nature of the receivable or state or federal laws
protecting the debtor. Certain collateral may be difficult to locate in the
event of default, and recoveries on depreciated or damaged collateral may not
fully cover payments due on these securities.

It is expected that governmental, government-related, or private entities may
create mortgage loan pools and other mortgage-backed securities offering
mortgage pass-through and mortgage-collateralized investments in addition to
those described above. As new types of mortgage-backed securities are developed
and offered to investors, investments in such new types of mortgage-backed
securities may be considered for the Underlying Funds.

The non-mortgage-related asset-backed securities in which certain Underlying
Funds may invest include, but are not limited to, interests in pools of
receivables, such as credit card and accounts receivables and motor vehicle and
other installment purchase obligations and leases. Interests in these pools are
not backed by the U.S. government and may or may not be secured.

The credit characteristics of asset-backed securities differs in a number of
respects from those of traditional debt securities. Asset-backed securities
generally do not have the benefit of a security interest in collateral that is
comparable to other debt obligations, and there is a possibility that recoveries
on repossessed collateral may not be available to support payment on these
securities.

Banking Industry Obligations

Banking industry obligations include certificates of deposit, bankers'
acceptances, and fixed time deposits. The Underlying Funds will not invest in
obligations issued by a bank unless (i) the bank is a U.S. bank and a member of
the FDIC and (ii) the bank has total assets of at least $1 billion (U.S.) or, if
not, Underlying Fund's investment is limited to the FDIC-insured amount of
$100,000.

Bank Certificates of Deposit, Bankers' Acceptances and Time Deposits. Certain
Underlying Funds may acquire certificates of deposit, bankers' acceptances and
time deposits. Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Underlying
Funds will be dollar-denominated obligations of domestic or foreign banks or
financial institutions which at the time of purchase have capital, surplus and
undivided profits in excess of $100 million (including assets of both domestic
and foreign branches), based on latest published reports, or less than $100
million if the principal amount of such bank obligations are fully insured by
the U.S. government.

An Underlying Fund holding instruments of foreign banks or financial
institutions may be subject to additional

                                       20




investment risks that are different in some respects from those incurred by a
fund which invests only in debt obligations of U.S. domestic issuers. Domestic
banks and foreign banks are subject to different governmental regulations with
respect to the amount and types of loans which may be made and interest rates
which may be charged. In addition, the profitability of the banking industry
depends largely upon the availability and cost of funds for the purpose of
financing lending operations under prevailing money market conditions. General
economic conditions as well as exposure to credit losses arising from possible
financial difficulties of borrowers play an important part in the operations of
the banking industry. Federal and state laws and regulations require domestic
banks to maintain specified levels of reserves, limited in the amount which they
can loan to a single borrower, and subject to other regulations designed to
promote financial soundness. However, such laws and regulations do not
necessarily apply to foreign bank obligations that an Underlying Fund may
acquire.

In addition to purchasing certificates of deposit and bankers' acceptances, to
the extent permitted under their respective investment objectives and policies
stated above and in their Prospectuses, certain Underlying Funds may make
interest-bearing time or other interest-bearing deposits in commercial or
savings banks. Time deposits are non-negotiable deposits maintained at a banking
institution for a specified period of time at a specified interest rate.

Savings Association Obligations. Certain Underlying Funds may invest in
certificates of deposit (interest-bearing time deposits) issued by savings banks
or savings and loan associations that have capital, surplus and undivided
profits in excess of $100 million, based on latest published reports, or less
than $100 million if the principal amount of such obligations is fully insured
by the U.S. government.

Commercial Paper, Short-Term Notes and Other Corporate Obligations. Certain
Underlying Funds may invest a portion of their assets in commercial paper and
short-term notes. Commercial paper consists of unsecured promissory notes issued
by corporations. Issues of commercial paper and short-term notes will normally
have maturities of less than nine months and fixed rates of return, although
such instruments may have maturities of up to one year.

Corporate obligations include bonds and notes issued by corporations to finance
longer-term credit needs than supported by commercial paper. While such
obligations generally have maturities of ten years or more, the Underlying Funds
may purchase corporate obligations which have remaining maturities of one year
or less from the date of purchase and which are rated "AA" or higher by S&P or
"Aa" or higher by Moody's or a comparable rating agency.

Credit-Linked Notes

A credit-linked note ("CLN") is generally issued by one party with a credit
option, or risk, linked to a second party. The embedded credit option allows the
first party to shift a specific credit risk to the CLN holder, or an Underlying
Fund in this case. The CLN is issued by a trust, a special purpose vehicle,
collateralized by AAA-rated securities. Because of its high ratings, a CLN may
be purchased for an Underlying Fund. The CLN's price or coupon is linked to the
performance of the reference asset of the second party. Generally, the CLN
holder receives either fixed or floating coupon rate during the life of the CLN
and par at maturity. The cash flows are dependent on specified credit-related
events. Should the second party default or declare bankruptcy, the CLN holder
will receive an amount equivalent to the recovery rate. The CLN holder bears the
risk of default by the second party and any unforeseen movements in the
reference asset, which could lead to loss of principal and receipt of interest
payments. In return for these risks, the CLN holder receives a higher yield. As
with most derivative investments, valuation of a CLN is difficult due to the
complexity of the security (i.e., the embedded option is not easily priced). An
Underlying Fund cannot assure that it can implement a successful strategy
regarding this type of investment.

                                       21




Derivatives

The ING Global Income Builder Fund and/or certain Underlying Funds may invest in
derivatives. Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the performance
of an underlying asset or assets. Types of derivatives include options, futures
contracts, options on futures and forward contracts. Derivative instruments may
be used for a variety of reasons including to enhance return, to hedge certain
market risks, or provide a substitute for purchasing or selling particular
securities. Derivatives may provide a cheaper, quicker or more specifically
focused way for ING Global Income Builder Fund and/or an Underlying Fund to
invest than "traditional" securities would.

Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit an ING Global Income Builder Fund
and/or an Underlying Fund to increase or decrease the level of risk, or change
the character of the risk, to which its portfolio is exposed in much the same
way as ING Global Income Builder Fund and/or an Underlying Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.

Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily payment system (i.e., margin requirements) operated by
the clearing agency in order to reduce overall credit risk. As a result, unless
the clearing agency defaults, there is relatively little counterparty credit
risk associated with derivatives purchased on an exchange. By contrast, no
clearing agency guarantees over-the-counter derivatives. Therefore, each party
to an over-the-counter derivative bears the risk that the counterparty will
default. Accordingly, ING Global Income Builder Fund and/or the Underlying Funds
will consider the creditworthiness of counterparties to over-the-counter
derivatives in the same manner as they would review the credit quality of a
security to be purchased by ING Global Income Builder Fund and/or an Underlying
Fund. Over-the-counter derivatives are less liquid than exchange-traded
derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the derivative to be interested in bidding for
it.

The value of some derivative instruments in which ING Global Income Builder Fund
and/or an Underlying Fund invests may be particularly sensitive to changes in
prevailing interest rates, and, like the other investments of ING Global Income
Builder Fund and/or the Underlying Funds, the ability of ING Global Income
Builder Fund and/or the Underlying Funds to successfully utilize these
instruments may depend in part upon the ability of the ING Global Income Builder
Fund's and/or an Underlying Fund's adviser or sub-adviser to forecast interest
rates and other economic factors correctly. If the adviser or sub-adviser
incorrectly forecasts such factors and has taken positions in derivative
instruments contrary to prevailing market trends, ING Global Income Builder Fund
and/or the Underlying Funds could be exposed to the risk of loss.

ING Global Income Builder Fund and/or an Underlying Fund might not employ any of
the strategies described below, and no assurance can be given that any strategy
used will succeed. If ING Global Income Builder Fund's and/or an Underlying
Fund's adviser or sub-adviser incorrectly forecasts interest rates, market
values or other economic factors in utilizing a derivatives strategy for ING
Global Income Builder Fund and/or an Underlying Fund, ING Global Income Builder
Fund and/or the Underlying Fund might have been in a better position if it had
not entered into the transaction at all. Also, suitable derivative transactions
may not be available in all circumstances. The use of these strategies involves
certain special risks, including a possible imperfect correlation, or even no
correlation, between price movements of derivative instruments and price
movements of related investments. While some strategies involving derivative
instruments can reduce the risk of loss, they can also reduce the opportunity
for gain or even result in losses by offsetting favorable price movements in
related investments or otherwise, due to the possible inability of ING Global
Income Builder Fund and/or the Underlying Funds to purchase or sell a portfolio
security at a time that otherwise would be favorable or the possible need to
sell a portfolio security at a disadvantageous time because ING Global Income
Builder Fund and/or the Underlying Funds are required to maintain asset coverage
or offsetting

                                       22




positions in connection with transactions in derivative instruments, and the
possible inability of ING Global Income Builder Fund and/or the Underlying Funds
to close out or to liquidate its derivatives positions. In addition, ING Global
Income Builder Fund and/or the Underlying Funds' use of such instruments may
cause ING Global Income Builder Fund and/or the Underlying Funds to realize
higher amounts of short-term capital gains (generally taxed at ordinary income
tax rates) than if it had not used such instruments.

Options on Securities and Indices - ING Global Income Builder Fund and/or
certain Underlying Funds may, to the extent specified herein or in the
Prospectuses, purchase and sell both put and call options on fixed-income or
other securities or indices in standardized contracts traded on foreign or
domestic securities exchanges, boards of trade, or similar entities, or quoted
on NASDAQ or on an over-the-counter market, and agreements, sometimes called
cash puts, which may accompany the purchase of a new issue of bonds from a
dealer.

An option on a security (or index) is a contract that gives the holder of the
option, in return for a premium, the right to buy from (in the case of a call)
or sell to (in the case of a put) the writer of the option the security
underlying the option (or the cash value of the index) at a specified exercise
price at any time during the term of the option. The writer of an option on a
security has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price or to pay the exercise
price upon delivery of the underlying security. Upon exercise, the writer of an
option on an index is obligated to pay the difference between the cash value of
the index and the exercise price multiplied by the specified multiplier for the
index option. (An index is designed to reflect features of a particular
financial or securities market, a specific group of financial instruments or
securities, or certain economic indicators.)

Certain Underlying Funds will write call options and put options only if they
are "covered." ING Global Income Builder Fund may write uncovered calls. In the
case of a call option on a security, the option is "covered" if an Underlying
Fund owns the security underlying the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or, if
additional cash consideration is required, cash or other assets determined to be
liquid by the Underlying Fund's adviser or sub-adviser in accordance with
procedures established by the Board, in such amount are segregated by its
custodian) upon conversion or exchange of other securities held by the
Underlying Funds. For a call option on an index, the option is covered if an
Underlying Fund maintains with its custodian assets determined to be liquid by
the Underlying Fund's adviser or sub-adviser in accordance with procedures
established by the Board, in an amount equal to the contract value of the index.
A call option is also covered if an Underlying Fund holds a call on the same
security or index as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written, or (ii)
greater than the exercise price of the call written, provided the difference is
maintained by the Underlying Funds in segregated assets determined to be liquid
by an Underlying Fund's adviser or sub-adviser in accordance with procedures
established by the Board. A put option on a security or an index is "covered" if
the Underlying Fund segregates assets determined to be liquid by the Underlying
Fund's adviser or sub-adviser in accordance with procedures established by the
Board, equal to the exercise price. A put option is also covered if an
Underlying Fund holds a put on the same security or index as the put written
where the exercise price of the put held is (i) equal to or greater than the
exercise price of the put written, or (ii) less than the exercise price of the
put written, provided the difference is maintained by the Underlying Fund in
segregated assets determined to be liquid by the sub-adviser in accordance with
procedures established by the Board.

If an option expires unexercised, the Underlying Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by an Underlying Fund expires unexercised, the Underlying Fund
realizes a capital loss equal to the premium paid. Prior to the earlier of
exercise or expiration, an exchange traded option may be closed out by an
offsetting purchase or sale of an option of the same series (type, exchange,
underlying security or index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be effected
when the Underlying Funds desire.

                                       23




ING Global Income Builder Fund and/or an Underlying Fund may well sell put or
call options it has previously purchased, which could result in a net gain or
loss depending on whether the amount realized on the sale is more or less than
the premium and other transaction costs paid on the put or call option which is
sold. Prior to exercise or expiration, an option may be closed out by an
offsetting purchase or sale of an option of the same series. ING Global Income
Builder Fund and/or the Underlying Funds will realize a capital gain from a
closing purchase transaction if the cost of the closing option is less than the
premium received from writing the option or, if it is more, ING Global Income
Builder Fund and/or the Underlying Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, ING Global Income Builder Fund and/or the Underlying
Funds will realize a capital gain or, if it is less, ING Global Income Builder
Fund and/or the Underlying Funds will realize a capital loss. The principal
factors affecting the market value of a put or a call option include supply and
demand, interest rates, the current market price of the underlying security or
index in relation to the exercise price of the option, the volatility of the
underlying security or index, and the time remaining until the expiration date.

The premium paid for a put or call option purchased by ING Global Income Builder
Fund and/or the Underlying Funds is an asset of ING Global Income Builder Fund
and/or the Underlying Funds. The premium received for an option written by ING
Global Income Builder Fund and/or the Underlying Funds is recorded as a deferred
credit. The value of an option purchased or written is marked-to-market daily
and is valued at the closing price on the exchange on which it is traded or, if
not traded on an exchange or no closing price is available at the mean between
the last bid and asked prices.

ING Global Income Builder Fund and/or certain Underlying Funds may write covered
straddles consisting of a combination of a call and a put written on the same
underlying security. A straddle will be covered when sufficient assets are
deposited to meet ING Global Income Builder Fund and/or an Underlying Fund's
immediate obligations. ING Global Income Builder Fund and/or the Underlying
Funds may use the same liquid assets to cover both the call and put options
where the exercise price of the call and put are the same, or the exercise price
of the call is higher than that of the put. In such cases, ING Global Income
Builder Fund and/or the Underlying Funds will also segregate liquid assets
equivalent to the amount, if any, by which the put is "in the money."

Risks Associated with Options on Securities and Indices. There are several risks
associated with transactions in options on securities and on indices. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.

During the option period, the covered call writer has, in return for the premium
on the option, given up the opportunity to profit from a price increase in the
underlying security above the exercise price, but, as long as its obligation as
a writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying security at the exercise price. If a put
or call option purchased by ING Global Income Builder Fund and/or the Underlying
Funds is not sold when it has remaining value, and if the market price of the
underlying security remains equal to or greater than the exercise price (in the
case of a put), or remains less than or equal to the exercise price (in the case
of a call), ING Global Income Builder Fund and/or the Underlying Funds will lose
its entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security.

There can be no assurance that a liquid market will exist when ING Global Income
Builder Fund and/or the Underlying Funds seek to close out an option position.
If ING Global Income Builder Fund and/or the

                                       24




Underlying Funds were unable to close out an option that it had purchased on a
security, it would have to exercise the option in order to realize any profit or
the option may expire worthless. If ING Global Income Builder Fund and/or the
Underlying Funds were unable to close out a covered call option that it had
written on a security, it would not be able to sell the underlying security
unless the option expired without exercise. As the writer of a covered call
option, ING Global Income Builder Fund and/or the Underlying Funds forgo, during
the option's life, the opportunity to profit from increases in the market value
of the security covering the call option above the sum of the premium and the
exercise price of the call.

If trading were suspended in an option purchased by ING Global Income Builder
Fund and/or the Underlying Funds, ING Global Income Builder Fund and/or the
Underlying Funds would not be able to close out the option. If restrictions on
exercise were imposed, ING Global Income Builder Fund and/or the Underlying
Funds might be unable to exercise an option it has purchased. Except to the
extent that a call option on an index written by ING Global Income Builder Fund
and/or the Underlying Funds is covered by an option on the same index purchased
by the ING Global Income Builder Fund and/or Underlying Funds, movements in the
index may result in a loss to ING Global Income Builder Fund and/or the
Underlying Funds. However, such losses may be mitigated by changes in the value
of ING Global Income Builder Fund's and/or the Underlying Fund's securities
during the period the option was outstanding.

Foreign Currency Options. ING Global Income Builder Fund and/or certain
Underlying Funds may buy or sell put and call options on foreign currencies
either on exchanges or in the over-the-counter market. A put option on a foreign
currency gives that purchaser of the option the right to sell a foreign currency
at the exercise price until the option expires. A call option on a foreign
currency gives the purchaser of the option the right to purchase the currency at
the exercise price until the option expires. Currency options traded on U.S. or
other exchanges may be subject to position limits, which may limit the ability
of ING Global Income Builder Fund and/or the Underlying Funds to reduce foreign
currency risk using such options. Over-the-counter options differ from traded
options in that they are two-party contracts with price and other terms
negotiated between buyer and seller, and generally do not have as much market
liquidity as exchange-traded options.

Futures Contracts and Options on Futures Contracts. A futures contract is an
agreement between two parties to buy and sell a security or commodity for a set
price on a future date. These contracts are traded on exchanges, so that, in
most cases, either party can close out its position on the exchange for cash,
without delivering the security or commodity. An option on a futures contract
gives the holder of the option the right to buy or sell a position in a futures
contract to the writer of the option, at a specified price and on or before a
specified expiration date.

ING Global Income Builder Fund and/or certain Underlying Funds may invest in
futures contracts and options thereon ("futures options") including such
contracts or options with respect to, but not limited to, interest rates,
commodities, and security or commodity indices. To the extent that ING Global
Income Builder Fund and/or an Underlying Fund may invest in foreign
currency-denominated securities, it may also invest in foreign currency futures
contracts and options thereon.

An interest rate, commodity, foreign currency or index futures contract provides
for the future sale by one party and purchase by another party of a specified
quantity of a financial instrument, commodity, foreign currency or the cash
value of an index at a specified price and time. A futures contract on an index
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. Although the value of an index might be a
function of the value of certain specified securities, no physical delivery of
these securities is made. A public market exists in futures contracts covering a
number of indices as well as financial instruments and foreign currencies
including: the S&P 500/R/ Composite Stock Price Index ("S&P 500/R/ Index"); the
S&P MidCap 400; the Nikkei 225; the NYSE composite; U.S. Treasury bonds; U.S.
Treasury notes; GNMA Certificates; three-month U.S. Treasury bills; 90-day
commercial paper; bank certificates of deposit; Eurodollar certificates of
deposit; the

                                       25




Australian dollar; the Canadian and certain multinational currencies, such as
the Euro. It is expected that other futures contracts will be developed and
traded in the future.

ING Global Income Builder Fund and/or certain Underlying Funds may purchase and
write call and put futures options, as specified for ING Global Income Builder
Fund and/or those Underlying Funds in this SAI or the Prospectuses. Futures
options possess many of the same characteristics as options on securities and
indices (discussed above). A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a long
position in the futures contract and the writer is assigned the opposite short
position. In the case of a put option, the opposite is true.

Certain Underlying Funds intend generally to limit their use of futures
contracts and futures options to "bona fide hedging" transactions, as such term
is defined in applicable regulations, interpretations and practice. For example,
an Underlying Fund might use futures contracts to hedge against anticipated
changes in interest rates that might adversely affect either the value of the
Underlying Fund's securities or the price of the securities, which the
Underlying Fund intends to purchase. An Underlying Fund's hedging activities may
include sales of futures contracts as an offset against the effect of expected
increases in interest rates, and purchases of futures contracts as an offset
against the effect of expected declines in interest rates. Although other
techniques could be used to reduce an Underlying Fund's exposure to interest
rate fluctuations, the Underlying Fund may be able to hedge its exposure more
effectively and perhaps at a lower cost by using futures contracts and futures
options.

Certain Underlying Funds will only enter into futures contracts and futures
options, which are standardized and traded on a U.S. or foreign exchange, board
of trade, or similar entity, or quoted on an automated quotation system.

When a purchase or sale of a futures contract is made by an Underlying Fund, the
Underlying Fund is required to deposit with its custodian (or broker, if legally
permitted) a specified amount of assets determined to be liquid by the
Underlying Fund's adviser or sub-adviser in accordance with procedures
established by the Board ("initial margin"). The margin required for a futures
contract is set by the exchange on which the contract is traded and may be
modified during the term of the contract. Margin requirements on foreign
exchanges may be different than U.S. exchanges. The initial margin is in the
nature of a performance bond or good faith deposit on the futures contract,
which is returned to the Underlying Fund upon termination of the contract,
assuming all contractual obligations have been satisfied. The Underlying Fund
expects to earn interest income on its initial margin deposits. A futures
contract held by the Underlying Fund is valued daily at the official settlement
price of the exchange on which it is traded. Each day the Underlying Fund pays
or receives cash, called "variation margin" equal to the daily change in value
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by Underlying Fund but is instead
a settlement between Underlying Fund and the broker of the amount one would owe
the other if the futures contract expired. In computing daily NAV, each Fund
will mark-to-market its open futures positions.

Certain Underlying Funds are also required to deposit and maintain margin with
respect to put and call options on futures contracts written by it. Such margin
deposits will vary depending on the nature of the underlying futures contract
(and the related initial margin requirements), the current market value of the
option, and other futures positions held by Underlying Fund.

Although some futures contracts call for making or taking delivery of the
underlying securities, generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index and delivery month). Closing out a
futures contract sale is effected by purchasing a futures contract for the same
aggregate amount of the specific type of financial instrument with the same
delivery date. If an offsetting purchase price is less than the original sale
price, an Underlying Fund realizes a capital gain, or if it is more, the
Underlying Fund realizes a capital loss. Conversely, if an offsetting sale price
is more than the original purchase price, Underlying Fund realizes a capital
gain, or if it is less, the

                                       26




Underlying Fund realizes a capital loss. The transaction costs must also be
included in these calculations.

A covered straddle consists of a call and a put written on the same underlying
futures contract. A straddle will be covered when sufficient assets are
deposited to meet the Underlying Fund's immediate obligations. An Underlying
Fund may use the same liquid assets to cover both the call and put options where
the exercise price of the call and put are the same, or the exercise price of
the call is higher than that of the put. In such cases, an Underlying Fund will
also segregate liquid assets equivalent to the amount, if any, by which the put
is "in the money."

Limitations on Use of Futures and Futures Options. In general, an Underlying
Fund intends to enter into positions in futures contracts and related options
only for "bona fide hedging" purposes. When purchasing a futures contract, an
Underlying Fund will maintain with its custodian (and mark-to-market on a daily
basis) assets determined to be liquid by the Underlying Fund's adviser or
sub-adviser in accordance with procedures established by the Board, that, when
added to the amounts deposited with a futures commission merchant as margin, are
equal to the market value of the futures contract. Alternatively, an Underlying
Fund may "cover" its position by purchasing a put option on the same futures
contract with a strike price as high or higher than the price of the contract
held by the Underlying Fund.

When purchasing a futures contract, an Underlying Fund will maintain with its
custodian (and mark-to-market on a daily basis) assets determined to be liquid
by the Underlying Fund's adviser or sub-adviser in accordance e with procedures
established by the Board, that, when added to the amounts deposited with a
futures commission merchant as margin, are equal to the market value of the
futures contract. Alternatively, an Underlying Fund may "cover" its position by
purchasing a put option on the same futures contract with a strike price as high
or higher than the price of the contract held by the Underlying Fund.

When selling a futures contract, an Underlying Fund will maintain with its
custodian (and mark-to-market on a daily basis) assets determined to be liquid
by the Underlying Fund's adviser or sub-adviser in accordance with procedures
established by the Board, that are equal to the market value of the instruments
underlying the contract. Alternatively, an Underlying Fund may "cover" its
position by owning the instruments underlying the contract (or, in the case of
an index futures contract, a portfolio with a volatility substantially similar
to that of the index on which the futures contract is based), or by holding a
call option permitting Underlying Fund to purchase the same futures contract at
a price no higher than the price of the contract written by an Underlying Fund
(or at a higher price if the difference is maintained in liquid assets with the
Underlying Fund's custodian).

When selling a call option on a futures contract, an Underlying Fund will
maintain with its custodian (and mark-to-market on a daily basis) assets
determined to be liquid by the Underlying Fund's adviser or sub-adviser in
accordance with procedures established by the Board, that equal the purchase
price of the futures contract, less any margin on deposit. Alternatively, an
Underlying Fund may cover the position either by entering into a short position
in the same futures contract, or by owning a separate put option permitting it
to sell the same futures contract so long as the strike price of the purchased
put option is the same or higher than the strike price of the put option sold by
an Underlying Fund.

When selling a put option on a futures contract, an Underlying Fund will
maintain with its custodian (and mark-to-market on a daily basis) assets
determined to be liquid by the Underlying Fund's adviser or sub-adviser in
accordance with procedures established by the Board, that equal the purchase
price of the futures contract, less any margin on deposit. Alternatively, an
Underlying Fund may cover the position either by entering into a short position
in the same futures contract, or by owning a separate put option permitting it
to sell the same futures contract so long as the strike price of the purchased
put option is the same or higher than the strike price of the put option sold by
the Underlying Fund.

To the extent that securities with maturities greater than one year are used to
segregate assets to cover an Underlying Fund's obligations under the futures
contracts and related options, such use will not eliminate the

                                       27




risk of a form of leverage, which may tend to exaggerate the effect on NAV of
any increase or decrease in the market value of the Underlying Fund's portfolio,
and may require liquidation of portfolio positions when it is not advantageous
to do so. However, any potential risk of leverage resulting from the use of
securities with maturities greater than one year may be mitigated by the overall
duration limit on an Underlying Fund's portfolio securities. Thus, the use of a
longer-term security may require an Underlying Fund to hold offsetting
short-term securities to balance the Underlying Fund's portfolio such that the
Underlying Fund's duration does not exceed the maximum permitted for an
Underlying Fund in the prospectuses.

The requirements for qualification as a regulated investment company also may
limit the extent to which Underlying Fund may enter into futures, futures
options or forward contracts.

Risks Associated with Futures and Futures Options. There are several risks
associated with the use of futures contracts and futures options as hedging
techniques. A purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can be no guarantee
that there will be a correlation between price movements in the hedging vehicle
and in an Underlying Fund's securities being hedged. In addition, there are
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given hedge
not to achieve its objectives. The degree of imperfection of correlation depends
on circumstances such as variations in speculative market demand for futures and
futures options on securities, including technical influences in futures trading
and futures options, and differences between the financial instruments being
hedged and the instruments underlying the standard contracts available for
trading in such respects as interest rate levels, maturities and
creditworthiness of issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.

Future exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day and
therefore does not limit potential loses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of positions and
subjecting some holder of futures contracts to substantial losses.

There can be no assurance that a liquid market will exist at a time when an
Underlying Fund seeks to close out a futures or a futures option position, and
that an Underlying Fund would remain obligated to meet margin requirements until
the position is closed. In addition, many of the contracts discussed above are
relatively new instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market will develop or
continue to exist.

Additional Risks of Options on Securities, Futures Contracts, Options on Futures
Contracts and Forward Currency Exchange Contracts and Options Thereon. Options
on securities, futures contracts and options on currencies may be traded on
foreign exchanges. Such transactions may not be regulated as effectively as
similar transactions in the United States; may not involve a clearing mechanism
and related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political, legal and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in an
Underlying Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the United States, (iv) the imposition of
different exercise and settlement terms and procedures and margin requirements
than in the United States, and (v) lesser trading volume.

Exchange-traded options generally have a continuous liquid market while Over the
Counter Options ("OTC")

                                       28




may not. Consequently, ING Global Income Builder Fund and/or an Underlying Fund
can realize the value of an OTC Option it has purchased only by exercising or
reselling the option to the issuing dealer. Similarly, when ING Global Income
Builder Fund and/or an Underlying Fund writes an OTC Option, ING Global Income
Builder Fund and/or the Underlying Fund can close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer.
While ING Global Income Builder Fund and/or the Underlying Funds seek to enter
into OTC Options only with dealers who will agree to and can enter into closing
transactions with ING Global Income Builder Fund and/or an Underlying Fund, no
assurance exists that ING Global Income Builder Fund and/or an Underlying Fund
will at any time be able to liquidate an OTC Option at a favorable price at any
time prior to expiration. Unless ING Global Income Builder Fund and/or an
Underlying Fund, as a covered OTC/call option writer, can effect a closing
purchase transaction, it will not be able to liquidate securities (or other
assets) used as cover until the option expires or is exercised. In the event of
insolvency of the other party, ING Global Income Builder Fund and/or an
Underlying Fund may be unable to liquidate an OTC Option. With respect to
options written by ING Global Income Builder Fund and/or an Underlying Fund, the
inability to enter into a closing transaction may result in material losses to
ING Global Income Builder Fund and/or an Underlying Fund. For example, because
ING Global Income Builder Fund and/or an Underlying Fund must maintain a secured
position with respect to any call option on a security it writes, ING Global
Income Builder Fund and/or the Underlying Fund may not sell the assets that it
has segregated to secure the position while it is obligated under the option.
This requirement may impair ING Global Income Builder Fund and/or the Underlying
Fund's ability to sell portfolio securities at a time when such sale might be
advantageous.

Financial Futures Contracts and Related Options. Financial futures contracts and
related options may be used to hedge against changes in the market value of
portfolio securities or securities intended to be purchased. An Underlying Fund
could purchase a financial futures contract (such as an interest rate futures
contract or securities index futures contract) to protect against a decline in
the value of its portfolio or to gain exposure to securities which Underlying
Fund otherwise wishes to purchase. Hedging is accomplished when an investor
takes a position in the futures market opposite to his cash market position.
There are two types of hedges -- long (or buying) and short (or selling) hedges.
Historically, prices in the futures market have tended to move in concert with
cash market prices, and prices in the futures market have maintained a fairly
predictable relationship to prices in the cash market. Thus, a decline in the
market value of securities in the Underlying Fund's portfolio may be protected
against to a considerable extent by gains realized on futures contracts sales.
Similarly, it is possible to protect against an increase in the market price of
securities that the Underlying Funds may wish to purchase in the future by
purchasing futures contracts.

Financial futures contracts, which are traded on a recognized exchange or board
of trade, may be used. Financial futures contracts consist of interest rate
futures contracts and securities index futures contracts. A public market
presently exists in interest rate futures contracts covering long-term U.S.
Treasury bonds, U.S. Treasury notes, three-month U.S. Treasury bills and GNMA
certificates. Securities index futures contracts are currently traded with
respect to the S&P 500/R/ Index and such other broad-based stock market indices
as the NYSE Composite Stock Index and the Value Line Composite Stock Price
Index. A clearing corporation associated with the exchange or board of trade on
which a financial futures contract trades assumes responsibility for the
completion of transactions and also guarantees that open futures contracts will
be performed.

An interest rate futures contract obligates the seller of the contract to
deliver, and the purchaser to take delivery of, the interest rate securities
called for in the contract at a specified future time and at a specified price.
A stock index assigns relative values to the common stocks included in the
index, and the index fluctuates with changes in the market values of the common
stocks so included. A stock index futures contract is an agreement pursuant to
which two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock index value at
the close of the last trading day of the contract and the price at which the
futures contract is originally struck. An option on a financial futures contract
gives the purchaser the right to assume a position in the contract (a long
position if the option is a call and short position if the option is a put) at a
specified exercise price at any time during the period of the option.

                                       29




In contrast to the situation when an Underlying Fund purchases or sells a
security, no security is delivered or received by Underlying Fund upon the
purchase or sale of a financial futures contract. Initially, the Underlying Fund
will be required to segregate with its custodian bank an amount of cash and/or
liquid assets. This amount is known as initial margin and is in the nature of a
performance bond or good faith deposit on the contract. The current initial
margin deposit required per contract is approximately 5% of the contract amount.
Brokers may establish deposit requirements higher than this minimum. Subsequent
payments, called variation margin, will be made to and from the account on a
daily basis as the price of the futures contract fluctuates. This process is
known as marking to market. At the time of purchase of a futures contract or a
call option on a futures contract, an amount of cash, U.S. government securities
or other appropriate high-grade securities equal to the market value of the
futures contract minus the Underlying Fund's initial margin deposit with respect
thereto will be segregated with the Underlying Fund's custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
The extent to which the Underlying Fund may enter into financial futures
contracts and related options may also be limited by the requirements of the
Code for qualification as a regulated investment company.

The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.

Although financial futures contracts by their terms call for actual delivery or
acceptance of securities, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery. Closing out is
accomplished by effecting an offsetting transaction. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of securities and the same delivery date. If the sale price exceeds the
offsetting purchase price, the seller immediately would be paid the difference
and would realize a gain. If the offsetting purchase price exceeds the sale
price, the seller immediately would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same securities and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize a
gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss.

The Underlying Funds will pay commissions on financial futures contracts and
related options transactions. These commissions may be higher than those that
would apply to purchases and sales of securities directly.

Limitations and Risks on Futures Contracts and Related Options. The purchase of
options involves certain risks. If a put option purchased by an Underlying Fund
is not sold when it has remaining value, and if the market price of the
underlying security remains equal to or greater than the exercise price, the
Underlying Fund will lose its entire investment in the option. Also, where a put
option is purchased to hedge against price movements in a particular security,
the price of the put option may move more or less than the price of the related
security. There can be no assurance that a liquid market will exist when an
Underlying Fund seeks to close out an option position. Furthermore, if trading
restrictions or suspensions are imposed on the options markets, an Underlying
Fund may be unable to close out a position. Positions in futures contracts and
related options may be closed out only on an exchange that provides a secondary
market for such contracts or options. An Underlying Fund will enter into an
option or futures position only if there appears to be a liquid secondary
market. However, there can be no assurance that a liquid secondary market will
exist for any particular option or futures contract at any specific time. Thus,
it may not be possible to close out a futures or related option position. In the
case of a futures position, in the event of adverse price movements, the
Underlying Fund would continue to be required to make daily margin payments. In
this situation, if the Underlying Fund has insufficient cash to meet daily
margin requirements it may have to sell portfolio securities at a time when it
may be disadvantageous to do so. In addition, the Underlying Fund may be
required to take or make delivery of the securities underlying the futures
contracts it holds. The inability to close out futures positions also could

                                       30




have an adverse impact on the Underlying Fund's ability to hedge its portfolio
effectively.

There are several risks in connection with the use of futures contracts as a
hedging device. While hedging can provide protection against an adverse movement
in market prices, it can also preclude a hedger's opportunity to benefit from a
favorable market movement. In addition, investing in futures contracts and
options on futures contracts will cause the Underlying Funds to incur additional
brokerage commissions and may cause an increase in the Underlying Fund's
portfolio turnover rate. The successful use of futures contracts and related
options also depends on the ability of the adviser or sub-adviser to forecast
correctly the direction and extent of market movements within a given time
frame. To the extent market prices remain stable during the period a futures
contract or option is held by an Underlying Fund or such prices move in a
direction opposite to that anticipated, the Underlying Fund may realize a loss
on the hedging transaction that is not offset by an increase in the value of its
portfolio securities. As a result, the return of the Underlying Fund for the
period may be less than if it had not engaged in the hedging transaction.

The use of futures contracts involves the risk of imperfect correlation in
movements in the price of futures contracts and movements in the price of the
securities that are being hedged. If the price of the futures contract moves
more or less than the price of the securities being hedged, an Underlying Fund
will experience a gain or loss that will not be completely offset by movements
in the price of the securities. It is possible that, where an Underlying Fund
has sold futures contracts to hedge its portfolio against a decline in the
market, the market may advance and the value of securities held in the
Underlying Fund's portfolio may decline. If this occurred, the Underlying Fund
would lose money on the futures contract and would also experience a decline in
value in its portfolio securities. Where futures are purchased to hedge against
a possible increase in the prices of securities before the Underlying Fund is
able to invest its cash (or cash equivalents) in securities (or options) in an
orderly fashion, it is possible that the market may decline; if the Underlying
Fund then determines not to invest in securities (or options) at that time
because of concern as to possible further market decline or for other reasons,
the Underlying Fund will realize a loss on the futures that would not be offset
by a reduction in the price of the securities purchased.

The market prices of futures contracts may be affected if participants in the
futures market elect to close out their contracts through off-setting
transactions rather than to meet margin deposit requirements. In such a case,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities rather than
to engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, due to the fact that, from the
point of view of speculators, the deposit requirements in the futures markets
are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market could cause temporary price
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the prices of
securities and movements in the prices of futures contracts, a correct forecast
of market trends may still not result in a successful transaction.

Compared to the purchase or sale of futures contracts, the purchase of put or
call options on futures contracts involves less potential risk for an Underlying
Fund because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to an Underlying Fund while
the purchase or sale of the futures contract would not have resulted in a loss,
such as when there is no movement in the price of the underlying securities.

Foreign Currency Futures Contracts. Foreign currency future contracts may be
used for hedging purposes. A foreign currency futures contract provides for the
future sale by one party and purchase by another party of a specified quantity
of a foreign currency at a specified price and time. A public market exists in
futures contracts covering several foreign currencies, including the Australian
dollar, the Canadian dollar, the British Pound, the Japanese Yen, the Swiss
Franc, and certain multinational currencies such as the European Euro. Other
foreign currency futures contracts are likely to be developed and traded in the
future.

                                       31




Foreign Currency Options.

A put or call option on a foreign currency gives the purchaser of the option the
right to sell or purchase a foreign currency at the exercise price until the
option expires. ING Global Income Builder Fund and/or the Underlying Funds use
foreign currency options separately or in combination to control currency
volatility. Among the strategies employed to control currency volatility is an
option collar. An option collar involves the purchase of a put option and the
simultaneous sale of call option on the same currency with the same expiration
date but with different exercise (or "strike") prices. Generally, the put option
will have an out-of-the-money strike price, while the call option will have
either an at-the-money strike price or an in-the-money strike price. Foreign
currency options are derivative securities. Currency options traded on U.S. or
other exchanges may be subject to position limits, which may limit the ability
of ING Global Income Builder Fund and/or the Underlying Funds to reduce foreign
currency risk using such options.

As with other kinds of option transactions, writing options on foreign currency
constitutes only a partial hedge up to the amount of the premium received. ING
Global Income Builder Fund and/or the Underlying Funds could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may constitute
an effective hedge against exchange rate fluctuations; however, in the event of
exchange rate movements adverse to ING Global Income Builder Fund's and/or an
Underlying Fund's position, ING Global Income Builder Fund and/or the Underlying
Fund may forfeit the entire amount of the premium plus related transaction
costs.

Forward Currency Contracts

Forward currency contracts are entered into in anticipation of changes in
currency exchange rates. A forward currency contract is an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. For example, an Underlying Fund might
purchase a particular currency or enter into a forward currency contract to
preserve the U.S. dollar price of securities it intends to or has contracted to
purchase. Alternatively, it might sell a particular currency on either a spot or
forward basis to hedge against an anticipated decline in the dollar value of
securities it intends to or has contracted to sell. Although this strategy could
minimize the risk of loss due to a decline in the value of the hedged currency,
it could also limit any potential gain from an increase in the value of the
currency.

OTC Options

OTC Options and the assets used as cover for written OTC Options are illiquid
securities. In connection with these special arrangements, ING Global Income
Builder Fund and/or the Underlying Fund intends to establish standards for the
creditworthiness of the dealers with which it may enter into OTC Option
contracts and those standards, as modified from time to time, will be
implemented and monitored by ING Global Income Builder Fund's and/or the
Underlying Fund's adviser or sub-adviser. Under these special arrangements, ING
Global Income Builder Fund and/or the Underlying Fund will enter into contracts
with dealers that provide that ING Global Income Builder Fund and/or the
Underlying Fund has the absolute right to repurchase an option it writes at any
time at a repurchase price which represents the fair market value, as determined
in good faith through negotiation between the parties, but that in no event will
exceed a price determined pursuant to a formula contained in the contract.
Although the specific details of the formula may vary between contracts with
different dealers, the formula will generally be based on a multiple of the
premium received by ING Global Income Builder Fund and/or the Underlying Fund
for writing the option, plus the amount, if any, by which the option is
"in-the-money." The formula will also include a factor to account for the
difference between the price of the security and the strike price of the option
if the option is written "out-of-the-money." "Strike price" refers to the price
at which an option will be exercised. "Cover assets" refers to the amount of
cash or liquid assets that must be segregated to collateralize the value of the
futures contracts written by ING Global Income Builder Fund and/or the
Underlying Fund. Under such circumstances, ING Global Income Builder Fund and/or
the Underlying Fund will treat as illiquid that amount of the cover assets equal
to the

                                       32




amount by which the formula price for the repurchase of the option is greater
than the amount by which the market value of the security subject to the option
exceeds the exercise price of the option (the amount by which the option is
"in-the-money"). Although each agreement will provide that ING Global Income
Builder Fund's and/or the Underlying Fund's repurchase price shall be determined
in good faith (and that it shall not exceed the maximum determined pursuant to
the formula), the formula price will not necessarily reflect the market value of
the option written. Therefore, ING Global Income Builder Fund and/or the
Underlying Fund might pay more to repurchase the OTC Option contract than ING
Global Income Builder Fund and/or the Underlying Fund would pay to close out a
similar exchange traded option.

Purchasing Options

Purchasing Put and Call Options. Put and call options are derivative securities
traded on U.S. and foreign exchanges, including the American Stock Exchange,
Chicago Board Options Exchange, Philadelphia Stock Exchange, Pacific Stock
Exchange and NYSE. Except as indicated in "Non-Hedging Strategic Transactions,"
ING Global Income Builder Fund and/or the Underlying Funds may engage in trading
of such derivative securities exclusively for hedging purposes.

If a put option is purchased, ING Global Income Builder Fund and/or the
Underlying Fund acquires the right to sell the underlying security at a
specified price at any time during the term of the option (for "American-style"
options) or on the option expiration date (for "European-style" options).
Purchasing put options may be used as a portfolio investment strategy when the
adviser or sub-adviser perceives significant short-term risk but substantial
long-term appreciation for the underlying security. The put option acts as an
insurance policy, as it protects against significant downward price movement
while it allows full participation in any upward movement. If ING Global Income
Builder Fund and/or the Underlying Fund holds a stock which the adviser or
sub-adviser believes has strong fundamentals, but for some reason may be weak in
the near term, ING Global Income Builder Fund and/or the Underlying Fund may
purchase a put option on such security, thereby giving itself the right to sell
such security at a certain strike price throughout the term of the option.
Consequently, ING Global Income Builder Fund and/or the Underlying Fund will
exercise the put only if the price of such security falls below the strike price
of the put. The difference between the put's strike price and the market price
of the underlying security on the date ING Global Income Builder Fund and/or the
Underlying Fund exercises the put, less transaction costs, is the amount by
which ING Global Income Builder Fund and/or the Underlying Fund hedges against a
decline in the underlying security. If during the period of the option the
market price for the underlying security remains at or above the put's strike
price, the put will expire worthless, representing a loss of the price ING
Global Income Builder Fund and/or the Underlying Fund paid for the put, plus
transaction costs. If the price of the underlying security increases, the
premium paid for the put option less any amount for which the put may be sold
reduces the profit ING Global Income Builder Fund and/or the Underlying Fund
realizes on the sale of the securities.

If a call option is purchased, it acquires the right to purchase the underlying
security at a specified price at any time during the term of the option. The
purchase of a call option is a type of insurance policy to hedge against losses
that could occur if ING Global Income Builder Fund and/or the Underlying Fund
has a short position in the underlying security and the security thereafter
increases in price. ING Global Income Builder Fund and/or the Underlying Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period the
market price for the underlying security remains at or below the strike price of
the call option, the option will expire worthless, representing a loss of the
price paid for the option, plus transaction costs. If ING Global Income Builder
Fund and/or an Underlying Fund purchases the call option to hedge a short
position in the underlying security and the price of the underlying security
thereafter falls, the premium paid for the call option less any amount for which
such option may be sold reduces the profit ING Global Income Builder Fund and/or
the Underlying Fund realizes on the cover of the short position in the security.

Prior to exercise or expiration, an option may be sold when it has remaining
value by a purchaser through a "closing sale transaction," which is accomplished
by selling an option of the same series as the option

                                       33




previously purchased. ING Global Income Builder Fund and/or the Underlying Funds
generally will purchase only those options for which the adviser or sub-adviser
believes there is an active secondary market to facilitate closing transactions.

Stock Index Options

Stock index options include put and call options with respect to the S&P 500/R/
Index and other stock indices. These may be purchased as a hedge against changes
in the values of portfolio securities or securities which it intends to purchase
or sell, or to reduce risks inherent in the ongoing management of ING Global
Income Builder Fund and/or the Underlying Fund. The distinctive characteristics
of options on stock indices create certain risks not found in stock options
generally. Because the value of an index option depends upon movements in the
level of the index rather than the price of a particular stock, whether ING
Global Income Builder Fund and/or the Underlying Fund will realize a gain or
loss on the purchase or sale of an option on an index depends upon movements in
the level of stock prices in the stock market generally rather than movements in
the price of a particular stock. Accordingly, successful use by ING Global
Income Builder Fund and/or an Underlying Fund of options on a stock index
depends on ING Global Income Builder Fund's and/or the Underlying Fund's adviser
or sub-adviser's ability to predict correctly movements in the direction of the
stock market generally. This requires different skills and techniques than
predicting changes in the price of individual stocks.

Index prices may be distorted if circumstances disrupt trading of certain stocks
included in the index, such as if trading were halted in a substantial number of
stocks included in the index. If this happens, ING Global Income Builder Fund
and/or the Underlying Fund could be unable to close out options which it had
purchased, and if restrictions on exercise were imposed, ING Global Income
Builder Fund and/or the Underlying Fund might be unable to exercise an option it
holds, which could result in substantial losses to ING Global Income Builder
Fund and/or the Underlying Fund. ING Global Income Builder Fund and/or the
Underlying Funds purchase put or call options only with respect to an index
which ING Global Income Builder Fund's and/or the Underlying Fund's adviser or
sub-adviser believes includes a sufficient number of stocks to minimize the
likelihood of a trading halt in the index.

Straddles

A Straddle, which may be used for hedging purposes, is a combination of put and
call options on the same underlying security used for hedging purposes to adjust
the risk and return characteristics of the Underlying Fund's overall position. A
possible combined position would involve writing a covered call option at one
strike price and buying a call option at a lower price, in order to reduce the
risk of the written covered call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.

Warrants

A warrant gives the holder a right to purchase at any time during a specified
period a predetermined number of shares of common stock at a fixed price. Unlike
convertible debt securities or preferred stock, warrants do not pay a fixed
dividend. Investments in warrants involve certain risks, including the possible
lack of a liquid market for resale of the warrants, potential price fluctuations
as a result of speculation or other factors, and failure of the price of the
underlying security to reach or have reasonable prospects of reaching a level at
which the warrant can be prudently exercised (in which event the warrant may
expire without being exercised, resulting in a loss of the Underlying Fund's
entire investment therein).

Put and call index warrants are instruments whose values vary depending on the
change in the value of one or more specified securities indices ("Index
Warrants"). Index Warrants are generally issued by banks or other financial
institutions and give the holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment from the issuer,
based on the value of the underlying index at the time

                                       34




of exercise. In general, if the value of the underlying index rises above the
exercise price of the Index Warrant, the holder of a call warrant will be
entitled to receive a cash payment from the issuer upon exercise, based on the
difference between the value of the index and the exercise price of the warrant;
if the value of the underlying index falls, the holder of a put warrant will be
entitled to receive a cash payment from the issuer upon exercise, based on the
difference between the exercise price of the warrant and the value of the index.
The holder of a warrant would not be entitled to any payments from the issuer at
any time when, in the case of a call warrant, the exercise price is greater than
the value of the underlying index, or, in the case of a put warrant, the
exercise price is less than the value of the underlying index. If an Underlying
Fund were not to exercise an Index Warrant prior to its expiration, then the
Underlying Fund would lose the amount of the purchase price paid by it for the
warrant. Certain Underlying Funds will normally use Index Warrants in a manner
similar to their use of options on securities indices. The risks of using Index
Warrants are generally similar to those relating to its use of index options.
Unlike most index options, however, Index Warrants are issued in limited amounts
and are not obligations of a regulated clearing agency, but are backed only by
the credit of the bank or other institution that issues the warrant. Also, Index
Warrants generally have longer terms than index options. Index Warrants are not
likely to be as liquid as certain index options backed by a recognized clearing
agency. In addition, the terms of Index Warrants may limit an Underlying Fund's
ability to exercise the warrants at such time, or in such quantities, as the
Underlying Fund would otherwise wish to do.

Options

There are numerous risks associated with transactions in options. A decision as
to whether, when and how to write call options under the Fund's or an Underlying
Fund's strategy involves the exercise of skill and judgment and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events. The extent to which the Fund and an Underlying
Fund may enter into options transactions may be limited by the Code requirements
for qualification of the Fund and an Underlying Fund's as a regulated investment
company. See "Dividends, Distributions and Taxes."

The purchaser of a call option written on an equity security or securities that
is written (sold) by the Fund or an Underlying Fund has the right to any
appreciation in the cash value of the price of such security or securities over
the exercise price up to and including the expiration date. Therefore, as the
writer of a call option, the Fund or the Underlying Fund forgoes, during the
term of the option, the opportunity to profit from increases in the market value
of the equity securities held by the Fund or an Underlying Fund, with respect to
which the option was written, above the sum of the premium and the exercise
price of the call option. However, the Fund or the Underlying Fund has retained
the risk of loss (net of premiums received) should the price of the Fund's or
the Underlying Fund's portfolio securities decline.

Because the exercise of call options may be required to settle in cash, writers
(sellers) of call options, such as the Fund and/or the Underlying Funds, cannot
provide in advance for their potential settlement obligations by acquiring and
holding the underlying securities. When a call option sold by the Fund or an
Underlying Fund is exercised or closed out, the Fund or the Underlying Fund may
be required to sell portfolio securities or to deliver portfolio securities to
the option purchaser to satisfy its obligations when it would not otherwise
choose to do so, or the Fund or the Underlying Fund may choose to sell portfolio
securities to realize gains to offset the losses realized upon option exercise.
Such sales or delivery would involve transaction costs borne by the Fund or an
Underlying Fund and may also result in the realization of taxable gains,
including short-term capital gains taxed at ordinary income tax rates, and may
adversely impact the Fund's or an Underlying Fund's after-tax returns.

Rising prices of the equity securities or a security in respect of which a call
option is written will increase the liability of the Fund or an Underlying Fund
under the options it has written. Such an increase in liability should generally
be offset, at least in part, by appreciation in the value of the Fund's or an
Underlying Fund's portfolio holdings. The Fund or Underlying Funds will seek to
maintain written call options positions on equity securities whose price
movements, taken in the aggregate, are correlated with the price movements of

                                       35




the portion of the Fund's or an Underlying Fund's portfolio securities on which
such options were written. To the extent that there is a lack of correlation,
for example if the Fund or an Underlying Fund were to sell all or a portion of
an individual security included in a Portfolio Call Option and the equity
securities underlying he Fund's or the Underlying Fund's written option
positions appreciate more than the Fund's or the Underlying Fund's portfolio,
this may result in losses or limit gains to the Fund or the Underlying Fund.

The principal factors affecting the market value of an option include supply and
demand, interest rates, the current market price of the underlying security in
relation to the exercise price of the option, the actual or perceived volatility
of the underlying security and the time remaining until the expiration date. The
premium received for an option written by the Fund or an Underlying Fund is
recorded as an asset of the Fund or the Underlying Fund and its obligation under
the option contract as an equivalent liability. The Fund or the Underlying Fund
adjusts, over time, the liability as the market value of the option changes. The
value of each written option will be marked to market daily.

The transaction costs of buying and selling options consist primarily of
commissions (which are imposed in opening, closing, exercise and assignment
transactions), but may also include margin and interest costs in particular
transactions. The impact of transaction costs on the profitability of a
transaction may often be greater for options transactions than for transactions
in the securities because these costs are often greater in relation to options
premiums than in relation to the cash value of the prices of underlying
securities. Transaction costs may be especially significant in option strategies
calling for multiple purchases and sales of options, such as call writing
strategies. Transaction costs may be different for transactions effected in
foreign markets then for transactions effected in U.S. market. Transaction costs
associated with the Fund's or an Underlying Fund's options strategy will vary
depending on market circumstances and other factors.

The Fund's or an Underlying Fund's ability to implement its option strategy may
be more limited than implementing such a strategy for equity portfolios that are
less thematic and more comparable to broad market indices than the Fund or the
Underlying Fund. There can be no assurance that a liquid market will exist when
the Fund or an Underlying Fund seeks to establish or close-out a Call Option. In
addition, over-the-counter options may involve the risk that banks,
broker-dealers or other financial institutions participating in such
transactions will not fulfill their obligations.

The Fund or the Underlying Funds cannot guarantee that the call option strategy
will be effective. The Fund or an Underlying Fund may also write call options
with different characteristics and managed differently than described above.

Index-, Currency-, and Equity-Linked Securities

Index-linked or "commodity-linked" notes are debt securities of companies that
call for interest payments and/or payment at maturity in different terms than
the typical note where the borrower agrees to make fixed interest payments and
to pay a fixed sum at maturity. Principal and/or interest payments on an
index-linked note depend on the performance of one or more market indices, such
as the S&P 500/R/ Index or a weighted index of commodity futures such as crude
oil, gasoline and natural gas. They may also invest in "equity linked" and
currency-linked debt securities. At maturity, the principal amount of an
equity-linked debt security is exchanged for common stock of the issuer or is
payable in an amount based on the issuer's common stock price at the time of
maturity. Currency-linked debt securities are short-term or intermediate term
instruments having a value at maturity, and/or an interest rate, determined by
reference to one or more foreign currencies. Payment of principal or periodic
interest may be calculated as a multiple of the movement of one currency against
another currency, or against an index.

Index- and currency-linked securities are derivative instruments, which may
entail substantial risks. Such instruments may be subject to significant price
volatility. The company issuing the instrument may fail to pay the amount due on
maturity. The underlying investment or security may not perform as expected by
the adviser or sub-adviser. Markets, underlying securities and indices may move
in a direction that was not

                                       36




anticipated by the adviser or sub-adviser. Performance of the derivatives may be
influenced by interest rate and other market changes in the United States and
abroad. Certain derivative instruments may be illiquid. See "Restricted and
Illiquid Securities" below.

IPOs

Initial Public Offerings ("IPOs") occur when the company first offers securities
to the public. Although companies can be any age or size at the time of their
IPO, they are often smaller and have a limited operating history, which involves
a greater potential for the value of their securities to be impaired following
the IPO.

Investors in IPOs can be adversely affected by substantial dilution in the value
of their shares, by sales of additional shares and by concentration of control
in existing management and principal shareholders. In addition, all of the
factors that affect stock market performance may have a greater impact on the
shares of IPO companies.

The price of a company's securities may be highly unstable at the time of its
IPO and for a period thereafter due to market psychology prevailing at the time
of the IPO, the absence of a prior public market, the small number of shares
available and limited availability of investor information. As a result of this
or other factors, the Underlying Funds' sub-adviser might decide to sell an IPO
security more quickly than it would otherwise, which may result in a significant
gain or loss and greater transaction costs to the Underlying Funds. Any gains
from shares held for 12 months or less will be treated as short-term gains,
taxable as ordinary income to the Underlying Funds' shareholders. In addition,
IPO securities may be subject to varying patterns of trading volume and may, at
times, be difficult to sell without an unfavorable impact on prevailing prices.

The effect of an IPO investment can have a magnified impact on the Underlying
Funds' performance when the Underlying Funds' asset bases are small.
Consequently, IPOs may constitute a significant portion of the Underlying Funds'
returns particularly when the Underlying Funds are small. Since the number of
securities issued in an IPO is limited, it is likely that IPO securities will
represent a smaller component of the Underlying Funds' assets as it increases in
size and, therefore, have a more limited effect on the Underlying Funds'
performance.

There can be no assurance that IPOs will continue to be available for the
Underlying Funds to purchase. The number or quality of IPOs available for
purchase by the Underlying Funds may vary, decrease or entirely disappear. In
some cases, the Underlying Funds may not be able to purchase IPOs at the
offering price, but may have to purchase the shares in the aftermarket at a
price greatly exceeding the offering price, making it more difficult for the
Underlying Funds to realize a profit.

Loan Participation and Assignments

An Underlying Fund's investment in loan participations typically will result in
the Underlying Fund having a contractual relationship only with the lender and
not with the borrower. The Underlying Fund will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the lender selling the participation and only upon receipt by the lender of the
payments from the borrower. In connection with purchasing participation, the
Underlying Fund generally will have no right to enforce compliance by the
borrower with the terms of the loan agreement relating to the loan, nor any
right of set-off against the borrower, and the Underlying Fund may not directly
benefit from any collateral supporting the loan in which it has purchased the
participation. As a result, the Underlying Fund may be subject to the credit
risk of both the borrower and the lender that is selling the participation. In
the event of the insolvency of the lender selling a participation, the
Underlying Fund may be treated as a general creditor of the lender and may not
benefit from any set-off between the lender and the borrower.

When the Underlying Fund purchases a loan assignment from lenders, it will
acquire direct rights against the borrowers on the loan. Because Assignments are
arranged through private negotiations between potential

                                       37




assignees and potential assignors, however, the rights and obligations acquired
by the Underlying Fund as the purchaser of an Assignment may differ from, and be
more limited than, those held by the assigning lender. Because there is no
liquid market for such securities, the Underlying Fund anticipates that such
securities could be sold only to a limited number of institutional investors.
The lack of a liquid secondary market may have an adverse impact on the value of
such securities and the Underlying Fund's ability to dispose of particular
assignments or participation when necessary to meet redemption of Underlying
Fund shares, to meet the Underlying Fund's liquidity needs or when necessary in
response to a specific economic event, such as deterioration in the
creditworthiness of the borrower. The lack of a liquid secondary market for
assignments and participation also may make it more difficult for the Underlying
Fund to value these securities for purposes of calculating its NAV.

Other Investment Companies

An Investment Company is a company engaged in the business of pooling investors'
money and trading in securities for them. Examples include face-amount
certificate companies, unit investment trusts and management companies. When an
Underlying Fund invests in other investment companies, shareholders of the
Underlying Fund bear their proportionate share of the underlying investment
companies' fees and expenses.

Exchange-Traded Funds ("ETFs") - An ETF is an investment company whose goal is
to track or replicate a desired index, such as a sector, market or global
segment. ETFs are on exchanges and traded similar to a publicly traded company.
Similarly, the risks and costs are similar to that of a publicly traded company.
The goal of an ETF is to correspond generally to the price and yield
performance, before fees and expenses of its underlying index. The risk of not
correlating to the index is an additional risk to the investors of ETFs. Because
ETFs trade on an exchange, they may not trade at NAV. Sometimes, the prices of
ETFs may vary significantly from the NAVs of the ETF's underlying securities.
Additionally, if the Underlying Fund elects to redeem its ETF shares rather than
selling them on the secondary market, the Underlying Fund may receive the
underlying securities which it must then sell in order to obtain cash.
Additionally, when an Underlying Fund invests in ETFs, shareholders of the
Underlying Fund bear their proportionate share of the underlying ETF's fees and
expenses.

Holding Company Depositary Receipts ("HOLDRs") - HOLDRs are trust-issued
receipts that represent an Underlying Fund's beneficial ownership of a specific
group of stocks. HOLDRs involve risks similar to the risks of investing in
common stock. For example, an Underlying Fund's investments will decline in
value if the underlying stocks decline in value. Because HOLDRs are not subject
to concentration limits, the relative weight of an individual stock may increase
substantially, causing the HOLDRs to be less diverse and creating more risk.

Senior Loans

The Underlying Funds may invest in investment companies that invest primarily in
interests in variable or floating rate loans or notes. Senior Loans in most
circumstances are fully collateralized by assets of a corporation, partnership,
limited liability company or other business entity. Senior Loans vary from other
types of debt in that they generally hold a senior position in the capital
structure of a borrower. Thus, Senior Loans are generally repaid before
unsecured bank loans, corporate bonds, subordinated debt, trade creditors, and
preferred or common stockholders.

Substantial increases in interest rates may cause an increase in loan defaults
as borrowers may lack resources to meet higher debt service requirements. The
value of an Underlying Fund's assets may also be affected by other uncertainties
such as economic developments affecting the market for Senior Loans or affecting
borrowers generally.

Senior Loans usually include restrictive covenants, which must be maintained by
the borrower. Under certain

                                       38




interests in Senior Loans, an investment company investing in a Senior Loan may
have an obligation to make additional loans upon demand by the borrower. Senior
Loans, unlike certain bonds, usually do not have call protection. This means
that interests, while having a stated one to ten-year term, may be prepaid,
often without penalty. The rate of such prepayments may be affected by, among
other things, general business and economic conditions, as well as the financial
status of the borrower. Prepayment would cause the actual duration of a Senior
Loan to be shorter than its stated maturity.

Credit Risk. Information about interests in Senior Loans generally is not in the
public domain, and interests are generally not currently rated by any nationally
recognized rating service. Senior Loans are subject to the risk of nonpayment of
scheduled interest or principal payments. Issuers of Senior Loans generally have
either issued debt securities that are rated lower than investment grade, or, if
they had issued debt securities, such debt securities would likely be rated
lower than investment grade. However, unlike other types of debt securities,
Senior Loans are generally fully collateralized.

In the event of a failure to pay scheduled interest or principal payments on
Senior Loans, an investment company investing in that Senior Loan could
experience a reduction in its income, and would experience a decline in the
market value of the particular Senior Loan so affected, and may experience a
decline in the NAV or the amount of its dividends. In the event of a bankruptcy
of the borrower, the investment company could experience delays or limitations
with respect to its ability to realize the benefits of the collateral securing
the Senior Loan.

Collateral. Senior Loans typically will be secured by pledges of collateral from
the borrower in the form of tangible assets and intangible assets. In some
instances, an investment company may invest in Senior Loans that are secured
only by stock of the borrower or its subsidiaries or affiliates. The value of
the collateral may decline below the principal amount of the Senior Loan
subsequent to an investment in such Senior Loan. In addition, to the extent that
collateral consists of stock of the borrower or its subsidiaries or affiliates,
there is a risk that the stock may decline in value, be relatively illiquid, or
may lose all or substantially all of its value, causing the Senior Loan to be
under collateralized.

Limited Secondary Market. Although it is growing, the secondary market for
Senior Loans is currently limited. There is no organized exchange or board of
trade on which Senior Loans may be traded; instead, the secondary market for
Senior Loans is an unregulated inter-dealer or inter-bank market. Accordingly,
Senior Loans may be illiquid. In addition, Senior Loans generally require the
consent of the borrower prior to sale or assignment. These consent requirements
may delay or impede an Underlying Fund's ability to sell Senior Loans. In
addition, because the secondary market for Senior Loans may be limited, it may
be difficult to value Senior Loans. Market quotations may not be available and
valuation may require more research than for liquid securities. In addition,
elements of judgment may play a greater role in the valuation, because there is
less reliable, objective data available.

Hybrid Loans. The growth of the syndicated loan market has produced loan
structures with characteristics similar to Senior Loans but which resemble bonds
in some respects, and generally offer covenants or other protections than
traditional Senior Loans while still being collateralized ("Hybrid Loans"). With
Hybrid Loans, an Underlying Fund may not possess a senior claim to all of the
collateral securing the Hybrid Loan. Hybrid Loans also may not include covenants
that are typical of Senior Loans, such as covenants requiring the maintenance of
minimum interest coverage ratios. As a result, Hybrid Loans present additional
risks besides those associated with traditional Senior Loans, although they may
provide a relatively higher yield. Because the lenders in Hybrid Loans waive or
forego certain loan covenants, their negotiating power or voting rights in the
event of a default may be diminished. As a result, the lenders' interests may
not be represented as significantly as in the case of a conventional Senior
Loan. In addition, because an investment company's security interest in some of
the collateral may be subordinate to other creditors, the risk of nonpayment of
interest or loss of principal may be greater than would be the case with
conventional Senior Loans.

Subordinated and Unsecured Loans. Certain investment companies may invest in
subordinated and

                                       39




unsecured loans. The primary risk arising from a holder's subordination is the
potential loss in the event of default by the issuer of the loans. Subordinated
loans in an insolvency bear an increased share, relative to senior secured
lenders, of the ultimate risk that the borrower's assets are insufficient to
meet its obligations to its creditors. Unsecured loans are not secured by any
specific collateral of the borrower. They do not enjoy the security associated
with collateralization and may pose a greater risk of nonpayment of interest or
loss of principal than do secured loans.

Private Funds

Private Underlying Funds include U.S. or foreign private limited partnerships or
other investment funds ("Private Funds"). Investments in Private Funds may be
highly speculative and volatile. Because Private Funds are either investment
companies for purposes of the 1940 Act or would be but for the exemptions
provided in sections 3(C)(1) or 3(C)(7) of the 1940 Act Underlying Fund's
ability to invest in them will be limited. In addition, Fund shareholders will
remain subject to Underlying Fund's expenses while also bearing their pro rata
share of the operating expenses of the Private Funds. The ability of Underlying
Fund to dispose of interests in Private Funds is very limited and involves
risks, including loss of Underlying Fund's entire investment in the Private
Fund.

Private investment funds include a variety of pooled investments. Generally,
these pooled investments are structured as a trust, a special purpose vehicle,
and are exempted from registration under the 1940 Act. As an investor, an
Underlying Fund owns a proportionate share of the trust. Typically, the trust
does not employ a professional investment manager. Instead, the pooled
investment tracks some index by investing in the issuers or securities that
comprise the index. The Underlying Fund receives a stream of cash flows in the
form of interest payments from the underlying assets or the proceeds from the
sale of the underlying assets in the event those underlying assets are sold.
However, some pooled investments may not dispose of the underlying securities
regardless of the adverse events affecting the issuers depending on the
investment strategy utilized. In this type of strategy, the pooled investment
continues to hold the underlying securities as long as the issuers or securities
remain members of the tracked index.

The pooled investments allow the Underlying Fund to synchronize the receipt of
interest and principal payments and also, diversify some of the risks involved
with investing in fixed-income securities. Because the trust holds securities of
many issuers, the default of a few issuers would not impact the Underlying Fund
significantly. However, the Underlying Fund bears any expenses incurred by the
trust. In addition, the Underlying Fund assumes the liquidity risks generally
associated the privately offered pooled investments.

Pooled investments that are structured as a trust contain many similarities to
Private Funds that are structured as limited partnerships. The primary
difference between the trust and the limited partnership structure is the
redemption of the ownership interests. Typically, the ownership interests in a
typical Private Fund are redeemable only by the general partners and thus, are
restricted from transferring from one party to another. Conversely, the
ownership interests in the trust are generally not redeemable by the trust,
except under certain circumstances, and are transferable among the general
public for publicly offered securities and "qualified purchasers" or "qualified
institutional buyers" for privately offered securities.

An Underlying Fund cannot assure that it can achieve better results by investing
in a pooled investment versus investing directly in the individual underlying
assets.

Private investment funds also include investments in certain structured
securities. Structured securities include notes, bonds or debentures that
provide for the payment of principal of, and/or interest in, amounts determined
by reference to changes in the value of specific currencies, interest rates,
commodities, indices or other financial indicators (the "Reference") or the
relative change in two or more References. The interest rate or the principal
amount payable upon maturity or redemption may be increased or decreased
depending upon changes in the applicable Reference. The terms of structured
securities may provide that under certain circumstances no principal is due at
maturity and, therefore, may result in the loss of an Underlying Fund's
investment.

                                       40




Structured securities may be positively or negatively indexed, so that
appreciation of the Reference may produce an increase or decrease in the
interest rate or value of the security at maturity. In addition, the change in
interest rate or the value of the security at maturity may be a multiple of the
change in the value of the Reference. Consequently, leveraged structured
securities entail a greater degree of market risk than other types of debt
obligations. Structured securities may also be more volatile, less liquid, and
more difficult to accurately price than less complex fixed-income investments.

Real Estate Securities

The Underlying Funds may invest in real estate investment trusts ("REITs") and
other real estate operating companies ("REOCs"). For purposes of the Underlying
Funds' investments, a REOC is a company that derives at least 50% of its gross
revenues or net profits from either (1) the ownership, development,
construction, financing, management or sale of commercial, industrial or
residential real estate, or (2) products or services related to the real estate
industry, such as building supplies or mortgage servicing. Investing in REITs
involves certain unique risks in addition to those risks associated with
investing in the real estate industry in general. Although the Underlying Funds
will not invest directly in real estate, the Underlying Funds may invest in
equity securities of issuers primarily engaged in or related to the real estate
industry. Therefore, an investment in REITs is subject to certain risks
associated with the direct ownership of real estate and with the real estate
industry in general. These risks include, among others: possible declines in the
value of real estate; risks related to general and local economic conditions;
possible lack of availability of mortgage funds; overbuilding; extended
vacancies of properties; increases in competition, property taxes and operating
expenses; changes in zoning laws; costs resulting from the clean-up of, and
liability to third parties for damages resulting from, environmental problems;
casualty or condemnation losses; uninsured damages from floods, earthquakes or
other natural disasters; limitations on and variations in rents; changes in
interest rates; and acts of terrorism, war or other acts of violence. To the
extent that assets underlying the REITs' investments are concentrated
geographically, by property type or in certain other respects, the REITs may be
subject to certain of the foregoing risks to a greater extent. Equity REITs may
be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax-free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.

REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REITs' investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REITs' investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REITs' investment in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.

Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities.

Investments in mortgage-related securities involve certain risks. In periods of
declining interest rates, prices of fixed-income securities tend to rise.
However, during such periods, the rate of prepayment of mortgages underlying
mortgage-related securities tends to increase, with the result that such
prepayments must be reinvested by the issuer at lower rates. In addition, the
value of such securities may fluctuate in response to the market's perception of
the creditworthiness of the issuers of mortgage-related securities owned by the
Underlying Funds. Because investments in mortgage-related securities are
interest sensitive, the ability of the issuer to reinvest or to reinvest
favorably in underlying mortgages may be limited by government regulation or tax
policy. For example, action by the Board of Governors of the Federal Reserve
System to limit the growth

                                       41




of the nation's money supply may cause interest rates to rise and thereby reduce
the volume of new residential mortgages. Additionally, although mortgages and
mortgage-related securities are generally supported by some form of government
or private guarantees and/or insurance, there is no assurance that private
guarantors or insurers will be able to meet their obligations.

Restricted and Illiquid Securities

Generally, a security is considered illiquid if it cannot be disposed of within
seven days. Its illiquidity might prevent the sale of such a security at a time
when the adviser or a sub-adviser might wish to sell, and these securities could
have the effect of decreasing the overall level of an Underlying Fund's
liquidity. Further, the lack of an established secondary market may make it more
difficult to value illiquid securities, requiring the Underlying Funds to rely
on judgments that may be somewhat subjective in determining value, which could
vary from the amount that an Underlying Fund could realize upon disposition.
Because of the nature of these securities, a considerable period of time may
elapse between the Underlying Funds' decision to dispose of these securities and
the time when the Underlying Funds are able to dispose of them, during which
time the value of the securities could decline. The expenses of registering
restricted securities (excluding securities that may be resold by the Underlying
Funds pursuant to Rule 144A under the 1933 Act) may be negotiated at the time
such securities are purchased by the Underlying Funds. When registration is
required before the securities may be resold, a considerable period may elapse
between the decision to sell the securities and the time when the Underlying
Funds would be permitted to sell them. Thus, the Underlying Funds may not be
able to obtain as favorable a price as that prevailing at the time of the
decision to sell. The Underlying Funds may also acquire securities through
private placements. Such securities may have contractual restrictions on their
resale, which might prevent their resale by the Underlying Funds at a time when
such resale would be desirable. Securities that are not readily marketable will
be valued by the Underlying Funds in good faith pursuant to procedures adopted
by the Funds' Board.

Restricted securities, including private placements, are subject to legal or
contractual restrictions on resale. They can be eligible for purchase without
SEC registration by certain institutional investors known as "qualified
institutional buyers," and under the Underlying Funds' procedures, restricted
securities could be treated as liquid. However, some restricted securities may
be illiquid and restricted securities that are treated as liquid could be less
liquid than registered securities traded on established secondary markets. The
Underlying Funds may not invest more than 15% of its net assets in illiquid
securities, measured at the time of investment. Each Underlying Fund will adhere
to a more restrictive investment limitation on its investments in illiquid or
restricted securities as required by the securities laws of those jurisdictions
where shares of the Underlying Funds are registered for sale.

Securities of Companies with Limited Operating Histories

The Underlying Funds consider securities of companies with limited operating
histories to be securities of companies with a record of less than three years'
continuous operation, even including the operations of any predecessors and
parents. (These are sometimes referred to as "unseasoned issuers.") These
companies by their nature have only a limited operating history that can be used
for evaluating the company's growth prospects. As a result, investment decisions
for these securities may place a greater emphasis on current or planned product
lines and the reputation and experience of the company's management and less
emphasis on fundamental valuation factors than would be the case for more mature
companies.

To Be Announced Sale Commitments

To Be Announced ("TBA") sale commitments involve commitments where the unit
price and the estimated principal amount are established upon entering into the
contract, with the actual principal amount being within a specified range of the
estimate. An Underlying Fund will enter into TBA sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not received until
the contractual settlement date. During the time a

                                       42




TBA sale commitment is outstanding, the Underlying Fund will maintain, in a
segregated account, cash or marketable securities in an amount sufficient to
meet the purchase price. Unsettled TBA sale commitments are valued at current
market value of the underlying securities. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the Underlying
Fund realizes a gain or loss on the commitment without regard to any unrealized
gain or loss on the underlying security. If the Underlying Fund delivers
securities under the commitment, the Underlying Fund realizes a gain or loss
from the sale of the securities, based upon the unit price established at the
date the commitment was entered into.

Zero-Coupon and Pay-In-Kind Securities

The Underlying Funds may invest in zero-coupon securities. Zero-coupon, or
deferred interest securities are debt obligations that do not entitle the holder
to any periodic payment of interest prior to maturity or a specified date when
the securities begin paying current interest (the "cash payment date") and
therefore are issued and traded at a discount from their face amounts or par
value. The discount varies, depending on the time remaining until maturity or
cash payment date, prevailing interest rates, liquidity of the security and the
perceived credit quality of the issuer. The discount, in the absence of
financial difficulties of the issuer, decreases as the final maturity or cash
payment date of the security approaches. The market prices of zero-coupon and
delayed interest securities generally are more volatile than the market prices
of securities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do non-zero-coupon securities
having similar maturities and credit quality. Current federal income tax law
requires holders of zero-coupon securities to report as interest income each
year the portion of the original issue discount on such securities (other than
tax-exempt original issue discount from a zero-coupon security) that accrues
that year, even though the holders receive no cash payments of interest during
the year.

The Underlying Funds may also invest in pay-in-kind securities. Pay-in-kind
securities are securities that pay interest or dividends through the issuance of
additional securities. An Underlying Fund will be required to report as income
annual inclusions of original issue discount over the life of such securities as
if it were paid on a current basis, although no cash interest or dividend
payments are received by the Underlying Funds until the cash payment date or the
securities mature. Under certain circumstances, the Underlying Funds could also
be required to include accrued market discount or capital gain with respect to
its pay-in-kind securities.

The risks associated with lower rated debt securities apply to these securities.
Zero-coupon and pay-in-kind securities are also subject to the risk that in the
event of a default, the Underlying Fund may realize no return on its investment,
because these securities do not pay cash interest.

INVESTMENT TECHNIQUES

Borrowing

The Underlying Fund may borrow from banks. If the fund borrows money, its share
price may be subject to greater fluctuation until the borrowing is paid off. If
the fund makes additional investments while borrowings are outstanding, this may
be considered a form of leverage. Under the 1940 Act, each Underlying Fund is
required to maintain continuous asset coverage of 300% with respect to such
borrowings and to sell (within three days) sufficient portfolio holdings to
restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidations of the Underlying Fund's
holdings may be disadvantageous from an investment standpoint.

Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities or the Underlying Fund's NAV, and
money borrowed will be subject to interest and other costs (which may include
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the income received from the securities purchased with
borrowed funds.

                                       43




Portfolio Hedging

Hedging against changes in financial markets, currency rates and interest rates
may be utilized. One form of hedging is with "derivatives." Derivatives (as
described above) are instruments whose value is linked to, or derived from,
another instrument, like an index or a commodity. Hedging transactions involve
certain risks. Although the Underlying Funds may benefit from hedging,
unanticipated changes in interest rates or securities prices may result in
greater losses for the Underlying Funds than if they did not hedge. If the
Underlying Funds do not correctly predict a hedge, it may lose money. In
addition, the Underlying Funds pay commissions and other costs in connection
with hedging transactions.

Risks Associated With Hedging Transactions. Hedging transactions have special
risks associated with them, including possible default by the counterparty to
the transaction, illiquidity and, to the extent the adviser's or sub-adviser's
view as to certain market movements is incorrect, the risk that the use of a
hedging transaction could result in losses greater than if it had not been used.
Use of call options could result in losses to the Underlying Fund, force the
sale or purchase of portfolio securities at inopportune times or for prices
lower than current market values, or cause the Underlying Fund to hold a
security it might otherwise sell.

Currency hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to an Underlying Fund if the currency being hedged fluctuates in value to
a degree or in a direction that is not anticipated. Further, the risk exists
that the perceived linkage between various currencies may not be present or may
not be present during the particular time that the Underlying Fund is engaging
in portfolio hedging. Currency transactions are also subject to risks different
from those of other portfolio transactions. Because currency control is of great
importance to the issuing governments and influences economic planning and
policy, purchases and sales of currency and related instruments can be adversely
affected by government exchange controls, limitations or restrictions on
repatriation of currency, and manipulations or exchange restrictions imposed by
governments. These forms of governmental actions can result in losses to the
Underlying Fund if it is unable to deliver or receive currency or monies in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs.

In addition, the Underlying Fund pays commissions and other costs in connection
with such investments. Losses resulting from the use of hedging transactions
will reduce the Underlying Fund's NAV, and possibly income, and the losses can
be greater than if hedging transactions had not been used.

Risks of Hedging Transactions Outside the United States When conducted outside
the United States - hedging transactions may not be regulated as rigorously as
in the United States, may not involve a clearing mechanism and related
guarantees, and will be subject to the risk of government actions affecting
trading in, or the price of, foreign securities, currencies and other
instruments. The value of positions taken as part of non-U.S. hedging
transactions also could be adversely affected by: (1) other complex foreign
political, legal and economic factors; (2) lesser availability of data on which
to make trading decisions than in the United States; (3) delays in the
Underlying Funds' ability to act upon economic events occurring in foreign
markets during non-business hours in the United States; (4) the imposition of
different exercise and settlement terms and procedures and margin requirements
than in the United States; and (5) lower trading volume and liquidity.

Non-Hedging Strategic Transactions. An Underlying Fund's options, futures and
swap transactions will generally be entered into for hedging purposes -- to
protect against possible changes in the market values of securities held in or
to be purchased for the Underlying Fund's portfolio resulting from securities
markets, currency or interest rate fluctuations, to protect the Underlying
Fund's unrealized gains in the values of its portfolio securities, to facilitate
the sale of such securities for investment purposes, to manage the effective
maturity or duration of the Underlying Fund's portfolio, or to establish a
position in the derivatives markets as a temporary substitute for purchase or
sale of particular securities. Each Underlying Fund's (except ING Index Plus
International Equity Fund) net loss exposure resulting from transactions entered
into for each purposes will not exceed 5% of the Underlying Fund's net assets at
any one time and, to the extent necessary, the

                                       44




Underlying Fund will close out transactions in order to comply with this
limitation. Such transactions are subject to the limitations described above
under "Options," "Futures Contracts," and "Interest Rate and Currency Swaps."

Lending of Portfolio Securities

Loans of portfolio securities earn income for the Underlying Funds and are
collateralized by cash, cash equivalent or U.S. government securities. An
Underlying Fund might experience a loss if the financial institution defaults on
the loan. The borrower at all times during the loan must maintain with the
lending Underlying Fund cash or cash equivalent collateral or provide to that
Underlying Fund an irrevocable letter of credit equal in value to at least 102%
of the value of loaned domestic securities and 105% of the value of loaned
foreign securities on a daily basis. Although voting rights of the loaned
securities may pass to the borrower, if a material event affecting the
investment in the loaned securities is to occur, the lending Underlying Fund
must terminate the loan and vote the securities. Alternatively, the lending
Underlying Fund may enter into an arrangement that ensures that it can vote the
proxy even while the borrower continues to hold the securities. During the time
portfolio securities are on loan, the borrower pays the lending Underlying Fund
any interest or distributions paid on such securities. Each Underlying Fund may
invest the cash collateral and earn additional income, or it may receive an
agreed-upon amount of interest income from the borrower who has delivered
equivalent collateral or a letter of credit. Loans are subject to termination at
the option of the lending Underlying Fund or the borrower at any time. Each
lending Underlying Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the income earned on
the cash to the borrower or placing broker. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower fail financially.

Repurchase Agreements

Repurchase agreements may be utilized, with respect to portfolio securities of
Underlying Funds. Such agreements may be considered to be loans by the
Underlying Funds for purposes of the 1940 Act. Each repurchase agreement must be
collateralized fully, in accordance with the provisions of Rule 5b-3 under the
1940 Act, at all times. Pursuant to such repurchase agreements, the Underlying
Fund acquires securities from financial institutions such as brokers, dealers
and banks, subject to the seller's agreement to repurchase and the Underlying
Fund's agreement to resell such securities at a mutually agreed upon date and
price. The term of such an agreement is generally quite short, possibly
overnight or for a few days, although it may extend over a number of months (up
to one year) from the date of delivery. The repurchase price generally equals
the price paid by the Underlying Fund plus interest negotiated on the basis of
current short-term rates (which may be more or less than the rate on the
underlying portfolio security). The securities underlying a repurchase agreement
will be marked-to-market every business day so that the value of the collateral
is at least equal to the value of the loan, including the accrued interest
thereon, and the Underlying Fund's adviser or sub-adviser will monitor the value
of the collateral. Securities subject to repurchase agreements will be held by
the Underlying Fund's custodian or in the Federal Reserve/Treasury Book-Entry
System or an equivalent foreign system. If the seller defaults on its repurchase
obligation, the Underlying Fund holding the repurchase agreement will suffer a
loss to the extent that the proceeds from a sale of the underlying securities is
less than the repurchase price under the agreement. Bankruptcy or insolvency of
such a defaulting seller may cause the Underlying Fund's rights with respect to
such securities to be delayed or limited. To mitigate this risk, each Underlying
Fund may only enter into repurchase agreements that qualify for an exclusion
from any automatic stay of creditors' rights against the counterparty under
applicable insolvency law in the event of the counterparty's insolvency.

The Underlying Funds treat any securities subject to restrictions on
repatriation for more than seven days, and securities issued in connection with
foreign debt conversion programs that are restricted as to remittance of
invested capital or profit, as illiquid. Illiquid securities do not include
securities that are restricted from trading on formal markets for some period of
time but for which an active informal market exists, or securities that meet the
requirements of Rule 144A under the 1933 Act and that, subject to the review by
the Board and

                                       45




guidelines adopted by the Board, the Adviser has determined to be liquid.

Reverse Repurchase Agreements and Dollar Roll Transactions

Reverse repurchase agreement transactions involve the sale of U.S. government
securities held by the Underlying Fund, with an agreement that the Underlying
Fund will repurchase such securities at an agreed upon price and date. The
Underlying Fund will employ reverse repurchase agreements when necessary to meet
unanticipated net redemptions so as to avoid liquidating other portfolio
investments during unfavorable market conditions. At the time it enters into a
reverse repurchase agreement, the Underlying Fund will place in a segregated
custodial account cash and/or liquid assets having a dollar value equal to the
repurchase price. Reverse repurchase agreements are considered to be borrowings
under the 1940 Act. Reverse repurchase agreements, together with other permitted
borrowings, may constitute up to 33 1/3% of the Underlying Fund's total assets.
Under the 1940 Act, the Underlying Fund is required to maintain continuous asset
coverage of 300% with respect to borrowings and to sell (within three days)
sufficient portfolio holdings to restore such coverage if it should decline to
less than 300% due to market fluctuations or otherwise, even if such
liquidations of the Underlying Fund's holdings may be disadvantageous from an
investment standpoint. Leveraging by means of borrowing may exaggerate the
effect of any increase or decrease in the value of portfolio securities or the
Underlying Fund's NAV, and money borrowed will be subject to interest and other
costs (which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income received from the
securities purchased with borrowed funds.

In order to enhance portfolio returns and manage prepayment risks, The
Underlying Funds may engage in dollar roll transactions with respect to mortgage
securities issued by GNMA, FNMA and FHLMC. In a dollar roll transaction, an
Underlying Fund sells a mortgage security held in the portfolio to a financial
institutional such as a bank or broker-dealer, and simultaneously agrees to
repurchase a substantially similar security (same type, coupon and maturity)
from the institution at a later date at an agreed upon price. The mortgage
securities that are repurchased will bear the same interest rate as those sold,
but generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Underlying Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be invested
in short-term instruments, and the income from these investments, together with
any additional fee income received on the sale, could generate income for the
Underlying Fund exceeding the yield on the sold security. When an Underlying
Fund enters into a dollar roll transaction, cash and/or liquid assets of the
Underlying Fund, in a dollar amount sufficient to make payment for the
obligations to be repurchased, are segregated with its custodian at the trade
date. These securities are marked daily and are maintained until the transaction
is settled.

Whether a reverse repurchase agreement or dollar roll transaction produces a
gain for an Underlying Fund depends upon the "costs of the agreements" (e.g., a
function of the difference between the amount received upon the sale of its
securities and the amount to be spent upon the purchase of the same or
"substantially the same" security) and the income and gains of the securities
purchased with the proceeds received from the sale of the mortgage security. If
the income and gains on the securities purchased with the proceeds of the
agreements exceed the costs of the agreements, then an Underlying Fund's NAV
will increase faster than otherwise would be the case; conversely, if the income
and gains on such securities purchased fail to exceed the costs of the
structure, NAV will decline faster than otherwise would be the case. Reverse
repurchase agreements and dollar roll transactions, as leveraging techniques,
may increase an Underlying Fund's yield in the manner described above; however,
such transactions also increase an Underlying Fund's risk to capital and may
result in a shareholder's loss of principal.

Swap Agreements and Options on Swap Agreements. Swap transactions, include, but
are not limited to, swap agreements on interest rates, security or commodity
indices, specific securities and commodities, and credit and event-linked swaps.
To the extent the Underlying Fund may invest in foreign currency-denominated
securities, it may also invest in currency exchange rate swap agreements. The
Underlying Fund may also enter into options on swap agreements ("swap options").

                                       46




The Underlying Fund may enter into swap transactions for any legal purpose
consistent with its investment objective and policies, such as for the purpose
of attempting to obtain or preserve a particular return or spread at a lower
cost than obtaining a return or spread through purchases and/or sales of
instruments in other markets, to protect against currency fluctuations, as a
duration management technique, to protect against any increase in the price of
securities the Underlying Fund anticipates purchasing at a later date, or to
gain exposure to certain markets in the most economical way possible.

Swap agreements are two party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard "swap" transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest factor. The
gross returns to be exchanged or "swapped" between the parties are generally
calculated with respect to a "notional amount," i.e., the return on or increase
in value of a particular dollar amount invested at a particular interest rate,
in a particular foreign currency, or in a "basket" of securities or commodities
representing a particular index. Forms of swap agreements include interest rate
caps, under which, in return for a premium, one party agrees to make payments to
the other to the extent that interest rates exceed a specified rate, or "cap";
interest rate floors, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified rate, or "floor"; and interest rate collars, under which a party sells
a cap and purchases a floor or vice versa in an attempt to protect itself
against interest rate movements exceeding given minimum or maximum levels.
Consistent with the Underlying Fund's investment objectives and general
investment policies, the Underlying Fund may invest in commodity swap
agreements. For example, an investment in a commodity swap agreement may involve
the exchange of floating-rate interest payments for the total return on a
commodity index. In a total return commodity swap, the Underlying Fund will
receive the price appreciation of a commodity index, a portion of the index, or
a single commodity in exchange for paying an agreed-upon fee. If the commodity
swap is for one period, the Underlying Fund may pay a fixed fee, established at
the outset of the swap. However, if the term of the commodity swap is more than
one period, with interim swap payments, the Underlying Fund may pay an
adjustable or floating fee. With a "floating" rate, the fee may be pegged to a
base rate, such as the LIBOR, and is adjusted each period. Therefore, if
interest rates increase over the term of the swap contract, the Underlying Fund
may be required to pay a higher fee at each swap reset date.

The Underlying Fund may enter into credit swap agreements. The "buyer" in a
credit default contract is obligated to pay the "seller" a periodic stream of
payments over the term of the contract provided that no event of default on an
underlying reference obligation has occurred. If an event of default occurs, the
seller must pay the buyer the full notional value, or "par value," of the
reference obligation in exchange for the reference obligation. The Underlying
Fund may be either the buyer or seller in a credit default swap transaction. If
the Underlying Fund is a buyer and no event of default occurs, the Underlying
Fund will lose its investment and recover nothing. However, if an event of
default occurs, the Underlying Fund (if the buyer) will receive the full
notional value of the reference obligation that may have little or no value. As
a seller, the Underlying Fund receives a fixed rate of income throughout the
term of the contract, which typically is between six months and three years,
provided that there is no default event. If an event of default occurs, the
seller must pay the buyer the full notional value of the reference obligation.
Credit default swap transactions involve greater risks than if the Underlying
Fund had invested in the reference obligation directly.

A swap option is a contract that gives a counterparty the right (but not the
obligation) in return for payment of a premium, to enter into a new swap
agreement or to shorten, extend, cancel or otherwise modify an existing swap
agreement, at some designated future time on specified terms. Each Underlying
Fund that may engage in swaps may write (sell) and purchase put and call swap
options.

Most swap agreements entered into by the Underlying Fund would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, the
Underlying Fund's current obligations (or rights) under a swap agreement will
generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). The

                                       47




Underlying Fund's current obligations under a swap agreement will be accrued
daily (offset against any amounts owed to the Underlying Fund) and any accrued
but unpaid net amounts owed to a swap counterparty will be covered by the
segregation of assets determined to be liquid by the Underlying Fund's adviser
or sub-adviser in accordance with procedures established by the Board, to avoid
any potential leveraging of the Underlying Fund's portfolio. Obligations under
swap agreements so covered will not be construed to be "senior securities" for
purposes of the Underlying Fund's investment restriction concerning senior
securities.

Whether the Underlying Fund's use of swap agreements or swap options will be
successful in furthering its investment objective of total return will depend on
the Underlying Fund's adviser or sub-adviser's ability to predict correctly
whether certain types of investments are likely to produce greater returns than
other investments. Because they are two party contracts and because they may
have terms of greater than seven days, swap agreements may be considered to be
illiquid. Moreover, the Underlying Fund bears the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. The Underlying Fund will enter into
swap agreements only with counterparties that meet certain standards of
creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Underlying Fund's repurchase agreement
guidelines). Certain restrictions imposed on the Underlying Fund by the Code may
limit the Underlying Fund's ability to use swap agreements. The swaps market is
a relatively new market and is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect the Underlying Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.

Depending on the terms of the particular option agreement, the Underlying Fund
will generally incur a greater degree of risk when it writes a swap option than
it will incur when it purchases a swap option. When the Underlying Fund
purchases a swap option, it risks losing only the amount of the premium it has
paid should it decide to let the option expire unexercised. However, when the
Underlying Fund writes a swap option, upon exercise of the option the Underlying
Fund will become obligated to make payments according to the terms of the
underlying agreement.

Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the
Commodity Futures Trading Commission ("CFTC"). To qualify for this exemption, a
swap agreement must be entered into by "eligible participants," which includes
the following, provided the participants' total assets exceed established
levels: a bank or trust company, savings association or credit union, insurance
company, investment company subject to regulation under the 1940 Act, commodity
pool, corporation, partnership, proprietorship, organization, trust or other
entity, employee benefit plan, governmental entity, broker-dealer, futures
commission merchant, natural person, or regulated foreign person. To be
eligible, natural persons and most other entities must have total assets
exceeding $10 million; commodity pools and employee benefit plans must have
assets exceeding $5 million. In addition, an eligible swap transaction must meet
three conditions. First, the swap agreement may not be part of a fungible class
of agreements that are standardized as to their material economic terms. Second,
the creditworthiness of parties with actual or potential obligations under the
swap agreement must be a material consideration in entering into or determining
the terms of the swap agreement, including pricing, cost or credit enhancement
terms. Third, swap agreements may not be entered into and traded on or through a
multilateral transaction execution facility. This exemption is not exclusive,
and participants may continue to rely on existing exclusions for swaps, such as
the Policy Statement issued in July 1989 which recognized a safe harbor for swap
transactions from regulation as futures or commodity option transactions under
the CEA or its regulations. The Policy Statement applies to swap transactions
settled in cash that (1) have individually tailored terms, (2) lack
exchange-style offset and the use of a clearing organization or margin system,
(3) are undertaken in conjunction with a line of business, and (4) are not
marketed to the public.

Structured Notes. Structured notes are derivative debt securities, the interest
rate or principal of which is determined by an unrelated indicator. Indexed
securities include structured notes as well as securities other

                                       48




than debt securities, the interest rate or principal of which is determined by
an unrelated indicator. Indexed securities may include a multiplier that
multiplies the indexed element by a specified factor and, therefore, the value
of such securities may be very volatile. To the extent the Underlying Fund
invests in these securities, however, the adviser or sub-adviser analyzes these
securities in its overall assessment of the effective duration of the Underlying
Fund's portfolio in an effort to monitor the Underlying Fund's interest rate
risk.

Securities, Interest Rate and Currency Swaps

Securities Swaps. Securities swaps, a technique primarily used to indirectly
participate in the securities market of a country from which an Underlying Fund
would otherwise be precluded for lack of an established securities custody and
safekeeping system. The Underlying Fund deposits an amount of cash with its
custodian (or the broker, if legally permitted) in an amount equal to the
selling price of the underlying security. Thereafter, the Underlying Fund pays
or receives cash from the broker equal to the change in the value of the
underlying security.

Interest and Currency Swaps. Interest rate and currency swap transactions and
purchase or sell interest rate and currency caps and floors may be used, as well
as entering into currency swap cap transactions. An interest rate or currency
swap involves an agreement between an Underlying Fund and another party to
exchange payments calculated as if they were interest on a specified
("notional") principal amount (e.g., an exchange of floating rate payments by
one party for fixed rate payments by the other). An interest rate cap or floor
entitles the purchaser, in exchange for a premium, to receive payments of
interest on a notional principal amount from the seller of the cap or floor, to
the extent that a specified reference rate exceeds or falls below a
predetermined level. An Underlying Fund usually enters into such transactions on
a "net" basis, with the Underlying Fund receiving or paying, as the case may be,
only the net amount of the two payment streams. The net amount of the excess, if
any, of an Underlying Fund's obligations over its entitlements with respect to
each swap is accrued on a daily basis, and an amount of cash or high-quality
liquid securities having an aggregate NAV at least equal to the accrued excess
is maintained in a segregated account by the Underlying Fund's custodian. If an
Underlying Fund enters into a swap on other than a net basis, or sells caps or
floors, the Underlying Fund maintains a segregated account in the full amount
accrued on a daily basis of the Underlying Fund's obligations with respect to
the transaction. Such segregated accounts are maintained in accordance with
applicable regulations of the Commission.

An Underlying Fund will not enter into any of these derivative transactions
unless the unsecured senior debt or the claims paying ability of the other party
to the transaction is rated at least "high quality" at the time of purchase by
at least one of the established rating agencies (e.g., AAA or AA by S&P). The
swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and agents
utilizing standard swap documentation and the adviser or sub-adviser has
determined that the swap market has become relatively liquid. Swap transactions
do not involve the delivery of securities or other underlying assets or
principal, and the risk of loss with respect to such transactions is limited to
the net amount of payments that the Underlying Fund is contractually obligated
to make or receive. Caps and floors are more recent innovations for which
standardized documentation has not yet been developed; accordingly, they are
less liquid than swaps. Caps and floors purchased by an Underlying Fund are
considered to be illiquid assets.

Interest Rate Swaps. As indicated above, an interest rate swap is a contract
between two entities ("counterparties") to exchange interest payments (of the
same currency) between the parties. In the most common interest rate swap
structure; one counterparty agrees to make floating rate payments to the other
counterparty, which in turn makes fixed rate payments to the first counterparty.
Interest payments are determined by applying the respective interest rates to an
agreed upon amount, referred to as the "notional principal amount." In most such
transactions, the floating rate payments are tied to the LIBOR, which is the
offered rate for short-term Eurodollar deposits between major international
banks. As there is no exchange of principal amounts, an interest rate swap is
not an investment or a borrowing.

Cross-Currency Swaps. A cross-currency swap is a contract between two
counterparties to exchange interest

                                       49




and principal payments in different currencies. A cross-currency swap normally
has an exchange of principal at maturity (the final exchange); an exchange of
principal at the start of the swap (the initial exchange) is optional. An
initial exchange of notional principal amounts at the spot exchange rate serves
the same function as a spot transaction in the foreign exchange market (for an
immediate exchange of foreign exchange risk). An exchange at maturity of
notional principal amounts at the spot exchange rate serves the same function as
a forward transaction in the foreign exchange market (for a future transfer of
foreign exchange risk). The currency swap market convention is to use the spot
rate rather than the forward rate for the exchange at maturity. The economic
difference is realized through the coupon exchanges over the life of the swap.
In contrast to single currency interest rate swaps, cross-currency swaps involve
both interest rate risk and foreign exchange risk.

Swap options. A swap option is a contract that gives a counterparty the right
(but not the obligation) to enter into a new swap agreement or to shorten,
extend, cancel or otherwise change an existing swap agreement, at some
designated future time on specified terms. It is different from a forward swap,
which is a commitment to enter into a swap that starts at some future date with
specified rates. A swap option may be structured European-style (exercisable on
the pre-specified date) or American-style (exercisable during a designated
period). The right pursuant to a swap option must be exercised by the right
holder. The buyer of the right to a swap option is said to own a call.

Caps and Floors. Interest rate caps and floors and currency swap cap
transactions. An interest rate cap is a right to receive periodic cash payments
over the life of the cap equal to the difference between any higher actual level
of interest rates in the future and a specified strike (or "cap") level. The cap
buyer purchases protection for a floating rate move above the strike. An
interest rate floor is the right to receive periodic cash payments over the life
of the floor equal to the difference between any lower actual level of interest
rates in the future and a specified strike (or "floor") level. The floor buyer
purchases protection for a floating rate move below the strike. The strikes are
typically based on the three-month LIBOR (although other indices are available)
and are measured quarterly. Rights arising pursuant to both caps and floors are
exercised automatically if the strike is in the money. Caps and floors eliminate
the risk that the buyer fails to exercise an in-the-money option.

Risks Associated with Swaps, Caps and Floors. The risks associated with interest
rate and currency swaps and interest rate caps and floors are similar to those
described above with respect to OTC options. In connection with such
transactions, an Underlying Fund relies on the other party to the transaction to
perform its obligations pursuant to the underlying agreement. If there were a
default by the other party to the transaction, the Underlying Fund would have
contractual remedies pursuant to the agreement, but could incur delays in
obtaining the expected benefit of the transaction or loss of such benefit. In
the event of insolvency of the other party, the Underlying Fund might be unable
to obtain its expected benefit. In addition, while certain Underlying Fund will
seek to enter into such transactions only with parties which are capable of
entering into closing transactions with the Underlying Fund, there can be no
assurance that an Underlying Fund will be able to close out such a transaction
with the other party, or obtain an offsetting position with any other party, at
any time prior to the end of the term of the underlying agreement. This may
impair an Underlying Fund's ability to enter into other transactions at a time
when doing so might be advantageous.

Short Sales

An Underlying Fund may make a short sale of securities it already owns or have
the right to acquire at no added cost through conversion or exchange of other
securities it owns (referred to as short sales "against the box"). In a short
sale that is not "against the box," an Underlying Fund sells a security, which
it does not own, in anticipation of a decline in the market value of the
security. To complete the sale, the Underlying Fund must borrow the security
generally from the broker through which the short sale is made) in order to make
delivery to the buyer. The Underlying Fund must replace the security borrowed by
purchasing it at the market price at the time of replacement. The Underlying
Fund is said to have a "short position" in the securities sold until it delivers
them to the broker. The period during which the Underlying Fund has a short
position can

                                       50




range from one day to more than a year. Until the Underlying Fund replaces the
security, the proceeds of the short sale are retained by the broker, and the
Underlying Fund must pay to the broker a negotiated portion of any dividends or
interest, which accrues during the period of the loan. To meet current margin
requirements, the Underlying Fund must deposit with the broker additional cash
or securities so that it maintains with the broker a total deposit equal to 150%
of the current market value of the securities sold short (100% of the current
market value if a security is held in the account that is convertible or
exchangeable into the security sold short within ninety (90) days without
restriction other than the payment of money).

Short sales by an Underlying Fund that are not made "against the box" create
opportunities to increase the Underlying Fund's return but, at the same time,
involve specific risk considerations and may be considered a speculative
technique. Since the Underlying Fund in effect profits from a decline in the
price of the securities sold short without the need to invest the full purchase
price of the securities on the date of the short sale, the Underlying Fund's NAV
per share tends to increase more when the securities it has sold short decrease
in value, and to decrease more when the securities it has sold short increase in
value, than would otherwise be the case if it had not engaged in such short
sales. The amount of any gain will be decreased, and the amount of any loss
increased, by the amount of any premium, dividends or interest the Underlying
Fund may be required to pay in connection with the short sale. Short sales
theoretically involve unlimited loss potential, as the market price of
securities sold short may continually increase, although an Underlying Fund may
mitigate such losses by replacing the securities sold short before the market
price has increased significantly. Under adverse market conditions the
Underlying Fund might have difficulty purchasing securities to meet its short
sale delivery obligations, and might have to sell portfolio securities to raise
the capital necessary to meet its short sale obligations at a time when
fundamental investment considerations would not favor such sales.

If an Underlying Fund makes a short sale "against the box," the Underlying Fund
would not immediately deliver the securities sold and would not receive the
proceeds from the sale. The seller is said to have a short position in the
securities sold until it delivers the securities sold, at which time it receives
the proceeds of the sale. To secure its obligation to deliver securities sold
short, an Underlying Fund will deposit in escrow in a separate account with the
Underlying Fund's custodian an equal amount of the securities sold short or
securities convertible into or exchangeable for such securities. The Underlying
Fund can close out its short position by purchasing and delivering an equal
amount of the securities sold short, rather than by delivering securities
already held by the Underlying Fund, because the Underlying Fund might want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.

An Underlying Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the adviser or sub-adviser believes
that the price of a security may decline, causing a decline in the value of a
security owned by the Underlying Fund or a security convertible into or
exchangeable for such security. In such case, any future losses in the
Underlying Fund's long position would be reduced by a gain in the short
position. The extent to which such gains or losses in the long position are
reduced will depend upon the amount of securities sold short relative to the
amount of the securities the Underlying Fund owns, either directly or
indirectly, and, in the case where the Underlying Fund owns convertible
securities, changes in the investment values or conversion premiums of such
securities.

In the view of the SEC, a short sale involves the creation of a "senior
security" as such term is defined in the 1940 Act, unless the sale is "against
the box" and the securities sold short are placed in a segregated account (not
with the broker), or unless the Underlying Fund's obligation to deliver the
securities sold short is "covered" by placing in a segregated account (not with
the broker) cash, U.S. government securities or other liquid debt or equity
securities in an amount equal to the difference between the market value of the
securities sold short at the time of the short sale and any such collateral
required to be deposited with a broker in connection with the sale (not
including the proceeds from the short sale), which difference is adjusted daily
for changes in the value of the securities sold short. The total value of the
cash, U.S. government securities or other liquid debt or equity securities
deposited with the broker and otherwise segregated may not at any time be less
than the market value of the securities sold short at the time of the short
sale. Each Underlying Fund

                                       51




will comply with these requirements. In addition, as a matter of policy, each
Underlying Fund's Board has determined that such Underlying Fund will not make
short sales of securities or maintain a short position if to do so could create
liabilities or require collateral deposits and segregation of assets aggregating
more than 25% of the Underlying Fund's total assets, taken at market value.

The extent to which an Underlying Fund may enter into short sales transactions
may be limited by the Code requirements for qualification of the Underlying Fund
as a regulated investment company. See "Dividends, Distributions and Taxes."

Temporary Defensive and Other Short-Term Positions

Investing in certain short-term, high-quality debt instruments and in U.S.
government securities is done for the following purposes: (i) to meet
anticipated day-to-day operating expenses; (ii) pending the adviser's or
sub-adviser's ability to invest cash inflows; (iii) to permit the Underlying
Fund to meet redemption requests; and (iv) for temporary defensive purposes. An
Underlying Fund for which the investment objective is capital appreciation may
also invest in such securities if the Underlying Fund's assets are insufficient
for effective investment in equities.

Although it is expected that each Underlying Fund will normally be invested
consistent with its investment objectives and policies, the short-term
instruments in which an Underlying Fund may invest include: (i) short-term
obligations of the U.S. government and its agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities;
(iii) commercial paper, including master notes; (iv) bank obligations, including
certificates of deposit, time deposits and bankers' acceptances; and (v)
repurchase agreements. When investing for the purposes indicated above, the
Underlying Funds will normally invest in short-term instruments that do not have
a maturity of greater than one year. To the extent an Underlying Fund is engaged
in temporary defensive investments, it will not be pursuing its investment
objective.

When-Issued Securities and Delayed-Delivery Transactions

In order to secure prices or yields deemed advantageous at the time, the
Underlying Funds may purchase or sell securities on a when-issued or a
delayed-delivery basis generally 15 to 45 days after the commitment is made. The
Underlying Funds will enter into a when-issued transaction for the purpose of
acquiring portfolio securities and not for the purpose of leverage. In such
transactions, delivery of the securities occurs beyond the normal settlement
periods, but no payment or delivery is made by, and no interest accrues to, the
Underlying Fund prior to the actual delivery or payment by the other party to
the transaction. Due to fluctuations in the value of securities purchased on a
when-issued or a delayed-delivery basis, the yields obtained on such securities
may be higher or lower than the yields available in the market on the dates when
the investments are actually delivered to the buyers. Similarly, the sale of
securities for delayed-delivery can involve the risk that the prices available
in the market when delivery is made may actually be higher than those obtained
in the transaction itself. Each Underlying Fund will establish a segregated
account with the custodian consisting of cash and/or liquid assets in an amount
equal to the amount of its when-issued and delayed-delivery commitments which
will be "marked-to-market" daily. Each Underlying Funds will only make
commitments to purchase such securities with the intention of actually acquiring
the securities, but the Underlying Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of investment strategy. In
these cases, the Underlying Funds may realize a taxable gain or loss. When an
Underlying Fund engages in when-issued, forward commitment and delayed
settlement transactions, it relies on the other party to consummate the trade.
Failure of such party to do so may result in an Underlying Fund incurring a loss
or missing an opportunity to obtain a price credited to be advantageous. Certain
Underlying Funds may not purchase when-issued securities or enter into firm
commitments, if as a result, more than 15% of the Underlying Fund's net assets
would be segregated to cover such securities.

When the time comes to pay for the securities acquired on a delayed-delivery
basis, an Underlying Fund will meet its obligations from the available cash
flow, sale of the securities held in the segregated account, sale of

                                       52




other securities or, although it would not normally expect to do so, from sale
of the when-issued securities themselves (which may have a market value greater
or less than the Underlying Fund's payment obligation). Depending on market
conditions, the Underlying Funds could experience fluctuations in share price as
a result of delayed delivery or when-issued purchases.

FUNDAMENTAL INVESTMENT RESTRICTIONS AND POLICIES

The investment objective of the Fund is not fundamental and may be changed
without a shareholder vote. The Fund has adopted certain investment restrictions
as fundamental policies that cannot be changed without the approval of the
holders of a "majority" of the Fund's outstanding voting securities, as that
term is defined in the 1940 Act. The term "majority" is defined in the 1940 Act
as the lesser of: (i) 67% or more of the Fund's voting securities present at a
meeting of shareholders, of which the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (ii) more
than 50% of the Fund's outstanding securities.

As a matter of fundamental policy, the Fund may not:

1.   purchase securities of any issuer if, as a result, with respect to 75 % of
     the Fund's total assets, more than 5% of the value of its total assets
     would be invested in the securities of any one issuer or the Fund's
     ownership would be more than 10% of the outstanding voting securities of
     any issuer, provided that this restriction does not limit the Fund's
     investments in securities issued or guaranteed by the U.S. government, its
     agencies and instrumentalities, or investments in securities of other
     registered management investment companies;

2.   purchase any securities which would cause 25 % or more of the value of its
     total assets at the time of purchase to be invested in securities of one or
     more issuers conducting their principal business activities in the same
     industry, provided that: (a) there is no limitation with respect to
     obligations issued or guaranteed by the U.S. government, any state or
     territory of the United States, or tax exempt securities issued by any of
     their agencies, instrumentalities or political subdivisions; and (b)
     notwithstanding this limitation or any other fundamental investment
     limitation, assets may be invested in the securities of one or more
     registered management investment companies to the extent permitted by the
     1940 Act, the rules and regulations thereunder and any exemptive relief
     obtained by the Fund;

3.   make loans, except to the extent permitted under the 1940 Act, including
     the rules, regulations, interpretations and any exemptive relief obtained
     by the Fund;

4.   issue senior securities except to the extent permitted by the 1940 Act, the
     rules and regulations thereunder and any exemptive relief obtained by the
     Fund;

5.   purchase or sell real estate, except that the Fund may (i) acquire or lease
     office space for its own use, (ii) invest in securities of issuers that
     invest in real estate or interests therein, (iii) invest in
     mortgage-related securities and other securities that are secured by real
     estate or interests therein, or (iv) hold and sell real estate acquired by
     the Fund as a result of the ownership of securities;

6.   purchase or sell physical commodities, unless acquired as a result of
     ownership of securities or other instruments (but this shall not prevent
     the Fund from purchasing or selling options and futures contracts or from
     investing in securities or other instruments backed by physical
     commodities). This limitation does not apply to foreign currency
     transactions, including, without limitation, forward currency contracts;

7.   borrow money, except to the extent permitted under the 1940 Act, including
     the rules, regulations, interpretations thereunder and any exemptive relief
     obtained by the Fund; and

8.   underwrite any issue of securities within the meaning of the 1933 Act
     except when it might

                                       53




     technically be deemed to be an underwriter either: (a) in connection with
     the disposition of a portfolio security or (b) in connection with the
     purchase of securities directly from the issuer thereof in accordance with
     its investment objective. This restriction shall not limit the Fund's
     ability to invest in securities issued by other registered management
     investment companies.

With respect to fundamental policy number (2), industry classifications are
determined in accordance with the classifications established by Global
Industrial Classification Standards ("GIC") or Standard Industrial
Classification ("SIC"). The adviser or sub-adviser believes that the industry
characteristics selected are reasonable and not so broad that the primary
economic characteristics of the companies in a single class are materially
different. Industry classifications may be changed from time to time to reflect
changes in the market place.

                               PORTFOLIO TURNOVER

A change in securities held in the portfolio of the Fund is known as "portfolio
turnover" and may involve the payment by the Fund of dealer mark-ups or
brokerage or underwriting commissions and other transaction costs on the sale of
securities, as well as on the reinvestment of the proceeds in other securities.
Portfolio turnover rate for a fiscal year is the percentage determined by
dividing the lesser of the cost of purchases or proceeds from sales of portfolio
securities by the average value of portfolio securities during such year, all
excluding securities whose maturities at acquisition were one year or less. The
Fund cannot accurately predict its turnover rate, however the rate will be
higher when the Fund finds it necessary to change significantly its portfolio to
adopt a temporary defensive position or respond to economic or market events. A
high turnover rate would increase commission expenses and may involve
realization of capital gains by the Fund.

                  DISCLOSURE OF THE FUND'S PORTFOLIO SECURITIES

The Fund is required to file its complete portfolio holdings schedule with the
SEC on a quarterly basis. This schedule is filed with the Fund's annual and
semi-annual shareholder reports on Form N-CSR for the second and fourth fiscal
quarters and on Form N-Q for the first and third fiscal quarters.

In addition, the Fund posts its portfolio holdings schedule on ING's website on
a calendar-quarter basis and it is available on the first day of the second
month of the next quarter. The portfolio holdings schedule is as of the last day
of the preceding quarter-end (e.g., the Fund will post the quarter-ending June
30 holdings on August 1).

The Fund also compiles a list composed of its ten largest holdings ("Top Ten").
This information is produced monthly, and is made available on ING's website, on
the tenth day of each month. The Top Ten holdings information is as of the last
day of the previous month.

Investors (both individual and institutional), financial intermediaries that
distribute the Fund's shares and most third parties may receive the Fund's
annual or semi-annual shareholder reports, or view on ING's website, the Fund's
portfolio holdings schedule. The Top Ten list also is provided in quarterly Fund
descriptions that are included in the offering materials of variable life
insurance products and variable annuity contracts.

Other than in regulatory filings or on ING's website, the Fund may provide its
complete portfolio holdings to certain unaffiliated third parties and affiliates
when the Fund has a legitimate business purpose for doing so. Unless otherwise
noted below, the Fund's disclosure of its portfolio holdings will be on an
as-needed basis, with no lag time between the date of which information is
requested and the date the information is provided. Specifically, the Fund's
disclosure of its portfolio holdings may include disclosure:

.    To the Fund's independent registered public accounting firm, named herein,
     for use in providing audit opinions;

.    To financial printers for the purpose of preparing Fund regulatory filings;

                                       54




.    For the purpose of due diligence regarding a merger or acquisition;

.    To a new adviser or sub-adviser prior to the commencement of its management
     of the Fund;

.    To rating and ranking agencies such as Bloomberg, Morningstar, Lipper and
     S&P, such agencies may receive more data from the Fund than is posted on
     the Fund's website;

.    To consultants for use in providing asset allocation advice in connection
     with investments by affiliated funds-of-funds in the Fund;

.    To service providers, such as proxy voting and class action services
     providers, on a daily basis, in connection with their providing services
     benefiting the Fund;

.    To a third party for purposes of effecting in-kind redemptions of
     securities to facilitate orderly redemption of portfolio assets and minimal
     impact on remaining Fund shareholders; or

.    To certain third parties, on a weekly basis with no lag time, that have
     financed the Fund's Class B shares.

In all instances of such disclosure the receiving party, by agreement, is
subject to a duty of confidentiality, including a duty not to trade on such
information.

The Board has adopted policies and procedures ("Policies") designed to ensure
that disclosure of information regarding the Fund's portfolio securities is in
the best interests of Fund shareholders, including procedures to address
conflicts between the interests of the Fund's shareholders, on the one hand, and
those of the Fund's adviser, sub-adviser, principal underwriter or any
affiliated person of the Fund, its adviser, or its principal underwriter, on the
other. Such Policies authorize the Fund's administrator to implement the Board's
Policies and direct the administrator to document the expected benefit to
shareholders. Among other considerations, the administrator is directed to
consider whether such disclosure may create an advantage for the recipient or
its affiliates or their clients over that of the Fund's shareholders. Similarly,
the administrator is directed to consider, among other things, whether the
disclosure of portfolio holdings creates a conflict between the interests of
shareholders and the interests of the adviser, sub-advisers, principal
underwriter and their affiliates. The Board has authorized the senior officers
of the Fund's administrator to authorize the release of the Fund's portfolio
holdings, as necessary, in conformity with the foregoing principles and to
monitor for compliance with the Policies. The Fund's administrator reports
quarterly to the Board regarding the implementation of the Policies.

The Fund has the following ongoing arrangements with certain third parties to
provide the Fund's portfolio holdings:

                                                                      Time Lag Between Date of
                                                                        Information and Date
          Party                       Purpose             Frequency     Information Released
-------------------------   ---------------------------   ---------   ------------------------
Societe Generale            Class B shares financing        Weekly              None
Constellation

Institutional Shareholder   Proxy Voting & Class Action     Daily               None
Services, Inc.              Services

Charles River Development   Compliance                      Daily               None

All of the arrangements in the table above are subject to the Policies adopted
by the Board to ensure such disclosure is for a legitimate business purpose and
is in the best interests of the Fund and its shareholders. The Board must
approve any material change to the Policies. The Policies may not be waived, or
exceptions made, without the consent of ING's Legal Department. All waivers and
exceptions involving the Fund will be disclosed to the Board no later than its
next regularly scheduled quarterly meeting. No compensation or other
consideration may be received by the Fund, the adviser, or any other party in
connection with the disclosure of portfolio holdings in accordance with the
Policies.

                                       55




MANAGEMENT OF THE COMPANY

Set forth in the table below is information about each Director of the Company.

                                                                                        Number of
                                                                                         Funds in
                                                                                           Fund
                                Position(s)   Term of Office                             Complex
                                 Held with    and Length of   Principal Occupation(s)  Overseen by  Other Board Memberships
     Name, Address and Age      the Company   Time Served/1/  During the Past 5 Years  Director/2/      held by Director
---------------------------------------------------------------------------------------------------------------------------
Directors who are not "Interested Persons"

Dr. Albert E. DePrince, Jr.       Director   June 1998 -      Professor of Economics        30      Academy of Economics
7337 East Doubletree Ranch Rd.               Present          and Finance, Middle                   and Finance (February
Scottsdale, Arizona 85258                                     Tennessee State                       2002 - Present);
Age: 66                                                       University (August 1991               Tennessee Tax Structure
                                                              - Present). Formerly,                 Commission (December
                                                              Director of Business                  2002-December 2004);
                                                              and Economic Research                 and Business and
                                                              Center, Middle                        Economic Research
                                                              Tennessee State                       Center (August
                                                              University (August                    1999-August 2003)
                                                              1994-August 2003).

Maria Teresa Fighetti             Director   April 1994 -     Retired. Formerly,            30      None.
7337 East Doubletree Ranch Rd.               Present          Associate
Scottsdale, Arizona 85258                                     Commissioner/Attorney,
Age:  64                                                      New York City
                                                              Department of Mental
                                                              Health (June 1973 -
                                                              October 2002).

Sidney Koch                       Director   April 1994 -     Self-Employed                 30      None.
7337 East Doubletree Ranch Rd.               Present          Consultant
Scottsdale, Arizona 85258                                     (June 2000 - present).
Age:  72

Corine T. Norgaard                Director   June 1991 -      Retired. Formerly,            30      Mass Mutual Corporate
7337 East Doubletree Ranch Rd.               Present          President, Thompson                   and Participation
Scottsdale, Arizona 85258                                     Enterprises (September                Investors (April 1997 -
Age:  70                                                      2004 - September 2005);               Present); Mass Mutual
                                                              and Dean of the Barney                Premier Series
                                                              School of Business,                   (December 2004 -
                                                              University of Hartford                Present); and Mass
                                                              (August 1996 - June                   Mutual MML Series II
                                                              2004).                                (December 2005 -
                                                                                                    Present).

Edward T. O'Dell                  Director   June 2002 -      Retired. Formerly,            30      None.
7337 East Doubletree Ranch Rd.               Present          Partner of Goodwin
Scottsdale, Arizona 85258                                     Procter LLP (June 1966
Age:  72                                                      - September 2000).

Joseph E. Obermeyer               Director   January 2003 -   President, Obermeyer &        30      None.
7337 East Doubletree Ranch Rd.               Present          Associates, Inc.
Scottsdale, Arizona 85258                                     (November 1999 -
Age:  50                                                      Present).

Russell Jones                     Director   December 2007 -  Senior Vice President,        30      None.
7337 East Doubletree Ranch Rd.               Present          Chief Investment
Scottsdale, Arizona 85258                                     Officer and Treasurer
Age:  63                                                      Kaman Corporation
                                                              (1973-Present).

Directors who are "Interested Persons"

Shaun Mathews(3)(4)               Director   December 2007 -  President and Chief           30      Mark Twain House &
7337 East Doubletree Ranch Rd.               Present          Executive Officer ING                 Museum (September
Scottsdale, Arizona 85258                                     Investments, LLC                      2002-Present;
Age:  52                                                      (December 2006-Present)               Connecticut Forum (May
                                                              and Head of ING USFS                  2002-Present); Capital
                                                              Mutual Funds and                      Community College
                                                              Investment Products                   Foundation (February
                                                              (October 2004-Present).               2002-Present); ING

                                       56




                                                                                        Number of
                                                                                         Funds in
                                                                                           Fund
                                Position(s)   Term of Office                             Complex
                                 Held with    and Length of   Principal Occupation(s)  Overseen by  Other Board Memberships
     Name, Address and Age      the Company   Time Served/1/  During the Past 5 Years  Director/2/      held by Director
------------------------------------------------------------------------------------------------------------------------------------
                                                              CMO of ING USFS (April                Services Holding
                                                              2002-October 2004) and                Company, Inc. (May
                                                              Head of Rollover/Payout               2000-Present);
                                                              (October 2001-December                Southland Life
                                                              2003).                                Insurance Company (June
                                                                                                    2002-Present); and ING
                                                                                                    Capital Corporation,
                                                                                                    LLC, ING Funds
                                                                                                    Distributor, LLC, ING
                                                                                                    Funds Services, LLC,
                                                                                                    ING Investments, LLC,
                                                                                                    and ING Pilgrim
                                                                                                    Funding, Inc. (March
                                                                                                    2006-Present).

Fredric (Rick) A. Nelson          Director   December 2007 -  Vice Chairman and Chief       30      None.
III/3/ 7337 East Doubletree                  Present          Investment Officer, ING
Ranch Rd. Scottsdale, Arizona                                 Investment Management
85258                                                         Americas. Formerly,
Age: 51                                                       head of the U.S. Equity
                                                              Group as well as a
                                                              member of the Global
                                                              and U.S. Executive
                                                              Committees at JPMorgan
                                                              Fleming Investment
                                                              Management, Inc. until
                                                              2003.

(1)  Directors serve until their successors are duly elected and qualified.

(2)  For the purposes of this table, "Fund Complex" mean the following
     investment companies: ING GET Fund; ING Series Fund, Inc.; ING Strategic
     Allocation Portfolios, Inc.; ING Variable Funds; ING VP Balanced Portfolio,
     Inc.; ING VP Intermediate Bond Portfolio; ING VP Money Market Portfolio.
     The number of Funds in the Fund Complex is as of January 31, 2008.

(3)  "Interested person" of the Company, as defined in the 1940 Act, is such
     because of a relationship with ING Groep N.V., the parent corporation of
     the adviser of the Fund, ING Investments, LLC, and the Distributor, ING
     Funds Distributor, LLC.

(4)  Shaun Mathews, President, ING USFS Mutual Funds and Investment Products,
     has held a seat on the Board of Directors of The Mark Twain House & Museum
     since September 19, 2002. ING Groep N.V. affiliates make non-material,
     charitable contributions to The Mark Twain House & Museum.

Officers

Information about the Fund's Officers is set forth in the table below:

                                                         Term of Office
                                      Position             and Length
                                     Held with               Of Time
     Name, Address and Age          the Company             Served(1)         Principal Occupation(s) During the Last Five Years
------------------------------------------------------------------------------------------------------------------------------------
Shaun P. Mathews                President and Chief     December 2006 -   President and Chief Executive Officer, ING Investments,
7337 East Doubletree Ranch Rd.  Executive Officer       Present           LLC/2/ and ING Fund Services/3/ (December 2006 - Present)
Scottsdale, Arizona 85258                                                 and Head of ING USFS Mutual Funds and Investment Products
Age: 52                                                                   (October 2004 - Present). Formerly, CMO, ING USFS (April
                                                                          2002 - October 2004) and Head of Rollover/Payout (October
                                                                          2001 - December 2003).

Michael J. Roland               Executive Vice          April 2002 -      Head of Mutual Fund Platform (February 2007 - Present) and
7337 East Doubletree Ranch Rd.  President               Present           Executive Vice President, ING Investments, LLC/2/
Scottsdale, Arizona 85258                                                 (December 2001 - Present). Formerly, Head of Product
Age: 49                                                                   Management (January 2005 - January 2007); Chief Compliance
                                                                          Officer, ING Investments, LLC/2/ and Directed Services,
                                                                          LLC/5/ (October 2004 - December 2005); and Chief Financial
                                                                          Officer and Treasurer, ING Investments, LLC/2/ (December
                                                                          2001 - March 2005).

Stanley D. Vyner                Executive Vice          March 2002 -      Executive Vice President, ING Investments, LLC/2/ (July
230 Park Avenue                 President               Present           2000 - Present); and Chief Investment Risk Officer, ING
New York, NY 10169                                                        Investments, LLC/2/ (January 2003 - Present). Formerly,
Age: 57                                                                   Chief Investment Officer of the International Investments
                                                                          (August 2000 - January 2003).

                                       57




                                                         Term of Office
                                     Position              and Length
                                    Held with               Of Time
     Name, Address and Age         the Company              Served/1/         Principal Occupation(s) During the Last Five Years
------------------------------------------------------------------------------------------------------------------------------------
Joseph M. O'Donnell             Executive Vice          March 2006 -      Chief Compliance Officer of the ING Funds (November 2004 -
7337 East Doubletree Ranch Rd.  President               Present           Present), ING Investments, LLC/2/ and Directed Services,
Scottsdale, Arizona 85258       Chief Compliance        November 2004 -   LLC(5) (March 2006 - Present); and Executive Vice
Age:  53                        Officer                 Present           President of the ING Funds (March 2006 - Present).
                                                                          Formerly, Chief Compliance Officer of ING Life Insurance
                                                                          and Annuity Company (March 2006 - December 2006); Vice
                                                                          President, Chief Legal Counsel, Chief Compliance Officer
                                                                          and Secretary of Atlas Securities, Inc., Atlas Advisers,
                                                                          Inc. and Atlas Funds (October 2001 - October 2004).

Todd Modic                      Senior Vice President,  March 2005 -      Senior Vice President, ING Funds Services, LLC/3/ (April
7337 East Doubletree Ranch Rd.  Chief/Principal         Present           2005 - Present). Formerly, Vice President, ING Funds
Scottsdale, Arizona 85258       Financial Officer and                     Services, LLC/3/ (September 2002 - March 2005); and
Age:  40                        Assistant Secretary                       Director of Financial Reporting, ING Investments, LLC/2/
                                                                          (March 2001- September 2002).

Kimberly A. Anderson            Senior Vice President   December 2003 -   Senior Vice President, ING Investments, LLC/2/ (October
7337 East Doubletree Ranch Rd.                          Present           2003 - Present). Formerly, Vice President and Assistant
Scottsdale, Arizona 85258                                                 Secretary, ING Investments, LLC/2/ (January 2001 - October
Age:  43                                                                  2003).

Ernest J. C'DeBaca              Senior Vice President   June 2006 -       Senior Vice President, ING Investments, LLC/2/ (December
7337 East Doubletree Ranch Rd.                          Present           2006 - Present), and ING Funds Services, LLC/3/ (April
Scottsdale, Arizona 85258                                                 2006 - Present). Formerly, Counsel, ING Americas, U.S.
Age:   38                                                                 Legal Services (January 2004 - March 2006); and
                                                                          Attorney-Adviser, U.S. Securities and Exchange Commission
                                                                          (May 2001 - December 2003).

Robert Terris                   Senior Vice President   June 2006 -       Senior Vice President, Head of Division Operations, ING
7337 East Doubletree Ranch Rd.                          Present           Funds (May 2006 - Present) and Vice President, Head of
Scottsdale, Arizona 85258                                                 Division Operations, ING Funds Services, LLC/3/ (March
Age:  37                                                                  2006 - Present). Formerly, Vice President of
                                                                          Administration, ING Funds Services, LLC/3/ (October 2001 -
                                                                          March 2006).

Robyn L. Ichilov                Vice President and      March 2002 -      Vice President and Treasurer, ING Funds Services, LLC/3/
7337 East Doubletree Ranch Rd.  Treasurer               Present           (October 2001 - Present) and ING Investments, LLC(2)
Scottsdale, Arizona 85258                                                 (August 1997 - Present).
Age:  40

Lauren D. Bensinger             Vice President          March 2003 -      Vice President and Chief Compliance Officer, ING Funds
7337 East Doubletree Ranch Rd.                          Present           Distributor, LLC/4/ (July 1995 - Present); and Vice
Scottsdale, Arizona 85258                                                 President (February 1996 - Present); and Director of
Age:  54                                                                  Compliance, ING Investments, LLC/2/ (October 2004 -
                                                                          Present). Formerly, Chief Compliance Officer, ING
                                                                          Investments, LLC/2/ (October 2001 - October 2004).

Maria M. Anderson               Vice President          September 2004 -  Vice President, ING Funds Services, LLC/3/ (September 2004
7337 East Doubletree Ranch Rd.                          Present           - Present). Formerly, Assistant Vice President, ING Funds
Scottsdale, Arizona 85258                                                 Services, LLC/3/ (October 2001 - September 2004); and
Age:  49                                                                  Manager of Fund Accounting and Fund Compliance, ING
                                                                          Investments, LLC/2/ (September 1999 - October 2001).

William Evans                   Vice President          December 2007 -   Vice President, Head of Mutual Fund Advisory Group (April
10 State House Square                                   Present           2007-present), Vice President, U.S. Mutual Funds and
Hartford, CT 06103                                                        Investment Products (May 2005-April 2007), Senior Fund
Age:  35                                                                  Analyst, U.S. Mutual Funds and Investment Products (May
                                                                          2002-May 2005).

Denise Lewis                    Vice President          April 2007 -      Vice President, ING Funds Services, LLC/3/ (December 2006
7337 East Doubletree Ranch Rd.                          Present           - Present). Formerly, Senior Vice President, UMB
Scottsdale, Arizona 85258                                                 Investment Services Group, LLC (November 2003 - December
Age:  44                                                                  2006); and Vice President, Wells Fargo Funds Management,
                                                                          LLC (December 2000 - August 2003).

                                       58




                                                         Term of Office
                                      Position             and Length
                                     Held with               Of Time
     Name, Address and Age          the Company             Served(1)         Principal Occupation(s) During the Last Five Years
------------------------------------------------------------------------------------------------------------------------------------
Kimberly K. Palmer              Vice President          March 2006 -      Vice President, ING Funds Services, LLC/3/ (March 2006 -
7337 East Doubletree Ranch Rd.                          Present           Present). Formerly, Assistant Vice President, ING Funds
Scottsdale, Arizona 85258                                                 Services, LLC/3/ (August 2004 - March 2006); Manager,
Age:  50                                                                  Registration Statements, ING Funds Services, LLC/3/ (May
                                                                          2003 - August 2004); Associate Partner, AMVESCAP PLC
                                                                          (October 2000 - May 2003); and Director of Federal Filings
                                                                          and Blue Sky Filings, INVESCO Funds Group, Inc. (March
                                                                          1994 - May 2003).

Susan P. Kinens                 Assistant Vice          March 2003 -      Assistant Vice President, ING Funds Services, LLC/3/
7337 East Doubletree Ranch Rd.  President               Present           (December 2002 - Present); and has held various other
Scottsdale, Arizona 85258                                                 positions with ING Funds Services, LLC/3/ for more than
Age:  31                                                                  the last five years.

Theresa K. Kelety               Secretary               September 2003 -  Counsel, ING Americas, U.S. Legal Services (April 2003 -
7337 East Doubletree Ranch Rd.                          Present           Present). Formerly, Senior Associate with Shearman &
Scottsdale, Arizona 85258                                                 Sterling (February 2000 - April 2003).
Age:  45

Huey P. Falgout, Jr.            Assistant Secretary     September 2003 -  Chief Counsel, ING Americas, U.S. Legal Services
7337 East Doubletree Ranch Rd.                          Present           (September 2003 - Present). Formerly, Counsel, ING
Scottsdale, Arizona 85258                                                 Americas, U.S. Legal Services (November 2002 - September
Age:  45                                                                  2003); and Associate General Counsel, AIG American General
                                                                          (January 1999 - November 2002).

(1)  The officers hold office until the next annual meeting of Directors and
     until their successors shall have been elected and qualified.

(2)  ING Investments, LLC was previously named ING Pilgrim Investments, LLC. ING
     Pilgrim Investments, LLC is the successor in interest to ING Pilgrim
     Investments, Inc. which was previously known as Pilgrim Investments, Inc.
     and before that was known as Pilgrim America Investments, Inc.

(3)  ING Funds Services, LLC was previously named ING Pilgrim Group, LLC. ING
     Pilgrim Group, LLC is the successor in interest to ING Pilgrim Group, Inc.
     which was previously known as Pilgrim Group, Inc. and before that was known
     as Pilgrim America Group, Inc.

(4)  ING Funds Distributor, LLC is the successor in interest to ING Funds
     Distributor, Inc. which was previously known as ING Pilgrim Securities,
     Inc. and before that was known as Pilgrim America Securities, Inc.

(5)  Directed Services, LLC is successor in interest to Directed Services, Inc.

                                       59




Board

The Board governs the Fund and is responsible for protecting the interests of
shareholders. The Directors are experienced executives who oversee the Fund's
activities, review contractual arrangements with companies that provide services
to the Fund, and review the Fund's performance.

Frequency of Meetings

The Board currently conducts regular meetings four (4) times a year. The Audit
Committee also meets regularly four (4) times per year, and the remaining
Committees meet as needed. In addition, the Board or the Committees may hold
special meetings by telephone or in person to discuss specific matters that may
require action prior to the next regular meeting. Each Committee listed below
operates pursuant to a Charter approved by the Board.

Committees

The Board has established an Audit Committee whose function includes, among
others, to meet with the independent registered public accounting firm of the
Fund to review the scope of the Fund's audit, its financial statements and
interim accounting controls, and to meet with management concerning these
matters. The Audit Committee currently consists of Dr. DePrince, Ms. Fighetti,
Mr. Koch, Dr. Norgaard, Mr. O'Dell, Mr. Obermeyer and Mr. Jones (collectively,
the "Independent Directors"). Mr. Obermeyer currently serves as Chairperson and
Dr. Norgaard currently serves as Vice Chairperson of the Audit Committee. The
Audit Committee held four (4) meetings during the fiscal year ended October 31,
2007.

The Board has established a Contracts Committee whose function is to consider,
evaluate and make recommendations to the full Board concerning contractual
arrangements with service providers to the Fund and all other matters in which
the investment adviser or any affiliated entity has an actual or potential
conflict of interest with the Fund or its shareholders. The Contracts Committee
currently consists of Dr. DePrince, Ms. Fighetti, Mr. Koch, Dr. Norgaard, Mr.
O'Dell, Mr. Obermeyer and Mr. Jones. Mr. Koch currently serves as Chairperson
and Dr. DePrince currently serves as Vice Chairperson of the Contracts
Committee. The Contracts Committee held five (5) meetings during the fiscal year
ended October 31, 2007.

The Board has established a Nominating Committee for the purpose of considering
and presenting to the Board candidates it proposes for nomination to fill
Independent Director vacancies on the Board. The Nominating Committee currently
consists of Dr. DePrince, Ms. Fighetti, Mr. Koch, Dr. Norgaard, Mr. O'Dell, Mr.
Obermeyer and Mr. Jones. The Nominating Committee is willing to consider
nominations for vacancies received from shareholders in the same manner as it
reviews its own nominees. Shareholders wishing to submit a nomination for
Director at an annual or special meeting of shareholders must provide such
recommendation in a sufficiently timely manner (and in any event no later than
the date specified for receipt of shareholder proposals in any applicable proxy
statement with respect to the Fund) in writing to the Nominating Committee, c/o
the Secretary of the Fund, ING Series Fund, Inc., 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258. Any such recommendation made by such
shareholder should include sufficient information for the Nominating Committee
to make an assessment of the candidate's suitability for the position of
Independent Director. The Nominating Committee held three no meetings during the
fiscal year ended October 31, 2007.

The Board has established a Valuation Committee for the purpose of approving
fair value determinations at the time they are being considered by management.
The Valuation Committee currently consists of Dr. DePrince, Ms. Fighetti, Mr.
Koch, Dr. Norgaard, Mr. O'Dell, Mr. Obermeyer and Mr. Jones. The Valuation
Committee held no meetings during the fiscal year ended October 31, 2007.

The Board has established a Compliance Committee for the purposes of (1)
providing oversight with respect to compliance by the Fund and its service
providers with applicable laws, regulations and internal policies and

                                       60




procedures affecting the operations of the Funds and (2) to serve as a
committee, and in such capacity to receive, retain and act upon reports of
evidence of possible material violations of applicable U.S. federal or state
securities laws and breaches of fiduciary duty arising under U.S. federal or
state laws. The Compliance Committee currently consists of Dr. DePrince, Ms.
Fighetti, Mr. Koch, Dr. Norgaard, Mr. O'Dell, Mr. Obermeyer and Mr. Jones. Dr.
Norgaard currently serves as Chairperson of the Compliance Committee and Mr.
O'Dell currently serves as Vice Chairperson. The Compliance Committee meets as
needed. The Compliance Committee held three (3) meetings during the fiscal year
ended October 31, 2007.

Director Ownership of Securities

Set forth in the table below is the dollar range of equity securities owned by
each Director for the calendar year ended December 31, 2007.

                                                   Aggregate Dollar Range of Securities in all Registered
                          Dollar Range of shares              Investment Companies Overseen by
    Name of Director            in the Fund              Director in Family of Investment Companies
-----------------------   ----------------------   ------------------------------------------------------
Independent Directors

Albert E. DePrince, Jr.            None                               Over $100,000/(1)/

Maria T. Fighetti                  None                               Over $100,000/(1)/

Sidney Koch                        None                               Over $100,000

Edward T. O'Dell                   None                               Over $100,000/(1)/

Joseph E. Obermeyer                None                               Over $100,000/(1)/

Corine T. Norgaard                 None                               Over $100,000

Russell Jones/(2)/                 None                               $10,000-$50,000/(1)/

Interested Directors

Shaun Mathews/(2)/                 None                               Over $100,000/(1)/

Rick Nelson/(2)/                   None                               Over $100,000/(1)/

/(1)/ Includes the value of shares in which a Director has an indirect interest
      through a deferred compensation plan.

/(2)/ Messrs. Jones, Mathews and Nelson commenced services as Directors
      effective December 2007.

Independent Director Ownership of Securities

Set forth in the table below is information regarding each Independent
Director's (and his or her immediate family members) share ownership in
securities of the Fund's adviser or principal underwriter, and the ownership of
securities in an entity controlling, controlled by or under common control with
the adviser or principal underwriter of the Fund (not including registered
investment companies) as of December 31, 2007.

                               Name of Owners and                                  Value of    Percentage of
Name of Director            Relationship to Director   Company   Title of Class   Securities       Class
-------------------------   ------------------------   -------   --------------   ----------   -------------
Albert E. DePrince, Jr.                N/A               N/A           N/A           $---           N/A

Maria T. Fighetti                      N/A               N/A           N/A           $---           N/A

Sidney Koch                            N/A               N/A           N/A           $---           N/A

Corine T. Norgaard                     N/A               N/A           N/A           $---           N/A

Edward T. O'Dell                       N/A               N/A           N/A           $---           N/A

Joseph Obermeyer                       N/A               N/A           N/A           $---           N/A

Russell Jones                          N/A               N/A           N/A           $---           N/A

Interested Directors

Shaun Mathews                          N/A               N/A           N/A           $---           N/A

Rick Nelson                            N/A               N/A           N/A           $---           N/A

Compensation of Directors

For service on the Board and the boards of other investment companies in the ING
Board Complex, each Independent Director who is not an "interested person" of
ING is entitled to receive (i) an annual retainer of $60,000, payable in equal
quarterly installments; (ii) $7,500 per meeting for each Board meeting in which
the Independent Director participates in person; (iii) $7,500 per meeting for
each Contracts Committee meeting in

                                       61




which the Independent Director participates in person; (iv) $3,500 per meeting
for each committee meeting, other than for a Contracts Committee meeting, held
in conjunction with a Board meeting in which the Independent Director
participates in person, and $5,000 per meeting for each committee meeting, other
than for Contracts Committee meeting, not held in conjunction with a Board
meeting, in which the Independent Director participates in person; (v) $2,500
per meeting for each meeting of the Board or an committee in which the
Independent Director participates by telephone (including via video conference);
(vi) $35,000 per annum for serving as Chairperson of the Contracts Committee,
payable in equal quarterly installments; (vii) $15,000 per annum for serving as
Chairperson of the Audit Committee, payable in equal quarterly installments;
(viii) $15,000 per annum for serving as Chairperson of the Compliance Committee,
payable in equal quarterly installments; (ix) $5,000 per annum for serving as
Chairperson of the Nominating Committee (in periods in which the Committee has
operated), payable in equal quarterly installments; (x) $20,000, $7,500 and
$7,500 per annum for serving as Committee Vice Chairperson of the Contracts,
Compliance and Audit Committees, respectively, payable in equal quarterly
installments. In addition, each Independent Director is entitled to
reimbursement for out-of-pocket expenses incurred in attending Board and
Committee meetings. All such fees and expense reimbursements are allocated among
all funds within the ING Board Complex pro rata based upon the average net
assets of all the funds within the ING Board Complex as of the date the payment
is due. None of the Independent Directors is entitled to receive pension or
retirement benefits.

The following table sets forth information provided by the Fund's adviser
regarding estimated future compensation of Directors by the Fund for the fiscal
year end on October 31, 2008 and actual compensation of Directors by other funds
managed by the adviser and its affiliates for the fiscal year ended October 31,
2007. Officers of the Company and Directors who are interested persons of the
Company do not receive any compensation from the Company or any other funds
managed by the adviser or its affiliates.

Compensation Table

                                    Aggregate         Pension or Retirement       Total Compensation From
                              Compensation from the    Benefits Accrued as          Registrant and Fund
Name of Person and Position            Fund           Part of Fund Expenses   Complex Paid to Directors /(1)/
---------------------------   ---------------------   ---------------------   -------------------------------
Albert E. DePrince, Jr.              $381.26                   None                       $212,500
Director

Maria T. Fighetti                    $339.43                   None                       $190,000
Director

Sidney Koch                          $411.14                   None                       $225,000
Director

Edward T. O'Dell                     $354.97                   None                       $185,000
Director

Joseph E. Obermeyer                  $369.31                   None                       $205,000
Director

Corine T. Norgaard                   $382.46                   None                       $212,500
Director

Russell Jones/(2)/                     N/A                      N/A                         N/A
Director

Shaun Mathews/(2)/                     N/A                      N/A                         N/A
Director

Rick Nelson/(2)/                       N/A                      N/A                         N/A
Director

/(1)/ Represents compensation from 33 funds (total in complex as of the fiscal
      year ended October 31, 2007).

/(2)/ Messrs. Jones, Mathews and Mr. Nelson commenced services as Directors
      effective December 2007.

The Board has adopted a retirement policy under with each Independent Director
is subject to mandatory retirement as of the later of (i) the March 31 next
occurring after he or she attains the age of 72 and (ii) the date his or her
successor is elected or appointed to the Board, provided that each Independent
Director under the age of 72 as of March 31, 2002 who held office as of that
date may, upon the vote of the other Independent Directors, be granted up to
three one-year extensions commencing as of the March 31 next occurring after he

                                       62




or she attains the age of 72.

                                 CODE OF ETHICS

The Fund, the adviser, the sub-adviser and the Distributor have adopted a code
of ethics ("Code of Ethics" or written supervisory procedures) governing
personal trading activities of all Directors, Officers of the Fund and persons
who, in connection with their regular functions, play a role in the
recommendation of any purchase or sale of a security by the Fund or obtain
information pertaining to such purchase or sale. The Code of Ethics is intended
to prohibit fraud against the Fund that may arise from personal trading of
securities that may be purchased or held by the Fund or of the Fund's shares.
The Code of Ethics also prohibits short-term trading of the Fund by persons
subject to the Code of Ethics. Personal trading is permitted by such persons
subject to certain restrictions; however such persons are generally required to
pre-clear all security transactions with the Fund's Compliance Department and to
report all transactions on a regular basis. The sub-adviser has adopted its own
Code of Ethics to govern the personal trading activities of its personnel.

                             PROXY VOTING PROCEDURES

The Board has adopted proxy voting procedures and guidelines to govern the
voting of proxies relating to the Fund's portfolio securities. The procedures
provide that fund-of-funds, including the Fund, will "echo" vote their interests
in Underlying Funds. This means that, if the Fund must vote on a proposal with
respect to an Underlying Fund, the Fund will vote its interest in that
Underlying Fund in the same proportion all other shareholders in the Underlying
Fund voted their interests. The effect of echo voting may be that a small number
of shareholders may determine the outcome of a vote. The procedures delegate to
the adviser the authority to vote proxies relating to portfolio securities, and
provide a method for responding to potential conflicts of interest. In
delegating voting authority to the adviser, the Board has also approved the
adviser's proxy voting procedures, which require the adviser to vote proxies in
accordance with the Fund's proxy voting procedures and guidelines. An
independent proxy voting service has been retained to assist in the voting of
Fund proxies through the provision of vote analysis, implementation and
recordkeeping and disclosure services. A copy of the proxy voting procedures and
guidelines of the Fund, including procedures of ING Investments, LLC, is
attached hereto as Appendix A. No later than August 31st of each year,
information regarding how the Fund voted proxies relating to portfolio
securities for the one-year period ending June 30th is available through the ING
Funds' website (www.ingfunds.com) or by accessing the SEC's EDGAR database
(www.sec.gov).

                   CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS

Control is defined by the 1940 Act as the beneficial ownership, either directly
or through one or more controlled companies, of more than 25% of the voting
securities of a company. A control person may be able to take action regarding
the Fund without the consent or approval of shareholders. As the Fund had not
commenced operations as of the date of this SAI, the only outstanding shares as
of the date of this SAI, the only outstanding shares as of the date of this SAI
are held by the adviser as the Fund's sole shareholder.

                                     ADVISER

The investment adviser for the Fund is ING Investments, LLC ("ING Investments"
or "Adviser"), which is registered with the SEC as an investment adviser and
serves as an investment adviser to registered investment companies (or series
thereof), as well as structured finance vehicles. ING Investments, subject to
the authority of the Directors of the Fund, has the overall responsibility for
the management of the Fund's portfolio subject to delegation of certain
responsibilities to other investment advisers. ING Investment Management Co.
("ING IM" or "Sub-Adviser") serves as Sub-Adviser to the Fund. ING Investments
and ING IM are indirect, wholly-owned subsidiaries of ING Groep N.V. ("ING
Groep") (NYSE: ING). ING Groep is one of the largest financial services
organizations in the world with approximately 120,000 employees. Based in
Amsterdam, ING Groep offers an array of banking, insurance and asset management
services to both individual and

                                       63




institutional investors. The principal executive offices of ING Groep are
located at Amstelveensesweg 500, 1081 KL Amsterdam, P.O. Box 810, 1000 AV
Amsterdam, the Netherlands.

On February 26, 2001, the name of the Adviser changed from "ING Pilgrim
Investments, Inc." to "ING Pilgrim Investments, LLC." On March 1, 2002, the name
of the Adviser was changed from "ING Pilgrim Investments, LLC," to "ING
Investments, LLC." Prior to March 1, 2002, ING IM served as Adviser to all the
Funds.

ING Investments serves pursuant to an investment management agreement
("Investment Advisory Agreement") between ING Investments and the Company, on
behalf of the Fund. The Investment Advisory Agreement requires ING Investments
to oversee the provision of all investment advisory and portfolio management
services for the Fund. Pursuant to a sub-advisory agreement (the "Sub-Advisory
Agreement") ING Investments has delegated certain management responsibilities to
ING IM for the Fund. ING Investments oversees the investment management of the
ING IM for the Fund.

The Investment Advisory Agreement requires ING Investments to provide, subject
to the supervision of the Board, investment advice and investment services to
the Fund and to furnish advice and recommendations with respect to investment of
the Fund's assets and the purchase or sale of its portfolio securities. ING
Investments also provides investment research and analysis. The Investment
Advisory Agreement provides that ING Investments is not subject to liability to
the Fund for any act or omission in the course of, or connected with, rendering
services under the Agreement, except by reason of willful misfeasance, bad
faith, negligence or reckless disregard of its obligations and duties under the
Investment Advisory Agreement.

After an initial term of two years, the Investment Advisory Agreement and
Sub-Advisor Agreement continues in effect from year to year so long as such
continuance is specifically approved at least annually by (a) the Board or (b)
the vote of a "majority" (as defined in the 1940 Act) of the Fund's outstanding
shares voting as a single class; provided, that in either event the continuance
is also approved by at least a majority of the Board who are not "interested
persons" (as defined in the 1940 Act) of ING Investments or ING IM by vote cast
in person at a meeting called for the purpose of voting on such approval.

Please see the Fund's semi-annual shareholder report that will be dated April
30, 2008 for information regarding the basis of the Board's approval of the
investment advisory and investment sub-advisory relationships.

The Investment Advisory Agreement may be terminated without penalty with not
less than 60 days' notice by the Board or by a vote of the holders of a majority
of the Fund's outstanding shares voting as a single class or upon not less than
60 days' notice by ING Investments. The Investment Advisory Agreement will
terminate automatically in the event of its "assignment" (as defined in the 1940
Act).

Advisory Fees

ING Investments bears the expense of providing its services and pays the fees of
the Sub-Advisers. For its services, the Fund pays ING Investments, expressed as
an annual rate, a monthly fee in arrears equal to 0.08% of the Fund's average
daily net assets during the month. To seek to achieve a return on uninvested
cash or for other reasons, the Fund may invest its assets in ING Institutional
Prime Market Fund and/or one or more other money market funds advised by ING
affiliates ("ING Money Market Funds"). The Fund's purchase of shares of an ING
Money Market Fund will result in the Fund paying a proportionate share of the
expenses of the ING Money Market Fund. The Fund's Adviser will waive its fee in
an amount equal to the advisory fee received by the adviser of the ING Money
Market Fund in which the Fund invests resulting from the Fund's investment into
the ING Money Market Fund.

                                       64




Total Advisory Fees Paid by the Fund

The Fund had not commenced operations as of the date of this SAI. Therefore, no
advisory fees were paid for the fiscal year ended October 31, 2007.

                          EXPENSE LIMITATION AGREEMENT

ING Investments has entered into an expense limitation agreement with the Fund,
pursuant to which ING Investments has agreed to waive or limit its fees. In
connection with these agreements and certain U.S. tax requirements, ING
Investments will assume other expenses so that the total annual ordinary
operating expenses of the Fund which exclude interest, taxes, brokerage
commissions, other investment related costs, acquired fund fees and expenses,
extraordinary expenses such as litigation, other expenses not incurred in the
normal course of the Fund's business, and expenses of any counsel or other
persons or services retained by the Fund's Directors who are not "interested
persons" (as defined in the 1940 Act) of ING Investments do not exceed the
following expense limitations:

Fund                        Class A   Class B   Class C   Class I   Class W
-------------------------   -------   -------   -------   -------   -------
ING Global Income Builder    1.30%     2.05%     2.05%     1.05%     1.05%

The Fund may at a later date reimburse ING Investments for management fees
waived and other expenses assumed by ING Investments during the previous
thirty-six (36) months, but only if, after such reimbursement, the Fund's
expense ratio does not exceed the percentage described above. ING Investments
will only be reimbursed for fees waived or expenses assumed after the effective
date of the expense limitation agreement.

The expense limitation agreement provides that these expense limitations shall
continue until March 1, 2009. The expense limitations are contractual and will
automatically renew for one-year terms unless ING Investments provides written
notice of the termination of the expense limitation agreement to the lead
Independent Director of the Company within ninety (90) days prior to the end of
the then-current term or upon termination of the Investment Advisory Agreement.
The expense limitation agreement may also be terminated by the Company, without
payment of any penalty, upon ninety (90) days' prior written notice to ING
Investments at its principal place of business.

                                   SUB-ADVISER

The Investment Advisory Agreement for the Fund provides that ING Investments,
with the approval of the Board, may select and employ investment advisers to
serve as sub-advisers for the Fund, and shall monitor the sub-adviser's
investment programs and results, and coordinate the investment activities of the
sub-adviser to ensure compliance with regulatory restrictions. ING Investments
pays all of its expenses arising from the performance of its obligations under
the Investment Advisory Agreement, including all fees payable to the ING IM,
executive salaries and expenses of the Directors and Officers of the Company who
are employees of ING Investments or its affiliates. ING IM pays all of its
expenses arising from the performance of its obligations under the Sub-Advisory
Agreement.

Subject to the expense reimbursement provisions described in this SAI, other
expenses incurred in the operation of the Company are borne by the Fund,
including, without limitation, investment advisory fees; brokerage commissions;
interest; legal fees and expenses of attorneys; fees of independent registered
public accounting firms, transfer agents and dividend disbursing agents,
shareholder servicing agents, and custodians; the expense of obtaining
quotations for calculating the Fund's NAV; taxes, if any, and the preparation of
the Fund's tax returns; cost of stock certificates and any other expenses
(including clerical expenses) of issue, sale, repurchase or redemption of
shares; fees and expenses of registering and maintaining the registration of
shares of the Fund under federal and state laws and regulations; expenses of
disposition or offering any of the portfolio securities held by the Fund;
expenses of printing and distributing annual and semi-annual shareholder
reports, notices and proxy materials to existing shareholders; expenses of
printing and filing annual and semi-

                                       65




annual shareholder reports and other documents filed with governmental agencies;
expenses of annual and special shareholder and director meetings; expenses of
printing and distributing prospectuses and statements of additional information
to existing shareholders; fees and expenses of Directors of the Company who are
not employees of ING Investments or the ING IM, or their affiliates; membership
dues in trade associations; insurance premiums; and extraordinary expenses such
as litigation expenses.

The Sub-Advisory Agreement may be terminated without payment of any penalties by
ING Investments, the Board, on behalf of the Fund, or the shareholders of the
Fund upon 60 days' prior written notice. Otherwise, after an initial term, the
Sub-Advisory Agreement will remain in effect from year to year, subject to the
annual approval of the Board, on behalf of the Fund, or the vote of a majority
of the outstanding voting securities, and the vote, cast in person at a meeting
duly called and held, of a majority of the Directors, on behalf of the Fund, who
are not parties to the sub-advisory agreement or "interested persons" (as
defined in the 1940 Act) of any such party.

On May 24, 2002, the SEC issued an Exemptive Relief Order permitting ING
Investments to enter into new investment sub-advisory contracts with a
non-affiliated sub-adviser or materially amend an existing sub-advisory
agreement, subject to approval by the Board (including a majority of Independent
Directors) but without obtaining shareholder approval. The Fund operates in this
manner. ING Investments may rely on this exemptive order only if, among other
things, the fund's shareholders have approved the arrangement. The shareholders
of the Fund approved these "manager-of-managers" arrangements on March 18, 2008.
This authority is subject to certain conditions, including the requirement that
the Directors (including a majority of Independent Directors) of the Fund must
approve any new or amended Sub-Advisory Agreements with sub-advisers on behalf
of the Fund. In accordance with the exemptive order received from the SEC, an
information statement describing any sub-adviser changes will be provided to
shareholders within ninety (90) days of the change. ING Investments remains
responsible for providing general management services to the Fund, including
overall supervisory responsibility for the general management and investment of
the Fund's assets, and, subject to the review and approval of the Board, will
among other things: (i) set the Fund's overall investment strategies; (ii)
evaluate, select and recommend sub-advisers to manage all or part of the Fund's
assets; (iii) when appropriate, allocate and reallocate the Fund's assets among
multiple sub-advisers; (iv) monitor and evaluate the investment performance of
sub-advisers; and (v) implement procedures reasonably designed to ensure that
the sub-advisers comply with the Fund's investment objectives, policies, and
restrictions.

Pursuant to the Sub-Advisory Agreement between ING Investments and ING IM, ING
IM acts as Sub-Adviser to the Fund. In this capacity, ING IM, subject to the
supervision and control of ING Investments and the Board, on behalf of the Fund,
manages the Fund's portfolio investments consistently with the Fund's investment
objective, and executes the Fund's investment policies that it deems appropriate
to utilize from time to time. Fees payable under the Sub-Advisory Agreement
accrue daily and are paid monthly by ING Investments. ING IM's principal address
is 230 Park Avenue, New York, New York 10169. ING IM is an affiliate of ING
Investments and an indirect, wholly-owned subsidiary of ING Groep .

The Sub-Advisory Agreement may be terminated without payment of any penalties by
the Adviser, the Directors, on behalf of the Fund, or the shareholders of the
Fund upon 60 days prior written notice.

Sub-Advisory Fees

As compensation to ING IM for its services, ING Investments pays ING IM a
monthly fee in arrears equal to 0.036% of the Fund's average daily net assets
managed during the month. To seek to achieve a return on uninvested cash or for
other reasons, the Fund may invest its assets in ING Institutional Prime Money
Market Fund and/or one or more other money market funds advised by ING
affiliates ("ING Money Market Funds"). The Fund's purchase of shares of an ING
Money Market Fund will result in the Fund paying a proportionate share of the
expenses of the ING Money Market Fund. The Fund's Sub-Adviser will waive its fee
in an amount equal to the sub-advisory fee received by the Sub-Adviser of the
ING Money Market Fund in which

                                       66




the Fund invests resulting from the Portfolio's investment into the ING Money
Market Fund.

Sub-Advisory Fees Paid

The Fund had not commenced operations as of the date of this SAI. Therefore, no
sub-advisory fees were paid for the fiscal year ended October 31, 2007.

                                PORTFOLIO MANAGER

Other Accounts Managed

The following table shows the number of accounts and total assets in the
accounts managed by the portfolio managers as of October 31, 2007.

                      Registered Investment Companies     Other Pooled Investment Vehicles              Other Accts
                    ----------------------------------   ---------------------------------   ---------------------------------
Portfolio Manager   Number of Accounts    Total Assets   Number of Accounts   Total Assets   Number of Accounts   Total Assets
-----------------   ------------------   -------------   ------------------   ------------   ------------------   ------------
Paul Zemsky                 39           5,189,394,019            0                $0              2/(1)/         $626,897,342

/(1)/ 1 account with total assets of $580,410,328 has an advisory fee that is
      also based on the performance of the account.

Potential Material Conflicts of Interest

Potential conflicts of interest may arise in the management of the Funds. ING
Investments and ING IM may be subject to competing interests that have the
potential to influence its decision making with regard to the allocation of the
Fund's assets. For example, one Underlying Fund may pay advisory fees that are
higher than others, and some Underlying Funds may have a sub-adviser that is
affiliated with ING Investments, while others do not.

ING Investments may also subsidize the expenses of some of the Underlying Funds
but not subsidize others. Further, ING Investments may believe that a redemption
from an Underlying Fund will be harmful to that fund or to ING Investments or an
affiliate or may believe that an Underlying Fund may benefit from additional
assets. Therefore, ING Investments may have incentives to allocate and
reallocate in a fashion that would advance its own interests or the interests of
an Underlying Fund rather than the Fund.

ING Investments has informed the Fund's Board that it has developed an
investment process that it believes will ensure the Fund is managed in the best
interests of the shareholders of the Fund.

Compensation

For Paul Zemsky, the portfolio manager ("Portfolio Manager") for the Fund,
compensation consists of (a) fixed base salary; (b) bonus which is based on ING
IM performance, one and three year pre-tax performance of the accounts the
portfolio manager is primarily and jointly responsible for relative to account
benchmarks and peer universe performance, and revenue growth of the accounts
they are responsible for; and (c) long-term equity awards tied to the
performance of our parent company, ING Groep.

The Portfolio Manager for the Fund is also eligible to participate in an annual
cash incentive plan. The overall design of the annual incentive plan was
developed to tie pay to both performance and cash flows, structured in such a
way as to drive performance and promote retention of top talent. As with base
salary compensation, individual target awards are determined and set based on
external market data and internal comparators. Investment performance is
measured on both relative and absolute performance in all areas. ING IM has
defined indices (the Dow Jones Global Market Index) and set performance goals to
appropriately reflect requirements for the investment team. The measures for
each team are outlined on a "scorecard" that is

                                       67




reviewed on an annual basis. These scorecards measure investment performance
versus peer groups over one- and three-year periods and year-to-date net cash
flow (changes in the accounts' net assets not attributable to changes in the
value of the accounts' investments) for all accounts managed by the team. The
results for overall ING IM scorecards are calculated on an asset weighted
performance basis of the individual team scorecards.

Investment professionals' performance measures for bonus determinations are
weighted by 25% being attributable to the overall ING IM performance and 75%
attributable to their specific team results (60% investment performance and 15%
net cash flow).

Based on job function, internal comparators and external market data, the
portfolio manager participates in the ING Long-Term Incentive Plan. Plan awards
are based on the current year's performance as defined by the ING IM component
of the annual incentive plan. The awards vest in three years and are paid in a
combination of ING restricted stock, stock options and restricted performance
units.

If the Portfolio Manager's fixed base salary compensation exceeds a particular
threshold, he may participate in ING's deferred compensation plan. The plan
provides an opportunity to invest deferred amounts of compensation in mutual
funds, ING stock or at an annual fixed interest rate. Deferral elections are
done on an annual basis and the amount of compensation deferred is irrevocable.

Portfolio Manager Ownership of Securities

The following table shows the dollar range of shares of the Fund owned by the
Portfolio Manager as of October 31, 2007, including investments by his immediate
family members and amounts invested through retirement and deferred compensation
plans.

Portfolio Manager            Fund           Dollar Range of Fund Shares Owned
-----------------   ---------------------   ---------------------------------
Paul Zemsky         Global Income Builder                  None

                                RULE 12b-1 PLANS

Fund shares are distributed by the Distributor. With respect to Class A shares
of the Fund, the Distributor is paid an annual fee at the rate of 0.25% of the
value of average daily net assets attributable to those shares under the
Distribution and Shareholder Services Plans adopted by the Company pursuant to
Rule 12b-1 under the 1940 Act ("Rule 12b-1 Plan"). With respect to Class B
shares of the Fund, the Distributor is paid an annual fee at the rate of 1% of
the value of average daily net assets attributable to those shares under the
Rule 12b-1 Plan. With respect to Class C shares of the Fund, the Distributor is
paid an annual fee at the rate of 1% of the value of average daily net assets
attributable to those shares under the Rule 12b-1 Plan. The Fund does not have a
distribution plan for Class I and Class W shares. The fee for a specific class
may be used to pay securities dealers (which may include the principal
underwriter itself) and other financial institutions and organizations for
servicing shareholder accounts. To the extent not used for servicing shareholder
accounts, the fee may be paid to cover expenses incurred in promoting the sale
of that class of shares, including (a) the costs of printing and distributing to
prospective investors prospectuses, statements of additional information and
sales literature; (b) payments to investment professionals and other persons to
obtain various distribution and/or administrative services for the Fund; (c)
overhead and other distribution related expenses; and (d) accruals for interest
on the amount of the foregoing expenses that exceed distribution fees and
contingent deferred sales charges. The fee for Class B shares may also be used
to pay the financing cost of accruing certain unreimbursed expenses. The
Distributor may re-allow all or a portion of these fees to broker-dealers
entering into selling agreements with it, including its affiliates. Payments
under the Rule 12b-1 Plan are not tied exclusively to actual distribution and
service expenses, and the payments may exceed distribution and service expenses
actually incurred.

                                       68




The Distributor is required to report in writing to the Board at least quarterly
on the amounts and purpose of any payment made under each Rule 12b-1 Plan and
any related agreements, as well as to furnish the Board with such other
information as may reasonably be requested in order to enable the Board to make
an informed determination whether each Plan should be continued. The terms and
provisions of the Rule 12b-1 Plans relating to required reports, term, and
approval are consistent with the requirements of Rule 12b-1.

The Rule 12b-1 Plans continue from year to year from their inception dates,
provided such continuance is approved annually by vote of the Board, including a
majority of Independent Directors. The Rule 12b-1 Plans may not be amended to
increase the amount to be spent for the services provided by the Distributor
without shareholder approval. All amendments to the Rule 12b-1 Plans must be
approved by the Board in the manner described above for annual renewals. The
Rule 12b-1 Plans may be terminated at any time, without penalty, by vote of a
majority of the Independent Directors upon not more than thirty (30) days'
written notice to any other party to the Rule 12b-1 Plans. All persons who are
under common control with the Fund could be deemed to have a financial interest
in the Rule 12b-1 Plans. No other interested person of the Fund has a financial
interest in the Rule 12b-1 Plans.

In approving the Rule 12b-1 Plans, the Board considered all the features of the
distribution system, including: (1) the advantages to the shareholders of
economies of scale resulting from growth in the Fund's assets and potential
continued growth; (2) the services provided to the Fund and its shareholders by
the Distributor; and (3) the Distributor's shareholder distribution-related
expenses and costs. In this regard, the Board considered organizational and
personnel changes at ING IM during the past year that are expected to enhance
the quality of its investment operations.

ING Investments, the Sub-Adviser or their affiliates may make payments to
securities dealers that enter into agreements providing the Distributor with
preferential access to registered representatives of the securities dealer.
These payments may be in an amount up to 0.07% of the total Fund assets held in
omnibus accounts or in customer accounts that designate such firm(s) and the
selling broker-dealer.

The Fund had not commenced operations as of the date of this SAI. As a result,
no distribution expenses were incurred by the Distributor for the costs of
promotion and distribution with respect to each class of shares for the Fund for
the fiscal year ended October 31, 2007.

                                  ADMINISTRATOR

ING Funds Services, LLC ("Administrator") serves as administrator for the Fund
pursuant to an Administration Agreement with the Company. The Administrator is
an affiliate of ING Investments. The address of the Administrator is 7337 East
Doubletree Ranch Road, Scottsdale, AZ 85258. Subject to the supervision of the
Board, the Administrator provides the overall business management and
administrative services necessary to the proper conduct of the Fund's business,
except for those services performed by ING Investments under the Investment
Advisory Agreement, the Sub-Adviser under the Sub-Advisory Agreement, the
custodian for the Fund under the Custodian Agreement, the transfer agent for the
Fund under the Transfer Agency Agreement, and such other service providers as
may be retained by the Funds from time to time. The Administrator acts as a
liaison among these service providers to the Fund. The Administrator is also
responsible for ensuring that the Fund operates in compliance with applicable
legal requirements and for monitoring ING Investments for compliance with
requirements under applicable law and with the investment policies and
restrictions of the Fund.

The Administration Agreement may be cancelled by the Board, without payment of
any penalty, by a vote of a majority of the Directors upon sixty (60) days'
written notice to the Administrator, or by the Administrator at any time,
without the payment of any penalty, upon sixty (60) days' written notice to the
Company.

For its services, the Administrator is entitled to receive from the Fund a fee
at an annual rate of 0.10% of the Fund's average daily net assets.

                                       69




Administrative Fees Paid

The Fund had not commenced operations as of the date of this SAI. As a result,
no fees were paid for the fiscal year ended October 31, 2007.

                                   CUSTODIAN

The Bank of New York Mellon Corporation (formerly, The Bank of New York), One
Wall Street, New York, New York 10286, serves as custodian of the Fund. The
custodian does not participate in determining the investment policies of the
Fund or in deciding which securities are purchased or sold by the Fund. The Fund
may, however, invest in obligations of the custodian and may purchase or sell
securities from or to the custodian. For portfolio securities that are purchased
and held outside the United States, The Bank of New York Mellon Corporation has
entered into sub-custodian arrangements (which are designed to comply with Rule
17f-5 under the 1940 Act) with certain foreign banks and clearing agencies.

                                  LEGAL COUNSEL

Legal matters for the Company are passed upon by Goodwin Procter LLP, Exchange
Place, 53 State Street, Boston, MA 02109.

                  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP serves as the independent registered public accounting firm for the
Funds. KPMG LLP provides audit services, tax return preparation and assistance
and consultation in connection with the review of SEC filings. KPMG LLP is
located at 99 High Street, Boston, Massachusetts 02110.

                                 TRANSFER AGENT

DST Systems, Inc, 330 West 9th Street, Kansas City, Missouri 64105-1514 serves
as the transfer agent and dividend-paying agent to the Fund.

                    BROKERAGE ALLOCATION AND TRADING POLICIES

Portfolio Transactions

The Sub-Adviser for the Fund places orders for the purchase and sale of
investment securities for the Fund pursuant to authority granted in the relevant
Investment Sub-Advisory Agreement. Subject to policies and procedures approved
by the Company's Board, the Sub-Adviser has discretion to make decisions
relating to placing these orders including, where applicable, selecting the
brokers or dealers that will execute the purchase and sale of investment
securities, negotiating the commission or other compensation paid to the broker
or dealer executing the trade, or using an electronic trading network ("ECN") or
alternative trading system ("ATS").

In situations where the Sub-Adviser resigns or ING Investments otherwise assumes
day to day management of the Fund pursuant to its Investment Advisory Agreement
with the Fund, ING Investments will perform the services described herein as
being performed by the Sub-Adviser.

How Securities Transactions are Effected

Purchases and sales of securities on a securities exchange (which include most
equity securities) are effected through brokers who charge a commission for
their services. In transactions on securities exchanges in the United States,
these commissions are negotiated, while on many foreign securities exchanges
commissions are

                                       70




fixed. Securities traded in the over-the-counter markets (such
as fixed income securities and some equity securities) are generally traded on a
"net" basis with market makers acting as dealers; in these transactions, the
dealers act as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer.
Transactions in certain over-the counter securities also may be effected on an
agency basis when, in the Sub-Adviser's opinion, the total price paid (including
commission) is equal to or better than the best total price available from a
market maker. In underwritten offerings, securities are usually purchased at a
fixed price, which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On occasion,
certain money market instruments may be purchased directly from an issuer, in
which case no commissions or discounts are paid. The Sub-Adviser may also place
trades using an ECN or ATS.

How the Sub-Adviser Selects Broker Dealers

The Sub-Adviser has a duty to seek to obtain best execution of the Fund's
orders, taking into consideration a full range of factors designed to produce
the most favorable overall terms reasonably available under the circumstances.
In selecting brokers and dealers to execute trades, the Sub-Adviser may consider
both the characteristics of the trade and the full range and quality of the
brokerage services available from eligible broker dealers. This consideration
often involves qualitative as well as quantitative judgments. Factors relevant
to the nature of the trade may include, among others, price (including the
applicable brokerage commission or dollar spread), the size of the order, the
nature and characteristics (including liquidity) of the market for the security,
the difficulty of execution, the timing of the order, potential market impact,
and the need for confidentiality, speed, and certainty of execution. Factors
relevant to the range and quality of brokerage services available from eligible
brokers and dealers may include, among others, the firms' execution, clearance,
settlement, and other operational facilities; willingness and ability to commit
capital or take risk in positioning a block of securities, where necessary;
special expertise in particular securities or markets; ability to provide
liquidity, speed and anonymity; the nature and quality of other brokerage and
research services provided to the Sub-Adviser (consistent with the "safe harbor"
described below); and the firms' general reputation, financial condition and
responsiveness to the Sub-Adviser, as demonstrated in the particular transaction
or other transactions. Subject to its duty to seek best execution of the Fund's
orders, the Sub-Adviser may select broker-dealers that participate in commission
recapture programs that have been established for the benefit of the Fund. Under
these programs, the participating broker-dealers will return to the Fund (in the
form of a credit to the Fund) a portion of the brokerage commissions paid to the
broker-dealers by the Fund. Theses credits are used to pay certain expenses of
the Fund. These commission recapture payments benefit the Fund and not the
Sub-Adviser.

The Safe Harbor for Soft Dollar Practices

In selecting broker dealers to execute a trade for the Fund, the Sub-Adviser may
consider the nature and quality of brokerage and research services provided to
the Sub-Adviser as a factor in evaluating the most favorable overall terms
reasonably available under the circumstances. As permitted by Section 28(e) of
the 1934 Act, the Sub-Adviser may cause the Fund to pay a broker-dealer a
commission for effecting a securities transaction for the Fund that is in excess
of the commission which another broker-dealer would have charged for effecting
the transaction, if the Sub-Adviser makes a good faith determination that the
broker's commission paid by the Fund is reasonable in relation to the value of
the brokerage and research services provided by the broker-dealer, viewed in
terms of either the particular transaction or the Sub-Adviser's overall
responsibilities to the Fund and its other investment advisory clients. The
practice of using a portion of the Fund's commission dollars to pay for
brokerage and research services provided to the Sub-Adviser is sometimes
referred to as "soft dollars." Section 28(e) is sometimes referred to as a "safe
harbor," because it permits this practice, subject to a number of restrictions,
including the Sub-Adviser's compliance with certain procedural requirements and
limitations on the type of brokerage and research services that qualify for the
safe harbor.

     Brokerage and Research Products and Services Under the Safe Harbor -
     Research products and services may include, but are not limited to, general
     economic, political, business and market

                                       71




     information and reviews, industry and company information and reviews,
     evaluations of securities and recommendations as to the purchase and sale
     of securities, financial data on a company or companies, performance and
     risk measuring services and analysis, stock price quotation services,
     computerized historical financial databases and related software, credit
     rating services, analysis of corporate responsibility issues, brokerage
     analysts' earning estimates, computerized links to current market data,
     software dedicated to research, and portfolio modeling. Research services
     may be provided in the form of reports, computer-generated data feeds and
     other services, telephone contacts, and personal meetings with securities
     analysts, as well as in the form of meetings arranged with corporate
     officers and industry spokespersons, economists, academics and governmental
     representatives. Brokerage products and services assist in the execution,
     clearance and settlement of securities transactions, as well as functions
     incidental thereto, including but not limited to, related communication and
     connectivity services and equipment, software related to order routing,
     market access, algorithmic trading, and other trading activities. On
     occasion, a broker-dealer may furnish the Sub-Adviser with a service that
     has a mixed use (that is, the service is used both for brokerage and
     research activities that are within the safe harbor and for other
     activities). In this case, the Sub-Adviser is required to reasonably
     allocate the cost of the service so that any portion of the service that
     does not qualify for the safe harbor is paid for by the Sub-Adviser from
     its own funds, and not by portfolio commissions paid by the Fund.

     Benefits to the Sub-Adviser - Research products and services provided to
     the Sub-Adviser by broker dealers that effect securities transactions for
     the Fund may be used by the Sub-Adviser in servicing all of its accounts.
     Accordingly, not all of these services may be used by the Sub-Adviser in
     connection with the Fund. Some of these products and services are also
     available to the Sub-Adviser for cash and some do not have an explicit cost
     or determinable value. The research received does not reduce the
     sub-advisory fees payable to the Sub-Adviser for services provided to the
     Fund. The Sub-Adviser's expenses would likely increase if the Sub-Adviser
     had to generate these research products and services through its own
     efforts or if it paid for these products or services itself.

Broker Dealers that are Affiliated with ING Investments or a Sub-Adviser

Portfolio transactions may be executed by brokers affiliated with the ING Groep,
ING Investments, or the Sub-Adviser, so long as the commission paid to the
affiliated broker is reasonable and fair compared to the commission that would
be charged by an unaffiliated broker in a comparable transaction.

Prohibition on Use of Brokerage Commissions for Sales or Promotional Activities

The placement of portfolio brokerage with broker-dealers who have sold shares of
the Fund is subject to rules adopted by the Securities and Exchange Commission
and the Financial Industry Regulatory Authority ("FINRA"). Under these rules,
the Sub-Adviser may not consider a broker's promotional or sales efforts on
behalf of the Fund when selecting a broker dealer for Fund portfolio
transactions and neither the Fund, nor a Sub-Adviser, may enter into an
agreement under which the Fund directs brokerage transactions (or revenue
generated from such transactions) to a broker dealer to pay for distribution of
Fund shares. The Fund has adopted policies and procedures, approved by the
Board, that are designed to attain compliance with these prohibitions.

Principal Trades and Research

Purchases of securities for the Fund also may be made directly from issuers or
from underwriters. Purchase and sale transactions may be effected through
dealers which specialize in the types of securities which the Fund will be
holding. Dealers and underwriters usually act as principals for their own
account. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the asked price. If the execution and price offered by more
than

                                       72




one dealer or underwriter are comparable, the order may be allocated to a dealer
or underwriter which has provided such research or other services as mentioned
above.

More Information about trading in Fixed Income Securities

Purchases and sales of fixed-income securities will usually be principal
transactions. Such securities often will be purchased or sold from or to dealers
serving as market makers for the securities at a net price. The Fund may also
purchase such securities in underwritten offerings and will, on occasion,
purchase securities directly from the issuer. Generally, fixed income securities
are traded on a net basis and do not involve brokerage commissions. The cost of
executing fixed income securities transactions consists primarily of dealer
spreads and underwriting commissions.

In purchasing and selling fixed income securities, it is the policy of the Fund
to obtain the best results while taking into account the dealer's general
execution and operational facilities, the type of transaction involved and other
factors, such as the dealer's risk in positioning the securities involved. While
the Sub-Adviser generally seeks reasonably competitive spreads or commissions,
the Fund will not necessarily pay the lowest spread or commission available.

Transition Management

Changes in the Sub-Adviser, investment personnel, reorganizations or mergers of
the Fund may result in the sale of a significant portion or even all of the
Fund's portfolio securities. This type of change generally will increase trading
costs and the portfolio turnover for the Fund. The Fund, ING Investments, or the
Sub-Adviser may engage a broker-dealer to provide transition management services
in connection with a change in Sub-Adviser, a reorganization, or other changes.

Allocation of Trades

Some securities considered for investment by the Fund may also be appropriate
for other clients served by the Fund's Sub-Adviser. If the purchase or sale of
securities consistent with the investment policies of the Fund and one or more
of these other clients is considered at or about the same time, transactions in
such securities will be placed on an aggregate basis and allocated among the
Fund and such other clients in a manner deemed fair and equitable, over time, by
the Sub-Adviser and consistent with the Sub-Adviser's written policies and
procedures. The Sub-Adviser may use different methods of allocating the results
aggregated trades. The Sub-Adviser's relevant policies and procedures and the
results of aggregated trades in which the Fund participated are subject to
periodic review by the Board. To the extent the Fund seeks to acquire (or
dispose of) the same security at the same time, the Fund may not be able to
acquire (or dispose of) as large a position in such security as it desires, or
it may have to pay a higher (or receive a lower) price for such security. It is
recognized that in some cases, this system could have a detrimental effect on
the price or value of the security insofar as the Fund is concerned. However,
over time, the Fund's ability to participate in aggregate trades is expected to
provide better execution for the Fund.

Cross-Transactions

The Board has adopted a policy allowing trades to be made between affiliated
registered investment companies or series thereof provided they meet the
condition of Rule 17a-7 under the 1940 Act and conditions of the policy.

Because the Fund had not commenced operations as of the date of this SAI, no
brokerage commissions were paid for the fiscal year ended October 31, 2007.

Because the Fund had not commenced operations as of the date of this SAI, no
brokerage commissions were paid to firms that also provided research,
statistical, or other services to the Adviser as of the fiscal year ended

                                       73




October 31, 2007.

Because the Fund had not commenced operations as of the date of this SAI, the
Fund did not use affiliated brokers to execute portfolio transactions as of the
fiscal year ended October 31, 2007.

                        PURCHASE AND REDEMPTION OF SHARES

A complete description of the manner in which the shares may be purchased,
redeemed or exchanged appears in the Class A, Class B, Class C, Class I and
Class W shares' respective Prospectuses under "Shareholder Guide."

Class I and Class W shares of the Company are purchased and redeemed at the
applicable NAV next determined after a purchase or redemption order is received,
as described in the Prospectus. Class B and Class C shares of the Company are
purchased at the applicable NAV next determined after a purchase order is
received. Class B and Class C shares are redeemed at the applicable NAV next
determined less any applicable contingent deferred sales charge ("CDSC") after a
redemption request is received, as described in the Prospectus. Class A shares
of the Company are purchased at the applicable NAV next determined after a
purchase order is received less any applicable front-end sales charge and
redeemed at the applicable NAV next determined adjusted for any applicable CDSC
after a redemption request is received, as described in the Prospectus.

Except as provided below, payment for shares redeemed will be made within seven
days (or the maximum period allowed by law, if shorter) after the redemption
request is received in proper form by the transfer agent. The right to redeem
shares may be suspended or payment therefore postponed for any period during
which (a) trading on the NYSE is restricted as determined by the SEC or the NYSE
is closed for other than weekends and holidays; (b) an emergency exists, as
determined by the SEC, as a result of which (i) disposal by the Fund of
securities owned by it is not reasonably practicable, or (ii) it is not
reasonably practicable for the Fund to determine fairly the value of its net
assets; or (c) the SEC by order so permits for the protection of shareholders of
the Fund.

Certain brokers or other designated intermediaries such as third party
administrators or plan trustees may accept purchase and redemption orders on
behalf of the Fund. The transfer agent will be deemed to have received such an
order when the broker or the designee has accepted the order. Customer orders
are priced at the NAV next computed after such acceptance. Such order may be
transmitted to the Fund or its agents several hours after the time of the
acceptance and pricing.

If you invest in the Fund through a financial intermediary, you may be charged a
commission or transaction fee by the financial intermediary for the purchase and
sale of Fund shares.

Any written request to redeem shares in amounts in excess of $100,000 must bear
the signatures of all the registered holders of those shares. The signatures
must be guaranteed by a national or state bank, trust company or a member of a
national securities exchange. Information about any additional requirements for
shares held in the name of a corporation, partnership, trustee, guardian, or in
any other representative capacity can be obtained from the transfer agent.

The Fund has the right to satisfy redemption requests by delivering securities
from its investment portfolio rather than cash when it decides that distributing
cash would not be in the best interests of shareholders. However, the Fund is
obligated to redeem its shares solely in cash up to an amount equal to the
lesser of $250,000 or 1% of its net assets for any one shareholder of the Fund
in any 90-day period. To the extent possible, the Fund will distribute readily
marketable securities, in conformity with applicable rules of the SEC. In the
event such redemption is requested by institutional investors, the Fund will
weigh the effects on nonredeeming shareholders in applying this policy.
Securities distributed to shareholders may be difficult to sell and may result
in additional costs to the shareholders.

                                       74




Purchases and exchanges should be made for investment purposes only. The Fund
reserves the right to reject any specific purchase or exchange request. In the
event the Fund rejects an exchange request, neither the redemption nor the
purchase side of the exchange will be processed until the Fund receives further
redemption instructions.

Front-end Sales Charge Waivers

Front-end sales charges will not apply if you are buying Class A shares with
proceeds from the following sources:

Redemptions from any ING -advised Fund if you:

     .    Originally paid a front-end sales charge on the shares and

     .    Reinvest the money within 90 days of the redemption date.

The Fund's front-end sales charges will also not apply to Class A purchases by:

1.   Employees of ING Groep and its affiliates (including retired employees and
     members of employees' and retired employees' immediate families and board
     members and their immediate families), FINRA registered representatives of
     the Distributor or any affiliated broker-dealer (including members of their
     immediate families) purchasing shares for their own accounts, and members
     of the Board (including their immediate families).

2.   Investors who purchase Fund shares with redemption proceeds received in
     connection with a distribution from a retirement plan investing either: (1)
     directly in any Fund or through an unregistered separate account sponsored
     by ING Life and Annuity Company ("ILIAC") or any successor thereto or
     affiliate thereof; or (2) in a registered separate account sponsored by
     ILIAC or any successor thereto or affiliate thereof but only if no deferred
     sales charge is paid in connection with such distribution and the investor
     receives the distribution in connection with a separation from service,
     retirement, death or disability.

3.   Certain trust companies and bank trust departments investing on behalf of
     their clients.

4.   Certain retirement plans that are sponsored by an employer and have plan
     assets of $500,000 or more.

5.   Current employees of broker-dealers and financial institutions that have
     entered into a selling agreement with the Distributor (or otherwise having
     an arrangement with a broker-dealer or financial institution with respect
     to sales of Fund shares) and their immediate family members, as allowed by
     the internal policies of their employer.

6.   Registered investment companies.

7.   Insurance companies (including separate accounts).

8.   Shareholders of the Adviser Class at the time such shares were redesignated
     as Class A shares.

9.   Certain executive deferred compensation plans.

Contingent Deferred Sales Charge

Certain Class A shares, all Class B shares and all Class C shares are subject to
a CDSC, as described in the Prospectus. For shareholders opening accounts on or
after March 1, 2002, there is no CDSC imposed on:

                                       75




.    redemptions of shares purchased through reinvestment of dividends or
     capital gains distributions; and

.    shares purchased more than one year (in the case of Class A and Class C
     shares), or six years (in the case of Class B shares) prior to the
     redemption.

CDSC Waivers

The CDSC will be waived for:

.    exchanges to other Funds of the same class;

.    redemptions following the death or disability of the shareholder or
     beneficial owner;

.    redemptions related to distributions from retirement plans or accounts
     under Code Section 403(b) after you attain age 70 1/2;

.    tax-free returns of excess contributions from employee benefit plans;

.    distributions from employee benefit plans, including those due to plan
     termination or plan transfer; and

.    redemptions made in connection with the Automatic Cash Withdrawal Plan (see
     Shareholder Services and Other Features), provided that such redemptions:

.    are limited annually to no more than 12% of the original account value;

.    are made in equal monthly amounts, not to exceed 1% per month; and

.    the minimum account value at the time the Automatic Cash Withdrawal Plan
     was initiated was no less than $10,000.

Letter of Intent

You may qualify for a reduced sales charge when you buy Class A shares as
described in the Prospectus. At any time, you may file with the Company a signed
shareholder application with the Letter of Intent section completed. After the
Letter of Intent is filed, each additional investment will be entitled to the
sales charge applicable to the level of investment indicated on the Letter of
Intent. Sales charge reductions are based on purchases in more than one Fund and
will be effective only after notification to the Distributor that the investment
qualifies for a discount. Your holdings in the Fund acquired within 90 days of
the day the Letter of Intent is filed, will be counted towards completion of the
Letter of Intent and will be entitled to a retroactive downward adjustment in
the sales charge. Such adjustment will be made by the purchase of additional
shares in an equivalent amount.

Five percent (5%) of the amount of the total intended purchase will be held by
the transfer agent in escrow until you fulfill the Letter of Intent. If, at the
end of the 13-month period, you have not met the terms of the Letter of Intent
an amount of shares equal to the difference owed will be deducted from your
account. In the event of a total redemption of the account before fulfillment of
the Letter of Intent, the additional sales charge due will be deducted from the
proceeds of the redemption, and the balance will be forwarded to you.

If the Letter of Intent is not completed within the 13-month period, there will
be an upward adjustment of the sales charge, depending on the amount actually
purchased during the period. The upward adjustment will be paid with shares
redeemed from your account.

Right of Accumulation/Cumulative Quantity Discount

A purchaser of Class A shares may qualify for a cumulative quantity discount by
combining a current purchase (or combined purchases as described above) with
certain other Class A shares of the funds already owned. To determine if you may
pay a reduced front-end sales charge, the amount of your current purchase is
added to the cost or current value, whichever is higher, of your other Class A
shares, as well as those Class A shares of your spouse and children under the
age of 21. If you are the sole owner of a company, you may also add any company
accounts, including retirement plan accounts invested in Class A shares of the
Funds. Companies

                                       76




with one or more retirement plans may add together the total
plan assets invested in Class A shares of the Fund to determine the front-end
sales charge that applies.

To qualify for the cumulative quantity discount on a purchase through an
investment dealer, when each purchase is made the investor or dealer must
provide the Company with sufficient information to verify that the purchase
qualifies for the privilege or discount. The shareholder must furnish this
information to the Company when making direct cash investments.

                        SHAREHOLDER ACCOUNTS AND SERVICES

Shareholder Accounts and Services Systematic Investment

The Systematic Investment feature, using the Electronic Funds Transfer ("EFT")
capability, allows you to make automatic monthly investments in the Fund. On the
application, you may select the amount of money to be moved and the Fund in
which it will be invested. In order to elect EFT, you must first have
established an account, subject to the minimum amount specified in the
Prospectuses. Thereafter, the minimum monthly Systematic Investment is currently
$50 per Fund, and we reserve the right to increase that amount. EFT transactions
will be effective 15 days following the receipt by the Transfer Agent of your
application. The Systematic Investment feature and EFT capability will be
terminated upon total redemption of your shares. Payment of redemption proceeds
will be held until a Systematic Investment has cleared, which may take up to 12
calendar days.

Shareholder Information

The Fund's transfer agent will maintain your account information. Account
statements will be sent at least quarterly. A Form 1099 generally will also be
sent each year by January 31. Annual and semiannual shareholder reports will
also be sent to shareholders. The transfer agent may charge you a fee for
special requests such as historical transcripts of your account and copies of
cancelled checks.

Consolidated statements reflecting current values, share balances and
year-to-date transactions generally will be sent to you each quarter. All
accounts identified by the same social security number and address will be
consolidated. For example, you could receive a consolidated statement showing
your individual and IRA accounts. With the prior permission of the other
shareholders involved, you have the option of requesting that accounts
controlled by other shareholders be shown on one consolidated statement. For
example, information on your individual account, your IRA, your spouse's
individual account and your spouse's IRA may be shown on one consolidated
statement.

Automatic Cash Withdrawal Plan

A CDSC may be applied to withdrawals made under this plan. The Automatic Cash
Withdrawal Plan permits you to have payments of $100 or more automatically
transferred from a Fund to your designated bank account on a monthly basis. To
enroll in this plan, you must have a minimum balance of $10,000 in the Fund
($250,000 in the case of Class I shares). Your automatic cash withdrawals will
be processed on a regular basis beginning on or about the first day of the
month. There may be tax consequences associated with these transactions. Please
consult your tax adviser.

Cross Investing

Cross investing may only be made in the Fund that has been previously
established with the minimum investment. To request information or to initiate a
transaction under either or both of these features, please call 1-866-BUY-FUND
(866-289-3863).

Dividend Investing. You may elect to have dividend and/or capital gains
distributions automatically invested in

                                       77




the same class of one other Fund.

Systematic Exchange. You may establish an automatic exchange of shares from one
Fund to another. The exchange will occur on or about the 15th day of each month
and must be for a minimum of $50 per month. Because this transaction is treated
as an exchange, the policies related to the exchange privilege apply. There may
be tax consequences associated with these exchanges. Please consult your tax
adviser.

Signature Guarantee

A signature guarantee is verification of the authenticity of the signature given
by certain authorized institutions. The Company requires a medallion signature
guarantee for redemption requests in amounts in excess of $100,000. In addition,
if you wish to have your redemption proceeds transferred by wire to your
designated bank account, paid to someone other than the shareholder of record,
or sent somewhere other than the shareholder address of record, you must provide
a medallion signature guarantee with your written redemption instructions
regardless of the amount of redemption.

A medallion signature guarantee may be obtained from a domestic bank or trust
company, broker, dealer, clearing agency, savings association, or other
financial institution which is participating in a medallion program recognized
by the Securities Transfer Association. The three recognized medallion programs
are Securities Transfer Agents Medallion Program ("STAMP"), Stock Exchanges
Medallion Program ("SEMP") and New York Stock Exchange, Inc. Medallion Signature
Program ("NYSE MSP"). Signature guarantees from financial institutions which are
not participating in one of these programs will not be accepted. Please note
that signature guarantees are not provided by notaries public. The Company
reserves the right to amend or discontinue this policy at any time and establish
other criteria for verifying the authenticity of any redemption request.

                                NET ASSET VALUE

As noted in the Prospectuses, the NAV and offering price of each class of the
Fund's shares will be determined once daily as of the close of regular trading
("Market Close") on the NYSE (normally 4:00 p.m. Eastern time unless otherwise
designated by the NYSE) during each day on which the NYSE is open for trading.
As of the date of this SAI, the NYSE is closed on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Portfolio securities listed or traded on a national securities exchange will be
valued at the last reported sale price on the valuation day. Securities traded
on an exchange for which there has been no sale that day and other securities
traded in the over-the-counter market will be valued at the mean between the
last reported bid and asked prices on the valuation day. Portfolio securities
reported by NASDAQ will be valued at the NASDAQ Official Closing Price on the
valuation day. In cases in which securities are traded on more than one
exchange, the securities are valued on the exchange that is normally the primary
market. Short-term obligations maturing in sixty (60) days or less will
generally be valued at amortized cost. This involves valuing a security at cost
on the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Fund would receive if it sold the instrument. See "Net Asset Value" in the
Shareholder Guide and Information for Investors sections of each Prospectus. The
long-term debt obligations held in the Fund's portfolio will be valued at the
mean between the most recent bid and asked prices as obtained from one or more
dealers that make markets in the securities when over-the-counter market
quotations are readily available.

Securities and assets for which market quotations are not readily available
(which may include certain restricted securities which are subject to
limitations as to their sale) or deemed unreliable are valued at their

                                       78




fair
values as determined in good faith by or under the supervision of the Fund's
Board, in accordance with methods that are specifically authorized by the Board.
Securities traded on exchanges, including foreign exchanges, which close earlier
than the time that the Fund calculates its NAV, may also be valued at their fair
values as determined in good faith by or under the supervision of the Fund's
Board, in accordance with methods that are specifically authorized by the Board.
The valuation techniques applied in any specific instance are likely to vary
from case to case. With respect to a restricted security, for example,
consideration is generally given to the cost of the investment, the market value
of any unrestricted securities of the same class at the time of valuation, the
potential expiration of restrictions on the security, the existence of any
registration rights, the costs to the Fund related to registration of the
security, as well as factors relevant to the issuer itself. Consideration may
also be given to the price and extent of any public trading in similar
securities of the issuer or comparable companies' securities.

The value of a foreign security traded on an exchange outside the United States
is generally based on its price on the principal foreign exchange where it
trades as of the time the Fund determines its NAV or if the foreign exchange
closes prior to the time the Fund determines its NAV, the most recent closing
price of the foreign security on its principal exchange. Trading in certain
non-U.S. securities may not take place on all days on which the NYSE is open.
Further, trading takes place in various foreign markets on days on which the
NYSE is not open. Consequently, the calculation of the Fund's NAV may not take
place contemporaneously with the determination of the prices of securities held
by the Fund in foreign securities markets. Further, the value of the Fund's
assets may be significantly affected by foreign trading on days when a
shareholder cannot purchase or redeem shares of the Fund. In calculating the
Fund's NAV, foreign securities in foreign currency are converted to U.S. dollar
equivalents.

If an event occurs after the time at which the market for foreign securities
held by the Fund closes but before the time that the Fund's NAV is calculated,
such event may cause the closing price on the foreign exchange to not represent
a readily available reliable market value quotation for such securities at the
time the Fund determines its NAV. In such a case, the Fund will use the fair
value of such securities as determined under the Fund's valuation procedures.
Events after the close of trading on a foreign market that could require the
Fund to fair value some or all of its foreign securities include, among others,
securities trading in the United States and other markets, corporate
announcements, natural and other disasters, and political and other events.
Among other elements of analysis in determination of a security's fair value,
the Board has authorized the use of one or more independent research services to
assist with such determinations. An independent research service may use
statistical analyses and quantitative models to help determine fair value as of
the time the Fund calculates its NAV. There can be no assurance that such models
accurately reflect the behavior of the applicable markets or the effect of the
behavior of such markets on the fair value of securities, nor that such markets
will continue to behave in a fashion that is consistent with such models. Unlike
the closing price of a security on an exchange, fair value determinations employ
elements of judgment. Consequently, the fair value assigned to a security may
not represent the actual value that the Fund could obtain if it were to sell the
security at the time of the close of the NYSE. Pursuant to procedures adopted by
the Board, the Fund is not obligated to use the fair valuation suggested by any
research service, and valuation recommendations provided by such research
services may be overridden if other events have occurred, or if other fair
valuations are determined in good faith to be more accurate. Unless an event is
such that it causes the Fund to determine that the closing prices for one or
more securities do not represent readily available reliable market value
quotations at the time the Fund determines its NAV, events that occur between
the time of the close of the regular trading on the NYSE will not be reflected
in the Fund's NAV.

Options on securities, currencies, futures, and other financial instruments
purchased by the Fund are valued at their last bid price in the case of listed
options or at the average of the last bid prices obtained from dealers in the
case of OTC Options.

The fair value of other assets is added to the value of all securities positions
to arrive at the value of the Fund's total assets. The Fund's liabilities,
including accruals for expenses, are deducted from its total assets. Once the
total value of the Fund's net assets is so determined, that value is then
divided by the total number of shares

                                       79




outstanding (excluding treasury shares), and the result, rounded to the nearest
cent, is the NAV per share.

In computing the NAV for a class of shares of the Fund, all class-specific
liabilities incurred or accrued are deducted from the class' net assets. The
resulting net assets are divided by the number of shares of the class
outstanding at the time of the valuation and the result (adjusted to the nearest
cent) is the NAV per share.

The per share NAV of Class A shares generally will be higher than the per share
NAV of shares of the other classes, reflecting daily expense accruals of the
higher service fees applicable to Class B and Class C. It is expected, however,
that the per share NAV of the classes will tend to converge immediately after
the payment of dividends or distributions that will differ by approximately the
amount of the expense accrual differentials between the classes.

Orders received by dealers prior to Market Close will be confirmed at the
offering price computed as of the close of regular trading on the NYSE provided
the order is received by the Transfer Agent prior to Market Close that same day.
It is the responsibility of the dealer to insure that all orders are transmitted
timely to the Fund. Orders received by dealers after Market Close will be
confirmed at the next computed offering price as described in the Prospectuses.

                               TAX CONSIDERATIONS

The following discussion summarizes certain U.S. federal income tax
considerations generally affecting the Fund and its shareholders. This
discussion does not provide a detailed explanation of all tax consequences, and
shareholders are advised to consult their own tax advisers with respect to the
particular federal, state, local and foreign tax consequences to them of an
investment in the Fund. This discussion is based on the Code, Treasury
Regulations issued thereunder, and judicial and administrative authorities as in
effect on the date of this SAI, all of which are subject to change, which change
may be retroactive.

The Fund intends to qualify annually as a regulated investment company ("RIC")
under the provisions of Subchapter M of the Code. To so qualify and to be taxed
as a RIC, the Fund must, among other things: (a) derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of stock or
securities and gains from the sale of other disposition of foreign currencies,
net income dividend from an interest in a qualified publicly traded partnership,
or other income (including gains from options, futures contracts and forward
contracts) derived with respect to the Fund's business of investing in stocks,
securities or currencies; (b) diversify its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the value of the Fund's total
assets is represented by cash and cash items, U.S. government securities,
securities of other RICs, and other securities, with such other securities
limited in respect of any one issuer to an amount not greater in value than 5%
of the Fund's total assets and to not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the Fund's
total assets is invested in the securities (other than U.S. government
securities or securities of other RICs) of any one issuer, of any two or more
issuers that the Fund controls and that are determined to be engaged in the same
business or similar or related businesses or of our more qualified publicly
traded partnerships; and (c) distribute at least 90% of its investment company
taxable income (which includes, among other items, dividends, interest and net
short-term capital gains in excess of net long-term capital losses) each taxable
year.

The U.S. Treasury Department is authorized to issue regulations providing that
foreign currency gains that are not directly related to the Fund's principal
business of investing in stock or securities (or options and futures with
respect to stock or securities) will be excluded from the income which qualifies
for purposes of the 90% gross income requirement described above. To date,
however, no such regulations have been issued.

As a RIC, the Fund generally will be relieved of liability for U.S. federal
income tax on that portion of its investment company taxable income and net
realized capital gains which it distributes to its shareholders. Amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement also are

                                       80




subject to a nondeductible 4% excise tax. To prevent application of the excise
tax, the Fund currently intends to make distributions in accordance with the
calendar year distribution requirement.

If, in any taxable year, the Fund fails to qualify as a RIC under the Code or
fails to meet the distribution requirement, it would be taxed in the same manner
as an ordinary corporation and distributions to its shareholders would not be
deductible by the Fund in computing its taxable income. In addition, the Fund's
distributions, to the extent derived from its current or accumulated earnings
and profits, would constitute dividends (which may be eligible for the corporate
dividends-received deduction) which are taxable to shareholders as ordinary
income or as qualifying dividends eligible for a reduced rate of tax as
discussed below. If the Fund fails to qualify as a RIC in any year, it must pay
out its earnings and profits accumulated in that year in order to qualify again
as a RIC. Moreover, if the Fund failed to qualify as a RIC for a period greater
than one taxable year, the Fund may be required to recognize any net built-in
gains with respect to certain of its assets (the excess of the aggregate gains,
including items of income, over aggregate losses that would have been realized
if the Fund had been liquidated) in order to qualify as a RIC in a subsequent
year.

Distributions

Dividends of investment company taxable income (including short-term capital
gains) are generally taxable to shareholders as ordinary income. Distributions
of investment company taxable income may be eligible for the corporate
dividends-received deduction to the extent that such distributions are
attributable to the Fund's dividend income from U.S. corporations, and if other
applicable requirements are met. However, the alternative minimum tax applicable
to corporations may reduce the benefit of the dividends-received deduction.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) designated by the Fund as capital gain
dividends are not eligible for the dividends-received deduction and will
generally be taxable to shareholders as long-term capital gains, regardless of
the length of time the Fund's shares have been held by a shareholder. Net
capital gains from assets held for one year or less will be taxed as ordinary
income. Generally, dividends and distributions are taxable to shareholders,
whether received in cash or reinvested in shares of the Fund. Any distributions
that are not from the Fund's investment company taxable income or net capital
gain may be characterized as a return of capital to shareholders or, in some
cases, as capital gain. Shareholders will be notified annually as to the federal
tax status of dividends and distributions they receive and any tax withheld
thereon.

Current tax law generally provides for a maximum tax rate for individual
taxpayers of 15% on long-term capital gains from sales and on certain qualifying
dividends on corporate stock. The rate reductions do not apply to corporate
taxpayers. The Fund will be able to separately designate distributions of any
qualifying long-term capital gains or qualifying dividends derived by the Fund
from an Underlying Fund that would be eligible for the lower maximum rate. A
shareholder and the Fund would also have to satisfy a sixty (60) day holding
period with respect to any distributions of qualifying dividends in order to
obtain the benefit of the lower rate. Distributions of earnings from an
Underlying Fund to the Fund of non-qualifying dividends, interest income, other
types of ordinary income and short-term capital gains will be taxed at the
ordinary income tax rate applicable to the taxpayer. Note that distributions of
earnings from dividends paid by "qualified foreign corporations" to an
Underlying Fund which is thereafter distributed to the Fund can also qualify for
the lower tax rates on qualifying dividends. Qualified foreign corporations are
corporations incorporated in a U.S. possession, corporations whose stock is
readily tradable on an established securities market in the United States, and
corporations eligible for the benefits of a comprehensive income tax treaty with
the United States which satisfy certain other requirements. Passive foreign
investment companies are not treated as "qualified foreign corporations." The
lower rates on long-term capital gains and qualifying dividends are currently
scheduled to apply through 2010. In the absence of further Congressional action,
for calendar years after 2010, the maximum rate on long-term capital gains for
individual taxpayers would increase to 20% and income from dividends would be
taxed at the rates applicable to ordinary income.

Dividends, including capital gain dividends, declared in October, November, or
December with a record date in such month and paid during the following January
will be treated as having been paid by the Fund and

                                       81




received by shareholders on December 31 of the calendar year in which declared,
rather than the calendar year in which the dividends are actually received.

Distributions by the Fund reduce the NAV of the Fund shares. Should a
distribution reduce the NAV below a shareholder's cost basis, the distribution
nevertheless may be taxable to the shareholder as ordinary income or capital
gain as described above, even though, from an investment standpoint, it may
constitute a partial return of capital. In particular, investors should be
careful to consider the tax implication of buying shares just prior to a
distribution by the Fund. The price of shares purchased at that time includes
the amount of the forthcoming distribution, but the distribution will generally
be taxable to them.

The Fund will not be able to offset gains distributed by one Underlying Fund in
which it invests against losses in another Underlying Fund in which the Fund
invests. Redemptions of shares in an Underlying Fund, including those resulting
from changes in the allocation among Underlying Funds, could also cause
additional distributable gains to shareholders of the Fund. A portion of any
such gains may be short-term capital gains that would be distributable as
ordinary income to shareholders of the Fund. Further, a portion of losses on
redemptions of shares in the Underlying Funds may be deferred under the wash
sale rules. As a result of these factors, the use of the fund-of-funds structure
by the Fund could therefore affect the amount, timing and character of
distributions to shareholders. The Fund will also not be able to pass through
from the Underlying Funds any potential benefit from the foreign tax credit or
income from certain federal obligations (that may be exempt from state tax).

Original Issue Discount and Market Discount

Certain debt securities acquired by the Fund may be treated as debt securities
that were originally issued at a discount. Original issue discount can generally
be defined as the difference between the price at which a security was issued
and its stated redemption price at maturity. Although no cash income is actually
received by the Fund, original issue discount that accrues on a debt security in
a given year generally is treated for federal income tax purposes as interest
and, therefore, such income would be subject to the distribution requirements of
the Code.

Some of the debt securities may be purchased by the Fund at a discount which
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount generally will be treated as ordinary income to the extent it does not
exceed the accrued market discount on such debt security. If the amount of
market discount is more than a de minimis amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which such Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to the portion of the market discount on
the debt security that has accrued but has not previously been included in
income. In general the amount of market discount that must be included for each
period is equal to the lesser of: (i) the amount of market discount accruing
during such period (plus any accrued market discount for prior periods not
previously taken into account); or (ii) the amount of the principal payment with
respect to such period. Generally, market discount accrues on a daily basis for
each day the debt security is held by the Fund at a constant rate over the time
remaining to the debt security's maturity or, at the election of the Fund, at a
constant yield to maturity which takes into account the semi-annual compounding
of interest.

Foreign Currency Transactions

Under the Code, gains or losses attributable to fluctuations in foreign currency
exchange rates which occur between the time the Fund accrues income or other
receivable or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivable or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain financial contracts and options, gains or losses

                                       82




attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "Section 988" gains and losses, may increase or decrease the amount of a
Fund's net investment income to be distributed to its shareholders as ordinary
income.

Passive Foreign Investment Companies

An Underlying Fund may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which an Underlying Fund held the PFIC stock. An Underlying Fund
itself will be subject to tax on the portion, if any, of the excess distribution
that is allocated to the Underlying Fund's holding period in prior taxable years
(and an interest factor will be added to the tax, as if the tax had actually
been payable in such prior taxable years) even though the Underlying Fund
distributes the corresponding income to shareholders. Gain from the sale of PFIC
stock as well as certain distributions from a PFIC are treated as excess
distributions. All excess distributions are taxable as ordinary income.

An Underlying Fund may be able to elect alternative tax treatment with respect
to PFIC stock. Under an election that currently may be available, an Underlying
Fund generally would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether any distributions
are received from the PFIC. If this election is made, the special rules,
discussed above, relating to the taxation of excess distributions, would not
apply. Alternatively, another election may be available that involves marking to
market the Underlying Fund's PFIC stock at the end of each taxable year with the
result that unrealized gains are treated as though they were realized and are
reported as ordinary income; any mark-to-market losses, as well as loss from an
actual disposition of PFIC stock, are reported as ordinary loss to the extent of
any net mark-to-market gains included in income in prior years.

Because the application of the PFIC rules may affect, among other things, the
character of gains, the amount of gain or loss and the timing of the recognition
of income with respect to PFIC stock, as well as subject an Underlying Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC stock. Note that distributions
from a PFIC are not eligible for the reduced rate of tax on "qualifying
dividends." In addition, each Underlying Fund will be subject to federal income
tax on a portion of any "excess distribution" received on any gain on a
disposition of the shares of an Underlying Fund, plus interest thereon, even if
the Underlying Fund distributes the PFIC income to shareholders.

Foreign Withholding Taxes

Income received by the Fund from sources within foreign countries may be subject
to withholding and other income or similar taxes imposed by such countries. If
more than 50% of the value of the Fund's total assets at the close of its
taxable year consists of securities of foreign corporations, the Fund will be
eligible and may elect to "pass through" to the Fund's shareholders the amount
of foreign income and similar taxes paid by the Fund. Pursuant to this election,
a shareholder will be required to include in gross income (in addition to
taxable dividends actually received) his/her pro rata share of the foreign taxes
paid by the Fund, and will be entitled either to deduct (as an itemized
deduction) his/her pro rata share of foreign income and similar taxes in
computing his/her taxable income or to use it as a foreign tax credit against
his/her U.S. federal income tax liability, subject to limitations. No deduction
for foreign taxes may be claimed by a shareholder who does not itemize
deductions, but such a shareholder may be eligible to claim the foreign tax
credit (see below). Each shareholder will be notified within sixty (60) days
after the close of the Fund's taxable year whether the foreign taxes paid by the
Fund will "pass through" for that year. Furthermore, the amount of the foreign
tax credit that is available may be limited to the extent that dividends from a
foreign corporation qualify for the

                                       83




lower tax rate on "qualifying dividends."

Generally, a credit for foreign taxes is subject to the limitations that it may
not exceed the shareholder's U.S. tax attributable to his foreign source taxable
income. For this purpose, if the pass-through election is made, the source of
the Fund's income flows through to its shareholders. With respect to the Fund,
gains from the sale of securities will be treated as derived from U.S. sources
and certain currency fluctuation gains, including fluctuation gains from foreign
currency denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by the Fund. Shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by the Fund.
The foreign tax credit limitation rules do not apply to certain electing
individual taxpayers who have limited creditable foreign taxes and no foreign
source income other than passive investment-type income. The foreign tax credit
is eliminated with respect to foreign taxes withheld on dividends if the
dividend-paying shares or the shares of the Fund are held by the Fund or the
shareholders, as the case may be, for less than sixteen (16) days (forty-six
(46) days in the case of preferred shares) during the thirty-one (31) day period
(ninety-one (91) day period for preferred shares) beginning fifteen (15) days
(forty-five (45) days for preferred shares) before the shares become
ex-dividend. If the Fund is not eligible to make the election to "pass-through"
to its shareholders its foreign taxes, the foreign income taxes it pays
generally will reduce investment company taxable income and the distributions by
the Fund will be treated as U.S. source income.

The taxation of equity options (including options on narrow-based stock indices)
and over-the-counter options on debt securities is governed by Code Section
1234. Pursuant to Code Section 1234, with respect to a put or call option that
is purchased by the Fund, if the option is sold, any resulting gain or loss will
be a capital gain or loss, and will be short-term or long term, depending upon
the holding period of the option. If the option expires, the resulting loss is a
capital loss and is short-term or long-term, depending upon the holding period
of the option. If the option is exercised, the cost of the option, in the case
of a call option, is added to the basis of the purchased security and, in the
case of a put option, reduces the amount realized on the underlying security in
determining gain or loss.

Certain options and financial contracts in which the Fund and the Underlying
Funds may invest are "Section 1256 contracts." Gains or losses on Section 1256
contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"); however, foreign currency gains or losses (as
discussed below) arising from certain Section 1256 contracts may be treated as
ordinary income or loss. Also, Section 1256 contracts held by a Fund at the end
of each taxable year (and on certain other dates as prescribed under the Code)
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized.

Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of the straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to a Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by a Fund which is taxed as ordinary income when
distributed to shareholders.

A Fund may make one or more of the elections available under the Code which are
applicable to straddles. If a Fund makes any of the elections, the amount,
character, and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.

                                       84




Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to shareholders as ordinary income or
long-term capital gain may be increased or decreased as compared to a fund that
did not engage in such hedging transactions.

Notwithstanding any of the foregoing, a Fund may recognize gain (but not loss)
from a constructive sale of certain "appreciated financial positions" if the
Fund enters into a short sale, notional principal contract, futures or forward
contract transaction with respect to the appreciated position or substantially
identical property. Appreciated financial positions subject to this constructive
sale treatment are interests (including options, futures and forward contracts
and short sales) in stock, partnership interests, certain actively traded trust
instruments and certain debt instruments. Constructive sale treatment does not
apply to certain transactions if such transaction is closed before the end of
the 30th day after the close of the Fund's taxable year and the Fund holds the
appreciated financial position throughout the sixty (60) day period beginning on
the day such transaction was closed, if certain conditions were met.

Under recently enacted tax law, certain hedging activities may cause a dividend
that would otherwise be subject to the lower tax rate applicable to "qualifying
dividend," to instead be taxed at the tax rate of tax applicable to ordinary
income.

Requirements relating to each Fund's tax status as a RIC may limit the extent to
which a Fund will be able to engage in transactions in options and foreign
currency forward contracts.

Short Sales and Short Sales Against the Box

If an Underlying Fund sells securities short "against the box," unless certain
constructive sale rules (discussed above) apply, it may realize a capital gain
or loss upon the closing of the sale. Such gain or loss generally will be long-
or short-term depending upon the length of time the Underlying Fund held the
security which it sold short. In some circumstances, short sales may have the
effect of reducing an otherwise applicable holding period of a security in the
portfolio. The constructive sale rule, however, alters this treatment by
treating certain short sales against the box and other transactions as a
constructive sale of the underlying security held by the Underlying Fund,
thereby requiring current recognition of gain, as described more fully under
"Options and Hedging Transactions" above. Similarly, if an Underlying Fund
enters into a short sale of property that becomes substantially worthless, the
Underlying Fund will recognize gain at that time as though it had closed the
short sale. Future Treasury regulations may apply similar treatment to other
transactions with respect to property that becomes substantially worthless.

Other Investment Companies

It is possible that by investing in other investment companies, the Fund may not
be able to meet the calendar year distribution requirement and may be subject to
federal income and excise tax. The diversification and distribution requirements
applicable to the Fund may limit the extent to which each Fund will be able to
invest in other investment companies. When the Fund invests in other investment
companies, shareholders of the Fund bear their proportionate share of the
underlying investment companies' fees and expenses.

Sale or Other Disposition of Shares

Upon the sale or exchange of Fund shares, a shareholder will realize a taxable
gain or loss depending upon such shareholder's basis in the shares. Such gain or
loss will be treated as capital gain or loss if the shares are capital assets in
the shareholder's hand, which generally may be eligible for reduced federal tax
rates, depending on the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent that the shares
disposed of are replaced (including replacement through the reinvesting of
dividends and capital gain distributions in the Fund) within a period of
sixty-one (61) days beginning thirty (30) days before and ending thirty (30)
days after the disposition of the shares. In such a case, the basis of the

                                       85




shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on the sale of the Fund's shares held by the
shareholder for six (6) months or less will be treated for federal income tax
purposes as a long-term capital loss to the extent of any distributions of
capital gain dividends received by the shareholder with respect to such shares.
As noted above, the maximum tax rate for individual taxpayers is 15% on
long-term capital gains.

In some cases, shareholders will not be permitted to take sales charges into
account for purposes of determining the amount of gain or loss realized on the
disposition of their shares. This prohibition generally applies where (1) the
shareholder incurs a sales charge in acquiring the stock of a RIC, (2) the stock
is disposed of before the 91st day after the date on which it was acquired, and
(3) the shareholder subsequently acquires shares of the same or another RIC and
the otherwise applicable sales charge is reduced or eliminated under a
"reinvestment right" received upon the initial purchase of shares of stock. In
that case, the gain or loss recognized will be determined by excluding from the
tax basis of the shares exchanged all or a portion of the sales charge incurred
in acquiring those shares. This exclusion applies to the extent that the
otherwise applicable sales charge with respect to the newly acquired shares is
reduced as a result of having incurred a sales charge initially. Sales charges
affected by this rule are treated as if they were incurred with respect to the
stock acquired under the reinvestment right. This provision may be applied to
successive acquisitions of stock.

Backup Withholding

The Fund generally will be required to withhold federal income tax at a rate
equal to the fourth lowest tax rate applicable to unmarried individuals
(currently 28%) ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to shareholders if (1) the shareholder
fails to furnish the Fund with the shareholder's correct taxpayer identification
number or social security number and to make such certifications as the Fund may
require, (2) the IRS notifies the shareholder or the Fund that the shareholder
has failed to report properly certain interest and dividend income to the IRS
and to respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. Any amounts withheld may be credited against the shareholder's
federal income tax liability.

Foreign Shareholders

Taxation of a shareholder who, as to the United States, is a nonresident alien
individual, foreign trust or estate, foreign corporation, or foreign partnership
("foreign shareholder"), depends on whether the income from the Fund is
"effectively connected" with a U.S. trade or business carried on by such
shareholder. If the income from the Fund is not effectively connected with a
U.S. trade or business carried on by a foreign shareholder, ordinary income
dividends (including distributions of any net short-term capital gains) will
generally be subject to U.S. withholding tax at the rate of 30% (or lower treaty
rate) upon the gross amount of the dividend. Note that the 15% rate of tax
applicable to certain dividends (discussed above) does not apply to dividends
paid to foreign shareholders. Such a foreign shareholder would generally be
exempt from U.S. federal income tax on gains realized on the sale of shares of
the Fund, and distributions of net long-term capital gains that are designated
as capital gain dividends. If the income from the Fund is effectively connected
with a U.S. trade or business carried on by a foreign shareholder, then ordinary
income dividends, capital gain dividends and any gains realized upon the sale of
shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.

The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund, including the
applicability of foreign taxes.

Other Taxes

Distributions also may be subject to state, local and foreign taxes. U.S. tax
rules applicable to foreign

                                       86




investors may differ significantly from those outlined above. This discussion
does not purport to deal with all of the tax consequences applicable to
individual shareholders. Shareholders are advised to consult their own tax
advisers for details with respect to the particular tax consequences to them of
an investment in a Fund.

                                   DISTRIBUTOR

Shares of the Fund are distributed by the Distributor pursuant to an
underwriting agreement between the Company on behalf of the Funds and the
Distributor ("Underwriting Agreement"). The Underwriting Agreement requires the
Distributor to use its best efforts on a continuing basis to solicit purchases
of shares of the Fund. The Company and the Distributor have agreed to indemnify
each other against certain liabilities. At the direction of the Distributor, all
sales charges may at times be reallowed to an authorized dealer ("Authorized
Dealer"). If 90% or more of the sales commission is reallowed, such Authorized
dealer may be deemed to be an "underwriter" as that term is defined under the
1933 Act. After an initial term, the Underwriting Agreement will remain in
effect for two years from its inception date and from year to year thereafter
only if its continuance is approved annually by a majority of the Board who are
not parties to such agreement or "interested persons" of any such party and must
be approved either by votes of a majority of the Directors or a majority of the
outstanding voting securities of the Fund. See the Prospectuses for information
on how to purchase and sell shares of the Fund, and the charges and expenses
associated with an investment. The sales charge retained by the Distributor is
not an expense of the Fund and has no effect on the NAV of the Fund. The
Distributor's address is 7337 East Doubletree Ranch Road, Scottsdale, Arizona
85258. The Distributor is a Delaware corporation and is an affiliate of ING
Investments and an indirect wholly-owned subsidiary of ING Groep.

The Distributor may, at its discretion, pay additional cash compensation to its
employee sales staff for sales by certain broker-dealers or "focus firms." The
Distributor may pay up to an additional 0.10% to its employee sales staff for
sales that are made by registered representatives of these focus firms. As of
the date of this SAI, the focus firms are: A.G. Edwards & Sons, Inc.; Advantage
Capital Corporation; AIG Financial Advisors, Inc.; American General Securities,
Inc.; Banc of America Investment Services, Inc.; Banc of America Securities LLC;
Banc One Securities Corporation; Chase Investment Services; Citigroup Global
Markets, Inc; Citistreet Equities LLC; Financial Network Investment Corporation;
FSC Securities Corporation; H & R Block Financial Advisors LLC; ING Financial
Partners, Inc.; JP Morgan Investment, LLC; JP Morgan Securities, Inc.; Linsco
Private Ledger Financial Services; Merrill Lynch, Morgan Stanley & Co. Inc.;
Morgan Stanley Dean Witter; Multi-Financial Securities Corporation; PrimeVest
Financial Services, Inc.; Prudential Investment Management Services, LLC;
Prudential Retirement Brokerage Services, Inc.; Prudential Securities; Raymond
James & Associates, Inc.; Raymond James Financial Services, Inc.; RBC Dain
Rauscher, Inc.; Royal Alliance Associates, Inc.; UBS Financial Services, Inc.;
Wachovia Bank; Wachovia Brokerage Services, Inc.; Wachovia Securities Financial
Network, Inc.; Wachovia Securities LLC; Wells Fargo Bank; Wells Fargo Bank N.A.;
and Wells Fargo Investments LLC.

The Fund had not commenced operations as of the date of this SAI. As a result,
the Distributor has no recovered any sales charges in connection with the sales
of shares for the fiscal year ended October 31, 2007.

The Fund had not commenced operations as of the date of this SAI. Therefore, no
commissions and other compensation were received by any principal underwriter
for the fiscal year ended October 31, 2007.

Other Payments to Securities Dealers

Typically, the portion of the front-end sales charge on Class A shares shown in
the following tables is paid to your securities dealer. Your securities dealer
may, however, receive up to the entire amount of the front-end sales charge.
Securities dealers that sell Class A shares (other than Index Plus Funds) may be
entitled to receive the following commissions:

                                       87



                                        Amount of sales charge typically are
                                       allowed to dealers as a percentage of
     When you invest this amount:                 offering price:

Under $50,000                                          5.00%
$50,000 or more but under $100,000                     3.75%
$100,000 or more but under $250,000                    2.75%
$250,000 or more but under $500,000                    2.00%
$500,000 or more but under $1,000,000                  1.75%

Securities dealers that sell Class A shares (other than shares of the Index Plus
Funds) in amounts of $1 million or more may be entitled to receive the following
commissions:

                                          Commission
. on sales of $1 million to $2,499,999       1.00%
. on sales of $2.5 million to $4,999,999     0.50%
. on sales of $5 million or greater          0.25%

For sales of Class B shares, your securities dealer is paid an up-front
commission equal to four percent (4%) of the amount sold. Beginning in the
thirteenth month after the sale is made, the Distributor uses the 0.25%
servicing fee to compensate securities dealers for providing personal services
to accounts that hold Class B shares, on a monthly basis.

The Distributor or its affiliates may make payments in addition to those
described above to securities dealers that enter into agreements providing the
Distributor with preferential access to registered representatives of the
securities dealer. These payments may be in an amount up to 0.13% of the total
Fund assets held in omnibus accounts or in customer accounts that designate such
firm(s) as the selling broker-dealer(s).

In addition, ING Investments may make payments of up to 0.05% of the Fund's
average daily net assets to national broker-dealers who, as a result of an
acquisition of a member of the Company's selling group, agree to allow Fund
shares to be made available to their clients in a proprietary wrap account
program, provided such accounts are networked accounts.

The Distributor or its affiliates may, from time to time, also make payments to
clearing firms that offer networking services, which make the Fund available to
their customers. Such payments to clearing firms will not exceed 0.10% of the
total Fund assets held in omnibus accounts or in customer accounts that
designate such firm(s) as the selling broker-dealer.

The Distributor has agreed to reimburse Financial Network Investment
Corporation, an affiliate of the Distributor, for trading costs incurred in
connection with trades through the Pershing brokerage clearing system.

The Distributor may make, or cause to be made, payments to affiliated and
unaffiliated securities dealers that engage in wholesaling efforts on behalf of
the Company and the Fund. These payments will not exceed 0.33% of the value of
Fund shares sold as a result of such wholesaling efforts. The Distributor may
also pay such firms a quarterly fee based on a percentage of assets retained as
of the end of a calendar quarter, not to exceed 0.125% of the value of such
assets.

The value of a shareholder's investment will be unaffected by these payments.

The Fund had not commenced operations as of the date of this SAI. As a result,
the Distributor did not receive any sales charges in connection with the sale of
shares as of October 31, 2007.

                         CALCULATION OF PERFORMANCE DATA

Average Annual Total Return Quotation

                                       88




The Fund may, from time to time, include "total return" in advertisements or
reports to shareholders or prospective investors. Quotations of average annual
total return will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in the Fund over periods of one (1), five
(5) and ten (10) years (up to the life of the Fund), calculated pursuant to the
following formula which is prescribed by the SEC:

                               P (1 + T)/n/ = ERV

Where: P   = a hypothetical initial payment of $1,000,
       T   = the average annual total return,
       n   = the number of years, and
      ERV  = the ending redeemable value of a hypothetical $1,000
             payment made at the beginning of the period.

All total return figures assume that all dividends are reinvested when paid.

From time to time, the Fund may advertise its average annual total return over
various periods of time. These total return figures show the average percentage
change in value of an investment in a Fund from the beginning date of the
measuring period. These figures reflect changes in the price of a Fund's shares
and assume that any income dividends and/or capital gains distributions made by
the Fund during the period were reinvested in shares of the Fund. Figures will
be given for one-, five- and ten- year periods (if applicable) and may be given
for other periods as well (such as from commencement of the Fund's operations,
or on a year-by-year basis).

Average Annual Total Return (After Taxes On Distributions) Quotation

The Fund may, from time to time, include "total return after taxes on
distributions" in advertisements or reports to shareholders or prospective
investors. Quotations of average annual total return after taxes on
distributions will be expressed in terms of the average annual compounded rate
of return of a hypothetical investment in a Fund over periods of one (1), five
(5) and ten (10) years (up to the life of the Fund), calculated pursuant to the
following formula which is prescribed by the SEC:

                              P (1 + T) /n/ = ATV//D//

Where: P    = a hypothetical initial payment of $1,000,
       T    = the average annual total return (after taxes on distributions),
       n    = the number of years, and
  ATV//D//  = ending value of a hypothetical $1,000 payment made at the
              beginning of the one-, five-, or ten-year periods (or
              fractional  portion),  after taxes on Fund distributions but
              not after taxes on redemptions.

All total return figures assume that all dividends are reinvested when paid.
Taxes are calculated using the highest individual marginal federal income tax
rates in effect on the reinvestment date. The rates used correspond to the
character of each component of the distributions (e.g., ordinary income rate for
ordinary income distributions, short-term capital gain rate for short-term
capital gain distributions, and long-term capital gain rate for long-term
capital gain distributions). The calculations do not consider any potential tax
liabilities other than federal tax liability.

From time to time, the Fund may advertise its average annual total return over
various periods of time. These total return figures show the average percentage
change in value of an investment in the Fund from the beginning date of the
measuring period. These figures reflect changes in the price of a Fund's shares
and assume that any income dividends and/or capital gains distributions made by
the Fund during the period were reinvested in shares of the Fund. Figures will
be given for one-, five- and ten- year periods (if applicable) and may be given
for other

                                       89




periods as well (such as from commencement of the Fund's operations,
or on a year-by-year basis).

Average Annual Total Return (After Taxes on Distributions and Redemption)
Quotation

The Fund may, from time to time, include "total return after taxes on
distributions and redemption" in advertisements or reports to shareholders or
prospective investors. Quotations of average annual total return after taxes on
distributions and redemption will be expressed in terms of the average annual
compounded rate of return of a hypothetical investment in the Fund over periods
of one (1), five (5) and ten (10) years (up to the life of the Fund), calculated
pursuant to the following formula which is prescribed by the SEC:

                               P (1 + T) /n/ = ATV//DR//

Where: P     = a hypothetical initial payment of $1,000,
       T     = the average annual total return (after taxes on distributions),
       n     = the number of years, and
   ATV//DR// = ending value of a hypothetical $1,000 payment made at the
               beginning of the one-, five-, or ten-year periods (or fractional
               portion), after taxes on Fund distributions and redemption.

All total return figures assume that all dividends are reinvested when paid.
Taxes are calculated using the highest individual marginal federal income tax
rates in effect on the reinvestment date. The rates used correspond to the
character of each component of the distributions (e.g., ordinary income rate for
ordinary income distributions, short-term capital gain rate for short-term
capital gain distributions, and long-term capital gain rate for long-term
capital gain distributions). The ending value is determined by subtracting
capital gain taxes resulting from the redemption and adding the tax benefit from
capital losses resulting from the redemption. The calculations do not consider
any potential tax liabilities other than federal tax liability.

From time to time, the Fund may advertise its average annual total return over
various periods of time. These total return figures show the average percentage
change in value of an investment in the Fund from the beginning date of the
measuring period. These figures reflect changes in the price of the Fund's
shares and assume that any income dividends and/or capital gains distributions
made by the Fund during the period were reinvested in shares of the Fund.
Figures will be given for one-, five- and ten- year periods (if applicable) and
may be given for other periods as well (such as from commencement of the Fund's
operations, or on a year-by-year basis).

Dividend Yield

The Fund may also publish a distribution rate in sales literature and in
investor communications preceded or accompanied by a copy of the current
Prospectus. The current distribution rate for the Fund is the annualization of
the Fund's distribution per share divided by the maximum offering price per
share of the Fund at the respective month-end. The current distribution rate may
differ from current yield because the distribution rate may contain items of
capital gain and other items of income, while yield reflects only earned net
investment income. In each case, the yield, distribution rates and total return
figures will reflect all recurring charges against Fund income and will assume
the payment of the maximum sales load, including any applicable contingent
deferred sales charge.

Additional Performance Quotations

Advertisements of total return will always show a calculation that includes the
effect of the maximum sales charge but may also show total return without giving
effect to that charge. Because these additional quotations will not reflect the
maximum sales charge payable, these performance quotations will be higher than
the performance quotations that reflect the maximum sales charge.

Total returns and yields are based on past results and are not necessarily a
prediction of future performance.

                                       90




                             PERFORMANCE COMPARISONS

In reports or other communications to shareholders or in advertising material,
the Fund may compare the performance of its Class A, Class B, Class C, Class I
and Class W Shares with that of other mutual funds as listed in the rankings
prepared by Lipper Analytical Services, Inc., Morningstar, Inc., CDA
Technologies, Inc., Value Line, Inc. or similar independent services that
monitor the performance of mutual funds or with other appropriate indices of
investment securities. In addition, certain indices may be used to illustrate
historic performance of select asset classes. The performance information may
also include evaluations of the Funds published by nationally recognized ranking
services and by financial publications that are nationally recognized, such as
Business Week, Forbes, Fortune, Institutional Investor, Money and The Wall
Street Journal. If the Fund compares its performance to other funds or to
relevant indices, the Fund's performance will be stated in the same terms in
which such comparative data and indices are stated, which is normally total
return rather than yield. For these purposes the performance of the Fund, as
well as the performance of such investment companies or indices, may not reflect
sales charges, which, if reflected, would reduce performance results.

The Fund had not commenced operations as of the fiscal year ended October 31,
2007. As a result, no average annual total returns are available.

                              FINANCIAL STATEMENTS

The Fund's annual and semi-annual shareholder reports may be obtained, when
available, without charge by contacting ING Funds at 7337 East Doubletree Ranch
Road, Scottsdale, Arizona 85258, (800) 992-0180.

                                       91




                                   APPENDIX A

                                       A-1


ING FUNDS

PROXY VOTING PROCEDURES AND GUIDELINES

Effective Date: July 29, 2003

Revision Date: March 13, 2008

 

I. INTRODUCTION

The following are the Proxy Voting Procedures and Guidelines (the “Procedures and Guidelines”) of the ING Funds set forth on Exhibit 1 attached hereto and each portfolio or series thereof (each a “Fund” and collectively, the “Funds”). The purpose of these Procedures and Guidelines is to set forth the process by which each Fund will vote proxies related to the equity assets in its investment portfolio (the “portfolio securities”). The Procedures and Guidelines have been approved by the Funds’ Boards of Trustees/Directors1 (each a “Board” and collectively, the “Boards”), including a majority of the independent Trustees/Directors2 of the Board. Only the Board may amend these Procedures and Guidelines. The Board shall review these Procedures and Guidelines at its discretion, and make any revisions thereto as deemed appropriate by the Board.

 

II. DELEGATION OF VOTING AUTHORITY

The Board hereby delegates to ING Investments, LLC (the “Adviser”) the authority and responsibility to vote all proxies with respect to all portfolio securities of the Fund, in accordance with the then-current Procedures and Guidelines approved by the Board. The Board may revoke such delegation with respect to any proxy or proposal, and assume the responsibility of voting any Fund proxy or proxies, as it deems appropriate. The President or Chief Financial Officer of a Fund may approve non-material amendments to the Procedures and Guidelines for immediate implementation, subject to ratification at the next regularly scheduled meeting of the Board.

When a Fund participates in the lending of its securities and the securities are on loan at record date, proxies related to such securities will not be forwarded to the Adviser by the Fund’s custodian and therefore will not be voted. However, the Adviser shall use best efforts to recall or restrict specific securities from loan for the purpose of facilitating a “material” vote as described in the Adviser’s proxy voting procedures (the “Adviser Procedures”).

 

1

Reference in these Procedures to one or more Funds shall, as applicable, mean those Funds that are under the jurisdiction of the particular Board at issue. No provision in these Procedures is intended to impose any duty upon the particular Board with respect to any other Fund.

 

2

The independent Trustees/Directors are those Board members who are not “interested persons” of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940.

 

A-1


Funds that are “funds-of-funds” will “echo” vote their interests in underlying mutual funds, which may include ING Funds (or portfolios or series thereof) other than those set forth on Exhibit 1 attached hereto. This means that, if the fund-of-funds must vote on a proposal with respect to an underlying investment company, the fund-of-funds will vote its interest in that underlying fund in the same proportion all other shareholders in the investment company voted their interests.

 

III. APPROVAL AND REVIEW OF PROCEDURES

The Adviser has adopted proxy voting procedures in connection with the voting of portfolio securities for the Funds as attached hereto in Exhibit 3. The Board hereby approves such procedures.

Any material changes to the Adviser Procedures must be approved by the Board prior to voting any Fund proxies in accordance with such amended procedures. The President or Chief Financial Officer of the Adviser may approve non-material amendments to the Procedures and Guidelines for immediate implementation, subject to ratification at the next regularly scheduled meeting of the Board of the Fund.

 

IV. VOTING PROCEDURES AND GUIDELINES

The Guidelines that are set forth in Exhibit 4 hereto specify the manner in which the Funds generally will vote with respect to the proposals discussed therein.

Unless otherwise noted, the defined terms used hereafter shall have the same meaning as defined in the Adviser Procedures.

 

  A. Routine Matters

The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear “For,” “Against,” “Withhold” or “Abstain” on a proposal. However, the Agent shall be directed to refer any proxy proposal to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional (as such term is defined for purposes of the Adviser Procedures) recommends a vote contrary to the Guidelines.

 

  B. Matters Requiring Case-by-Case Consideration

The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted “case-by-case” consideration.

 

A-2


Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.

Except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation, the Proxy Coordinator will forward the Agent’s analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.

The Proxy Coordinator shall use best efforts to convene the Proxy Group with respect to all matters requiring its consideration. In the event quorum requirements cannot be timely met in connection with a voting deadline, it shall be the policy of the Funds to vote in accordance with the Agent’s recommendation, unless the Agent’s recommendation is deemed to be conflicted as provided for under the Adviser Procedures, in which case no action shall be taken on such matter (i.e., a “Non-Vote”).

 

  1. Within-Guidelines Votes: Votes in Accordance with a Fund’s Guidelines and/or, where applicable, Agent Recommendation

In the event the Proxy Group, and where applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in this manner. Except as provided for herein, no Conflicts Report (as such term is defined for purposes of the Adviser Procedures) is required in connection with Within-Guidelines Votes.

 

  2. Non-Votes: Votes in Which No Action is Taken

The Proxy Group may recommend that a Fund refrain from voting under circumstances including, but not limited to, the following: (1) if the economic effect on shareholders’ interests or the value of the portfolio holding is indeterminable or insignificant, e.g., proxies in connection with fractional shares securities no longer held in the portfolio of an ING Fund or proxies being considered on behalf of a Fund that is no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g., certain international proxies, particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security. In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy. The Proxy Group may provide the Proxy Coordinator with standing instructions on parameters that would dictate a Non-Vote without the Proxy Group’s review of a specific proxy. It is noted a Non-Vote determination would generally not be made in connection with voting rights received pursuant to class action participation; while a Fund may no longer hold the security, a continuing economic effect on shareholders’ interests is likely.

 

A-3


Reasonable efforts shall be made to secure and vote all other proxies for the Funds, but, particularly in markets in which shareholders’ rights are limited, Non-Votes may also occur in connection with a Fund’s related inability to timely access ballots or other proxy information in connection with its portfolio securities.

Non-Votes may also result in certain cases in which the Agent’s recommendation has been deemed to be conflicted, as described in Section IV.B. above and Section V. below.

 

  3. Out-of-Guidelines Votes: Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, Where No Recommendation is Provided by Agent, or Where Agent’s Recommendation is Conflicted

If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, if the Agent has made no recommendation on a matter requiring case-by-case consideration and the Procedures and Guidelines are silent, or the Agent’s recommendation on a matter requiring case-by-case consideration is deemed to be conflicted as provided for under the Adviser Procedures, the Proxy Coordinator will then request that all members of the Proxy Group, including any members not in attendance at the meeting at which the relevant proxy is being considered, and each Investment Professional participating in the voting process complete a Conflicts Report (as such term is defined for purposes of the Adviser Procedures), in substantially the form attached hereto as Exhibit 2. As provided for in the Adviser Procedures, the Proxy Coordinator shall be responsible for identifying to Counsel potential conflicts of interest with respect to the Agent.

If Counsel determines that a conflict of interest appears to exist with respect to the Agent, any member of the Proxy Group or the participating Investment Professional(s), the Proxy Coordinator will instruct the Agent to vote the proxy as directed by the Guidelines, or in accordance with the recommendation of the Agent, where applicable. Cases in which any member of the Proxy Group or a participating Investment Professional has failed to complete and return a Conflicts Report shall be treated as if a conflict of interest appears to exist, except that, upon Counsel’s finding that a conflict of interest exists with respect to one or more members of the Proxy Group or the Advisers generally, the remaining members of the Proxy Group shall not be required to complete a Conflicts Report in connection with the proxy.

If Counsel determines that each member of the Proxy Group has completed and returned a Conflicts Report and there does not appear to be a conflict of interest with respect to the Agent, any member of the Proxy Group or the participating Investment Professional(s), the Proxy Coordinator will instruct the Agent to vote the proxy as recommended by the Proxy Group.

 

A-4


V. CONFLICTS OF INTEREST

In any case in which there appears to be a conflict of interest with respect to the Agent’s recommendation on a matter requiring case-by-case consideration, no action shall be taken on such matter (i.e., a “Non-Vote”). In any case in which a member of the Proxy Group has failed to complete and return a Conflicts Report when so required, or in which there appears to be a conflict of interest with respect to any member of the Proxy Group or any Investment Professional participating in the voting process, the Agent will be directed to vote Within Guidelines so that the Adviser shall have no opportunity to vote a Fund’s proxy in a situation in which the Adviser or certain other related parties may be deemed to have a conflict of interest.

 

VI. REPORTING AND RECORD RETENTION

 

  A. Reporting by the Funds

Annually in August, each Fund will post its proxy voting record or a link thereto for the prior one-year period ending on June 30th on the ING Funds website. The proxy voting record for each Fund will also be available in the EDGAR database on the SEC’s website.

 

  B. Reporting to the Boards

At each regularly scheduled meeting, the Board will receive a report from the Adviser’s Proxy Coordinator indicating each proxy proposal, or a summary of such proposals, (1) that was voted Out-of-Guidelines; and (2) for which the Proxy Group initially recommended a vote Out-of-Guidelines, but which was ultimately voted Within Guidelines in accordance with Section V hereof. Such report shall indicate the name of the issuer, the substance of the proposal, and the reasons for voting, or recommending, an Out-of-Guidelines Vote.

 

A-5


EXHIBIT 1

to the

ING Funds

Proxy Voting Procedures

ING VP BALANCED PORTFOLIO, INC.

ING STRATEGIC ALLOCATION PORTFOLIOS, INC.

ING GET FUNDS

ING VP BOND PORTFOLIO

ING VP MONEY MARKET PORTFOLIO

ING VARIABLE FUNDS

ING VARIABLE PORTFOLIOS, INC.

ING SERIES FUND, INC.

 

A-6


EXHIBIT 2

to the

ING Funds

Proxy Voting Procedures

FORM OF CONFLICTS REPORT

 

A-7


FORM OF CONFLICT OF INTEREST REPORT – PROXY GROUP MEMBERS

PROXY VOTING OF THE ING FUNDS

 

Issuer:

  

Meeting Date:

  

1.

  

To your knowledge, do you, or anyone in your immediate household, have a personal relationship of any sort with the Issuer, its officers, directors, or employees, or might you, or anyone in your immediate household, be affected by the outcome of the proxy proposal? This does not include former business relationships with which you have had no communication for at least one year and have no expectation of future or ongoing communication.

Explanation:

           YES   NO

¨      ¨ 

2.

  

To your knowledge, (1) does any ING Entity have a Material Business Relationship with the Issuer or (2) is any ING Entity actively seeking to have a Material Business Relationship with the Issuer?

Explanation:

           YES  NO

¨      ¨ 

3.

  

Have you, or, to your knowledge, anyone else employed by an ING Entity, been contacted by any person or organization, including another ING employee or affiliate, with a recommendation or request that a proxy be voted for (or against) a particular proposal with respect to the Issuer? This includes communications from the Issuer or its Affiliates, from a shareholder, or from a commercial, union or any other special interest group, but would not include routine communications from proxy solicitors.

Explanation:

           YES  NO

¨      ¨ 

4.

  

Are you aware of any other information that might lead a reasonable person to conclude that an ING Entity appears to have a conflict of interest with respect to the proxy proposal?

Explanation:

           YES  NO

¨      ¨ 

Name:

   Date:   

Certification: As a member of the Proxy Group, I understand that I have a fiduciary duty to vote Fund proxies solely in the best interests of the Fund(s) and its (their) shareholders. I certify that my recommendation with respect to the vote on the proxy proposal relating to the Issuer noted above is based solely on this criterion.

Definitions:

Affiliate means (A) any company directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the Issuer; (B) any company 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the issuer; (C) any company directly or indirectly controlling, controlled by, or under common control with, the Issuer; (D) any officer, director, partner, copartner, or employee of the Issuer; (E) if the Issuer is an investment company, any investment adviser thereof or any member of an advisory board thereof; and (F) if the Issuer is an unincorporated investment company not having a board of directors, the depositor thereof.

ING Entity means all direct and indirect subsidiaries, joint ventures and business units of ING Groep N.V., including, but not limited to, ING Investments, LLC, ING Funds Distributor, LLC, ING Investment Management Co., ING Investment Management Americas, Directed Services, LLC and ING Financial Advisers, LLC.

Issuer includes the company with respect to which the proxy is solicited, and any other entity which you know to be affiliated therewith, such as a pension plan, joint venture, merger partner, subsidiary or parent, or company under common control, but does not include entities associated with the Issuer solely through the provision of consulting, advisory or other professional services.

Material Business Relationship means, but, subject to review by Counsel, may not be limited to, a relationship which you know to constitute (1) participation in a joint venture, (2) revenues to ING of $1 million or more per year, or (3) ownership by ING of more than 5% of the outstanding securities of the Issuer (“5% Issuer”) (except that an Issuer’s affiliation with a 5% Issuer shall not constitute a de facto conflict of interest for ING with the first Issuer).

** Please return to ING Funds Proxy Coordinator at 480-477-2786 or proxycoordinator@ingfunds.com **

 

A-8


EXHIBIT 3

to the

ING Funds

Proxy Voting Procedures

ING INVESTMENTS, LLC,

ING INVESTMENT MANAGEMENT CO.

AND

DIRECTED SERVICES, LLC

PROXY VOTING PROCEDURES

 

I. INTRODUCTION

ING Investments, LLC, ING Investment Management Co. and Directed Services, LLC (each an “Adviser” and collectively, the “Advisers”) are the investment advisers for the registered investment companies and each series or portfolio thereof (each a “Fund” and collectively, the “Funds”) comprising the ING family of funds. As such, the Advisers have been delegated the authority to vote proxies with respect to securities for certain Funds over which they have day-to-day portfolio management responsibility.

The Advisers will abide by the proxy voting guidelines adopted by a Fund’s respective Board of Directors or Trustees (each a “Board” and collectively, the “Boards”) with regard to the voting of proxies unless otherwise provided in the proxy voting procedures adopted by a Fund’s Board.

In voting proxies, the Advisers are guided by general fiduciary principles. Each must act prudently, solely in the interest of the beneficial owners of the Funds it manages. The Advisers will not subordinate the interest of beneficial owners to unrelated objectives. Each Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.

The following are the Proxy Voting Procedures of ING Investments, LLC, ING Investment Management Co. and Directed Services, LLC (the “Adviser Procedures”) with respect to the voting of proxies on behalf of their client Funds as approved by the respective Board of each Fund.

Unless otherwise noted, best efforts shall be used to vote proxies in all instances.

 

A-9


II. ROLES AND RESPONSIBILITIES

 

  A. Proxy Coordinator

The Proxy Coordinator identified in Appendix 1 will assist in the coordination of the voting of each Fund’s proxies in accordance with the ING Funds Proxy Voting Procedures and Guidelines (the “Procedures” or “Guidelines” and collectively the “Procedures and Guidelines”). The Proxy Coordinator is authorized to direct the Agent to vote a Fund’s proxy in accordance with the Procedures and Guidelines unless the Proxy Coordinator receives a recommendation from an Investment Professional (as described below) to vote contrary to the Procedures and Guidelines. In such event, and in connection with proxy proposals requiring case-by-case consideration (except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation), the Proxy Coordinator will call a meeting of the Proxy Group (as described below).

Responsibilities assigned herein to the Proxy Coordinator, or activities in support thereof, may be performed by such members of the Proxy Group or employees of the Advisers’ affiliates as are deemed appropriate by the Proxy Group.

Unless specified otherwise, information provided to the Proxy Coordinator in connection with duties of the parties described herein shall be deemed delivered to the Advisers.

 

  B. Agent

An independent proxy voting service (the “Agent”), as approved by the Board of each Fund, shall be engaged to assist in the voting of Fund proxies for publicly traded securities through the provision of vote analysis, implementation, recordkeeping and disclosure services. The Agent is ISS Governance Services, a unit of RiskMetrics Group, Inc. The Agent is responsible for coordinating with the Funds’ custodians to ensure that all proxy materials received by the custodians relating to the portfolio securities are processed in a timely fashion. To the extent applicable, the Agent is required to vote and/or refer all proxies in accordance with these Adviser Procedures. The Agent will retain a record of all proxy votes handled by the Agent. Such record must reflect all the information required to be disclosed in a Fund’s Form N-PX pursuant to Rule 30b1-4 under the Investment Company Act. In addition, the Agent is responsible for maintaining copies of all proxy statements received by issuers and to promptly provide such materials to the Adviser upon request.

The Agent shall be instructed to vote all proxies in accordance with a Fund’s Guidelines, except as otherwise instructed through the Proxy Coordinator by the Adviser’s Proxy Group, or a Fund’s Compliance Committee (“Committee”).

The Agent shall be instructed to obtain all proxies from the Funds’ custodians and to review each proxy proposal against the Guidelines. The Agent also shall be requested to call the Proxy Coordinator’s attention to specific proxy proposals that although governed by the Guidelines appear to involve unusual or controversial issues.

 

A-10


Subject to the oversight of the Advisers, the Agent shall establish and maintain adequate internal controls and policies in connection with the provision of proxy voting services voting to the Advisers, including methods to reasonably ensure that its analysis and recommendations are not influenced by conflict of interest, and shall disclose such controls and policies to the Advisers when and as provided for herein. Unless otherwise specified, references herein to recommendations of the Agent shall refer to those in which no conflict of interest has been identified.

 

  C. Proxy Group

The Adviser shall establish a Proxy Group (the “Group” or “Proxy Group”) which shall assist in the review of the Agent’s recommendations when a proxy voting issue is referred to the Group through the Proxy Coordinator. The members of the Proxy Group, which may include employees of the Advisers’ affiliates, are identified in Appendix 1, as may be amended from time at the Advisers’ discretion.

A minimum of four (4) members of the Proxy Group (or three (3) if one member of the quorum is either the Fund’s Chief Investment Risk Officer or Chief Financial Officer) shall constitute a quorum for purposes of taking action at any meeting of the Group. The vote of a simple majority of the members present and voting shall determine any matter submitted to a vote. Tie votes shall be broken by securing the vote of members not present at the meeting; provided, however, that the Proxy Coordinator shall ensure compliance with all applicable voting and conflict of interest procedures and shall use best efforts to secure votes from all or as many absent members as may reasonably be accomplished. The Proxy Group may meet in person or by telephone. The Proxy Group also may take action via electronic mail in lieu of a meeting, provided that each Group member has received a copy of any relevant electronic mail transmissions circulated by each other participating Group member prior to voting and provided that the Proxy Coordinator follows the directions of a majority of a quorum (as defined above) responding via electronic mail. For all votes taken in person or by telephone or teleconference, the vote shall be taken outside the presence of any person other than the members of the Proxy Group and such other persons whose attendance may be deemed appropriate by the Proxy Group from time to time in furtherance of its duties or the day-to-day administration of the Funds. In its discretion, the Proxy Group may provide the Proxy Coordinator with standing instructions to perform responsibilities assigned herein to the Proxy Group, or activities in support thereof, on its behalf, provided that such instructions do not contravene any requirements of these Adviser Procedures or a Fund’s Procedures and Guidelines.

A meeting of the Proxy Group will be held whenever (1) the Proxy Coordinator receives a recommendation from an Investment Professional to vote a Fund’s proxy contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, (2) the Agent has made no recommendation with respect to a vote on a proposal, or (3) a matter requires case-by-case consideration, including those in which the Agent’s recommendation is deemed to be conflicted as provided for under these Adviser Procedures, provided that, if the Proxy Group has previously provided the Proxy

 

A-11


Coordinator with standing instructions to vote in accordance with the Agent’s recommendation and no issue of conflict must be considered, the Proxy Coordinator may implement the instructions without calling a meeting of the Proxy Group.

For each proposal referred to the Proxy Group, it will review (1) the relevant Procedures and Guidelines, (2) the recommendation of the Agent, if any, (3) the recommendation of the Investment Professional(s), if any, and (4) any other resources that any member of the Proxy Group deems appropriate to aid in a determination of a recommendation.

If the Proxy Group recommends that a Fund vote in accordance with the Procedures and Guidelines, or the recommendation of the Agent, where applicable, it shall instruct the Proxy Coordinator to so advise the Agent.

If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, or if the Agent’s recommendation on a matter requiring case-by-case consideration is deemed to be conflicted, it shall follow the procedures for such voting as established by a Fund’s Board.

The Proxy Coordinator shall use best efforts to convene the Proxy Group with respect to all matters requiring its consideration. In the event quorum requirements cannot be timely met in connection with to a voting deadline, the Proxy Coordinator shall follow the procedures for such voting as established by a Fund’s Board.

 

  D. Investment Professionals

The Funds’ Advisers, sub-advisers and/or portfolio managers (each referred to herein as an “Investment Professional” and collectively, “Investment Professionals”) may submit, or be asked to submit, a recommendation to the Proxy Group regarding the voting of proxies related to the portfolio securities over which they have day-to-day portfolio management responsibility. The Investment Professionals may accompany their recommendation with any other research materials that they deem appropriate or with a request the vote be deemed “material” in the context of the portfolio(s) they manage, such that that lending activity on behalf of such portfolio(s) with respect to the relevant security should be reviewed by the Proxy Group and considered for recall and/or restriction. Input from the relevant sub-advisers and/or portfolio managers shall be given primary consideration in the Proxy Group’s determination of whether a given proxy vote is to be deemed material and the associated security accordingly restricted from lending. The determination that a vote is material in the context of a Fund’s portfolio shall not mean that such vote is considered material across all Funds voting that meeting. In order to recall or restrict shares timely for material voting purposes, the Proxy Group shall use best efforts to consider, and when deemed appropriate, to act upon, such requests timely, and requests to review lending activity in connection with a potentially material vote may be initiated by any relevant Investment Professional and submitted for the Proxy Group’s consideration at any time.

 

A-12


III. VOTING PROCEDURES

 

  A. In all cases, the Adviser shall follow the voting procedures as set forth in the Procedures and Guidelines of the Fund on whose behalf the Adviser is exercising delegated authority to vote.

 

  B. Routine Matters

The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear “For”, “Against,” “Withhold” or “Abstain” on a proposal. However, the Agent shall be directed to refer any proxy proposal to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional recommends a vote contrary to the Guidelines.

 

  C. Matters Requiring Case-by-Case Consideration

The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted “case-by-case” consideration.

Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.

Except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation, the Proxy Coordinator will forward the Agent’s analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.

 

  1. Within-Guidelines Votes: Votes in Accordance with a Fund’s Guidelines and/or, where applicable, Agent Recommendation

In the event the Proxy Group, and where applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in this manner. Except as provided for herein, no Conflicts Report (as such term is defined herein) is required in connection with Within-Guidelines Votes.

 

  2. Non-Votes: Votes in Which No Action is Taken

The Proxy Group may recommend that a Fund refrain from voting under circumstances including, but not limited to, the following: (1) if the economic effect on shareholders’ interests or the value of the portfolio holding is

 

A-13


indeterminable or insignificant, e.g., proxies in connection with fractional shares, securities no longer held in the portfolio of an ING Fund or proxies being considered on behalf of a Fund that is no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g., certain international proxies, particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security. In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy. The Proxy Group may provide the Proxy Coordinator with standing instructions on parameters that would dictate a Non-Vote without the Proxy Group’s review of a specific proxy. It is noted a Non-Vote determination would generally not be made in connection with voting rights received pursuant to class action participation; while a Fund may no longer hold the security, a continuing economic effect on shareholders’ interests is likely.

Reasonable efforts shall be made to secure and vote all other proxies for the Funds, but, particularly in markets in which shareholders’ rights are limited, Non-Votes may also occur in connection with a Fund’s related inability to timely access ballots or other proxy information in connection with its portfolio securities.

Non-Votes may also result in certain cases in which the Agent’s recommendation has been deemed to be conflicted, as provided for in the Funds’ Procedures.

 

  3. Out-of-Guidelines Votes: Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, Where No Recommendation is Provided by Agent, or Where Agent’s Recommendation is Conflicted

If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, if the Agent has made no recommendation on a matter requiring case-by-case consideration and the Procedures and Guidelines are silent, or the Agent’s recommendation on a matter requiring case-by-case consideration is deemed to be conflicted as provided for under these Adviser Procedures, the Proxy Coordinator will then implement the procedures for handling such votes as adopted by the Fund’s Board.

 

  4. The Proxy Coordinator will maintain a record of all proxy questions that have been referred to a Fund’s Compliance Committee, all applicable recommendations, analysis, research and Conflicts Reports.

 

IV. ASSESSMENT OF THE AGENT AND CONFLICTS OF INTEREST

In furtherance of the Advisers’ fiduciary duty to the Funds and their beneficial owners, the Advisers shall establish the following:

 

  A. Assessment of the Agent

 

A-14


The Advisers shall establish that the Agent (1) is independent from the Advisers, (2) has resources that indicate it can competently provide analysis of proxy issues and (3) can make recommendations in an impartial manner and in the best interests of the Funds and their beneficial owners. The Advisers shall utilize, and the Agent shall comply with, such methods for establishing the foregoing as the Advisers may deem reasonably appropriate and shall do not less than annually as well as prior to engaging the services of any new proxy service. The Agent shall also notify the Advisers in writing within fifteen (15) calendar days of any material change to information previously provided to an Adviser in connection with establishing the Agent’s independence, competence or impartiality.

Information provided in connection with assessment of the Agent shall be forwarded to a member of the mutual funds practice group of ING US Legal Services (“Counsel”) for review. Counsel shall review such information and advise the Proxy Coordinator as to whether a material concern exists and if so, determine the most appropriate course of action to eliminate such concern.

 

  B. Conflicts of Interest

The Advisers shall establish and maintain procedures to identify and address conflicts that may arise from time to time concerning the Agent. Upon the Advisers’ request, which shall be not less than annually, and within fifteen (15) calendar days of any material change to such information previously provided to an Adviser, the Agent shall provide the Advisers with such information as the Advisers deem reasonable and appropriate for use in determining material relationships of the Agent that may pose a conflict of interest with respect to the Agent’s proxy analysis or recommendations. The Proxy Coordinator shall forward all such information to Counsel for review. Counsel shall review such information and provide the Proxy Coordinator with a brief statement regarding whether or not a material conflict of interest is present. Matters as to which a material conflict of interest is deemed to be present shall be handled as provided in the Fund’s Procedures and Guidelines.

In connection with their participation in the voting process for portfolio securities, each member of the Proxy Group, and each Investment Professional participating in the voting process, must act solely in the best interests of the beneficial owners of the applicable Fund. The members of the Proxy Group may not subordinate the interests of the Fund’s beneficial owners to unrelated objectives, including taking steps to reasonably insulate the voting process from any conflict of interest that may exist in connection with the Agent’s services or utilization thereof.

For all matters for which the Proxy Group recommends an Out-of-Guidelines Vote, or for which a recommendation contrary to that of the Agent has been received from an Investment Professional and is to be utilized, the Proxy Coordinator will implement the procedures for handling such votes as adopted by the Fund’s Board, including completion of such Conflicts Reports as may be required under the Fund’s Procedures. Completed Conflicts Reports shall be provided to the Proxy Coordinator within two (2) business days. Such Conflicts Report should describe any known conflicts of either a business or personal nature, and set forth any contacts

 

A-15


with respect to the referral item with non-investment personnel in its organization or with outside parties (except for routine communications from proxy solicitors). The Conflicts Report should also include written confirmation that any recommendation from an Investment Professional provided in connection with an Out-of-Guidelines Vote or under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

The Proxy Coordinator shall forward all Conflicts Reports to Counsel for review. Counsel shall review each report and provide the Proxy Coordinator with a brief statement regarding whether or not a material conflict of interest is present. Matters as to which a material conflict of interest is deemed to be present shall be handled as provided in the Fund’s Procedures and Guidelines.

 

V. REPORTING AND RECORD RETENTION

The Adviser shall maintain the records required by Rule 204-2(c)(2), as may be amended from time to time, including the following: (1) A copy of each proxy statement received regarding a Fund’s portfolio securities. Such proxy statements received from issuers are available either in the SEC’s EDGAR database or are kept by the Agent and are available upon request. (2) A record of each vote cast on behalf of a Fund. (3) A copy of any document created by the Adviser that was material to making a decision how to vote a proxy, or that memorializes the basis for that decision. (4) A copy of written requests for Fund proxy voting information and any written response thereto or to any oral request for information on how the Adviser voted proxies on behalf of a Fund. All proxy voting materials and supporting documentation will be retained for a minimum of six (6) years.

 

A-16


APPENDIX 1

to the

Advisers’ Proxy Voting Procedures

Proxy Group for registered investment company clients of ING Investments, LLC, ING Investment Management Co. and Directed Services, LLC:

 

Name

 

Title or Affiliation

Stanley D. Vyner

  Chief Investment Risk Officer and Executive Vice President, ING Investments, LLC

Todd Modic

  Senior Vice President, ING Funds Services, LLC and ING Investments, LLC; and Chief Financial Officer of the ING Funds

Maria Anderson

  Vice President of Fund Compliance, ING Funds Services, LLC

Karla J. Bos

  Proxy Coordinator for the ING Funds and Assistant Vice President – Special Projects, ING Funds Services, LLC

Julius A. Drelick III, CFA

  Vice President, Platform Product Management and Project Management, ING Funds Services, LLC

Harley Eisner

  Vice President of Financial Analysis, ING Funds Services, LLC

Theresa K. Kelety, Esq.

  Counsel, ING Americas US Legal Services

Effective as of January 1, 2008

 

A-17


EXHIBIT 4

to the

ING Funds

Proxy Voting Procedures

 

 

PROXY VOTING GUIDELINES OF THE ING FUNDS

 

 

 

 

I. INTRODUCTION

The following is a statement of the Proxy Voting Guidelines (“Guidelines”) that have been adopted by the respective Boards of Directors or Trustees of each Fund. Unless otherwise provided for herein, any defined term used herein shall have the meaning assigned to it in the Funds’ and Advisers’ Proxy Voting Procedures (the “Procedures”).

Proxies must be voted in the best interest of the Fund(s). The Guidelines summarize the Funds’ positions on various issues of concern to investors, and give a general indication of how Fund portfolio securities will be voted on proposals dealing with particular issues. The Guidelines are not exhaustive and do not include all potential voting issues.

The Adviser, in exercising its delegated authority, will abide by the Guidelines as outlined below with regard to the voting of proxies except as otherwise provided in the Procedures. In voting proxies, the Adviser is guided by general fiduciary principles. It must act prudently, solely in the interest of the beneficial owners of the Funds it manages. The Adviser will not subordinate the interest of beneficial owners to unrelated objectives. The Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.

 

II. GUIDELINES

The following Guidelines are grouped according to the types of proposals generally presented to shareholders of U.S. issuers: Board of Directors, Proxy Contests, Auditors, Proxy Contest Defenses, Tender Offer Defenses, Miscellaneous, Capital Structure, Executive and Director Compensation, State of Incorporation, Mergers and Corporate Restructurings, Mutual Fund Proxies, and Social and Environmental Issues. An additional section addresses proposals most frequently found in global proxies.

General Policies

These Guidelines apply to securities of publicly traded companies and to those of privately held companies if publicly available disclosure permits such application. All matters for which such disclosure is not available shall be considered CASE-BY-CASE.

 

A-18


It shall generally be the policy of the Funds to take no action on a proxy for which no Fund holds a position or otherwise maintains an economic interest in the relevant security at the time the vote is to be cast.

In all cases receiving CASE-BY-CASE consideration, including cases not specifically provided for under these Guidelines, unless otherwise provided for under these Guidelines, it shall generally be the policy of the Funds to vote in accordance with the recommendation provided by the Funds’ Agent, Institutional Shareholder Services, Inc.

Unless otherwise provided for herein, it shall generally be the policy of the Funds to vote in accordance with the Agent’s recommendation in cases in which such recommendation aligns with the recommendation of the relevant issuer’s management or management has made no recommendation. However, this policy shall not apply to CASE-BY-CASE proposals for which a contrary recommendation from the Investment Professional for the relevant Fund has been received and is to be utilized, provided that incorporation of any such recommendation shall be subject to the conflict of interest review process required under the Procedures.

Recommendations from the Investment Professionals, while not required under the Procedures, are likely to be considered with respect to proxies for private equity securities and/or proposals related to merger transactions/corporate restructurings, proxy contests, or unusual or controversial issues. Such input shall be given primary consideration with respect to CASE-BY-CASE proposals being considered on behalf of the relevant Fund.

Except as otherwise provided for herein, it shall generally be the policy of the Funds not to support proposals that would impose a negative impact on existing rights of the Funds to the extent that any positive impact would not be deemed sufficient to outweigh removal or diminution of such rights.

The foregoing policies may be overridden in any case as provided for in the Procedures. Similarly, the Procedures provide that proposals whose Guidelines prescribe a firm voting position may instead be considered on a CASE-BY-CASE basis in cases in which unusual or controversial circumstances so dictate.

Interpretation and application of these Guidelines is not intended to supersede any law, regulation, binding agreement or other legal requirement to which an issuer may be or become subject. No proposal shall be supported whose implementation would contravene such requirements.

 

PROPOSAL

  

Guidelines

THE BOARD OF DIRECTORS

  
Unless otherwise provided for herein, the Agent’s standards with respect to determining director independence shall apply. These standards generally provide that, to be considered completely independent, a director shall have no material connection to the company other than the board seat. Agreement with the Agent’s independence standards shall not dictate that a   

 

A-19


PROPOSAL

  

Guidelines

Fund’s vote shall be cast according to the Agent’s corresponding recommendation. Where applicable and except as otherwise provided for herein, it shall be the policy of the Funds to lodge disagreement with an issuer’s policies or practices by withholding support from a proposal for the relevant policy or practice rather than the director nominee(s) to which the Agent assigns a correlation. Support shall be withheld from culpable nominees as appropriate, but if they are not standing for election (e.g., the board is classified), support shall generally not be withheld from others in their stead. Withholding support from a nominee shall be effected by withholding support from, or voting against, the candidate, pursuant to the applicable election standard.   
Voting on director nominees in uncontested elections not subject to specific policies described herein    Case-by-Case
Voting on independent outside director nominees if application of the policies described herein is likely to result in withholding support from the majority of independent outside directors sitting on a board, or removal of such directors would negatively impact majority board independence, unless the concerns identified are of such grave nature as to merit removal of the independent directors.    Do Not Withhold
Where applicable and except as otherwise provided for herein, support in connection with issues raised by the Agent if the nominee did not serve on the board or relevant committee during the majority of the time period relevant to the concerns cited by the Agent.    Do Not Withhold
Support from a nominee who, during both of the most recent two years, attended less than 75 percent of the board and committee meetings without a valid reason for the absences. Do not withhold support in connection with attendance issues for nominees who have served on the board for less than the two most recent years.    Withhold
Support from a nominee in connection with poison pill or anti-takeover considerations (e.g., furtherance of measures serving to disenfranchise shareholders or failure to remove restrictive pill features or ensure pill expiration or submission to shareholders for vote) in cases for which culpability for implementation or renewal of the pill in such form can be specifically attributed to the nominee    Withhold
Provided that a nominee served on the board during the relevant time period, support from a nominee who has failed to implement a shareholder proposal that was approved by (1) a majority of the issuer’s shares outstanding (most recent annual meeting) or (2) a majority of the votes cast for two consecutive years. However, in the case of shareholder proposals seeking shareholder ratification of a poison pill, generally do not withhold support from a nominee in such cases if the company has already implemented a policy that should reasonably prevent abusive use of the pill.    Withhold

 

A-20


PROPOSAL

  

Guidelines

Voting on a nominee who has not acted upon negative votes (withhold or against, as applicable based on the issuer’s election standard) representing a majority of the votes cast at the previous annual meeting    Case-by-Case

•        Such nominees when (1) the issue relevant to the majority negative vote has been adequately addressed or cured or (2) the Funds’ Guidelines or voting record do not support the relevant issue.

   For
Support from inside directors or affiliated outside directors who sit on the audit committee    Withhold
Support from inside directors or affiliated outside directors who sit on the nominating or compensation committee, provided that such committee meets the applicable independence requirements of the relevant listing exchange.    Do Not Withhold
Support from inside directors or affiliated outside directors if the full board serves as the compensation or nominating committee OR has not created one or both committees, provided that the issuer is in compliance with all provisions of the listing exchange in connection with performance of relevant functions (e.g., performance of relevant functions by a majority of independent directors in lieu of the formation of a separate committee).    Do Not Withhold
Compensation Practices   
It shall generally be the policy of the Funds that matters of compensation are best determined by an independent board and compensation committee. Generally:   

(1)    Where applicable and except as otherwise provided for herein, support for nominees who did not serve on the compensation committee, or board, as applicable based on the Agent’s analysis, during the majority of the time period relevant to the concerns cited by the Agent.

   Do Not Withhold

(2)    In cases in which the Agent has identified a “pay for performance” disconnect or internal pay disparity, as such issues are defined by the Agent, support for director nominees.

   Do Not Withhold

(3)    If the Agent recommends withholding support from nominees in connection with executive compensation or perquisites related to retention or recruitment, including severance or termination arrangements, votes on such nominees if the issuer has provided adequate rationale and/or disclosure.

   For

(4)    If the Agent has raised issues of options backdating, consideration of members of the compensation committee, or board, as applicable, as well as company executives nominated as directors.

   Case-by-Case

(5)    Nominees if the Agent has raised other considerations regarding “poor compensation practices.

   Case-by-Case

 

A-21


PROPOSAL

  

Guidelines

Accounting Practices   

(1)    Independent outside director nominees serving on the audit committee.

   For

(2)    Where applicable and except as otherwise provided for herein, support for nominees serving on the audit committee who did not serve on that committee during the majority of the time period relevant to the concerns cited by the Agent.

   Do Not Withhold

(3)    If the Agent has raised concerns regarding poor accounting practices, consideration of the company’s CEO and CFO, if nominated as directors, and nominees serving on the audit committee.

   Case-by-Case

(4)    If total non-audit fees exceed the total of audit fees, audit-related fees and tax compliance and preparation fees, the provisions under AUDITORS below shall apply.

  
Board Independence   
It shall generally be the policy of the Funds that a board should be majority independent. Inside director or affiliated outside director nominees in cases in which the full board is not majority independent.    Case-by-Case

(1)    Support from the fewest directors whose removal would achieve majority independence across the remaining board, except that support may be withheld from additional nominees whose relative level of independence cannot be differentiated.

   Withhold

(2)    Support from all non-independent nominees, including the founder, chairman or CEO, if the number required to achieve majority independence is equal to or greater than the number of non-independent nominees.

   Withhold

(3)    Except as provided above, support for non-independent nominees in the role of CEO, and when appropriate, founder or chairman. Determine support for other non-independent nominees based on the qualifications and contributions of the nominee as well as the Funds’ voting precedent for assessing relative independence to management, e.g., insiders holding senior executive positions are deemed less independent than affiliated outsiders with a transactional or advisory relationship to the company, and affiliated outsiders with a material transactional or advisory relationship are deemed less independent than those with lesser relationships.

   For

(4)    Non-voting directors (e.g., director emeritus or advisory director) shall be excluded from calculations with respect to majority board independence.

  

 

A-22


PROPOSAL

  

Guidelines

(5)    When conditions contributing to a lack of majority independence remain substantially similar to those in the previous year, it shall generally be the policy of the Funds to vote on nominees in a manner consistent with votes cast by the Fund(s) in the previous year.

  
Nominees without regard to “over-boarding” issues raised by the Agent, unless other concerns requiring case-by-case consideration have been raised    For
Consideration of nominees when the Agent recommends withholding support due to assessment that a nominee acted in bad faith or against shareholder interests in connection with a major transaction, such as a merger or acquisition, factoring in the merits of the nominee’s performance and rationale and disclosure provided    Case-by-Case
Performance Test for Directors   

•        Support on nominees failing the Agent’s performance test, which includes market-based and operating performance measures, provided that input from the Investment Professional(s) for a given Fund shall be given primary consideration with respect to such proposals.

   Case-by-Case
Proposals Regarding Board Composition or Board Service   

•        Except as otherwise provided for herein, shareholder proposals to impose new board structures or policies, including those requiring that the positions of Chairman and CEO be held separately, except support proposals in connection with a binding agreement or other legal requirement to which an issuer has or reasonably may expect to become subject, and consider such proposals on a case-by-case basis if the board is not majority independent or pervasive corporate governance concerns have been identified.

   Against

•        Management proposals to adopt or amend board structures or policies, except consider such proposals on a case-by-case basis if the board is not majority independent, pervasive corporate governance concerns have been identified, or the proposal may result in a material reduction in shareholders’ rights.

   For

•        Shareholder proposals seeking more than a simple majority of independent directors.

   Against

•        Shareholder proposals asking that board compensation and/or nominating committees be composed exclusively of independent directors.

   Against

•        Shareholder proposals to limit the number of public company boards on which a director may serve.

   Against

 

A-23


PROPOSAL

   Guidelines

•        Shareholder proposals that seek to redefine director independence or directors’ specific roles (e.g., responsibilities of the lead director)

   Against

•        Shareholder proposals requesting creation of additional board committees or offices, except as otherwise provided for herein

   Against

•        Shareholder proposals that seek creation of an audit, compensation or nominating committee of the board, unless the committee in question is already in existence or the issuer has availed itself of an applicable exemption of the listing exchange (e.g., performance of relevant functions by a majority of independent directors in lieu of the formation of a separate committee)

   For

•        Shareholder proposals to limit the tenure of outside directors

   Against

•        Shareholder proposals to impose a mandatory retirement age for outside directors unless the proposal seeks to relax existing standards, but generally do not vote against management proposals seeking to establish a retirement age for directors

   Against
Shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a
director or to remain on the board
   Against
Director and Officer Indemnification and Liability Protection    Case-by-Case

•        Limit or eliminate entirely directors’ and officers’ liability for monetary damages for violating the duty of care

   Against

•        Proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness

   Against

•        Proposals providing such expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if:

  

(1)    The director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and

 

(2)    Only if the director’s legal expenses would be covered

   For
PROXY CONTESTS     
Input from the Investment Professional(s) for a given Fund shall be given primary consideration with respect to proposals in connection with proxy contests being considered on behalf of that Fund.   
Voting for director nominees in contested elections    Case-by-Case
Reimburse proxy solicitation expenses    Case-by-Case

 

A-24


PROPOSAL

  

Guidelines

AUDITORS     
Management proposals to ratify auditors, except in cases of poor accounting practices or high non-audit fees. Consider
management proposals to ratify auditors on a case-by-case basis if the Agent cites poor accounting practices.
   For
Non-Audit Services   

•        Approval of auditors when fees for non-audit services exceed 50 percent of total auditor fees as described below. Vote against management proposals to ratify auditors only in cases in which concerns exist that remuneration for the non-audit work is so lucrative as to taint the auditor’s independence. For purposes of this review, fees deemed to be reasonable, generally non-recurring, exceptions to the non-audit fee category (e.g., those related to an IPO) shall be excluded. If concerns exist or an issuer has a history of questionable accounting practices, also vote for shareholder proposals asking the issuer to present its auditor annually for ratification, but in other cases generally vote against.

   Case-by-Case
Auditor Independence   

•        Shareholder proposals asking companies to prohibit their auditors from engaging in non-audit services or capping the level of non-audit services

   Case-by-Case
Audit Firm Rotation   

•        Shareholder proposals asking for mandatory audit firm rotation

   Against
PROXY CONTEST DEFENSES   
Board Structure: Staggered vs. Annual Elections   

•        Proposals to classify or otherwise restrict shareholders’ ability to vote upon directors

   Against

•        Proposals to repeal classified boards and to elect all directors annually

   For
Shareholder Ability to Remove Directors   

•        Proposals that provide that directors may be removed only for cause

   Against

•        Proposals to restore shareholder ability to remove directors with or without cause

   For

•        Proposals that provide that only continuing directors may elect replacement to fill board vacancies

   Against

 

A-25


PROPOSAL

  

Guidelines

•        Proposals that permit shareholders to elect directors to fill board vacancies

   For
Cumulative Voting   

•        Management proposals to eliminate cumulative voting, when the company maintains a classified board of directors, except that such proposals may be supported irrespective of classification in furtherance of an issuer’s plan to adopt a majority voting standard

   Against

•        Shareholder proposals to restore or permit cumulative voting, in cases in which the company maintains a classified board of directors

   For
Time-Phased Voting   

•        Proposals to implement time-phased or other forms of voting that do not promote a one share, one vote standard

   Against

•        Proposals to eliminate such forms of voting

   For
Shareholder Ability to Call Special Meetings   

•        Proposals to restrict or prohibit shareholder ability to call special meetings

   Against

•        Proposals that remove restrictions on the right of shareholders to act independently of management

   For
Shareholder Ability to Act by Written Consent   

•        Proposals to restrict or prohibit shareholder ability to take action by written consent

   Against

•        Proposals to allow or make easier shareholder action by written consent

   For
Shareholder Ability to Alter the Size of the Board   

•        Proposals that seek to fix the size of the board or designate a range for its size

   For

•        Proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval

   Against
TENDER OFFER DEFENSES   
Poison Pills   

•        Proposals that ask a company to submit its poison pill for shareholder ratification, or to redeem its pill in lieu thereof, unless:

   For

(1)    shareholders have approved adoption of the plan,

 

(2)    a policy has already been implemented by the company that should reasonably prevent abusive use of the pill, or

   Against

 

A-26


PROPOSAL

  

Guidelines

(3)    the board had determined that it was in the best interest of shareholders to adopt a pill without delay, provided that such plan would be put to shareholder vote within twelve months of adoption or expire, and if not approved by a majority of the votes cast, would immediately terminate

  

•        Shareholder proposals to redeem a company’s poison pill

   Case-by-Case

•        Management proposals to approve or ratify a poison pill or any plan that can reasonably be construed as an anti-takeover measure, with voting decisions generally based on the Agent’s approach to evaluating such proposals, considering factors such as rationale, trigger level and sunset provisions. Votes will generally be cast in a manner that seeks to preserve shareholder value and the right to consider a valid offer.

   Case-by-Case

•        Management proposals in connection with poison pills or anti-takeover activities that do not meet the Agent’s standards

   Against
Fair Price Provisions   

•        Proposals to adopt fair price provisions

   Case-by-Case

•        Fair price provisions with shareholder vote requirements greater than a majority of disinterested shares

   Against
Greenmail   

•        Proposals to adopt antigreenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments

   For

•        Antigreenmail proposals when they are bundled with other charter or bylaw amendments

   Case-by-Case
Pale Greenmail    Case-by-Case
Unequal Voting Rights   

•        Dual-class exchange offers

   Against

•        Dual-class recapitalizations

   Against
Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws   

•        Management proposals to require a supermajority shareholder to approve charter and bylaw amendments or other key proposals

   Against

•        Shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw amendments, unless the proposal also asks the issuer to mount a solicitation campaign or similar form of comprehensive commitment to obtain passage of the proposal

   For

 

A-27


PROPOSAL

  

Guidelines

Supermajority Shareholder Vote Requirement to Approve Mergers     

•        Management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations

   Against

•        Shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations

   For
White Squire Replacements    For
MISCELLANEOUS     
Amendments to Corporate Documents   

•        Except to align with legislative or regulatory changes or when support is recommended by the Agent or Investment Professional (including, for example, as a condition to a major transaction such as a merger), proposals seeking to remove shareholder approval requirements or otherwise remove or diminish shareholder rights, e.g., by:

 

(1)    adding restrictive provisions,

 

(2)    removing article provisions or moving them to portions of the charter not requiring shareholder approval or

 

(3)    in corporate structures such as holding companies, removing provisions in an active subsidiary’s charter that provide voting rights to parent company shareholders. This policy would also generally apply to proposals seeking approval of corporate agreements or amendments to such agreements that the Agent recommends against because a similar reduction in shareholder rights is requested.

   Against

•        Proposals for charter amendments that may support board entrenchment or may be used as an anti-takeover device, particularly if the proposal is bundled or the board is classified

   Against

•        Proposals seeking charter or bylaw amendments to remove anti-takeover provisions

   For

•        Proposals seeking charter or bylaw amendments not addressed under these Guidelines

   Case-by-Case
Shareholder proposals to adopt confidential voting, use independent tabulators, and use independent inspectors of election    For
Management proposals to adopt confidential voting    For
Proxy Access   

•        Shareholder proposals seeking open access to management’s proxy material in order to nominate their own candidates to the board

   Case-by-Case

 

A-28


PROPOSAL

  

Guidelines

Majority Voting Standard   
Except as otherwise provided for herein, it shall generally be the policy of the Funds to extend discretion to issuers to determine when it may be appropriate to adopt a majority voting standard.   

•        Management proposals, irrespective of whether the proposal contains a plurality carve-out for contested elections, and shareholder proposals also supported by management, seeking election of directors by the affirmative vote of the majority of votes cast in connection with a meeting of shareholders, including amendments to corporate documents or other actions in furtherance of such standard, and provided such standard when supported does not conflict with state law in which the company is incorporated

   For

•        Shareholder proposals not otherwise supported by management seeking adoption of the majority voting standard or related amendments or actions

   Against

•        Proposals seeking adoption of the majority voting standard for issuers with a history of board malfeasance or pervasive corporate governance concerns

   Case-by-Case
Bundled or “Conditioned” Proxy Proposals    Case-by-Case

•        Proposals containing one or more items not supported under these Guidelines if the Agent or an Investment Professional deems the negative impact, on balance, to outweigh any positive impact

   Against
Shareholder Advisory Committees    Case-by-Case
Reimburse Shareholder for Expenses Incurred   

•        Proposals to reimburse expenses incurred in connection with shareholder proposals, with voting decisions determined based on the Agent’s criteria, considering whether the related proposal received the requisite support for approval and was adopted for the benefit of the company and its shareholders

   Case-by-Case
Management proposals for Other Business, in connection with proxies of U.S. issuers, except in connection with a proxy contest in which a Fund is not voting in support of management    For
Proposals to lower quorum requirements for shareholder meetings below a majority of the shares outstanding    Case-by-Case
Advance Notice for Shareholder Proposals   

•        Management proposals related to advance notice period requirements, provided that the period requested is in accordance with applicable law and no material governance concerns have been identified in connection with the issuer

   For

 

A-29


PROPOSAL

  

Guidelines

CAPITAL STRUCTURE     
Common Stock Authorization   

•        Proposals to increase the number of shares of common stock, taking into consideration whether intention exists to significantly dilute shareholders proportionate interest or to be unduly dilutive to shareholders’ proportionate interest. Except where otherwise indicated, the Agent’s proprietary approach, utilizing quantitative criteria (e.g., dilution, peer group comparison, company performance and history) to determine appropriate thresholds and, for requests marginally above such allowable threshold, a qualitative review (e.g., rationale and prudent historical usage), will generally be utilized in evaluating such proposals.

   Case-by-Case

•        Proposals to authorize capital increases within the Agent’s allowable thresholds or those in excess but meeting Agent’s qualitative standards. Consider on a case-by-case basis those requests failing the Agent’s review for proposals in connection with which a contrary recommendation from the Investment Professional(s) has been received and is to be utilized (e.g., in support of a merger or acquisition proposal).

   For

•        Proposals to authorize capital increases within the Agent’s allowable thresholds or those in excess but meeting Agent’s qualitative standards, unless the company states that the stock may be used as a takeover defense. In those cases, consider on a case-by-case basis if a contrary recommendation from the Investment Professional(s) has been received and is to be utilized.

   For

•        Proposals to authorize capital increases exceeding the Agent’s thresholds when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain.

   For

•        Proposals to increase the number of authorized shares of a class of stock if the issuance which the increase is intended to service is not supported under these Guidelines.

   Against
Dual Class Capital Structures   

•        Proposals to increase the number of authorized shares of the class of stock that has superior voting rights in companies that have dual class capital structures, but consider case-by-case if (1) bundled with favorable proposal(s),(2) approval of such proposal(s) is a condition of such favorable proposal(s), or (3) part of a recapitalization for which support is recommended by the Agent or an Investment Professional

   Against

 

A-30


PROPOSAL

  

Guidelines

•        Management proposals to create or perpetuate dual class capital structures with unequal voting rights in cases in which the relevant Fund owns the class with inferior voting rights (except consider case-by-case if bundled with favorable proposal(s) or if approval of such proposal(s) is a condition of such favorable proposal(s)), but generally vote for such proposals if the relevant Fund owns the class with superior voting rights

   Against

•        Shareholder proposals to eliminate dual class capital structures with unequal voting rights in cases in which the relevant Fund owns the class with inferior voting rights, but generally vote against such proposals if the relevant Fund owns the class with superior voting rights, and consider case-by-case if (1) bundled with favorable proposal(s),(2) approval of such proposal(s) is a condition of such favorable proposal(s), or (3) part of a recapitalization for which support is recommended by the Agent or an Investment Professional

   For

•        Management proposals to eliminate dual class capital structures, generally voting with the Agent’s recommendation unless a contrary recommendation has been received from the Investment Professional for the relevant Fund and is to be utilized

   Case-by-Case
Stock Distributions: Splits and Dividends   

•        Management proposals to increase common share authorization for a stock split, provided that the increase in authorized shares falls within the Agent’s allowable thresholds, but consider on a case-by-case basis those proposals exceeding the Agent’s threshold for proposals in connection with which a contrary recommendation from the Investment Professional(s) has been received and is to be utilized

   For
Reverse Stock Splits   

•        Management proposals to implement a reverse stock split when the number of shares authorized for issue is proportionately reduced

   For

•        Proposals to implement a reverse stock split that do not proportionately reduce the number of shares of authorized for issue

   Case-by-Case

•        Requests that do not proportionately reduce the number of shares authorized and effectively exceed the Agent’s allowable threshold for capital increase if the Agent otherwise supports management’s rationale

   For

 

A-31


PROPOSAL

  

Guidelines

Preferred Stock   

•        Proposals authorizing the issuance of preferred stock or creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (“blank check” preferred stock), but vote for if the Agent or an Investment Professional so recommends because the issuance is required to effect a merger or acquisition proposal

   Against

•        Proposals to issue or create blank check preferred stock in cases where the company expressly states that the stock will not be used as a takeover defense. Generally vote against in cases where the company expressly states that, or fails to disclose whether, the stock may be used as a takeover defense, but vote for if the Agent or an Investment Professional so recommends because the issuance is required to effect a merger or acquisition proposal

   For

•        Proposals to issue or authorize preferred stock in cases where the company specified the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable

   For

•        Proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company’s industry performance in terms of shareholder returns

   Case-by-Case
Shareholder proposals to have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in the normal course of business, submitted for shareholder ratification    For
Management Proposals to Reduce the Par Value of Common Stock    For
Shareholder Proposals that Seek Preemptive Rights or Management Proposals that Seek to Eliminate Them    Case-by-Case
Debt Restructuring    Case-by-Case
Share Repurchase Programs   

•        Proposals for open-market share repurchase plans in which all shareholders may participate on equal terms

   For

•        Proposals for programs with terms favoring selected, non-Fund parties

   Against

•        Proposals for share repurchase methods lacking adequate risk mitigation as assessed by the Agent

   Against
Management Proposals to Cancel Repurchased Shares    For

 

A-32


PROPOSAL

  

Guidelines

Tracking Stock    Case-by-Case
EXECUTIVE AND DIRECTOR COMPENSATION     
Votes with respect to compensation and employee benefit plans, except as otherwise provided for herein, with voting
decisions generally based on the Agent’s approach to evaluating such plans, which includes determination of costs and
comparison to an allowable cap.
   Case-by-Case

•        Generally vote in accordance with the Agent’s recommendations for equity-based plans with costs within such cap and against those with costs in excess of it, except that plans above the cap may be supported if so recommended by the Agent or Investment Professional as a condition to a major transaction such as a merger

  

•        Proposals seeking approval of plans for which the Agent suggests cost or dilution assessment may not be possible due to the method of disclosing shares allocated to the plan(s), except that such concerns arising in connection with evergreen provisions shall be considered case-by-case

   Against

•        Proposals for plans with costs within the cap if the primary considerations raised by the Agent pertain to matters that would not result in a negative vote under these Guidelines for the relevant board or committee member(s), or equity compensation burn rate or pay for performance as defined by the Agent

   For

•        Proposals for plans administered by potential grant recipients

   Against

•        Proposals to eliminate existing shareholder approval requirements for plan changes assessed as material by the Agent, unless the company has provided a reasonable rationale and/or adequate disclosure regarding the requested changes

   Against

•        Proposals for plans for which the Agent raises other considerations not otherwise provided for herein

   Case-by-Case
Restricted Stock or Stock Option Plans   

•        Proposals for restricted stock or stock option plans, or the issuance of shares in connection with such plans, considering factors such as level of disclosure and adequacy of vesting or performance requirements. Proposals for plans that do not meet the Agent’s criteria in this regard may be supported, but vote against if no disclosure is provided regarding either vesting or performance requirements.

   Case-by-Case
Management Proposals Seeking Approval to Reprice, Replace or Exchange Options, considering factors such as rationale, historic trading patterns, value-for-value exchange, vesting periods and replacement option terms    Case-by-Case

 

A-33


PROPOSAL

  

Guidelines

•        Proposals that meet the Agent’s criteria for acceptable repricing, replacement or exchange transactions, except that considerations raised by the Agent regarding burn rate or executive participation shall not be grounds for withholding support

   For

•        Management proposals seeking approval of compensation plans that:

 

(1)    permit or may permit (e.g., history of repricing and no express prohibition against future repricing) repricing of stock options, or any form or alternative to repricing, without shareholder approval,

 

(2)    include provisions that permit repricing, replacement or exchange transactions that do not meet the Agent’s criteria (except regarding burn rate or executive participation as noted above), or

 

(3)    give the board sole discretion to approve option repricing, replacement or exchange programs

   Against
Director Compensation, with voting decisions generally based on the Agent’s quantitative approach described above
as well as a review of qualitative features of the plan in cases in which costs exceed the Agent’s threshold. Do not
vote against
plans for which burn rate is the sole consideration raised by the Agent.
   Case-by-Case
Employee Stock Purchase Plans, and capital issuances in support of such plans, with voting decisions generally based
on the Agent’s approach to evaluating such plans, except that negative recommendations by the Agent due to
evergreen provisions will be reviewed case-by-case.
   Case-by-Case
OBRA-Related Compensation Proposals   
Votes on plans intended to qualify for favorable tax treatment under the provisions of Section 162(m) of OBRA should be evaluated irrespective of the Agent’s assessment of board independence, provided that the board meets the independence requirements of the relevant listing exchange.   

•        Amendments that Place a Cap on Annual Grants or Amend Administrative Features

   For

•        Amendments to Add Performance-Based Goals

   For

•        Amendments to Increase Shares and Retain Tax Deductions Under OBRA

   Case-by-Case

•        Approval of Cash or Cash-and-Stock Bonus Plan, with primary consideration given to management’s assessment that such plan meets the requirements for exemption of performance-based compensation

   For

 

A-34


PROPOSAL

  

Guidelines

Shareholder Proposals Regarding Executive and Director Pay

 

•        Regarding the remuneration of individuals other than senior executives and directors, proposals that seek to expand or restrict disclosure or require shareholder approval beyond regulatory requirements and market practice, or proposals seeking disclosure of executive and director compensation if providing it would be out of step with market practice and potentially disruptive to the business

   Against

•        Proposals that seek to impose new compensation structures or policies, such as “claw back” recoupments or advisory votes, unless evidence exists of abuse in historical compensation practices, and except as otherwise provided for herein

   Against
Severance and Termination Payments   

•        Shareholder proposals to have parachute arrangements submitted for shareholder ratification, (with “parachutes” defined as compensation arrangements related to termination that specify change-in-control events), and provided that the proposal does not include unduly restrictive or arbitrary provisions such as advance approval requirements

   For

•        Shareholder proposals to submit executive severance agreements for shareholder ratification, unless such proposals do not specify change-in-control events; Supplemental Executive Retirement Plans; or deferred executive compensation plans; or ratification is required by the listing exchange

   Against

•        All proposals to approve, ratify or cancel executive severance or termination arrangements, including those related to executive recruitment or retention, generally voting FOR such compensation arrangements if the issuer has provided adequate rationale and/or disclosure or support is recommended by the Agent or Investment Professional (e.g., as a condition to a major transaction such as a merger).

   Case-by-Case
Employee Stock Ownership Plans (ESOPs)    For
401(k) Employee Benefit Plans    For
Shareholder proposals requiring mandatory periods for officers and directors to hold company stock    Against
Advisory Votes on Executive Compensation   

•        Management proposals seeking ratification of the company’s compensation program, unless the program includes practices or features not supported under these Guidelines and the proposal receives a negative recommendation from the Agent

   For

 

A-35


PROPOSAL

  

Guidelines

•        Unless otherwise provided for herein, reports not receiving the Agent’s support due to concerns regarding severance/termination payments, incentive structures or vesting or performance criteria not otherwise supported by these Guidelines, generally voting for if the company has provided a reasonable rationale and/or adequate disclosure regarding the matter(s) under consideration

   Case-by-Case
STATE OF INCORPORATION     
Voting on State Takeover Statutes    Case-by-Case
Voting on Reincorporation Proposals, generally supporting management proposals not assessed by the Agent as a
potential takeover defense, but if so assessed, weighing management’s rationale for the change
   Case-by-Case

•        Management reincorporation proposals upon which another key proposal, such as a merger transaction, is contingent if the other key proposal is also supported

   For

•        Shareholder reincorporation proposals not also supported by the company

   Against

MERGERS AND CORPORATE RESTRUCTURINGS

  
Input from the Investment Professional(s) for a given Fund shall be given primary consideration with respect to proposals regarding business combinations, particularly those between otherwise unaffiliated parties, or other corporate restructurings being considered on behalf of that Fund.   
Proposals not typically supported under these Guidelines, if a key proposal, such as a merger transaction, is contingent upon its support and a vote for is accordingly recommended by the Agent or an Investment Professional    For
Mergers and Acquisitions    Case-by-Case
Corporate Restructuring, including demergers, minority squeezeouts, leveraged buyouts, spinoffs, liquidations, dispositions, divestitures and asset sales, with voting decisions generally based on the Agent’s approach to evaluating such proposals    Case-by-Case
Appraisal Rights    For
Changing Corporate Name    For
Adjournment of Meeting   

•        Proposals to adjourn a meeting when the primary proposal is also voted FOR

   For

 

A-36


PROPOSAL

   Guidelines
MUTUAL FUND PROXIES     
Election of Directors    Case-by-Case
Converting Closed-end Fund to Open-end Fund    Case-by-Case
Proxy Contests    Case-by-Case
Investment Advisory Agreements    Case-by-Case
Approving New Classes or Series of Shares    For
Preferred Stock Proposals    Case-by-Case
1940 Act Policies    Case-by-Case
Changing a Fundamental Restriction to Nonfundamental Restriction    Case-by-Case
Change Fundamental Investment Objective to Nonfundamental    Case-by-Case
Name Rule Proposals    Case-by-Case
Disposition of Assets/Termination/Liquidation    Case-by-Case
Changes to the Charter Document    Case-by-Case
Changing the Domicile of a Fund    Case-by-Case
Change in Fund’s Subclassification    Case-by-Case
Authorizing the Board to Hire and Terminate Subadvisors Without Shareholder Approval    For
Distribution Agreements    Case-by-Case
Master-Feeder Structure    For
Mergers    Case-by-Case
Shareholder Proposals to Establish Director Ownership Requirement    Against
Reimburse Shareholder for Expenses Incurred    Case-by-Case
Terminate the Investment Advisor    Case-by-Case
SOCIAL AND ENVIRONMENTAL ISSUES     
Unless otherwise specified herein. While a wide variety of factors may go into each analysis, the overall principle guiding all vote recommendations focuses on how or whether the proposal will enhance the economic value of the company. Because a company’s board is likely to have access to relevant, non-public information regarding a company’s business, such proposals will generally be voted in a manner intended to give the board (rather than shareholders) latitude to set corporate policy and oversee management.    Case-by-Case

 

A-37


PROPOSAL

  

Guidelines

 

Shareholder proposals seeking to dictate corporate conduct, apply existing law, duplicate policies already substantially in place and/or addressed by the issuer or release information that would not help a shareholder evaluate an investment in the corporation as an economic matter, absent concurring support from the issuer, compelling evidence of abuse, significant public controversy or litigation, the issuer’s significant history of relevant violations; or activities not in step with market practice or regulatory requirements, or unless provided for otherwise herein.

 

•        Such proposals would generally include those seeking preparation of reports and/or implementation or additional disclosure of corporate policies related to issues such as:

 

•        consumer and public safety

 

•        environment and energy

 

•        labor standards and human rights

 

•        military business and political concerns

 

•        workplace diversity and non-discrimination

 

•        sustainability

 

•        social issues

 

•        vendor activities

 

•        economic risk, or

 

•        matters of science and engineering

   Against

 

A-38


PROPOSAL

   Guidelines

 

GLOBAL PROXIES

    

 

The foregoing Guidelines provided in connection with proxies of U.S. issuers shall also be applied to global proxies where applicable and not provided for otherwise herein. The following provide for differing regulatory and legal requirements, market practices and political and economic systems existing in various global markets.

 

  

Proposals in cases in which the Agent recommends voting against such proposal because relevant disclosure by the issuer, or the time provided for consideration of such disclosure, is inadequate, unless otherwise provided for herein. For purposes of these global Guidelines, “against” shall mean withholding of support for a proposal, resulting in submission of a vote of against or abstain, as appropriate for the given market and level of concern raised by the Agent regarding the issue or lack of disclosure or time provided.

 

   Against

Proposals for which the Agent recommends support of practices described herein as associated with a firm against vote:

 

(1)    as the issuer or market transitions to better practices (e.g., having committed to new regulations or governance codes) or

 

(2)    as the more favorable choice in cases in which shareholders must choose between alternate proposals

 

   Case-by-Case

Routine Management Proposals

 

   For

•        The opening of the shareholder meeting

 

   For

•        That the meeting has been convened under local regulatory requirements

 

   For

•        The presence of quorum

 

   For

•        The agenda for the shareholder meeting

 

   For

•        The election of the chair of the meeting

 

   For

•        The appointment of shareholders to co-sign the minutes of the meeting

 

   For

•        Regulatory filings (e.g., to effect approved share issuances)

 

   For

•        The designation of inspector or shareholder representative(s) of minutes of meeting

 

   For

•        The designation of two shareholders to approve and sign minutes of meeting

 

   For

•        The allowance of questions

 

   For

•        The publication of minutes

   For

 

A-39


PROPOSAL

   Guidelines

•        The closing of the shareholder meeting

   For

•        Other similar routine management proposals

   For

Discharge of Management/Supervisory Board Members

 

  

•        Management proposals seeking the discharge of management and supervisory board members, unless the Agent recommends against due to concern about the past actions of the company’s auditors or directors or legal action is being taken against the board by other shareholders, including when the proposal is bundled

   For

Director Elections

 

  

•        Votes on director nominees in uncontested elections not otherwise subject to policies described herein. Unless otherwise provided for herein, the Agent’s standards with respect to determining director independence shall apply. These standards generally provide that, to be considered completely independent, a director shall have no material connection to the company other than the board seat. Agreement with the Agent’s independence standards shall not dictate that a Fund’s vote shall be cast according to the Agent’s corresponding recommendation. Further, unless otherwise provided for herein, the application of Guidelines in connection with such standards shall apply only in cases in which the nominee’s level of independence can be ascertained based on available disclosure.

 

   Case-by-Case

•        Votes in contested elections, with primary consideration given to input from the Investment Professional(s) for a given Fund

 

   Case-by-Case

•        For issuers domiciled in Canada, Finland, France, Ireland, the Netherlands, Sweden or tax haven markets, non-independent directors in cases in which the full board serves as the audit committee, or the company does not have an audit committee

 

   Against

•        For issuers in all markets, including those in tax haven markets and those in Japan that have adopted the U.S.-style board-with-committees structure, non-independent nominees to the audit committee, or, if the slate of nominees is bundled, the slate. However, if the slate is bundled and audit committee membership is unclear or proposed as a separate agenda item, vote for if the Agent otherwise recommends support. For Canadian issuers, the Funds’ U.S. Guidelines with respect to audit committees shall apply.

 

   Against

•        In tax haven markets, non-independent directors in cases in which the full board serves as the compensation committee, or the company does not have a compensation committee

 

   Do Not Vote
Against

•        Non-independent directors who sit on the compensation or nominating committees, provided that such committees meet the applicable independence requirements of the relevant listing exchange

   Do Not Vote
Against

 

A-40


PROPOSAL

   Guidelines

•        In cases in which committee membership is unclear, non-independent director nominees if no other issues have been raised in connection with his/her nomination

   Case-by-Case

•        Individuals nominated as outside/non-executive directors who do not meet the Agent’s standard for independence, unless the slate of nominees is bundled, in which case the proposal(s) to elect board members shall be considered on a case-by-case basis

   Against

•        For issuers in tax haven markets, votes on bundled slates of nominees if the board is non-majority independent. For issuers in Canada and other global markets, generally follow the Agent’s standards for withholding support from bundled slates or non-independent directors (typically excluding the CEO), as applicable, if the board does not meet the Agent’s independence standards or the board’s independence cannot be ascertained due to inadequate disclosure.

   Against

•        Nominees or slates of nominees presented in a manner not aligned with market practice and/or legislation, including:

 

•        Bundled slates of nominees (e.g., France, Hong Kong or Spain);

 

•        Simultaneous reappointment of retiring directors (e.g., South Africa);

 

•        In markets with term lengths capped by legislation or market practice, nominees whose terms exceed the caps or are not disclosed (except that bundled slates with such lack of disclosure shall be considered on a case-by-case basis); or

 

•        Nominees whose names are not disclosed in advance of the meeting (e.g., Austria, Philippines, Hong Kong or South Africa) or far enough in advance relative to voting deadlines (e.g., Italy) to make an informed voting decision

 

•        Such criteria will not generally provide grounds for withholding support in countries in which they may be identified as best practice but such legislation or market practice is not yet applicable, unless specific governance shortfalls identified by the Agent dictate that less latitude should be extended to the issuer.

   Against

•        Nominees in connection with which a recommendation has been made that the position of chairman should be separate from that of CEO or otherwise required to be independent, unless other concerns requiring CASE-BY-CASE consideration have been raised

   For

•        In cases in which cumulative or net voting applies, generally vote with Agent’s recommendation to support nominees asserted by the issuer to be independent, even if independence disclosure or criteria fall short of Agent’s standards.

  

 

A-41


PROPOSAL

   Guidelines

•        Nominees for whom the Agent has raised concerns regarding scandals or internal controls

 

   Case-by-Case

•        Nominees or slates of nominees when (1) the scandal or shortfall in controls took place at the company, or an affiliate, for which the nominee is being considered; (2) culpability can be attributed to the nominee (e.g., nominee manages or audits relevant function), and (3) the nominee has been directly implicated, with resulting arrest and criminal charge or regulatory sanction.

 

   Against

•        For markets such as the tax havens, Australia, Canada, Hong Kong, Japan, Malaysia and South Africa (and for outside directors in South Korea) in which nominees’ attendance records are adequately disclosed, the Funds’ U.S. Guidelines with respect to director attendance shall apply. The same policy shall be applied regarding attendance by statutory auditors of Japanese companies.

 

  

•        Self-nominated director candidates, with voting decisions generally based on the Agent’s approach to evaluating such candidates

 

   Case-by-Case

•        Nominees for whom “over-boarding” issues have been raised by the Agent, unless other concerns require case-by-case consideration

 

   For

•        For companies incorporated in tax haven markets but which trade exclusively in the U.S., the Funds’ U.S. Guidelines with respect to director elections shall apply.

 

  
Board Structure   

•        Proposals to fix board size, but also support proposals seeking a board range if the range is reasonable in the context of market practice and anti-takeover considerations

 

   For

•        Proposed article amendments in this regard, with voting decisions generally based on the Agent’s approach to evaluating such proposals

 

   Case-by-Case

Director and Officer Indemnification and Liability Protection, voting in accordance with the Agent’s standards

 

   Case-by-Case

•        Proposals seeking approval of overly broad provisions

 

   Against

Independent Statutory Auditors

 

  

•        With respect to Japanese companies that have not adopted the U.S.-style board-with-committees structure, any nominee to the position of “independent statutory auditor” whom the Agent considers affiliated, e.g., if the nominee has worked a significant portion of his

   Against

 

A-42


PROPOSAL

   Guidelines

career for the company, its main bank or one of its top shareholders. Where shareholders are forced to vote on multiple nominees in a single resolution, vote against all nominees. In cases in which multiple slates of statutory auditors are presented, generally vote with the Agent’s recommendation, typically to support nominees deemed to be more independent and/or aligned with interests of minority shareholders.

 

  

•        Incumbent nominees at companies implicated in scandals or exhibiting poor internal controls

 

   Against
Key Committees   

•        Proposals that permit non-board members to serve on the audit, compensation or nominating committee, provided that bundled slates may be supported if no slate nominee serves on the relevant committee(s)

 

   Against

Director and Statutory Auditor Remuneration, with voting decisions generally based on the Agent’s approach to evaluating such proposals, while also factoring in the merits of the rationale and disclosure provided

 

   Case-by-Case

•        Proposals to approve the remuneration of directors and auditors as long as the amount is not excessive (e.g., significant increases should be supported by adequate rationale and disclosure) and there is no evidence of abuse. For Toronto Stock Exchange (TSX) issuers, the Agent’s limits with respect to equity awards to non-employee directors shall apply.

 

   For

Bonus Payments

 

  
With respect to Japanese companies:   

•        Retirement bonus proposals if all payments are for directors and auditors who have served as executives of the company

 

   For

•        Proposals if one or more payments are for non-executive, affiliated directors or statutory auditors; when one or more of the individuals to whom the grants are being proposed (1) has not served in an executive capacity for the company for at least three years or (2) has been designated by the company as an independent statutory auditor, regardless of the length of time he/she has served

 

   Against

•        In all markets, if issues have been raised regarding a scandal or internal controls, bonus proposals for retiring directors or continuing directors or auditors when culpability can be attributed to the nominee (e.g., if a Fund is also voting against the nominee under criteria herein regarding issues of scandal or internal controls), unless bundled with bonuses for a majority of retirees a Fund is voting for

   Against

 

A-43


PROPOSAL

   Guidelines

Stock Option Plans for Independent Internal Statutory Auditors

 

  

•        With respect to Japanese companies, proposals regarding option grants to independent internal statutory auditors, following the Agent’s guidelines

 

   Against

Compensation Plans

 

  

•        Votes with respect to compensation plans, and awards thereunder or capital issuances in support thereof, unless otherwise provided for herein, with voting decisions generally based on the Agent’s approach to evaluating such plans, considering quantitative or qualitative factors as appropriate for the market

 

   Case-by-Case

Amendment Procedures for Equity Compensation Plans and ESPPs

 

  

•        For TSX issuers, votes with respect to amendment procedures for security-based compensation arrangements and employee share purchase plans shall generally be cast in a manner designed to preserve shareholder approval rights, with voting decisions generally based on the Agent’s recommendation.

 

  

Shares Reserved for Equity Compensation Plans

 

  

•        Unless otherwise provided for herein, voting decisions shall generally be based on the Agent’s methodology, including classification of a company’s stage of development as growth or mature and the corresponding determination as to reasonability of the share requests.

 

  

•        Equity compensation plans (e.g., option, warrant, restricted stock or employee share purchase plans or participation in company offerings such as IPOs or private placements), the issuance of shares in connection with such plans, or related management proposals (e.g., article amendments) that:

 

   Against

•        Exceed the Agent’s recommended dilution limits, including cases in which the Agent suggests dilution cannot be fully assessed (e.g., due to inadequate disclosure);

 

•        Provide deep or near-term discounts to executives or directors, unless discounts to executives are deemed by the Agent to be adequately mitigated by other vesting requirements (e.g., Japan) or broad-based employee participation otherwise meeting Agent’s standards (e.g., France);

 

•        Are administered with discretion by potential grant recipients;

 

•        Provide for retirement benefits or equity incentive awards to outside directors if not in line with market practice (e.g., Australia, Belgium, The Netherlands);

  

 

A-44


PROPOSAL

   Guidelines

•        Permit financial assistance in the form of non-recourse (or essentially non-recourse) loans in connection with executive’s participation;

 

•        For matching share plans, do not meet the Agent’s standards, considering holding period, discounts, dilution, participation, purchase price and performance criteria;

 

•        Provide for vesting upon change in control if deemed by the Agent to evidence a conflict of interest or anti-takeover device;

 

•        Provide no disclosure regarding vesting or performance criteria (provided that proposals providing disclosure in one or both areas, without regard to Agent’s criteria for such disclosure, shall be supported provided they otherwise satisfy these Guidelines);

 

•        Permit post-employment vesting if deemed inappropriate by the Agent;

 

•        Allow plan administrators to make material amendments without shareholder approval unless adequate prior disclosure has been provided, with such voting decisions generally based on the Agent’s approach to evaluating such plans; or

 

•        Provide for retesting in connection with achievement of performance hurdles unless the Agent’s analysis indicates that:

 

(1)    Performance targets are adequately increased in proportion to the additional time available,

 

(2)    Retesting is de minimis as a percentage of overall compensation or is acceptable relative to market practice, or

 

(3)    The issuer has committed to cease retesting within a reasonable period of time.

 

  

•        Such plans/awards or the related issuance of shares that:

 

(1)    Do not suffer from the defects noted above; or

 

(2)    Otherwise meet the Agent’s tests if the considerations raised by the Agent pertain primarily to performance hurdles, contract or notice periods, discretionary bonuses, recruitment awards, retention incentives, non-compete payments or vesting upon change in control (other than addressed above), if the company has provided adequate disclosure and/or a reasonable rationale in support of the relevant plan/award, practice or participation. Unless otherwise provided for herein, market practice of the primary country in which a company does business, or in which an employee is serving, as applicable, shall supersede that of the issuer’s domicile.

   For

 

A-45


PROPOSAL

   Guidelines

•        Proposals in connection with such plans or the related issuance of shares in other instances

 

   Case-by-Case

Remuneration Reports

 

  

•        Reports that include compensation plans permitting:

 

(1)    Practices or features not supported under these Guidelines, including financial assistance under the conditions described above;

 

(2)    Retesting deemed by the Agent to be excessive relative to market practice (irrespective of the Agent’s support for the report as a whole);

 

(3)    Equity award valuation triggering a negative recommendation from the Agent; or

 

(4)    Provisions for retirement benefits or equity incentive awards to outside directors if not in line with market practice, except that reports will generally be voted for if contractual components are reasonably aligned with market practices on a going-forward basis (e.g., existing obligations related to retirement benefits or terms contrary to evolving standards would not preclude support for the report)

 

   Against

•        Reports receiving the Agent’s support and not triggering the concerns cited above

 

   For

•        Unless otherwise provided for herein, reports not receiving the Agent’s support due to concerns regarding severance/ termination payments, “leaver” status, incentive structures and vesting or performance criteria not otherwise supported by these Guidelines, generally voted for if the company has provided a reasonable rationale and/or adequate disclosure regarding the matter(s) under consideration. Reports with typically unsupported features may be voted for in cases in which the Agent recommends their initial support as the issuer or market transitions to better practices (e.g., having committed to new regulations or governance codes).

 

   Case-by-Case

Shareholder Proposals Regarding Executive and Director Pay

 

  

•        The Funds’ U.S. Guidelines with respect to such shareholder proposals shall apply.

 

  

General Share Issuances

 

  

•        Unless otherwise provided for herein, voting decisions shall generally be based on the Agent’s practice to determine support for general issuance requests (with or without preemptive rights), or related requests to repurchase and reissue shares, based on their

   For

 

A-46


PROPOSAL

   Guidelines

amount relative to currently issued capital as well as market-specific considerations (e.g., priority right protections in France, reasonable levels of dilution and discount in Hong Kong). Requests to reissue repurchased shares will not be supported unless a related general issuance request is also supported.

  

•        Specific issuance requests, based on the proposed use and the company’s rationale

 

   Case-by-Case

•        Proposals to issue shares (with or without preemptive rights), convertible bonds or warrants, to grant rights to acquire shares, or to amend the corporate charter relative to such issuances or grants in cases in which concerns have been identified by the Agent with respect to inadequate disclosure, inadequate restrictions on discounts, failure to meet the Agent’s standards for general issuance requests, or authority to refresh share issuance amounts without prior shareholder approval

 

   Against

Increases in Authorized Capital

 

  

•        Unless otherwise provided for herein, voting decisions should generally be based on the Agent’s approach.

  

•        Nonspecific proposals, including bundled proposals, to increase authorized capital up to 100 percent over the current authorization unless the increase would leave the company with less than 30 percent of its new authorization outstanding

 

   For

•        Specific proposals to increase authorized capital, unless:

 

   For

•        The specific purpose of the increase (such as a share-based acquisition or merger) does not meet these Guidelines for the purpose being proposed; or

 

•        The increase would leave the company with less than 30 percent of its new authorization outstanding after adjusting for all proposed issuances

 

   Against

•        Proposals to adopt unlimited capital authorizations

 

   Against

•        The Agent’s market-specific exceptions to the above parameters (e.g., The Netherlands, due to hybrid market controls) shall be applied.

 

  

Preferred Stock

 

  

•        Unless otherwise provided for herein, voting decisions should generally be based on the Agent’s approach.

 

  

•        Creation of a new class of preferred stock or issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred stock would adversely affect the rights of existing shareholders

   For

 

A-47


PROPOSAL

   Guidelines

•        Creation/issuance of convertible preferred stock as long as the maximum number of common shares that could be issued upon conversion meets the Agent’s guidelines on equity issuance requests

 

   For

•        Creation of (1) a new class of preference shares that would carry superior voting rights to the common shares or (2) blank check preferred stock unless the board states that the authorization will not be used to thwart a takeover bid

 

   Against

Poison Pills/Protective Preference Shares

 

  

•        Management proposals in connection with poison pills or anti-takeover activities (e.g., disclosure requirements or issuances, transfers or repurchases) that do not meet the Agent’s standards. Generally vote in accordance with Agent’s recommendation to withhold support from a nominee in connection with poison pill or anti-takeover considerations when culpability for the actions can be specifically attributed to the nominee.

 

   Against

•        Director remuneration in connection with poison pill considerations raised by the Agent.

 

   Do Not Vote

Against

Approval of Financial Statements and Director and Auditor Reports

 

  

•        Management proposals seeking approval of financial accounts and reports, unless there is concern about the company’s financial accounts and reporting, which, in the case of related party transactions, would include concerns raised by the Agent regarding consulting agreements with non-executive directors

 

   For

•        Unless otherwise provided for herein, reports not receiving the Agent’s support due to concerns regarding severance/termination payments not otherwise supported by these Guidelines, factoring in the merits of the rationale and disclosure provided

 

   Case-by-Case

•        Board-issued reports receiving a negative recommendation from the Agent due to concerns regarding independence of the board or the presence of non-independent directors on the audit committee

 

   Against

•        Such proposals in connection with remuneration practices otherwise supported under these Guidelines or as a means of expressing disapproval of broader practices of the issuer or its board

 

   Do Not Vote
Against

Remuneration of Auditors

 

  

•        Proposals to authorize the board to determine the remuneration of auditors, unless there is evidence of excessive compensation relative to the size and nature of the company

   For

 

A-48


PROPOSAL

   Guidelines

Indemnification of Auditors

 

   Against

Ratification of Auditors and Approval of Auditors’ Fees, generally following the Agent’s standards for proposals seeking auditor ratification or approval of auditors’ fees, except that for Canadian issuers, the Funds’ U.S. Guidelines with respect to auditors and auditor fees shall apply.

 

  

•        Such proposals for companies in the MSCI EAFE index, provided the level of audit fee disclosure meets the Agent’s standards

 

   For

•        In other cases, such proposals unless there are material concerns raised by the Agent about the auditor’s practices or independence

   For
Allocation of Income and Dividends   

•        Management proposals concerning allocation of income and the distribution of dividends, including adjustments to reserves to make capital available for such purposes. In the event management offers multiple dividend proposals on the same agenda, primary consideration shall be given to input from the relevant Investment Professional(s).

 

   For
Stock (Scrip) Dividend Alternatives    For

•        Stock (scrip) dividend proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value

 

   Against
Debt Instruments   

•        Proposals authorizing excessive discretion, as assessed by the Agent, to a board to issue or set terms for debt instruments (e.g., commercial paper)

 

   Against

Debt Issuance Requests

 

When evaluating a debt issuance request, the issuing company’s present financial situation is examined. The main factor for analysis is the company’s current debt-to-equity ratio, or gearing level. A high gearing level may incline markets and financial analysts to downgrade the company’s bond rating, increasing its investment risk factor in the process. A gearing level up to 100 percent is considered acceptable.

   Case-by-Case

•        Debt issuances for companies when the gearing level is between zero and 100 percent

 

   For

•        Proposals where the issuance of debt will result in the gearing level being greater than 100 percent, or for which inadequate disclosure precludes calculation of the gearing level, comparing any such proposed debt issuance to industry and market standards, and with voting decisions generally based on the Agent’s approach to evaluating such requests

   Case-by-Case

 

A-49


PROPOSAL

   Guidelines

Financing Plans

 

  

•        Adoption of financing plans if they are in the best economic interests of shareholders

 

   For

Related Party Transactions

 

   Case-by-Case

•        Approval of such transactions unless the agreement requests a strategic move outside the company’s charter or contains unfavorable or high risk terms (e.g., deposits without security interest or guaranty)

 

   For

Approval of Donations

 

  

•        Proposals for which adequate, prior disclosure of amounts is not provided

 

   Against

•        Proposals seeking single- or multi-year authorities for which adequate, prior disclosure of amounts is provided

 

   For

Capitalization of Reserves

 

  

•        Proposals to capitalize the company’s reserves for bonus issues of shares or to increase the par value of shares

 

   For
Investment of Company Reserves, with primary consideration for such proposals given to input from the Investment Professional(s) for a given Fund    Case-by-Case
Amendments to Articles of Association    Case-by-Case

•        That are editorial in nature

 

   For

•        Where shareholder rights are protected

 

   For

•        Where there is negligible or positive impact on shareholder value

 

   For

•        For which management provides adequate reasons for the amendments or the Agent otherwise supports management’s position

 

   For

•        That seek to discontinue and/or delist a form of the issuer’s securities in cases in which the relevant Fund does not hold the affected security type

 

   For

•        Which the company is required to do so by law (if applicable)

 

   For

•        That remove or lower quorum requirements for board or shareholder meetings below levels recommended by the Agent

 

   Against

•        That reduce relevant disclosure to shareholders

   Against

 

A-50


PROPOSAL

   Guidelines

•        That seek to align the articles with provisions of another proposal not supported by these Guidelines

 

   Against

•        That are not supported under these Guidelines, are presented within a bundled proposal, and for which the Agent deems the negative impact, on balance, to outweigh any positive impact

 

   Against

•        That impose a negative impact on existing shareholder rights, including rights of the Funds, to the extent that any positive impact would not be deemed by the Agent to be sufficient to outweigh removal or diminution of such rights

 

   Against

•        With respect to article amendments for Japanese companies:

 

  

•        Management proposals to amend a company’s articles to expand its business lines

 

   For

•        Management proposals to amend a company’s articles to provide for an expansion or reduction in the size of the board, unless the expansion/ reduction is clearly disproportionate to the growth/decrease in the scale of the business or raises anti-takeover concerns

 

   For

•        If anti-takeover concerns exist, management proposals, including bundled proposals, to amend a company’s articles to authorize the Board to vary the annual meeting record date or to otherwise align them with provisions of a takeover defense

 

   Against

•        Management proposals regarding amendments to authorize share repurchases at the board’s discretion, unless there is little to no likelihood of a “creeping takeover” (major shareholder owns nearly enough shares to reach a critical control threshold) or constraints on liquidity (free float of shares is low), and where the company is trading at below book value or is facing a real likelihood of substantial share sales; or where this amendment is bundled with other amendments which are clearly in shareholders’ interest (generally following the Agent’s guidelines)

 

   Against

Other Business

 

  

•        Management proposals for Other Business in connection with global proxies, voting in accordance with the Agent’s market-specific recommendations

   Against

 

A-51