SEMI-ANNUAL REPORT
August 31, 2002 ING PRIME
RATE TRUST
[LION LOGO]
ING FUNDS
ING Prime Rate Trust
SEMI-ANNUAL REPORT
August 31, 2002
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Table of Contents
Portfolio Managers' Report ................................................ 2
Statistics and Performance ................................................ 6
Additional Notes and information .......................................... 9
Portfolio of Investments .................................................. 11
Statement of Assets and Liabilities ....................................... 30
Statement of Operations ................................................... 31
Statements of Changes in Net Assets ....................................... 32
Statement of Cash Flows ................................................... 33
Financial Highlights ...................................................... 34
Notes to Financial Statements ............................................. 36
Trustee and Officer Information ........................................... 43
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ING Prime Rate Trust
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PORTFOLIO MANAGERS' REPORT
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Dear Shareholders:
We are pleased to present the August 31, 2002 Semi-Annual report for the ING
Prime Rate Trust.
ING Prime Rate Trust (the "Trust") invests in a diversified portfolio of
non-investment grade senior floating rate loans made primarily to U.S. based
corporations. During the six months ended August 31, 2002, the Trust paid its
172nd consecutive dividend.
PERFORMANCE OF THE TRUST
Based on $0.11 of dividends declared to common shareholders during the quarter
and the average month-end net asset value ("NAV") per share of $6.94, the
Trust's annualized distribution rate was 6.34%(1) for the quarter ended August
31, 2002, improved slightly from 6.09% for the three-month period ended May 31,
2002.
During a very challenging and volatile quarter, the Trust posted a total return
(based on NAV) of -4.46%, as compared to the Lipper Rankings for Loan
Participation Funds which showed an average of -2.97%(2), placing the Trust in
the third quartile of its peer group according to Lipper. In general, the
performance of all loan participation funds has been negatively impacted by a
confluence of factors, including the continued slow downward grind in bid levels
for most actively traded loans (largely traceable to dramatic movements in the
high yield bond and equity markets), a pronounced decline in value across the
more troubled sectors (heavy cyclicals, energy and anything remotely related to
telecommunications), and credit challenges stemming from a seemingly endless
flow of negative news emanating from corporate boardrooms. Nonetheless, although
the third quarter was a difficult time in the loan market, there is no question
our market has performed well during 2002 relative to high-yield bonds and
equities. As reference, the S&P 500 Index was down 29% during the first three
quarters of the year while the Merrill Lynch U.S High-Yield Master II Index
suffered a loss in excess of 8%. For the six-month period ended August 31, 2002,
the S&P 500 Index and the Merrill Lynch U.S. High-Yield Master II Index were
down 17% and 6%, respectively. We continue to strive to position the Trust to
withstand the continued volatility in the capital markets.
Specific to the Trust, in addition to the factors noted above, the two most
significant contributors to the most recent quarterly performance were 1) the
ongoing deterioration in value across the wireless telecommunications sector,
and 2) dramatically lower recoveries on a handful of existing non-performing
credits, particularly on several of the Trust's older, illiquid positions.
Although the Trust did benefit from continued strength in several key industry
groups (e.g., healthcare, beverage & food), those benefits were more than offset
by the continued downward thrust in wireless telecom. With little exception,
wireless and related credits continue to suffer from a pronounced lack of bid
support, even in the face of, in some cases, apparent financial and operational
stabilization. An optimistic view would argue the Trust's telecom holdings are
approaching a valuation trough, thereby reducing potential future downside risk.
In such a scenario, given the senior position of the Trust's holdings in
virtually all of these capital structures, we would expect to see modest
recoveries in these positions over time. Any systemic recovery, however, would
be subject to tangible evidence supporting fundamental improvement in the sector
and the return of investor confidence. At this point, both appear rather
elusive.
LEVERAGE
The Trust utilizes financial leverage to seek to increase the yield to the
holders of common shares. As of August 31, 2002, the Trust had $662 million of
borrowings outstanding, consisting of $450 million of "aaa/AAA" rated cumulative
auction rate preferred shares, and $212 million under $540
2
million in credit facilities. Total leverage, as a percentage of total assets
(including preferred shares), was 41.3% at quarter end. The weighted average
leverage cost including all borrowings and preferred shares as of quarter ended
August 31, 2002 was 1.86%.
OUTLOOK
Needless to say, the overall tone to the loan market at large remains cautious
at best, as investors and issuers alike grapple with the prospects and
consequences of a double-dip recession and potential military engagement in the
Middle East. There is no doubt our market will continue to mirror, to some
extent, the rollercoaster-like tendencies of the equity and bond markets over
the near term. Specific catalysts to loan market performance may continue to be
the sustainability of a very recent pick-up in M&A activity (which drives a good
portion of new loan supply) and of course, macro, sector and issue-specific
credit developments. In the interim, we will remain in a defensive posture while
attempting to take advantage of selective accretive buying opportunities.
We thank you for your investment in ING Prime Rate Trust.
/s/ Jeffrey A. Bakalar /s/ Daniel A. Norman
Jeffrey A. Bakalar Daniel A. Norman
SENIOR VICE PRESIDENT SENIOR VICE PRESIDENT
CO-SENIOR PORTFOLIO MANAGER CO-SENIOR PORTFOLIO MANAGER
ING Prime Rate Trust
October 10, 2002
3
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PORTFOLIO MANAGERS' FOOTNOTES
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1. The distribution rate is calculated by annualizing dividends declared
during the quarter and dividing the resulting annualized dividend by the
Trust's average month-end net asset value (in the case of NAV) or the
average month-end NYSE Composite closing price (in the case of Market). The
distribution rate is based solely on the actual dividends and
distributions, which are made at the discretion of management. The
distribution rate may or may not include all investment income and
ordinarily will not include capital gains or losses, if any.
2. Lipper, Inc. rankings are based on average annual total returns, not
including sales charges, among 43 Loan Participation Funds.
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE TRUST
WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
SENIOR LOANS ARE SUBJECT TO CREDIT RISKS AND THE POTENTIAL FOR NON-PAYMENT OF
SCHEDULED PRINCIPAL OR INTEREST PAYMENTS, WHICH MAY RESULT IN A REDUCTION OF THE
TRUST'S NAV.
THIS LETTER CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING STATEMENTS." ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING
STATEMENTS."
THE VIEWS EXPRESSED IN THIS LETTER REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
4
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INDEX DESCRIPTIONS
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The S&P 500 INDEX is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization companies whose securities
are traded on major U.S. stock markets.
The MERRILL LYNCH U.S. HIGH YIELD MASTER II INDEX is an unmanaged market
value-weighted index of all domestic and Yankee high yield bonds, including
deferred interest bonds and payment-in-kind securities. Issues included in the
index have maturities of one year or more and have a credit rating lower than
BBB-/Baa3 but are not in default.
All indices are unmanaged.
An investor cannot invest directly in an index.
5
ING Prime Rate Trust
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STATISTICS AND PERFORMANCE as of August 31, 2002
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PORTFOLIO CHARACTERISTICS
Net Assets $934,298,225
Assets Invested in Senior Loans* $1,523,311,527
Total Number of Senior Loans 266
Average Amount Outstanding per Loan $5,726,735
Total Number of Industries 35
Average Loan Amount per Industry $43,523,186
Portfolio Turnover Rate (YTD) 30%
Weighted Average Days to Interest Rate Reset 48 days
Average Loan Final Maturity 51 months
Total Leverage as a Percentage of Total Assets
(including Preferred Shares) 41.3%
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* INCLUDES LOANS AND OTHER DEBT RECEIVED THROUGH RESTRUCTURINGS
TOP TEN INDUSTRY SECTORS AS A PERCENTAGE OF:
NET ASSETS TOTAL ASSETS
---------- ------------
Cable Television 11.8% 6.9%
Healthcare, Education and Childcare 11.4% 6.6%
Cellular Communications 10.7% 6.3%
Lodging 9.9% 5.8%
Containers, Packaging and Glass 9.5% 5.6%
Leisure, Amusement, Motion Pictures and Entertainment 9.1% 5.3%
Automobile 8.1% 4.7%
Beverage, Food and Tobacco 6.8% 4.0%
Chemicals, Plastics and Rubber 6.7% 3.9%
Retail Stores 6.3% 3.7%
TOP TEN SENIOR LOANS AS A PERCENTAGE OF:
NET ASSETS TOTAL ASSETS
---------- ------------
Nextel Finance Company 5.5% 3.2%
Charter Communications Operating LLC 4.5% 2.6%
SC International Services 2.5% 1.5%
Wyndham International, Inc. 2.4% 1.4%
SPX Corporation 2.4% 1.4%
Lodgian Financing Corporation 2.0% 1.2%
Safelite Glass Corporation 2.0% 1.2%
Dean Foods Corporation 1.8% 1.1%
Mandalay Resort Group 1.8% 1.1%
Fitness Holding Worldwide, Inc. 1.8% 1.1%
6
ING Prime Rate Trust
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STATISTICS AND PERFORMANCE as of August 31, 2002
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YIELDS AND DISTRIBUTION RATES
AVERAGE AVERAGE
(NAV) (NAV) ANNUALIZED ANNUALIZED
PRIME 30-DAY SEC 30-DAY SEC DISTRIBUTION DISTRIBUTION
QUARTER-ENDED RATE YIELD(A) YIELD(A) RATE AT NAV(B) RATE AT MKT(B)
------------- ---- -------- -------- -------------- --------------
August 31, 2002 4.75% 7.39% 8.53% 6.34% 7.33%
May 31, 2002 4.75% 7.32% 7.94% 6.09% 6.52%
February 28, 2002 4.75% 7.26% 7.73% 6.80% 7.31%
November 30, 2001 5.00% 8.33% 9.26% 7.48% 8.23%
AVERAGE ANNUAL TOTAL RETURNS
NAV MKT
--- ---
1 Year -4.40% -15.47%
3 Years -0.71% -5.98%
5 Years 2.46% -1.87%
10 Years 5.14% 3.82%
Since Trust Inception F,H 6.34% N/A
Since Initial Trading on NYSE G N/A 4.29%
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ASSUMES RIGHTS WERE EXERCISED AND EXCLUDES SALES CHARGES AND COMMISSIONS(C,D,E)
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE TRUST
WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
See performance footnotes on page 8.
7
ING Prime Rate Trust
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STATISTICS AND PERFORMANCE FOOTNOTES
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(A) Yield is calculated by dividing the Trust's net investment income per share
for the most recent thirty days by the net asset value (in the case of NAV)
or the NYSE Composite closing price (in the case of market) at quarter-end.
Yield calculations do not include any commissions or sales charges, and are
compounded for six months and annualized for a twelve-month period to
derive the Trust's yield consistent with the SEC standardized yield formula
for open-end investment companies.
(B) The distribution rate is calculated by annualizing each monthly dividend,
then averaging the annualized dividends declared for each month during the
quarter and dividing the resulting average annualized dividend amount by
the Trust's average net asset value (in the case of NAV) or the NYSE
Composite closing price (in the case of Market) at the end of the period.
(C) Calculation of total return assumes a hypothetical initial investment at
the net asset value (in the case of NAV) or the NYSE Composite closing
price (in the case of Market) on the last business day before the first day
of the stated period, with all dividends and distributions reinvested at
the actual reinvestment price.
(D) On December 27, 1994, the Trust issued to its shareholders transferable
rights which entitled the holders to subscribe for 17,958,766 shares of the
Trust's common stock at the rate of one share of common stock for each four
rights held. On January 27, 1995, the offering expired and was fully
subscribed. The Trust issued 17,958,766 shares of its common stock to
exercising rights holders at a subscription price of $8.12. Offering costs
of $4,470,955 were charged against the offering proceeds.
(E) On October 18, 1996, the Trust issued to its shareholders non-transferable
rights which entitled the holders to subscribe for 18,122,963 shares of the
Trust's common stock at the rate of one share of common stock for each five
rights held. On November 12, 1996, the offering expired and was fully
subscribed. The Trust issued 18,122,963 shares of its common stock to
exercising rights holders at a subscription price of $9.09. Offering costs
of $6,972,203 were charged against the offering proceeds.
(F) Inception Date -- May 12, 1988.
(G) Initial Trading on NYSE -- March 9, 1992.
(H) Reflects partial waiver of fees.
8
ING Prime Rate Trust
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ADDITIONAL NOTES AND INFORMATION
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SHAREHOLDER INVESTMENT PROGRAM
The Trust offers a Shareholder Investment Program (the "Program," formerly known
as the Dividend Reinvestment and Cash Purchase Plan) which allows common
shareholders a simple way to reinvest dividends and capital gains distributions,
if any, in additional common shares of the Trust. The Program also offers Trust
common shareholders the ability to make optional cash investments in any amount
from $100 to $5,000 on a monthly basis. Amounts in excess of $5,000 require
prior approval of the Trust. DST Systems, Inc., the Trust's Transfer Agent, is
the Administrator for the Program.
For dividend reinvestment purposes, the Administrator will purchase shares of
the Trust on the open market when the market price plus estimated commissions is
less than the net asset value on the valuation date. The Trust may issue new
shares when the market price plus estimated commissions is equal to or exceeds
the net asset value on the valuation date. New shares may be issued at the
greater of (i) net asset value or (ii) the market price of the shares during the
pricing period, minus a discount of 5%.
For optional cash investments, shares will be purchased on the open market by
the Administrator when the market price plus estimated commissions is less than
the net asset value on the valuation date. New shares may be issued by the Trust
when the market price plus estimated commissions is equal to or exceeds the net
asset value on the valuation date.
There is no charge to participate in the Program. Participants may elect to
discontinue participation in the Program at any time. Participants will share,
on a pro-rata basis, in the fees or expenses of any shares acquired in the open
market.
Participation in the Program is not automatic. If you would like to receive more
information about the Program or if you desire to participate, please contact
your broker or our Shareholder Services Department at (800) 992-0180.
KEY FINANCIAL DATES -- CALENDAR 2002 DIVIDENDS:
DECLARATION DATE EX-DATE PAYABLE DATE
---------------- ------- ------------
January 31 February 7 February 25
February 28 March 7 March 22
March 28 April 8 April 22
April 30 May 8 May 22
May 31 June 6 June 24
June 28 July 8 July 22
July 31 August 8 August 22
August 30 September 6 September 23
September 30 October 8 October 22
October 31 November 7 November 22
November 29 December 6 December 23
December 20 December 27 January 13, 2003
RECORD DATE WILL BE TWO BUSINESS DAYS AFTER EACH EX-DATE. THESE
DATES ARE SUBJECT TO CHANGE.
STOCK DATA
The Trust's shares are traded on the New York Stock Exchange (Symbol: PPR).
Effective March 1, 2002, the Trust's name changed to ING Prime Rate Trust and
its CUSIP number changed to 44977W106. On November 16, 1998 the Trust's name
changed to Pilgrim Prime Rate Trust and its CUSIP number became 72146W103. Prior
to November 16, 1998 the Trust's name was Pilgrim America Prime Rate Trust and
its CUSIP number was 720906106. The Trust's NAV and market price are published
daily under the "Closed-End Funds" feature in Barron's, The New York Times, The
Wall Street Journal and many other regional and national publications.
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(THIS PAGE INTENTIONALLY LEFT BLANK)
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ING Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
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SENIOR LOANS
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE: 5.2%
AEROSTRUCTURES CORPORATION NR BB-
$ 1,674,485 Term Loan, maturing May 9, 2003 $ 1,666,112
ALLIANT TECHSYSTEMS, INC. Ba2 BB-
2,992,500 Term Loan, maturing April 20, 2009 3,008,210
AVBORNE, INC. NR NR
9,853,907 Term Loan, maturing June 30, 2005(3) 1,125,774
DRS TECHNOLOGIES, INC. Ba3 BB-
1,985,000 Term Loan, maturing September 30, 2008 1,999,060
ERICKSON AIR-CRANE COMPANY, LLC NR NR
8,203,692 Term Loan, maturing December 31, 2004 8,064,605
NEW PIPER AIRCRAFT, INC. NR NR
8,506,357 Term Loan, maturing April 15, 2005 8,400,027
PIEDMONT AVIATION SERVICES NR NR
6,209,887 Term Loan, maturing July 23, 2006 6,147,788
6,209,887 Term Loan, maturing July 23, 2007 6,147,788
TITAN CORPORATION Ba3 BB-
3,000,000 Term Loan, maturing June 30, 2009 3,010,782
TRANSDIGM HOLDING CORPORATION B1 B+
446,103 Term Loan, maturing May 15, 2006 446,011
1,152,035 Term Loan, maturing May 15, 2007 1,151,795
TRANSTAR METALS, INC. NR NR
14,866,071 Term Loan, maturing December 31, 2005(3) 2,973,214
UNITED DEFENSE INDUSTRIES, INC. Ba3 BB-
4,053,734 Term Loan, maturing August 13, 2009 4,059,814
--------------
48,200,980
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AUTOMOBILE: 8.1%
AFTERMARKET TECHNOLOGY CORPORATION Ba2 BB-
1,995,000 Term Loan, maturing February 8, 2008 1,999,156
AMERICAN AXLE & MANUFACTURING, INC. Ba2 BB
2,456,595 Term Loan, maturing April 30, 2006 2,458,514
BREED TECHNOLOGIES, INC. NR NR
1,140,679 Term Loan, maturing December 20, 2004 1,077,942
CAPITAL TOOL & DESIGN, LTD. NR NR
8,963,265 Term Loan, maturing May 31, 2003 8,797,216
COLLINS & AIKMAN PRODUCTS Ba3 BB-
2,985,000 Term Loan, maturing December 31, 2005 2,987,131
DURA OPERATING CORPORATION Ba3 BB
3,200,000 Term Loan, maturing December 31, 2008 3,216,000
EXIDE TECHNOLOGIES(2) NR D
371,195 Revolving Loan, maturing December 18, 2003(3) 215,293
1,612,012 Term Loan, maturing December 18, 2003(3) 934,967
3,227,260 Term Loan, maturing March 18, 2005(3) 1,882,299
FORD MOTOR CREDIT COMPANY A3 BBB+
15,000,000 Floating Rate Note, maturing October 25, 2004 14,362,290
See Accompanying Notes to Financial Statements
11
ING Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
AUTOMOBILE (CONTINUED)
HAYES LEMMERZ INTERNATIONAL, INC.(2) Caa2 NR
$ 3,478,750 Term Loan, maturing December 31, 2005(3) $ 3,052,603
METALDYNE COMPANY, LLC B1 BB-
4,000,000 Term Loan, maturing December 31, 2009 3,923,332
POLYPORE, INC. Ba3 B+
5,486,250 Term Loan, maturing December 31, 2007 5,503,395
SAFELITE GLASS CORPORATION B3 B+
19,087,138 Term Loan, maturing September 30, 2007 18,609,960
STONERIDGE, INC. Ba3 BB
1,995,000 Term Loan, maturing April 30, 2008 1,997,494
TENNECO AUTOMOTIVE, INC. B2 B
2,489,943 Term Loan, maturing November 4, 2007 2,328,789
2,489,943 Term Loan, maturing May 4, 2008 2,328,789
--------------
75,675,170
--------------
BANKING: 1.3%
OUTSOURCING SOLUTIONS, INC. B2 B
12,055,854 Term Loan, maturing December 10, 2006 11,769,528
--------------
11,769,528
--------------
BEVERAGE, FOOD AND TOBACCO: 6.8%
AGRILINK FOODS, INC. Ba3 B+
4,500,000 Term Loan, maturing June 30, 2008 4,511,250
AURORA FOODS, INC. B2 B-
1,657,143 Revolving Loan, maturing June 30, 2005 1,492,257
4,450,091 Term Loan, maturing June 30, 2005 4,127,460
COTT BEVERAGES, INC. Ba3 BB
1,893,109 Term Loan, maturing December 31, 2006 1,900,997
CP KELCO APS B3 B+
4,585,563 Term Loan, maturing March 31, 2008 4,130,809
1,527,683 Term Loan, maturing September 30, 2008 1,375,679
DEAN FOODS COMPANY Ba2 BB+
16,957,500 Term Loan, maturing July 15, 2008 17,025,805
EMPIRE KOSHER POULTRY, INC. NR NR
13,545,000 Term Loan, maturing July 31, 2004(3) 8,262,450
FLEMING COMPANIES, INC. Ba2 BB+
654,545 Revolving Loan, maturing June 18, 2007 628,364
5,000,000 Term Loan, maturing June 19, 2008 4,955,210
FLOWERS FOODS, INC. Ba2 BBB-
2,475,000 Term Loan, maturing March 26, 2007 2,489,954
INTERSTATE BRANDS CORPORATION Ba1 BBB-
3,970,000 Term Loan, maturing July 19, 2007 3,985,763
MAFCO WORLDWIDE CORPORATION B1 B
3,198,844 Term Loan, maturing March 31, 2006 3,166,856
NATIONAL DAIRY HOLDINGS, L.P. Ba2 BB+
997,500 Term Loan, maturing April 29, 2009 1,001,657
See Accompanying Notes to Financial Statements
12
ING Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
BEVERAGE, FOOD AND TOBACCO (CONTINUED)
NUTRASWEET ACQUISITION CORPORATION Ba3 NR
$ 765,213 Term Loan, maturing May 25, 2007 $ 767,127
PABST BREWING COMPANY NR CCC
1,448,868 Term Loan, maturing April 27, 2003 1,438,907
SOUTHERN WINE & SPIRITS OF AMERICA, INC. Ba3 BBB-
2,000,000 Term Loan, maturing July 2, 2008 2,004,375
--------------
63,264,920
--------------
BUILDINGS AND REAL ESTATE: 3.6%
ASSOCIATED MATERIALS, INC. Ba3 BB-
772,000 Term Loan, maturing April 19, 2009 776,343
HQ GLOBAL WORKPLACES, INC.(2) NR NR
3,865,243 Term Loan, maturing November 6, 2005(3) 2,744,323
JDN REALTY CORPORATION Ba3 BB-
10,000,000 Term Loan, maturing December 31, 2002 10,025,000
MACERICH PARTNERSHIP, L.P. Ba2 NR
4,500,000 Term Loan, maturing January 26, 2003 4,477,500
6,000,000 Term Loan, maturing July 26, 2005 5,970,000
NATIONAL GOLF OPERATING PARTNERSHIP, L.P. NR NR
7,284,629 Term Loan, maturing March 31, 2003 7,175,360
U.S. AGGREGATES, INC.(2) NR NR
1,555,139 Term Loan, maturing March 31, 2006(3) 388,073
VENTAS REALTY, L.P. NR BB-
2,000,000 Term Loan, maturing April 17, 2007 2,005,000
--------------
33,561,599
--------------
CABLE TELEVISION: 11.8%
CC VI OPERATING, LLC Ba3 B+
8,000,000 Term Loan, maturing November 12, 2008 6,737,144
CC VIII OPERATING, LLC Ba3 BB-
4,477,500 Term Loan, maturing February 2, 2008 3,805,875
CENTURY CABLE HOLDINGS, LLC(2) Caa1 D
11,000,000 Term Loan, maturing June 30, 2009 7,768,750
5,000,000 Term Loan, maturing December 31, 2009 3,534,375
CHARTER COMMUNICATIONS OPERATING, LLC Ba3 BB
28,983,609 Term Loan, maturing March 18, 2008 25,070,822
19,950,000 Term Loan, maturing September 18, 2008 17,238,057
FRONTIERVISION OPERATING PARTNERS, L.P.(2) B2 D
2,593,939 Revolving Loan, maturing October 31, 2005 2,146,485
INSIGHT MIDWEST HOLDINGS, LLC Ba3 BB+
14,500,000 Term Loan, maturing December 31, 2009 13,615,906
LODGENET ENTERTAINMENT CORPORATION Ba3 B+
992,500 Term Loan, maturing June 30, 2006 996,222
MCC IOWA MEDIACOM BROADBAND Ba3 BB+
13,500,000 Term Loan, maturing September 30, 2010 12,835,125
OLYMPUS CABLE HOLDINGS, LLC(2) B2 D
2,000,000 Term Loan, maturing June 30, 2010 1,605,714
18,250,000 Term Loan, maturing September 30, 2010 14,616,589
--------------
109,971,064
--------------
See Accompanying Notes to Financial Statements
13
ING Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
CARGO TRANSPORT: 2.2%
AMERICAN COMMERCIAL LINES, LLC B3 B
$ 1,358,758 Term Loan, maturing June 30, 2006 $ 1,251,513
1,948,946 Term Loan, maturing June 30, 2007 1,795,118
EVERGREEN INTERNATIONAL AVIATION, INC. Ba2 B+
346,265 Term Loan, maturing May 7, 2003 323,758
2,242,882 Term Loan, maturing May 7, 2003 2,097,094
GEMINI LEASING, INC. B1 NR
4,117,116 Term Loan, maturing August 12, 2005(3) 1,749,774
NEOPLAN USA CORPORATION NR NR
9,588,562 Term Loan, maturing May 29, 2005 8,054,392
OMNITRAX RAILROADS, LLC NR NR
4,458,552 Term Loan, maturing May 13, 2005 4,447,405
OSHKOSH TRUCK COMPANY Ba1 BB+
1,136,786 Term Loan, maturing January 31, 2007 1,142,825
--------------
20,861,879
--------------
CELLULAR COMMUNICATIONS: 10.7%
AIRGATE PCS, INC. B2 B-
967,427 Term Loan, maturing August 29, 2007 798,127
8,456,026 Term Loan, maturing September 30, 2008 6,976,222
AMERICAN CELLULAR CORPORATION B3 CCC-
2,579,187 Term Loan, maturing March 31, 2008 1,761,907
4,499,033 Term Loan, maturing March 31, 2009 3,073,402
INDEPENDENT WIRELESS ONE CORPORATION B2 B
10,000,000 Term Loan, maturing June 20, 2008 9,759,795
MICROCELL CONNEXIONS, INC. Caa2 CCC
5,000,000 Term Loan, maturing February 22, 2007 1,612,500
NEXTEL FINANCE COMPANY Ba3 BB-
4,750,000 Term Loan, maturing June 30, 2008 4,151,894
4,750,000 Term Loan, maturing December 31, 2008 4,151,894
50,500,000 Term Loan, maturing March 31, 2009 42,723,000
NEXTEL OPERATIONS, INC. Ba3 BB-
5,791,757 Term Loan, maturing March 15, 2005 5,498,435
RURAL CELLULAR CORPORATION Ba3 B+
4,911,130 Term Loan, maturing October 3, 2008 3,932,995
4,911,130 Term Loan, maturing April 3, 2009 3,932,995
WESTERN WIRELESS CORPORATION B1 B
4,000,000 Revolving Loan, maturing March 31, 2008 2,280,000
8,000,000 Term Loan, maturing March 31, 2008 4,790,000
8,000,000 Term Loan, maturing September 30, 2008 4,808,000
--------------
100,251,166
--------------
CHEMICALS, PLASTICS AND RUBBER: 6.7%
ACADIA ELASTOMERS CORPORATION NR NR
9,379,562 Term Loan, maturing March 31, 2004 9,079,542
CEDAR CHEMICALS CORPORATION(2) NR NR
9,057,535 Term Loan, maturing October 3, 2003(3) 849,637
See Accompanying Notes to Financial Statements
14
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
CHEMICALS, PLASTICS AND RUBBER (CONTINUED)
EQUISTAR CHEMICALS, L.P. Ba2 BB+
$ 4,962,500 Term Loan, maturing August 24, 2007 $ 4,978,782
FOAM FABRICATORS, INC. NR NR
3,014,030 Term Loan, maturing March 5, 2005 3,006,495
FOAMEX, L.P. B2 BB-
1,682,843 Term Loan, maturing June 30, 2005 1,677,584
1,529,863 Term Loan, maturing June 30, 2006 1,525,082
GEO SPECIALITY CHEMICALS, INC. B1 B+
2,757,857 Term Loan, maturing December 31, 2007 2,638,351
HUNTSMAN CORPORATION B3 NR
3,395,120 Revolving Loan, maturing December 31, 2002 2,974,974
5,800,000 Term Loan, maturing December 31, 2002 5,792,750
7,000,000 Term Loan, maturing December 31, 2005 6,156,500
HUNTSMAN INTERNATIONAL, LLC B2 B+
904,712 Term Loan, maturing June 30, 2005 891,707
3,940,128 Term Loan, maturing June 30, 2007 3,947,926
3,940,128 Term Loan, maturing June 30, 2008 3,947,926
JOHNSONDIVERSEY, INC. Ba3 BB-
4,000,000 Term Loan, maturing November 3, 2009 4,025,936
LYONDELL CHEMICAL COMPANY Ba3 BB
3,344,070 Term Loan, maturing May 17, 2006 3,347,830
MILLENNIUM AMERICA, INC. Baa3 BBB-
800,000 Term Loan, maturing June 18, 2006 801,600
NOVEON, INC. B1 BB-
4,687,575 Term Loan, maturing September 30, 2008 4,701,385
OM GROUP, INC Ba3 BB
2,000,000 Term Loan, maturing April 1, 2007 2,001,750
--------------
62,345,757
--------------
CONTAINERS, PACKAGING AND GLASS: 9.5%
BERRY PLASTICS CORPORATION B1 B+
3,000,000 Term Loan, maturing July 22, 2010 3,016,251
BLUE RIDGE PAPER PRODUCTS, INC. B2 B+
8,726,947 Term Loan, maturing May 14, 2006 8,508,774
GRAPHIC PACKAGING CORPORATION Ba3 BB
1,990,000 Term Loan, maturing February 28, 2009 1,994,975
GREIF BROS. CORPORATION Ba3 BB
3,000,000 Term Loan, maturing August 23, 2009 3,000,000
IMPAXX, INC. NR NR
4,246,208 Term Loan, maturing April 30, 2005 3,779,125
JEFFERSON SMURFIT CORPORATION Ba3 B+
3,000,000 Term Loan, maturing March 31, 2007 3,002,814
LINCOLN PULP & EASTERN FINE(2) NR NR
92,280 Term Loan, maturing December 31, 2001 73,824
14,881,108 Term Loan, maturing August 31, 2004 11,904,887
NEXPAK CORPORATION B1 B+
2,283,631 Term Loan, maturing December 31, 2005 1,952,505
2,283,631 Term Loan, maturing December 31, 2006 1,952,505
See Accompanying Notes to Financial Statements
15
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
CONTAINERS, PACKAGING AND GLASS (CONTINUED)
OWENS-ILLINOIS, INC. B1 BB
$ 9,147,525 Revolving Loan, maturing March 31, 2004 $ 8,827,362
PACKAGING CORPORATION OF AMERICA Baa3 BBB
1,446,837 Term Loan, maturing June 29, 2006 1,443,220
PLIANT CORPORATION B2 B+
2,946,429 Term Loan, maturing May 31, 2008 2,959,687
RIVERWOOD INTERNATIONAL CORPORATION B1 B
861,666 Revolving Loan, maturing December 31, 2006 842,818
15,000,000 Term Loan, maturing December 31, 2006 14,998,830
SILGAN HOLDINGS, INC. Ba2 BB-
2,000,000 Term Loan, maturing November 30, 2008 2,003,126
SMURFIT-STONE CONTAINER CANADA, INC. Ba3 B+
4,307,692 Term Loan, maturing June 30, 2009 4,309,308
STONE CONTAINER CORPORATION Ba3 B+
11,692,308 Term Loan, maturing June 30, 2009 11,696,692
TEKNI-PLEX, INC. B1 B+
2,940,000 Term Loan, maturing June 21, 2008 2,944,287
--------------
89,210,990
--------------
DATA AND INTERNET SERVICES: 1.4%
360NETWORKS, INC.(2) NR NR
5,000,000 Term Loan, maturing September 30, 2007(3) 1,100,000
2,500,000 Term Loan, maturing December 31, 2007(3) 526,250
ARCH WIRELESS HOLDINGS, INC. NR NR
1,328,000 Senior Note, maturing May 15, 2007 823,360
ICG EQUIPMENT, INC.(2) B3 NR
6,995,226 Term Loan, maturing March 31, 2006 6,680,441
MCLEODUSA, INC. Caa2 NR
1,858,824 Term Loan, maturing May 30, 2008 808,588
TELETOUCH COMMUNICATIONS, INC. NR NR
2,548,020 Term Loan, maturing May 1, 2005 2,458,839
TELIGENT, INC.(2) NR NR
4,687,500 Term Loan, maturing June 30, 2006(3) 121,092
TSR WIRELESS, LLC(1) NR NR
11,440,280 Term Loan, maturing June 30, 2005(3) 188,480
--------------
12,707,050
--------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING: 5.6%
BARJAN PRODUCTS, LLC NR NR
4,851,000 Term Loan, maturing May 31, 2006 4,632,705
DRESSER, INC. Ba3 BB-
5,620,494 Term Loan, maturing April 10, 2009 5,649,602
FLOWSERVE CORPORATION Ba3 BB-
2,000,000 Term Loan, maturing June 30, 2009 1,998,542
GENERAL CABLE CORPORATION Ba3 BB-
2,587,775 Term Loan, maturing May 25, 2007 2,092,863
MANITOWOC COMPANY, INC. Ba2 BB
1,980,000 Term Loan, maturing May 9, 2007 1,989,488
See Accompanying Notes to Financial Statements
16
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING (CONTINUED)
MUELLER GROUP, INC. B1 B+
$ 4,000,000 Term Loan, maturing May 31, 2008 $ 4,005,000
NEPTUNE TECHNOLOGY GROUP, INC. Ba3 BB-
3,921,939 Term Loan, maturing November 1, 2008 3,941,548
SPX CORPORATION Ba2 BB+
3,304,762 Term Loan, maturing September 30, 2004 3,296,500
7,125,000 Term Loan, maturing September 30, 2009 7,135,524
11,875,000 Term Loan, maturing March 31, 2010 11,897,943
UNITED PET GROUP NR NR
6,086,937 Term Loan, maturing March 31, 2006 6,078,284
--------------
52,717,999
--------------
DIVERSIFIED/CONGLOMERATE SERVICE: 0.7%
ENTERPRISE PROFIT SOLUTIONS CORPORATION NR NR
1,494,118 Term Loan, maturing June 14, 2001(3) --
IRON MOUNTAIN INC. Ba3 BB
2,000,000 Term Loan, maturing February 15, 2008 2,009,750
PRIVATE BUSINESS, INC. NR NR
3,682,754 Term Loan, maturing August 19, 2006 3,645,926
URS CORPORATION Ba3 BB-
1,382,000 Term Loan, maturing August 22, 2008 1,378,545
--------------
7,034,221
--------------
ECOLOGICAL: 2.9%
ALLIED WASTE NORTH AMERICA, INC. Ba3 BB
3,709,197 Term Loan, maturing July 21, 2005 3,563,681
4,001,248 Term Loan, maturing July 21, 2006 3,914,077
4,801,497 Term Loan, maturing July 21, 2007 4,697,535
AMERICAN REF-FUEL COMPANY, LLC Baa2 BBB
3,716,279 Term Loan, maturing April 30, 2005 3,660,535
IT GROUP, INC.(2) Caa1 NR
4,154,605 Term Loan, maturing June 11, 2007(3) 457,007
RUMPKE CONSOLIDATED COMPANIES, INC. B1 BB-
6,327,894 Term Loan, maturing September 26, 2002 6,297,836
WASTE CONNECTIONS, INC. Ba3 BB
4,252,874 Revolving Loan, maturing May 16, 2005 4,210,345
--------------
26,801,016
--------------
ELECTRONICS: 2.9%
ACTERNA, LLC Caa1 B
6,224,376 Term Loan, maturing September 30, 2007 2,972,140
DECISION ONE CORPORATION B3 CCC
10,374,981 Term Loan, maturing April 18, 2005 8,818,734
2,057,328 Term Loan, maturing April 18, 2005 1,748,729
ELECTRO MECHANICAL SOLUTIONS(2) NR NR
2,405,453 Term Loan, maturing June 30, 2004(3) 12,027
INSILCO TECHNOLOGIES, INC. Caa2 D
4,925,016 Term Loan, maturing March 25, 2007(3) 1,723,755
See Accompanying Notes to Financial Statements
17
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
ELECTRONICS (CONTINUED)
KNOWLES ELECTRONICS, INC B3 CCC+
$ 3,404,081 Term Loan, maturing June 29, 2007 $ 3,191,326
SARCOM, INC. NR NR
8,993,645 Term Loan, maturing December 31, 2002(3) 4,856,568
TRANSACTION NETWORK SERVICES, INC. Ba3 BB-
3,947,917 Term Loan, maturing April 3, 2007 3,940,514
--------------
27,263,793
--------------
FINANCE: 2.6%
ALLIANCE DATA SYSTEMS CORPORATION B1 B+
8,710,638 Term Loan, maturing July 25, 2005 8,612,644
ANTHONY CRANE RENTAL, L.P. Caa2 CCC+
14,550,000 Term Loan, maturing July 20, 2006 8,899,755
RENT-A-CENTER, INC. Ba2 BB
1,611,305 Term Loan, maturing January 31, 2006 1,607,880
3,544,856 Term Loan, maturing January 31, 2007 3,537,324
1,404,449 Term Loan, maturing December 31, 2007 1,403,570
VALUE ASSET MANAGEMENT, INC. B1 B+
750,000 Term Loan, maturing April 28, 2003 736,875
--------------
24,798,048
--------------
GAMING: 4.9%
ALADDIN GAMING, LLC(2) Caa1 NR
2,968,421 Term Loan, maturing August 26, 2006(3) 2,463,789
4,455,000 Term Loan, maturing February 26, 2008(3) 3,697,650
ALLIANCE GAMING CORPORATION B1 B+
4,987,500 Term Loan, maturing December 31, 2006 5,024,906
AMERISTAR CASINOS, INC. Ba3 B+
1,362,345 Term Loan, maturing December 20, 2006 1,370,178
1,581,906 Term Loan, maturing December 20, 2006 1,591,002
ARGOSY GAMING COMPANY Ba2 BB
4,455,000 Term Loan, maturing July 31, 2008 4,472,633
BOYD GAMING CORPORATION Ba1 BB+
1,000,000 Term Loan, maturing June 24, 2008 1,000,833
ISLE OF CAPRI CASINOS, INC. Ba2 BB-
997,500 Term Loan, maturing April 26, 2008 1,003,200
LAS VEGAS SANDS, INC. B2 B+
2,000,000 Term Loan, maturing June 4, 2008 2,005,416
MANDALAY RESORT GROUP Ba2 BB+
17,000,000 Term Loan, maturing August 22, 2006 17,005,321
PALACE STATION HOTEL & CASINO Ba2 BB+
1,260,670 Revolving Loan, maturing September 30, 2003 1,229,153
SCIENTIFIC GAMES CORPORATION Ba3 BB-
4,912,500 Term Loan, maturing September 30, 2007 4,927,852
--------------
45,791,933
--------------
See Accompanying Notes to Financial Statements
18
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
GROCERY: 0.4%
GIANT EAGLE, INC. Ba2 BB+
$ 2,000,000 Term Loan, maturing August 2, 2009 $ 2,006,250
WINN DIXIE STORES, INC. Baa3 BBB
1,450,000 Term Loan, maturing March 29, 2007 1,455,800
--------------
3,462,050
--------------
HEALTHCARE, EDUCATION AND CHILDCARE: 11.4%
ALLIANCE IMAGING, INC. B1 B+
1,190,840 Term Loan, maturing November 2, 2006 1,167,023
6,945,925 Term Loan, maturing June 10, 2008 6,951,711
ALPHARMA OPERATING CORPORATION B1 BB-
1,388,848 Term Loan, maturing October 5, 2008 1,302,045
APRIA HEALTHCARE GROUP, INC. Ba1 BBB-
4,962,500 Term Loan, maturing July 20, 2007 4,963,274
BROWN SCHOOLS B3 B
7,872,203 Term Loan, maturing June 30, 2003 7,783,346
CAREMARK RX, INC. Ba2 BB+
4,488,750 Term Loan, maturing March 31, 2006 4,492,472
COMMUNITY HEALTH SYSTEMS, INC. Ba3 BB-
13,000,000 Term Loan, maturing July 16, 2010 13,041,977
CONCENTRA OPERATING CORPORATION B1 B+
3,233,333 Term Loan, maturing June 30, 2006 3,243,438
1,616,667 Term Loan, maturing June 30, 2007 1,620,910
COVENANT CARE, INC. NR NR
5,456,057 Term Loan, maturing June 30, 2003 5,387,856
DAVITA, INC. Ba3 BB-
8,958,441 Term Loan, maturing March 31, 2009 8,988,120
EXPRESS SCRIPTS, INC. Ba1 BBB-
2,164,404 Term Loan, maturing March 31, 2005 2,150,877
721,467 Revolving Loan, maturing March 31, 2005 710,645
5,000,000 Term Loan, maturing March 31, 2008 4,995,835
FOUNTAIN VIEW, INC.(2) NR NR
12,352,941 Term Loan, maturing March 31, 2004 11,815,477
GENESIS HEALTH VENTURES, INC. Ba3 BB-
1,776,583 Term Loan, maturing March 31, 2007 1,781,626
1,555,582 Floating Rate Note, maturing April 2, 2007 1,555,582
HCA, INC. Ba1 BBB-
10,028,571 Term Loan, maturing April 30, 2006 9,905,009
KINETIC CONCEPTS, INC. Ba3 B
3,960,000 Term Loan, maturing March 31, 2006 3,962,475
MAGELLAN HEALTH SERVICES, INC. B2 B-
1,255,288 Term Loan, maturing February 12, 2006 1,207,587
1,255,288 Term Loan, maturing February 12, 2005 1,209,260
MARINER HEALTH CARE, INC. B1 NR
988,381 Term Loan, maturing May 13, 2009 983,439
See Accompanying Notes to Financial Statements
19
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
HEALTHCARE, EDUCATION AND CHILDCARE (CONTINUED)
MEDPOINTE, INC. B1 B+
$ 2,977,500 Term Loan, maturing September 30, 2008 $ 2,994,248
SYBRON DENTAL MANAGEMENT, INC. Ba3 BB-
1,850,000 Term Loan, maturing June 6, 2009 1,862,334
TRIAD HOSPITALS, INC. Ba3 B+
1,983,636 Term Loan, maturing September 30, 2008 1,999,010
VISION TWENTY-ONE, INC. NR NR
2,898,018 Term Loan, maturing October 31, 2002(3) 289,802
--------------
106,365,378
--------------
HOME AND OFFICE FURNISHING, HOUSEWARES: 1.7%
AMERICAN BLIND & WALLPAPER FACTORY, INC. NR NR
722,983 Term Loan, maturing December 31, 2005 722,983
DESA INTERNATIONAL, INC.(2) Caa2 NR
3,510,000 Debtor in Possession, maturing
September 30, 2002 3,492,450
7,136,218 Term Loan, maturing November 26, 2004(3) 5,161,862
HOLMES PRODUCTS CORPORATION B2 B
3,592,084 Term Loan, maturing February 5, 2007 3,304,716
IDENTITY GROUP, INC. B2 B+
4,525,000 Term Loan, maturing May 11, 2007 2,579,250
IMPERIAL HOME DECOR GROUP, INC. NR NR
833,725 Term Loan, maturing April 4, 2006 779,533
--------------
16,040,794
--------------
INSURANCE: 1.2%
USI HOLDINGS CORPORATION B1 B+
7,325,636 Term Loan, maturing September 17, 2004 7,032,611
WHITE MOUNTAINS INSURANCE GROUP, LTD. Baa2 BBB+
4,443,750 Term Loan, maturing March 31, 2007 4,445,603
--------------
11,478,214
--------------
LEISURE, AMUSEMENT, MOTION PICTURES, AND ENTERTAINMENT: 9.1%
AMF BOWLING WORLDWIDE, INC. B1 B
2,000,000 Term Loan, maturing February 28, 2008 2,001,250
BALLY TOTAL FITNESS HOLDING CORPORATION Ba3 B+
5,942,759 Term Loan, maturing November 10, 2004 5,942,759
FITNESS HOLDINGS WORLDWIDE, INC. NR B
9,248,750 Term Loan, maturing November 2, 2006 8,863,382
8,268,750 Term Loan, maturing November 2, 2007 7,924,215
LOEWS CINEPLEX ENTERTAINMENT CORPORATION NR NR
9,941,851 Term Loan, maturing February 29, 2008 9,817,578
METRO-GOLDWYN-MAYER STUDIOS, INC. Ba3 BB-
14,500,000 Term Loan, maturing June 30, 2008 14,509,063
PANAVISION, INC. B3 CCC
14,040,405 Term Loan, maturing March 31, 2005 12,811,870
See Accompanying Notes to Financial Statements
20
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
LEISURE, AMUSEMENT, MOTION PICTURES, AND ENTERTAINMENT (CONTINUED)
REGAL CINEMAS, INC. B1 BB-
$ 2,500,000 Term Loan, maturing December 31, 2007 $ 2,506,250
SIX FLAGS THEME PARKS, INC. Ba2 BB-
11,000,000 Term Loan, maturing June 30, 2009 10,979,375
WFI GROUP, INC. B1 BB+
3,000,000 Term Loan, maturing July 14, 2004 3,002,814
XANTERRA PARKS & RESORTS, LLC NR NR
3,454,646 Term Loan, maturing September 30, 2004 3,446,010
3,454,646 Term Loan, maturing September 30, 2005 3,446,010
--------------
85,250,576
--------------
LODGING: 9.9%
EXTENDED STAY AMERICA, INC. Ba3 BB-
16,227,853 Term Loan, maturing January 15, 2008 16,258,280
HILTON HAWAIIAN VILLAGE, LLC Ba1 BBB-
13,970,588 Revolving Loan, maturing June 1, 2003 13,865,809
KSL RECREATIONAL GROUP, INC. Ba3 B+
1,513,611 Term Loan, maturing April 30, 2005 1,507,620
1,513,611 Term Loan, maturing April 30, 2006 1,510,063
9,075,000 Term Loan, maturing December 22, 2006 9,062,240
LODGIAN FINANCING CORPORATION(2) Ca NR
19,543,212 Term Loan, maturing July 15, 2006 18,908,058
MERISTAR INVESTMENT PARTNERS Ba3 B-
8,779,275 Term Loan, maturing March 31, 2003 8,801,223
WYNDHAM INTERNATIONAL, INC. NR B-
7,677,208 Term Loan, maturing June 30, 2004 6,427,267
19,471,911 Term Loan, maturing June 30, 2006 16,129,227
--------------
92,469,787
--------------
MACHINERY: 0.8%
ALLIANCE LAUNDRY HOLDINGS, LLC B1 B
4,072,034 Term Loan, maturing August 2, 2007 4,055,917
MORRIS MATERIAL HANDLING, INC. NR NR
258,831 Term Loan, maturing September 28, 2004 245,888
VUTEK, INC. B1 NR
1,712,905 Term Loan, maturing July 31, 2007 1,675,935
1,772,705 Term Loan, maturing December 30, 2007 1,726,659
--------------
7,704,399
--------------
MINING, STEEL, IRON AND NON-PRECIOUS METALS: 0.1%
NATIONAL REFRACTORIES & MINERALS
CORPORATION NR NR
1,250,000 Term Loan, maturing March 30, 2002 1,244,104
--------------
1,244,104
--------------
See Accompanying Notes to Financial Statements
21
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
OIL AND GAS: 2.2%
PACIFIC ENERGY GROUP, LLC Ba2 BBB-
$ 4,000,000 Term Loan, maturing July 26, 2009 $ 4,007,500
PLAINS MARKETING, L.P. Ba1 BB+
3,500,000 Term Loan, maturing September 21, 2007 3,510,210
PMC COMPANY Ba1 BB+
2,970,000 Term Loan, maturing May 5, 2006 2,973,713
TESORO PETROLEUM CORPORATION Ba3 BB+
5,963,461 Term Loan, maturing December 31, 2007 5,444,640
996,401 Term Loan, maturing December 31, 2007 909,714
W-H ENERGY SERVICES, INC. B2 B+
3,456,250 Term Loan, maturing April 16, 2007 3,469,210
--------------
20,314,987
--------------
OTHER TELECOMMUNICATIONS: 2.2%
BROADWING, INC. Ba3 BB
9,779,000 Term Loan, maturing November 9, 2004 7,839,502
6,342,670 Term Loan, maturing December 30, 2006 5,125,670
761,673 Term Loan, maturing June 28, 2007 615,050
INFONET SERVICES CORPORATION Ba3 BB-
4,703,611 Term Loan, maturing June 30, 2006 4,656,575
PACIFIC COIN NR NR
3,924,560 Term Loan, maturing March 31, 2004(3) 2,747,192
3,189,976 Term Loan, maturing March 31, 2004(3) --
--------------
20,983,989
--------------
PERSONAL & NON DURABLE CONSUMER PRODUCTS: 5.6%
AM COSMETICS CORPORATION NR NR
2,292,689 Revolving Loan, maturing May 30, 2004(3) 2,292,689
1,305,151 Term Loan, maturing May 30, 2004(3) 203,604
2,610,303 Term Loan, maturing December 31, 2004(3) 407,207
AMSCAN HOLDINGS, INC. B1 B+
9,519,257 Term Loan, maturing December 31, 2004 9,233,679
ARMKEL, LLC Ba3 B+
1,985,000 Term Loan, maturing March 28, 2009 2,000,773
BUHRMANN U.S., INC. Ba3 BB-
2,958,821 Term Loan, maturing October 26, 2005 2,908,891
5,072,551 Term Loan, maturing October 26, 2007 5,033,452
CENTIS, INC.(2) NR NR
3,900,000 Term Loan, maturing September 30, 2005(3) 1,014,000
3,421,250 Term Loan, maturing September 30, 2006(3) 889,525
CHURCH & DWIGHT CO., INC. Ba2 BB
2,000,000 Term Loan, maturing September 30, 2007 2,015,892
JOSTENS, INC. B1 BB-
2,845,552 Term Loan, maturing May 31, 2006 2,800,498
4,500,000 Term Loan, maturing December 31, 2009 4,508,906
NORWOOD PROMOTIONAL PRODUCTS, INC. NR NR
8,673,040 Term Loan, maturing February 1, 2005 8,673,040
5,860,162 Term Loan, maturing February 1, 2005(3) 3,044,354
1,641,647 Term Loan, maturing February 1, 2005(3) --
See Accompanying Notes to Financial Statements
22
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
PERSONAL & NON DURABLE CONSUMER PRODUCTS (CONTINUED)
PAINT SUNDRY BRANDS CORPORATION B2 B+
$ 977,360 Term Loan, maturing August 11, 2005 $ 948,039
957,213 Term Loan, maturing August 11, 2006 928,496
PLAYTEX PRODUCTS, INC. Ba3 BB-
3,666,667 Term Loan, maturing May 31, 2009 3,671,250
RELIZON COMPANY Ba3 BB-
1,769,250 Revolving Loan, maturing August 4, 2006 1,671,940
--------------
52,246,235
--------------
PERSONAL, FOOD & MISCELLANEOUS: 5.4%
AFC ENTERPRISES, INC. Ba2 BB
1,600,000 Term Loan, maturing May 23, 2009 1,604,200
COINMACH CORPORATION B1 BB-
4,925,000 Term Loan, maturing July 25, 2009 4,954,550
DOMINOS, INC. Ba3 BB-
3,000,000 Term Loan, maturing June 30, 2008 3,011,250
NEW WORLD RESTAURANT GROUP, INC. Caa2 CCC+
4,000,000 Secured Floating Rate Note, maturing
June 15, 2003 3,600,000
OTIS SPUNKMEYER, INC. B1 B+
7,000,000 Term Loan, maturing January 21, 2009 6,877,500
PAPA GINO'S, INC. NR NR
7,100,497 Term Loan, maturing August 31, 2007 7,038,472
SC INTERNATIONAL SERVICES Ba1 BB
25,189,225 Term Loan, maturing March 1, 2007 23,583,411
--------------
50,669,383
--------------
PRINTING AND PUBLISHING: 5.0%
ADAMS OUTDOOR ADVERTISING, L.P. B1 B+
1,990,000 Term Loan, maturing February 8, 2008 1,997,463
ADVANSTAR COMMUNICATIONS, INC. B2 B
11,150,448 Term Loan, maturing April 11, 2007 10,509,298
2,782,857 Term Loan, maturing October 11, 2007 2,612,407
CANWEST MEDIA, INC. Ba3 BB-
4,243,723 Term Loan, maturing May 15, 2008 4,259,637
4,545,047 Term Loan, maturing May 15, 2009 4,562,090
LAMAR MEDIA CORPORATION Ba2 BB-
5,471,875 Term Loan, maturing March 1, 2006 5,390,935
PRIMEDIA, INC. B3 B
3,960,000 Term Loan, maturing June 30, 2009 3,210,899
READER'S DIGEST ASSOCIATIONS, INC. Baa3 BB+
7,000,000 Term Loan, maturing May 20, 2008 6,944,000
TRANSWESTERN PUBLISHING COMPANY Ba3 B+
2,970,000 Term Loan, maturing June 27, 2008 2,984,850
VERTIS, INC. B1 B+
2,860,798 Term Loan, maturing December 7, 2008 2,800,006
ZIFF DAVIS MEDIA, INC. B3 CCC-
1,696,124 Term Loan, maturing March 31, 2007 1,450,186
--------------
46,721,771
--------------
See Accompanying Notes to Financial Statements
23
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
RADIO AND TELEVISION BROADCASTING: 5.4%
BENEDEK BROADCASTING CORPORATION(2) B2 NR
$ 6,515,585 Term Loan, maturing November 20, 2007 $ 6,481,378
BLOCK COMMUNICATIONS, INC. Ba2 BB-
3,000,000 Term Loan, maturing November 15, 2009 3,013,125
CITADEL BROADCASTING COMPANY Ba2 B+
4,500,000 Term Loan, maturing June 26, 2009 4,532,625
CUMULUS MEDIA, INC. B1 B
3,000,000 Term Loan, maturing March 28, 2010 3,016,875
EMMIS OPERATING COMPANY Ba2 B+
10,982,904 Term Loan, maturing August 31, 2009 11,008,648
FISHER BROADCASTING, INC. Ba3 B+
2,500,000 Term Loan, maturing February 28, 2010 2,498,438
GRAY COMMUNICATIONS SYSTEMS, INC. Ba3 B+
3,000,000 Term Loan, maturing September 30, 2009 3,005,625
PAXSON COMMUNICATIONS CORPORATION Ba3 BB
4,950,000 Term Loan, maturing June 30, 2006 4,900,500
PEGASUS MEDIA & COMMUNICATIONS, INC. B3 B+
5,914,962 Term Loan, maturing April 30, 2005 5,323,466
SINCLAIR BROADCAST GROUP, INC. Ba2 BB
4,000,000 Term Loan, maturing December 31, 2009 4,008,124
SUSQUEHANNA MEDIA COMPANY Ba1 BB-
2,493,750 Term Loan, maturing June 30, 2008 2,506,218
--------------
50,295,022
--------------
RETAIL STORES: 6.3%
ADVANCE STORES COMPANY, INC. Ba3 BB-
3,500,000 Term Loan, maturing November 30, 2007 3,514,585
CH OPERATING, LLC B2 B+
4,758,621 Term Loan, maturing June 30, 2007 4,711,033
HERBALIFE INTERNATIONAL, INC. B1 BB-
3,500,000 Term Loan, maturing July 31, 2008 3,491,250
K MART CORPORATION Ba1 BBB
3,500,000 Debtor in Possession Term Loan, maturing
April 22, 2004 3,474,846
MURRAY'S DISCOUNT AUTO STORES, INC. NR B
14,290,531 Term Loan, maturing June 30, 2003 14,198,472
PEEBLES, INC. NR NR
59,645 Term Loan, maturing April 30, 2003 57,856
7,872,213 Term Loan, maturing April 30, 2004 7,636,046
PETCO ANIMAL SUPPLIES, INC. B1 BB-
3,500,000 Term Loan, maturing October 2, 2008 3,517,500
RITE AID CORPORATION B2 BB-
14,856,764 Term Loan, maturing June 27, 2005 14,633,913
SHOPPERS DRUG MART CORPORATION Ba1 BBB+
952,941 Term Loan, maturing February 4, 2009 956,515
TRAVELCENTERS OF AMERICA, INC. Ba3 BB
2,487,500 Term Loan, maturing November 14, 2008 2,498,383
--------------
58,690,399
--------------
See Accompanying Notes to Financial Statements
24
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT: 5.3%
AMERICAN TOWER, L.P. B2 BB-
$ 11,916,667 Term Loan, maturing June 30, 2007 $ 9,870,968
CROWN CASTLE OPERATING COMPANY Ba3 BB-
13,000,000 Term Loan, maturing March 15, 2008 11,680,500
PINNACLE TOWERS, INC.(2) B3 D
11,933,585 Term Loan, maturing June 30, 2007 10,650,725
SPECTRASITE COMMUNICATIONS, INC. B3 CC
8,500,000 Term Loan, maturing December 31, 2007 7,020,227
TRIPOINT GLOBAL COMMUNICATIONS, INC. NR NR
4,614,512 Term Loan, maturing May 31, 2006 4,538,020
TSI TELECOMMUNICATION SERVICES, INC. Ba3 B+
6,000,000 Term Loan, maturing December 31, 2006 5,700,000
--------------
49,460,440
--------------
TEXTILES AND LEATHER: 3.1%
ACCESSORY NETWORK GROUP, INC. NR NR
8,212,974 Term Loan, maturing June 30, 2003 5,749,082
GALEY & LORD, INC.(2) Caa2 NR
2,743,904 Term Loan, maturing April 2, 2005 1,870,429
1,964,649 Term Loan, maturing April 1, 2006 1,339,236
LEVI STRAUSS & CO B1 BB+
241,580 Term Loan, maturing August 29, 2003 239,074
1,190,426 Revolving Loan, maturing August 29, 2003 1,158,880
MALDEN MILLS INDUSTRIES, INC.(2) NR NR
8,958,296 Term Loan, maturing October 28, 2006(3) 4,755,010
POLYMER GROUP, INC.(2) B3 NR
4,779,769 Term Loan, maturing December 20, 2005 4,387,144
5,462,500 Term Loan, maturing December 20, 2006 5,011,844
TARGUS GROUP, INC. NR NR
3,441,181 Term Loan, maturing August 31, 2006 3,148,681
WILLIAM CARTER COMPANY Ba3 BB-
992,500 Term Loan, maturing September 30, 2008 1,004,910
--------------
28,664,290
--------------
UTILITIES: 1.0%
CALPINE CORPORATION Ba3 BBB-
2,000,000 Term Loan, maturing March 8, 2004 1,731,428
MICHIGAN ELECTRIC TRANSMISSION COMPANY Baa2 BB+
3,000,000 Term Loan, maturing May 1, 2007 3,010,314
PIKE ELECTRIC, INC. Ba3 BB-
1,788,235 Term Loan, maturing April 18, 2010 1,798,666
SOUTHERN CALIFORNIA EDISON COMPANY Ba2 BB
2,500,000 Term Loan, maturing March 1, 2003 2,482,188
--------------
9,022,596
--------------
TOTAL SENIOR LOANS -- 163.0%
(COST $1,708,401,216) $1,523,311,527
--------------
See Accompanying Notes to Financial Statements
25
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
OTHER CORPORATE DEBT
BANK LOAN
RATINGS+
(UNAUDITED)
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------
AUTOMOBILE: 0.5%
CAPITAL TOOL & DESIGN, LTD. NR NR
$ 6,000,000 Subordinated Note, maturing July 10, 2004 $ 4,800,000
--------------
4,800,000
--------------
DATA AND INTERNET SERVICES: 0.0%
ARCH WIRELESS HOLDINGS, INC. NR NR
701,000 Subordinated Note, maturing May 15, 2009(3) 84,120
--------------
84,120
--------------
FINANCE: 1.1%
VALUE ASSET MANAGEMENT, INC. B2 B
10,000,000 Senior Subordinated Bridge, maturing
August 31, 2005 9,825,000
--------------
9,825,000
--------------
HEALTHCARE, EDUCATION AND CHILDCARE: 0.0%
VISION TWENTY-ONE, INC. NR NR
368,022 Convertible Note, maturing October 31, 2003(3) 37
--------------
37
--------------
HOME AND OFFICE FURNISHINGS, HOUSEWARES, AND
DURABLE CONSUMER PRODUCTS: 0.8%
MP HOLDINGS, INC. NR NR
64,527 Subordinated Note, maturing March 14, 2007 61,301
--------------
61,301
--------------
PREMCOR REFINING GROUP Ba3 BB-
8,000,000 Floating Rate Note, maturing November 15, 2004 7,120,000
--------------
7,120,000
--------------
PERSONAL & NONDURABLE CONSUMER PRODUCTS: 0.2%
AM COSMETICS CORPORATION NR NR
3,127,215 Subordinated Note, maturing March 31, 2006(3) --
PAINT SUNDRY BRANDS B3 B+
2,875,000 Subordinated Note, maturing August 11, 2008 2,386,250
--------------
2,386,250
--------------
TEXTILES AND LEATHER: 0.1%
TARTAN TEXTILE SERVICES, INC. NR NR
1,332,583 Subordinated Note, maturing April 1, 2011 1,265,954
--------------
1,265,954
--------------
TOTAL OTHER CORPORATE DEBT -- 2.7%
(COST $31,368,447) 25,542,662
--------------
See Accompanying Notes to Financial Statements
26
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
EQUITIES AND OTHER ASSETS
VALUE
--------------
Allied Digital Technologies Corporation (Residual
Interest in Bankruptcy Estate)(1)(@)(R) $ 186,961
AM Cosmetics Corporation (37,197 Common Shares)(@)(R) --
AM Cosmetics Corporation (415 Preferred Shares)(@)(R) --
American Blind & Wallpaper Factory, Inc. (80,400
Common Shares)(@)(R) 804
Arch Wireless Holdings, Inc. (102,124 Common
Shares)(@)(R) 65,359
Autotote Systems, Inc. (Option to Purchase 0.248%
of Common Shares Issued and Outstanding)(@)(R) --
Boston Chicken Inc. (Residual Interest in Boston
Chicken Plan Trust)(2)(@)(R) 8,014,962
Breed Technologies, Inc. (212,171 Common Shares)(@)(R) 4,281,610
Capital Tool & Design, Ltd. (Warrants for 19,000 Common
Shares, Expires July 10, 2006)(@)(R) --
Casden Properties Operation (10,000 Shares of Junior
Cumulative Preferred Partnership Units)(R) 250,000
Covenant Care, Inc. (Warrants for 26,501 Common Shares,
Expires March 31, 2003)(@)(R) --
Covenant Care, Inc. (Warrants for 19,000 Common Shares,
Expires January 13, 2005)(@)(R) --
Dan River, Inc. (127,306 Common Shares)(@) 413,745
Decision One Corporation (350,059 Common Shares)(@)(R) 1,501,752
Electro Mechanical Solutions (Warrants for 2,564 Common
Shares, Expires September 29, 2002)(2)(@)(R) --
Euro United Corporation (Residual Interest in Bankruptcy
Estate)(4)(@)(R) 4,466,250
Exide Technologies (Warrants for 16,501 Common Shares,
Expires March 16, 2006)(2)(@)(R) 165
Genesis Health Ventures, Inc. (190,605 Common Shares)(@) 2,868,605
Genesis Health Ventures, Inc. (2,223 Preferred Shares)(@) 200,070
Grand Union Company (Residual Interest in Bankruptcy
Estate)(2)(@)(R) 69,225
Holmes Products Corporation (Warrants for 19,397 Common
Shares, Expires May 7, 2006)(@)(R) --
Humphreys, Inc. (Residual Interest in Bankruptcy
Estate)(2) (@)(R) 25,000
Imperial Home Decor Group, Inc. (300,141 Common
Shares)(@)(R) 1
IHDG Realty (300,141 Common Shares)(@)(R) 1
Kevco, Inc. (Residual Interest in Bankruptcy
Estate)(2)(@)(R) 400,069
Mariner Health Care, Inc. (126,525 Common Shares)(@) 1,613,194
Morris Material Handling, Inc. (481,373 Common
Shares)(@)(R) 673,922
MP Holdings, Inc. (590 Common Shares)(@)(R) 6
Murray's Discount Auto Stores, Inc. (17 Common
Shares)(@)(R) 62,442
Murray's Discount Auto Stores, Inc. (Warrants for
955 Common Shares, Expires January 22, 2007)(@)(R) 3,515,004
New World Restaurant Group, Inc. (Warrants for 4,000
Common Shares, Expires June 15, 2006)(@)(R) 96,040
Pacific Coin, Inc. (1,091 Common Shares)(@)(R) 1
Safelite Glass Corporation (660,808 Common Shares)(@)(R) 7,427,482
See Accompanying Notes to Financial Statements
27
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
VALUE
--------------
Safelite Realty (44,605 Common Shares)(@)(R) $ 1
Scientific Games Corporation (48,930 Warrants for
Class B Non-Voting Common Shares, Expires October
2003)(@)(R) 138,445
Soho Publishing (17,582 Common Shares)(@)(R) 176
Staff Leasing, Inc. (60,056 Common Shares)(@) 195,182
Stellex Aerostructures, Inc. (11,130 Common Shares)(@)(R) 275,767
Tartan Textile Services, Inc. (23,449 Shares of
Series D Preferred Stock)(@)(R) 2,227,655
Tartan Textile Services, Inc. (36,775 Shares of
Series E Preferred Stock)(@)(R) 2,333,852
Tembec, Inc. (167,239 Common Shares)(@)(R) 1,252,353
U.S. Office Products Company (Residual Interest in
Bankruptcy Estate)(2)(@)(R) --
Vision Twenty-One, Inc. (Warrants for 243,778 Common
Shares, Expires October 31, 2010)(@)(R) --
--------------
TOTAL FOR EQUITIES AND OTHER ASSETS -- 4.6%
(COST $34,710,718) 42,556,101
--------------
TOTAL INVESTMENTS (COST $1,774,480,381)(5) 170.3% $1,591,410,290
PREFERRED SHARES AND LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS-NET (70.3)% (657,112,065)
----- --------------
NET ASSETS 100.0% $ 934,298,225
===== ==============
See Accompanying Notes to Financial Statements
28
ING Prime Rate Trust
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
----------
@ Non-income producing security.
(R) Restricted security.
* Senior loans, while exempt from registration under the Securities Act of
1933, as amended contain certain restrictions on resale and cannot be sold
publicly. These senior loans bear interest (unless otherwise noted) at
rates that float periodically at a margin above the Prime Rate of a U.S.
bank specified in the credit agreement, LIBOR, the certificate of deposit
rate, or in some cases another base lending rate.
NR Not Rated
+ Bank Loans rated below Baa by Moody's Investors Services, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
(1) The borrower filed for protection under Chapter 7 of the U.S. Federal
bankruptcy code.
(2) The borrower filed for protection under Chapter 11 of the U.S. Federal
bankruptcy code.
(3) Loan is on non-accrual basis.
(4) The borrower filed for protection under the Canadian Bankruptcy and
Insolvency Act.
(5) For federal income tax purposes, the cost of investments is $1,771,698,381
and net unrealized depreciation consists of the following:
Gross Unrealized Appreciation $ 37,141,568
Gross Unrealized Depreciation (217,429,659)
--------------
Net Unrealized Depreciation $ (180,288,091)
==============
See Accompanying Notes to Financial Statements
29
ING Prime Rate Trust
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
ASSETS:
Investments in securities at value (Cost $1,774,480,381) $ 1,591,410,290
Cash 171,393
Receivables:
Interest 8,781,627
Other 87,620
Prepaid expenses 193,119
Prepaid arrangement fees on notes payable 150,637
---------------
Total assets 1,600,794,686
---------------
LIABILITIES:
Notes payable 212,000,000
Deferred arrangement fees on senior loans 1,858,480
Accrued interest payable 333,208
Accrued preferred shares dividend payable 82,251
Payable to affiliates 1,422,713
Accrued expenses 799,809
---------------
Total liabilities 216,496,461
---------------
Preferred shares, $25,000 stated value per share
at liquidation value (18,000 shares outstanding) 450,000,000
NET ASSETS $ 934,298,225
===============
Net asset value per common share outstanding (net assets
divided by 136,972,914 common shares authorized and
outstanding, par value $0.01) $ 6.82
===============
NET ASSETS CONSIST OF:
Paid in capital $ 1,287,948,209
Undistributed net investment income 9,908,912
Accumulated net realized loss on investments (180,488,805)
Net unrealized depreciation of investments (183,070,091)
---------------
NET ASSETS $ 934,298,225
===============
See Accompanying Notes to Financial Statements
30
ING Prime Rate Trust
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS for the Six Months Ended August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 45,822,768
Arrangement fees earned 1,375,117
Dividends 6,006
Other 1,794,317
------------
Total investment income 48,998,208
------------
EXPENSES:
Interest 2,330,041
Investment management fees 6,534,017
Administration fees 2,041,861
Transfer agent and registrar fees 301,063
Printing expense 104,420
Custodian fees 322,250
Revolving credit facility fees 155,174
Professional fees 486,709
Preferred shares -- dividend disbursing agent fees 577,234
Insurance expense 12,406
Pricing fees 39,354
Postage expense 128,800
Trustees' fees 36,800
Miscellaneous expense 151,903
NYSE registration fees 22,207
------------
Total expenses 13,244,239
------------
Net investment income 35,753,969
------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS:
Net realized loss on investments (53,390,412)
Net change in unrealized depreciation of investments 654,802
------------
Net loss on investments (52,735,610)
------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
From net investment income (4,226,144)
------------
Net decrease in net assets resulting from operations $(21,207,785)
============
See Accompanying Notes to Financial Statements
31
ING Prime Rate Trust
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, YEAR ENDED
2002 FEBRUARY 28,
(UNAUDITED) 2002
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 35,753,969 $ 101,753,746
Net realized loss on investments (53,390,412) (53,063,828)
Change in unrealized depreciation
of investments 654,802 (69,951,020)
Distributions to preferred shareholders from
net investment income (4,226,144) (15,273,093)
--------------- ---------------
Net decrease in net assets resulting
from operations (21,207,785) (36,534,195)
--------------- ---------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Distributions from net investment income (30,475,669) (85,728,945)
--------------- ---------------
Decrease in net assets from distributions to
common shareholders (30,475,669) (85,728,945)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Common shares issued from dividend reinvestment -- 919,219
Common shares sold in connection with shelf offerings -- 87,513
Offering costs of preferred shares -- (194,010)
--------------- ---------------
Net increase from capital share transactions -- 812,722
--------------- ---------------
Net decrease in net assets (51,683,454) (121,450,418)
NET ASSETS:
Beginning of period 985,981,679 1,107,432,097
--------------- ---------------
End of period (including undistributed net investment
income of $9,908,912 and $8,856,756, respectively) $ 934,298,225 $ 985,981,679
=============== ===============
SUMMARY OF COMMON SHARE TRANSACTIONS:
Shares issued in payment of distributions from net
investment income -- 114,904
Shares sold in connection with shelf offerings -- 10,939
--------------- ---------------
Net increase in shares common shares outstanding -- 125,843
=============== ===============
See Accompanying Notes to Financial Statements
32
ING Prime Rate Trust
--------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS for the Six Months Ended August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 43,804,938
Dividends received 6,006
Facility fees paid (35,001)
Dividends paid to preferred shareholders (4,221,504)
Arrangement fees received 2,615,375
Other income received 1,848,576
Interest paid (2,513,899)
Other operating expenses paid (10,293,350)
Purchases of securities (489,984,004)
Proceeds from sale of securities 558,552,837
-------------
Net cash provided by operating activities 99,779,974
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to common shareholders (30,475,669)
Loan advance (70,000,000)
-------------
Net cash flows used in financing activities (100,475,669)
-------------
Net change in cash (695,695)
Cash at beginning of period 867,088
-------------
Cash at end of period $ 171,393
=============
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations $ (21,207,785)
-------------
Adjustments to reconcile net increase in net assets resulting
from operations to net cash used for operating activities:
Change in unrealized depreciation of securities (654,802)
Net accretion of discounts on securities (2,228,358)
Realized loss on sale of securities 53,390,412
Purchase of securities (489,984,004)
Proceeds on sale of securities 558,552,837
Decrease in interest receivable 210,528
Decrease in other assets 54,257
Decrease in prepaid arrangement fees on notes payable 120,175
Decrease in prepaid expenses 134,275
Increase in deferred arrangement fees on senior loans 1,240,258
Decrease in accrued interest payable (183,858)
Increase in preferred shareholders dividend payable 4,640
Increase in payable to affiliates 44,351
Increase in accrued expenses 287,048
-------------
Total adjustments 120,987,759
-------------
Net cash provided by operating activities $ 99,779,974
=============
See Accompanying Notes to Financial Statements
33
ING Prime Rate Trust
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a common share outstanding throughout the period
SIX MONTHS
ENDED YEARS ENDED FEBRUARY 28 OR FEBRUARY 29,
AUGUST 31, -------------------------------------------
2002 2002 2001 2000
----------- ----------- ----------- -----------
(UNAUDITED)
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 7.20 $ 8.09 $ 8.95 $ 9.24
Net investment income 0.25 0.74 0.88 0.79
Net realized and unrealized gain (loss) on
investments (0.38) (0.89) (0.78) (0.30)
Distribution to Preferred Shareholders (0.03) (0.11) (0.06) --
Increase (decrease) in net asset value from
investment operations (0.16) (0.26) 0.04 0.49
Distributions to Common Shareholders from net
investment income (0.22) (0.63) (0.86) (0.78)
Increase in net asset value from share offerings -- -- -- --
Reduction in net asset value from rights offering -- -- -- --
Increase in net asset value from
repurchase of capital stock -- -- -- --
Reduction in net asset value from
Preferred Shares offerings -- -- (0.04) --
----------- ----------- ----------- -----------
Net asset value, end of period $ 6.82 $ 7.20 $ 8.09 $ 8.95
=========== =========== =========== ===========
Closing market price at end of period $ 5.92 $ 6.77 $ 8.12 $ 8.25
TOTAL RETURN(3)
Total investment return at closing
market price(4) (9.50)% (9.20)% 9.10% (5.88)%
Total investment return at net asset value(5) (1.97)% (3.02)% 0.19% 5.67%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (000's) $ 934,298 $ 985,982 $ 1,107,432 $ 1,217,339
Preferred Rate Shares
Aggregate amount outstanding (000's) $ 450,000 $ 450,000 $ 450,000 --
Liquidation and market value Per Share $ 25,000 $ 25,000 $ 25,000 --
Asset coverage Per Share** 241% 235% 215% --
Average borrowings (000's) $ 193,853 $ 365,126 $ 450,197 $ 524,019
Ratios to average net assets including preferred*
Expenses (before interest and other fees related
to revolving credit facility)(1) 1.51% 1.57% 1.62% --
Expenses(1) 1.84% 2.54% 3.97% --
Net investment income(1) 4.98%(A) 6.83% 9.28% --
Ratios to average net assets plus borrowing
Expenses (before interest and other fees related
to revolving credit facility)(1) 1.83% 1.66% 1.31% 1.00%(9)
Expenses(1) 2.24% 2.70% 3.21% 2.79%(9)
Net investment income(1) 6.05%(B) 7.24% 7.50% 6.12%
Ratios to average net assets
Expenses (before interest and other fees related
to revolving credit facility)(1) 2.18% 2.25% 1.81% 1.43%(9)
Expenses(1) 2.70% 3.64% 4.45% 4.00%(9)
Net investment income(1) 7.26%(C) 9.79% 10.39% 8.77%
Portfolio turnover rate 30% 53% 46% 71%
Common shares outstanding at end of period
(000's) 136,973 136,973 136,847 136,036
YEARS ENDED FEBRUARY 28 OR FEBRUARY 29,
-------------------------------------------
1999(8) 1998(8) 1997(8)
----------- ----------- -----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 9.34 $ 9.45 $ 9.61
Net investment income 0.79 0.87 0.82
Net realized and unrealized gain (loss) on
investments (0.10) (0.13) (0.02)
Distribution to Preferred Shareholders -- -- --
Increase (decrease) in net asset value from
investment operations 0.69 0.74 0.80
Distributions to Common Shareholders from net
investment income (0.82) (0.85) (0.82)
Increase in net asset value from share offerings 0.03 -- --
Reduction in net asset value from rights offering -- -- (0.14)
Increase in net asset value from
repurchase of capital stock -- -- --
Reduction in net asset value from
Preferred Shares offerings -- -- --
----------- ----------- -----------
Net asset value, end of period $ 9.24 $ 9.34 $ 9.45
=========== =========== ===========
Closing market price at end of period $ 9.56 $ 10.31 $ 10.00
TOTAL RETURN(3)
Total investment return at closing
market price(4) 1.11% 12.70% 15.04%(6)
Total investment return at net asset value(5) 7.86% 8.01% 8.06%(6)
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (000's) $ 1,202,565 $ 1,034,403 $ 1,031,089
Preferred Rate Shares
Aggregate amount outstanding (000's) -- -- --
Liquidation and market value Per Share -- -- --
Asset coverage Per Share** -- -- --
Average borrowings (000's) $ 490,978 $ 346,110 $ 131,773
Ratios to average net assets including preferred*
Expenses (before interest and other fees related
to revolving credit facility)(1) -- -- --
Expenses(1) -- -- --
Net investment income(1) -- -- --
Ratios to average net assets plus borrowing
Expenses (before interest and other fees related
to revolving credit facility)(1) 1.05%(9) 1.04% 1.13%
Expenses(1) 2.86%(9) 2.65% 1.92%
Net investment income(1) 6.00% 6.91% 7.59%
Ratios to average net assets
Expenses (before interest and other fees related
to revolving credit facility)(1) 1.50%(9) 1.39% 1.29%
Expenses(1) 4.10%(9) 3.54% 2.20%
Net investment income(1) 8.60% 9.23% 8.67%
Portfolio turnover rate 68% 90% 82%
Common shares outstanding at end of period
(000's) 130,206 110,764 109,140
----------
(1) Annualized for periods less than one year.
(2) Prior to the waiver of expenses, the ratios of expenses to average net
assets were 1.95% (annualized), 1.48% and 1.44% for the period from May 12,
1988 to February 28, 1989, and for the fiscal years ended February 28, 1990
and February 29, 1992, respectively, and the ratios of net investment
income to average net assets were 8.91% (annualized), 10.30% and 7.60% for
the period from May 12, 1988 to February 28, 1989, and for the fiscal years
ended February 28, 1990 and February 29, 1992, respectively.
(3) Total return calculations are attributable to common shareholders. (4)
Total investment return measures the change in the market value of your
investment assuming reinvestment of dividends and capital gain
distributions, if any, in accordance with the provisions of the dividend
reinvestment plan. On March 9, 1992, the shares of the Trust were initially
listed for trading on the New York Stock Exchange. Accordingly, the total
investment return for the year ended February 28, 1993, covers only the
period from March 9, 1992, to February 28, 1993. Total investment return
for periods prior to the year ended February 28, 1993, are not presented
since market values for the Trust's shares were not available. Total
returns for less than one year are not annualized.
(5) Total investment return at net asset value has been calculated assuming a
purchase at net asset value at the beginning of each period and a sale at
net asset value at the end of each period and assumes reinvestment of
dividends and capital gain distributions in accordance with the provisions
of the dividend reinvestment plan. This calculation differs from total
investment return because it excludes the effects of changes in the market
values of the Trust's shares. Total returns for less than one year are not
annualized.
(6) Calculation of total return excludes the effects of the per share dilution
resulting from the rights offering as the total account value of a fully
subscribed shareholder was minimally impacted.
See Accompanying Notes to Financial Statements
34
ING Prime Rate Trust
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Continued)
--------------------------------------------------------------------------------
YEARS ENDED FEBRUARY 28 OR FEBRUARY 29,
---------------------------------------------------------------------------------------------------------------------------
1996(7) 1995 1994 1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 9.66 $ 10.02 $ 10.05 $ 9.96 $ 9.97 $ 10.00 $ 10.00 $ 10.00
0.89 0.74 0.60 0.60 0.76 0.98 1.06 0.72
(0.08) 0.07 (0.05) 0.01 (0.02) (0.05) -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
0.81 0.81 0.55 0.61 0.74 0.93 1.06 0.72
(0.86) (0.73) (0.60) (0.57) (0.75) (0.96) (1.06) (0.72)
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- (0.44) -- -- -- -- -- --
-- -- 0.02 0.05 -- -- -- --
-- -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 9.61 $ 9.66 $ 10.02 $ 10.05 $ 9.96 $ 9.97 $ 10.00 $ 10.00
=========== =========== =========== =========== =========== =========== =========== ===========
$ 9.50 $ 8.75 $ 9.25 $ 9.13 -- -- -- --
19.19% 3.27%(6) 8.06% 10.89% -- -- -- --
9.21% 5.24%(6) 6.28% 7.29% 7.71% 9.74% 11.13% 7.35%
$ 862,938 $ 867,083 $ 719,979 $ 738,810 $ 874,104 $ 1,158,224 $ 1,036,470 $ 252,998
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
1.23% 1.30% 1.31% 1.42% 1.42%(2) 1.38% 1.46%(2) 1.18%(2)
9.23% 7.59% 6.04% 5.88% 7.62%(2) 9.71% 10.32%(2) 9.68%(2)
88% 108% 87% 81% 53% 55% 100% 49%
89,794 89,794 71,835 73,544 87,782 116,022 103,660 25,294
----------
(7) ING Investments, LLC, the Trust's investment manager, acquired certain
assets of Pilgrim Management Corporation, the Trust's former investment
manager, in a transaction that closed on April 7, 1995.
(8) The Manager agreed to reduce its fee for a period of three years from the
Expiration Date of the November 12, 1996 Rights Offering to 0.60% of the
average daily net assets, plus the proceeds of any outstanding borrowings,
over $1.15 billion.
(9) Calculated on total expenses before impact of earnings credits.
* Ratios do not reflect the effect of dividend payments to Preferred
Shareholders; income ratios reflect income earned on assets attributable to
preferred shares.
** Asset coverage represents the total assets available for settlement of
Preferred Stockholder's interest and notes payables in relation to the
Preferred Shareholder interest and notes payable balance outstanding. The
Preferred Shares were first offered November 2, 2000.
(A) Had the Trust not amortized premiums and accreted discounts, the ratio of
net investment income to average net assets including preferred shares
would have been 4.86% for the six months ended August 31, 2002.
(B) Had the Trust not amortized premiums and accreted discounts, the ratio of
net investment income to average net assets plus borrowings applicable to
common shares would have been 5.93% for the six months ended August 31,
2002.
(C) Had the Trust not amortized premiums and accreted discounts, the ratio of
net investment income to average net assets applicable to common shares
would have been 7.10% for the six months ended August 31, 2002.
See Accompanying Notes to Financial Statements
35
ING Prime Rate Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
ING Prime Rate Trust (the "Trust"), is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as a diversified, closed-end,
investment management company. The Trust invests in senior loans which are
exempt from registration under the Securities Act of 1933 as amended (the "`33
Act"), but contain certain restrictions on resale and cannot be sold publicly.
These loans bear interest (unless otherwise noted) at rates that float
periodically at a margin above the Prime Rate of a U.S. bank specified in the
credit agreement, the London Inter-Bank Offered Rate ("LIBOR"), the certificate
of deposit rate, or in some cases another base lending rate. The following is a
summary of the significant accounting policies consistently followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with accounting principles generally accepted in the United States of
America.
A. SENIOR LOAN AND OTHER SECURITY VALUATION. Loans are normally valued at the
mean of the means of one or more bid and asked quotations obtained from a
pricing service or other sources determined by the Board of Trustees to be
independent and believed to be reliable. Loans for which reliable
quotations are not available may be valued with reference to another loan
or a group of loans for which quotations are more readily available and
whose characteristics are comparable to the loan being valued. Under this
approach, the comparable loan or loans serve as a proxy for changes in
value. The Trust has engaged an independent pricing service to provide
quotations from dealers in loans and to calculate values under the proxy
procedure described above. It is expected that most of the loans held by
the Trust will be valued with reference to quotations from the independent
pricing service or with reference to the proxy procedure described above.
ING Investments, LLC (the "Investment Manager") may believe that the price
for a loan derived from market quotations or the proxy procedure described
above is not reliable or accurate. Among other reasons, this may be the
result of information about a particular loan or borrower known to the
Investment Manager that the Investment Manager believes may not be known to
the pricing service or reflected in a price quote. In this event, the loan
is valued at fair value as determined in good faith under procedures
established by the Trust's Board of Trustees and in accordance with the
provisions of the 1940 Act. Under these procedures, fair value is
determined by the Investment Manager and monitored by the Trust's Board of
Trustees through its Valuation Committee. In fair valuing a loan,
consideration is given to several factors, which may include, among others,
the following: (i) the charactistics of and fundamental analytical data
relating to the loan, including the cost, size, current interest rate,
period until the next interest rate reset, maturity and base lending rate
of the loan, the terms and conditions of the loan and any related
agreements, and the position of the loan in the borrower's debt structure;
(ii) the nature, adequacy and value of the collateral, including the
Trust's rights, remedies and interests with respect to the collateral;
(iii) the creditworthiness of the borrower and the cash flow coverage of
outstanding principal and interest, based on an evaluation of its financial
condition, financial statements and information about the borrower's
business, cash flows, capital structure and future prospects; (iv)
information relating to the market for the loan, including price quotations
for, and trading in, the loan and interests in similar loans; (v) the
reputation and financial condition of the agent for the loan and any
intermediate participants in the loan; (vi) the borrower's management; and
(vii) the general economic and market conditions affecting the fair value
of the loan. Securities for which the primary market is a national
securities exchange or the NASDAQ National Market System are stated at the
last reported sale price on the day of valuation. Debt and equity
securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the mean between the
last reported bid and asked price. Securities other than senior loans for
which reliable quotations are not readily available and all other assets
will be valued at their respective fair values as determined in good faith
by, or under procedures established by, the Board of Trustees of the Trust.
Investments in securities maturing in
36
ING Prime Rate Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
less than 60 days from the date of acquisition are valued at amortized
cost, which, when combined with accrued interest, approximates market
value.
B. FEDERAL INCOME TAXES. It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
At February 28, 2002, the Trust had capital loss carryforwards for federal
income tax purposes of approximately $125,806,013 which are scheduled to
expire through February 28, 2011.
The Board of Trustees intends to offset any future net capital gains with
the capital loss carryforwards until each carryforward has been fully
utilized or expires.
C. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Loans are booked on a
settlement date basis and security transactions are accounted for on trade
date (date the order to buy or sell is executed). Realized gains or losses
are reported on the basis of identified cost of securities delivered.
Dividend income is recognized on the ex-dividend date. Interest income is
recorded on an accrual basis at the then-current interest rate of the loan.
The accrual of interest on loans is discontinued when, in the opinion of
management, there is an indication that the borrower may be unable to meet
payments as they become due. Upon such discontinuance, all unpaid accrued
interest is reversed. Cash collections on nonaccrual senior loans are
generally applied as a reduction to the recorded investment of the loan.
Senior loans are returned to accrual status only after all past due amounts
have been received and the borrower has demonstrated sustained performance.
For all loans acquired prior to March 1, 2001, arrangement fees, which
represent non-refundable fees associated with the acquisition of loans, are
deferred and recognized over the shorter of 2.5 years or the actual terms
of the loan. For all loans, except revolving credit facilities, acquired
subsequent to February 28, 2001, arrangement fees are treated as discounts
and accreted as described in Note 1.H. Arrangement fees associated with
revolving credit facilities acquired subsequent to February 28, 2001 are
deferred and recognized over the shorter of 4 years or the actual term of
the loan.
D. DISTRIBUTIONS TO SHAREHOLDERS. The Trust records distributions to its
shareholders on the ex-date. Distributions from income are declared by the
Trust on a monthly basis. Distributions from capital gains, if any, are
declared on an annual basis. The amount of distributions from net
investment income and net realized capital gains are determined in
accordance with federal income tax regulations, which may differ from
accounting principles generally accepted in the United States of America
for items such as the treatment of short term capital gains and the
amortization of premiums and accretion of discounts. These "book/tax"
differences are considered either temporary or permanent in nature. To the
extent that these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassifications.
Distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are
reported as distributions in excess of net investment income and/or
realized capital gains. To the extent they exceed net investment income and
net realized capital gains for tax purposes, they are reported as a tax
return of capital. During the year ended February 28, 2002 the Trust
reclassified $2,580,000 from undistributed net investment income to
accumulated net realized loss on investments, to reflect the treatment of
permanent book/tax differences.
E. DIVIDEND REINVESTMENTS. Pursuant to the Shareholder Investment Program
(formerly known as the Automatic Dividend Reinvestment Plan), DST Systems,
Inc., the Plan Agent, purchases, from time to time, shares of beneficial
interest of the Trust on the open market to satisfy dividend reinvestments.
Such shares are purchased only when the closing sale or bid price plus
commission is less than the net asset value per share of the stock on the
valuation date. If the market
37
ING Prime Rate Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
price plus commissions is equal to or exceeds the net asset value, new
shares are issued at the greater of (i) net asset value or (ii) the market
price of the shares during the pricing period, minus a discount of 5%.
F. USE OF ESTIMATES. Management of the Trust has made certain estimates and
assumptions relating to the reporting of assets, liabilities, revenues,
expenses and contingencies to prepare these financial statements in
conformity with generally accepted accounting principles in the United
States of America. Actual results could differ from these estimates.
G. SHARE OFFERINGS. During the year ended February 28, 1999, the Trust began
issuing shares under various shelf registration statements, whereby the net
proceeds received by the Trust from share sales may not be less than the
greater of (i) the NAV per share or (ii) 94% of the average daily market
price over the relevant pricing period.
H. CHANGE IN ACCOUNTING PRINCIPLE. In November 2000 the American Institute of
Certified Public Accountants (the "AICPA") issued a revised version of the
AICPA Audit and Accounting Guide for Investment Companies (the "Guide").
Effective March 1, 2001, the Fund adopted the provisions of the Guide and
began amortizing premiums and accreting discounts on debt securities. Prior
to March 1, 2001, the Trust had not amortized premiums nor accreted
discounts. The cumulative effect of this accounting change had no impact on
net assets of the Trust, but resulted in a $3,653,000 increase in the cost
of securities and a corresponding $3,653,000 increase in net unrealized
depreciation of investments, based on securities held by the Trust on March
1, 2001.
I. RECLASSIFICATION. Under EITF Topic D-98, CLASSIFICATION AND MEASUREMENT OF
REDEEMABLE SECURITIES, which was issued on July 19, 2001, preferred
securities that are redeemable for cash or other assets are to be
classified outside of permanent equity to the extent that the redemption is
at a fixed or determinable price and at the option of the holder or upon
the occurrence of an event that is not solely within the control of the
issuer. Subject to the guidance of the EITF, the Trust's preferred stock,
which was previously classified as a component of net assets, has been
reclassified outside of permanent equity (net assets) in the accompanying
financial statements. Prior year amounts have also been reclassified to
conform with this presentation. The impact of this reclassification creates
no change to the net assets available to common shareholders.
NOTE 2 -- INVESTMENTS
For the six months ended August 31, 2002, the cost of purchases and the proceeds
from principal repayment and sales of investments, excluding short-term notes,
totaled $489,984,004 and $558,552,837, respectively. At August 31, 2002, the
Trust held senior loans valued at $1,523,311,257 representing 95.7% of its total
investments. The market value of these assets is established as set forth in
Note 1.
The senior loans acquired by the Trust may take the form of a direct co-lending
relationship with the corporate issuer, an assignment of a co-lender's interest
in a loan, or a participation interest in a co-lender's interest in a loan. The
lead lender in a typical corporate loan syndicate administers the loan and
monitors collateral. In the event that the lead lender becomes insolvent, enters
FDIC receivership or, if not FDIC insured, enters into bankruptcy, the Trust may
incur certain costs and delays in realizing payment, or may suffer a loss of
principal and/or interest. Additionally, certain situations may arise where the
Trust acquires a participation in a co-lender's interest in a loan and the Trust
does not have privity with or direct recourse against the corporate issuer.
Accordingly, the Trust may incur additional credit risk as a participant because
it must assume the risk of insolvency or bankruptcy of the co-lender from which
the participation was acquired. Common and preferred stocks, and stock purchase
warrants held in the portfolio were acquired in conjunction with senior loans
held by the Trust. Certain of these stocks and warrants are restricted and may
not be publicly
38
ING Prime Rate Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
sold without registration under the '33 Act, or without an exemption under the
'33 Act. In some cases, these restrictions expire after a designated period of
time after issuance of the stock or warrant. These restricted securities are
valued at fair value as determined by the Board of Trustees by considering
quality, dividend rate, and marketability of the securities compared to similar
issues. In order to assist in the determination of fair value, the Trust will
obtain quotes from dealers who periodically trade in such securities where such
quotes are available. Dates of acquisition and cost or assigned basis of
restricted securities are as follows:
DATE OF COST OR
ACQUISITION ASSIGNED BASIS
----------- --------------
Allied Digital Technologies Corporation -- Residual Interest in
Bankruptcy Estate 06/05/02 $ 186,961
American Blind and Wallpaper, Inc. -- Common Stock 01/12/99 --
AM Cosmetics Corporation -- Common Stock 06/08/99 385,610
AM Cosmetics Corporation -- Preferred Stock 06/02/99 --
Arch Wireless Holdings, Inc. -- Common Stock 07/22/02 68,423
Autotote Systems, Inc. -- Option 02/26/97 --
Boston Chicken, Inc. -- Residual interest in Boston Chicken Trust 12/26/00 8,014,961
Breed Technologies -- Common Stock 12/27/00 3,343,665
Capital Tool & Design, Ltd. -- Warrants 07/26/96 --
Casden Properties Corporation -- Preferred Partnership Units 12/31/98 --
Covenant Care, Inc. -- Warrants 12/22/95 --
Covenant Care, Inc. -- Warrants 01/18/02 --
Decision One Corporation -- Common Stock 06/16/00 --
Electro Mechanical Solutions -- Warrants 06/20/00 --
Euro United Corporation -- Residual Interest in Bankruptcy Estate 06/21/02 4,466,250
Exide Technologies -- Warrants 11/30/01 --
Grand Union Company -- Residual Interest in Bankruptcy Estate 07/01/02 8,198
Holmes Group -- Warrants 10/24/01 --
Humphry's, Inc. -- Common Stock 05/01/02 25,000
Imperial Home Decor Group -- Common Stock 05/02/01 1,654,378
IHDG Realty -- Common Stock 05/02/01 1
Kevco, Inc. -- Residual Interest in Bankruptcy Estate 06/05/02 400,069
Morris Material Handling, Inc. -- Common Stock 01/10/01 3,009,059
MP Holdings, Inc. -- Common Stock 03/14/01 6
Murray's Discount Auto Stores, Inc. -- Warrants 02/16/99 --
New World Coffee Manhattan Bagel, Inc. -- Warrants 09/27/01 40
Pacific Coin, Inc. -- Common Stock 07/09/01 1
Safelite Glass Corporation -- Common Stock 09/12/00 --
Safelite Realty -- Common Stock 09/12/00 --
Scientific Games Corp. -- Common Stock 05/11/01 --
Soho Publishing, Inc. -- Common Stock 03/14/01 176
Stellex Aerostructures, Inc. -- Common Stock 10/17/01 275,767
Tartan Textiles Services, Series D Preferred Stock 07/17/01 2,227,655
Tartan Textiles Services, Series E Preferred Stock 07/17/01 2,333,852
Tembec, Inc. -- Conversion rights representing
Tembec Common Stock Shares 01/10/01 1,442,942
U.S. Office Products Company -- Residual Interest in
Bankruptcy Estate 06/11/02 --
Vision Twenty-One -- Warrants 11/28/00 --
-----------
Total restricted securities excluding senior loans (market value of
$37,265,305 was 4.0% of net assets at August 31, 2002) $27,843,014
===========
39
ING Prime Rate Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
NOTE 3 -- MANAGEMENT AND ADMINISTRATION AGREEMENTS
The Trust has entered into an Investment Management Agreement with the
Investment Manager, a wholly-owned subsidiary of ING Funds Services, LLC (the
"Administrator"), to provide advisory and management services. The Investment
Management Agreement compensates the Investment Manager with a fee, computed
daily and payable monthly, at an annual rate of 0.80% of the Trust's average
daily net assets (inclusive of preferred stock) plus borrowings ("Managed
Assets").
The Trust has also entered into an Administration Agreement with the
Administrator to provide administrative services and also to furnish facilities.
The Administrator is compensated with a fee, computed daily and payable monthly,
at an annual rate of 0.25% of the Trust's average daily Managed Assets.
At August 31, 2002, the Trust had the following amounts recorded in payable to
affiliates on the accompanying Statement of Assets and Liabilities:
ACCRUED INVESTMENT ACCRUED ADMINISTRATIVE
MANAGEMENT FEES FEES TOTAL
--------------- ---- -----
$1,083,984 $338,729 $1,422,713
NOTE 4 -- COMMITMENTS
The Trust has entered into both a 364-day and a five-year revolving credit
agreement, collateralized by assets of the Trust, to borrow up to $540 million
from a syndicate of major financial institutions maturing July 15, 2003.
Borrowing rates under these agreements are based on a fixed spread over LIBOR,
the federal funds rate, or a commercial paper-based rate. Prepaid arrangement
fees for any unborrowed amounts are amortized over the term of the agreements.
The amount of borrowings outstanding at August 31, 2002, was $212 million, at a
weighted average interest rate of 2.3%. The amount of borrowings represented
13.2% of total assets at August 31, 2002. Average borrowings for the the six
months ended August 31, 2002 were $193,853,261 and the average annualized
interest rate was 2.5%.
As of August 31, 2002, the Trust had unfunded loan commitments pursuant to the
terms of the following loan agreements:
Airgate PCS, Inc. $ 1,576,547
Aladdin Gaming, LLC 2,500,000
Aurora Foods, Inc. 342,857
Doshi Diagnostic 1,287,031
Express Scripts, Inc. 2,370,538
Fleming Companies, Inc. 1,345,455
Frontiervision Operating Partners, L.P. 1,296,970
Hilton Hawaiian Village, LLC 1,654,412
Huntsman Corporation 2,270,595
Insight Health Services Corp. 5,000,000
Lamar Media Corporation 6,398,437
Levi Strauss & Co. 6,161,575
Murray's Discount Auto Stores, Inc. 3,700,000
Owens -- Illinois, Inc. 2,813,151
Packaging Corporation of America 2,753,594
Palace Station Hotel and Casino 4,904,794
Relizon Company (The) 6,444,539
Riverwood International Corp. 4,638,334
Six Flags Theme Parks, Inc. 3,000,000
Waste Connection, Inc. 5,747,126
Western Wireless Corporation 6,000,000
-----------
$72,205,955
===========
NOTE 5 -- RIGHTS AND OTHER OFFERINGS
On October 18, 1996, the Trust issued to its shareholders non-transferable
rights which entitled the holders to subscribe for 18,122,963 shares of the
Trust's common stock at the rate of one share of common stock for each five
rights held. On November 12, 1996, the offering expired and was fully
subscribed. The Trust issued 18,122,963 shares of its common stock to exercising
rights holders at a subscription price of $9.09. Offering costs of $6,972,203
were charged against the offering proceeds.
40
ING Prime Rate Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
On December 27, 1994, the Trust issued to its shareholders transferable rights
which entitled the holders to subscribe for 17,958,766 shares of the Trust's
common stock at the rate of one share of common stock for each four rights held.
On January 27, 1995, the offering expired and was fully subscribed. The Trust
issued 17,958,766 shares of its common stock to exercising rights holders at a
subscription price of $8.12. Offering costs of $4,470,955 were charged against
the offering proceeds.
As of August 31, 2002, share offerings pursuant to shelf registrations were as
follows:
REGISTRATION SHARES SHARES
DATE REGISTERED REMAINING
---- ---------- ---------
6/11/98 15,000,000 --
6/19/98 10,000,000 9,730,800
9/15/98 25,000,000 19,170,354
3/04/99 5,000,000 3,241,645
On November 2, 2000, the Trust issued 3,600 shares each of Series M, Series W
and Series F Auction Rate Cumulative Preferred Shares, $.01 Par Value, $25,000
liquidation preference, for a total issuance of $270 million. Also, on November
16, 2000, the Trust issued 3,600 shares of Series T and Series Th Auction Rate
Cumulative Preferred Shares, $.01 Par Value, $25,000, liquidation preference,
for a total issuance of $180 million. Costs associated with the offering of
approximately $5,438,664 were charged against the proceeds received. The Trust
used the net proceeds of the offering to partially pay down the then existing
indebtedness. The Trust may reborrow amounts in the future to increase its use
of leverage which will be consistent with the limitations imposed by the 1940
Act. Preferred Shares pay dividends based on a rate set at auctions, normally
held every 7 days. In the most instances dividends are also payable every 7
days, on the first business day following the end of the rate period.
NOTE 6 -- CUSTODIAL AGREEMENT
State Street Bank and Trust Company ("SSB") serves as the Trust's custodian and
recordkeeper. Custody fees paid to SSB are reduced by earnings credits based on
the cash balances held by SSB for the Trust. There were no earnings credits for
the six months ended August 31, 2002.
NOTE 7 -- SUBORDINATED LOANS AND UNSECURED LOANS
The primary risk arising from investing in subordinated loans or in unsecured
loans is the potential loss in the event of default by the issuer of the loans.
The Trust may acquire a subordinated loan only if, at the time of acquisition,
it acquires or holds a Senior Loan from the same borrower. The Trust will
acquire unsecured loans only where the Investment Manager believes, at the time
of acqusition, that the Trust would have the right to payment upon default that
is not subordinate to any other creditor. The Trust may invest up to 5% of its
total assets, measured at the time of investment, in subordinated loans and
unsecured loans. As of August 31, 2002, the Trust held 3.2% of its total assets
in subordinated loans and unsecured loans.
41
ING Prime Rate Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
NOTE 8 -- SUBSEQUENT EVENTS
Subsequent to August 31, 2002, the Trust paid to Common Shareholders the
following dividends from net investment income:
PER SHARE AMOUNT DECLARATION DATE RECORD DATE PAYABLE DATE
---------------- ---------------- ----------- ------------
$0.0385 08/30/2002 09/10/2002 09/23/2002
$0.0375 09/30/2002 10/10/2002 10/22/2002
Subsequent to August 31, 2002, the Trust paid to Preferred Shareholders the
following dividends from net investment income:
TOTAL
PREFERRED PER SHARE AUCTION RECORD PAYABLE
SHARES AMOUNT DATES DATES DATES
------ ------ ----- ----- -----
Series M $40.15 09/09/02 to 10/07/02 09/16/02 to 10/11/02 09/17/02 to 10/15/02
Series T $39.47 09/03/02 to 10/01/02 09/10/02 to 10/08/02 09/11/02 to 10/09/02
Series W $40.30 09/04/02 to 10/02/02 09/11/02 to 10/09/02 09/12/02 to 10/10/02
Series Th $39.46 09/05/02 to 10/03/02 09/12/02 to 10/10/02 09/13/02 to 10/11/02
Series F $41.84 09/06/02 to 10/04/02 09/13/02 to 10/11/02 09/16/02 to 10/15/02
MANAGEMENT'S ADDITIONAL OPERATING INFORMATION (UNAUDITED)
APPROVAL OF CHANGES IN INVESTMENT POLICIES
At a Special Meeting of Trust Shareholders, held August 6, 1998, Shareholders
approved changes in the Trust's fundamental investment policies which make
available certain additional investment opportunities to the Trust, including
(i) investing in loans in any form of business entity, as long as the loans
otherwise meet the Trust's requirements regarding the quality of loans in which
it may invest; (ii) the treatment of lease participations as Senior Loans which
would constitute part of the 80% of the Trust's assets normally invested in
Senior Loans; (iii) investing in all types of hybrid loans that meet credit
standards established by the Investment Manager constituting part of the 20% of
the Trust's assets that may be invested in Other Investments; and (iv) the
ability to invest up to 5% of its total assets in both subordinated loans and
unsecured loans which would constitute part of the 20% of the Trust's assets
that may be invested in Other Investments.
Additionally, another policy change approved by the Board of Trustees of the
Trust, which does not require shareholder approval, permits the Trust to accept
guarantees and expanded forms of intangible assets as collateral, including
copyrights, patent rights, franchise value, and trademarks. Another policy
change approved by the Board, that does not require shareholder approval,
provides that 80% of the Trust's managed assets, as opposed to 80% of its net
assets, may normally be invested in Senior Loans.
The Trust's Manager considered the evolving nature of the syndicated loan market
and the potential benefits to the Trust and its shareholders of revising the
restriction to permit the Trust to invest in loans other than Senior Loans and
the increase in the number of attractive investment opportunities available to
the Trust due to the change.
REPURCHASE OF SECURITIES BY CLOSED-END COMPANIES
In accordance with Section 23(c) of the 1940 Act, and Rule 23c-1 under the 1940
Act the Trust may from time to time purchase shares of beneficial interest of
the Trust in the open market, in privately negotiated transactions and/or
purchase shares to correct erroneous transactions.
SHAREHOLDER INVESTMENT PROGRAM
The Trust offers a Shareholder Investment Program (the "Program") which enables
investors to conveniently add to their holdings at reduced costs. Should you
desire further information concerning this Program, please contact the
Shareholder Servicing Agent at (800) 992-0180.
42
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TRUSTEE AND OFFICER INFORMATION (Unaudited)
--------------------------------------------------------------------------------
The business and affairs of the Trust is managed under the direction of the
Trust's Board of Trustees. Information pertaining to the Trustees and Officers
of the Trust is set forth below:
NUMBER OF
PRINCIPAL PORFOLIOS IN OTHER
TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE OVERSEEN BY HELD BY
AND AGE HELD WITH TRUST TIME SERVED PAST FIVE YEARS TRUSTEE TRUSTEE
------- --------------- ----------- --------------- ------- -------
INDEPENDENT TRUSTEES:
Paul S. Doherty Trustee 10-29-99 to Mr. Doherty is President 102 Mr. Doherty is a
7337 E. Doubletree Ranch Rd. Present and Partner, Doherty, Trustee of The GCG
Scottsdale, Arizona 85258 Wallace, Pillsbury and Trust (February 2002
Age: 68 Murphy, P.C., Attorneys to Present).
(1996 to Present); Director
of Tambrands, Inc. (1993
to 1998); and Trustee of
each of the funds
managed by Northstar
Investment Management
Corporation (1993 to
1999).
J. Michael Earley Trustee 2-26-02 to President and Chief 102 Mr. Earley is a
7337 E. Doubletree Ranch Rd. Present Executive Officer of Trustee of The GCG
Scottsdale, Arizona 85258 Bankers Trust Company, Trust (1997 to
Age: 57 N.A. (1992 to Present). Present).
R. Barbara Gitenstein Trustee 2-26-02 to President of the College of 102 Dr. Gitenstein is a
7337 E. Doubletree Ranch Rd. Present New Jersey (1999 to Trustee of The GCG
Scottsdale, Arizona 85258 Present); Executive Vice Trust (1997 to
Age: 54 President and Provost at Present).
Drake University (1992 to
1998).
Walter H. May Trustee 10-29-99 to Retired. Mr. May was 102 Mr. May is a Trustee
7337 E. Doubletree Ranch Rd. Present formerly Managing of the Best Prep
Scottsdale, Arizona 85258 Director and Director of Charity (1991 to
Age: 65 Marketing for Piper Present) and The GCG
Jaffray, Inc., an investment Trust (February 2002
banking/underwriting firm. to Present).
Mr. May was formerly a
Trustee of each of the
funds managed by
Northstar Investment
Management Corporation
(1996 to 1999).
Jock Patton Trustee 8-28-95 to Private Investor. Mr. Patton 102 Mr. Patton is a
7337 E. Doubletree Ranch Rd. Present was formerly Director and Trustee of The GCG
Scottsdale, Arizona 85258 Chief Executive Officer of Trust (February 2002
Age: 56 Rainbow Multimedia to Present) and
Group, Inc. (January 1999 Director of Hypercom,
to December 2001); Inc. (January 1999 to
Director of Stuart Present); JDA Software
Entertainment, Inc.; Group, Inc. (January
Director of Artisoft, Inc. to Present); Buick of
(1994 to 1998); President Scottsdale, Inc.;
and co-owner of StockVal, National Airlines,
Inc. (November 1992 to Inc.; BG Associates,
June 1997) and a Partner Inc.; BK
and Director at Streich, Entertainment, Inc.;
Lang P.A. (1972 to 1993). and Arizona
Rotorcraft, Inc.
43
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TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
--------------------------------------------------------------------------------
NUMBER OF
PRINCIPAL PORFOLIOS IN OTHER
TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE OVERSEEN BY HELD BY
AND AGE HELD WITH TRUST TIME SERVED PAST FIVE YEARS TRUSTEE TRUSTEE
------- --------------- ----------- --------------- ------- -------
INDEPENDENT TRUSTEES:
David W.C. Putnam Trustee 10-29-99 to President and Director of 102 Mr. Putnam is a
7337 E. Doubletree Ranch Rd. Present F.L. Putnam Securities Trustee of The GCG
Scottsdale, Arizona 85258 Company, Inc. and its Trust (February 2002
Age: 63 affiliates. Mr. Putnam is to Present) and
also President, Secretary Director of F.L.
and Trustee of The Putnam Securities
Principled Equity Market Company, Inc. (June
Fund. Mr. Putnam was 1978 to Present); F.L.
formerly a Director/Trustee Putnam Investment
of Trust Realty Corp.; Management Company
Anchor Investment Trust; (December 2001 to
Bow Ridge Mining Present); Asian
Company and each of the American Bank and
funds managed by Trust Company (June
Northstar Investment 1992 to Present); and
Management Corporation Notre Dame Health Care
(1994 to 1999). Center (1991 to
Present). He is also a
Trustee of The
Principled Equity
Market Fund (November
1996 to Present);
Progressive Capital
Accumulation Trust
(August 1998 to
Present); Anchor
International Bond
Trust (December 2000
to Present); F.L.
Putnam Foundation
(December 2000 to
Present); Mercy
Endowment Foundation
(1995 to Present); and
an Honorary Trustee of
Mercy Hospital (1973
to Present).
Blaine E. Rieke Trustee 2-26-01 to General Partner of 102 Mr. Rieke is a Trustee
7337 E. Doubletree Ranch Rd. Present Huntington Partners, an of the Morgan Chase
Scottsdale, Arizona 85258 investment partnership Trust Co. (January
Age: 69 (1997 to Present). Mr. 1998 to Present) and
Rieke was formerly The GCG Trust
Chairman and Chief (February 2002 to
Executive Officer of Firstar Present).
Trust Company (1973 to
1996). Mr. Rieke was
formerly the Chairman of
the Board and a Trustee of
each of the funds
managed by ING
Investment Management
Co. LLC (1998 to 2001).
Roger B. Vincent Trustee 2-26-02 to President of Springwell 102 Mr. Vincent is a
7337 E. Doubletree Ranch Rd. Present Corporation, a corporate Trustee of The GCG
Scottsdale, Arizona 85258 advisory firm (1989 to Trust (1994 to
Age: 57 Present). Mr. Vincent was Present) and Director
formerly a Director of of AmeriGas Propane,
Tatham Offshore, Inc. Inc. (1998 to Present)
(1996 to 2000) and
Petrolane, Inc. (1993 to
1995).
44
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TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
--------------------------------------------------------------------------------
NUMBER OF
PRINCIPAL PORFOLIOS IN OTHER
TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE OVERSEEN BY HELD BY
AND AGE HELD WITH TRUST TIME SERVED PAST FIVE YEARS TRUSTEE TRUSTEE
------- --------------- ----------- --------------- ------- -------
INDEPENDENT TRUSTEES:
Richard A. Wedemeyer Trustee 2-26-01 to Vice President -- Finance 102 Mr. Wedemeyer is a
7337 E. Doubletree Ranch Rd. Present and Administration -- of Trustee of Touchstone
Scottsdale, Arizona 85258 the Channel Corporation, Consulting Group (1997
Age: 66 an importer of specialty to Present) and The
alloy aluminum products GCG Trust (February
(1996 to Present). Mr. 2002 to Present).
Wedemeyer was formerly
Vice President -- Finance
and Administration -- of
Performance Advantage,
Inc., a provider of training
and consultation services
(1992 to 1996), and Vice
President, Operations and
Administration, of Jim
Henson Productions (1979
to 1997). Mr. Wedemeyer
was formerly a Trustee of
First Choice Funds (1997 to
2001). Mr. Wedemeyer was
also a Trustee of each of
the funds managed by ING
Investment Management
Co., LLC (1998 to 2001).
INTERESTED TRUSTEES:
R. Glenn Hilliard(1) Trustee 2-26-02 to Chairman and CEO of ING 102 Mr. Hilliard is a
7337 E. Doubletree Ranch Rd. Present Americas and a member of Trustee of The GCG t
Scottsdale, Arizona 85258 its Americas Executive Trus (February 2002 to
Age: 59 Committee (1999 to Present); and serves
Present). Mr. Hilliard was as a member of the
formerly Chairman and Board of Directors of
CEO of ING North America, the Clemson University
encompassing the U.S., Foundation, the Board
Mexico and Canada of Councilors for the
regions (1994 to 1999). Carter Center, Trustee
of the Woodruff Arts
Center and sits on the
Board of Directors for
the High Museum of
Art.
45
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TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
--------------------------------------------------------------------------------
NUMBER OF
PRINCIPAL PORFOLIOS IN OTHER
TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE OVERSEEN BY HELD BY
AND AGE HELD WITH TRUST TIME SERVED PAST FIVE YEARS TRUSTEE TRUSTEE
------- --------------- ----------- --------------- ------- -------
INTERESTED TRUSTEES:
Thomas J. McInerney(2) Trustee 2-26-01 to Chief Executive Officer, 154 Mr. McInerney serves
7337 E. Doubletree Ranch Rd. Present ING U.S. Financial Services as a Director/Trustee
Scottsdale, Arizona 85258 (September 2001 to of Aeltus Investment
Age: 46 Present) and member of Management, Inc. (1997
ING Americas Executive to Present); and each
Committee (2001 to of the ING Funds
Present); President, Chief (February 2001 to
Executive Officer and Present); the
Director of Northern Life Ameribest Life
Insurance Company (2001 Insurance Co. (2001 to
to Present); and President Present); ING
and Director of ING Life Equitable Life (2001
Insurance and Annuity to Present); First
Company (1997 to Columbine Life
Present), ING Retirement Insurance Co. (2001 to
Holdings, Inc. (1997 to Present); Golden
Present), ING Aeltus American Life
Holdings Company Inc. Insurance Co. (2001 to
(2000 to Present), and ING Present); ING Life of
Retail Holding Company Georgia (2001 to
(2000 to Present). Mr. Present); Midwestern
McInerney was formerly United Life Insurance
General Manager and Co.; ReliaStar Life
Chief Executive Officer of Insurance Co. (2001 to
ING Worksite Division Present); ING Security
(December 2000 to Life (2001 to
October 2001); President Present); Security
of Aetna Financial Services Connecticut Life
(August 1997 to December Insurance Co. (2001 to
2000); Head of National Present); ING
Accounts and Core Sales Southland Life (2001
and Marketing for Aetna to Present); ING USG
U.S. Healthcare (April 1996 Annuity (2001 to
to March 1997); Head of Present); and ING
Corporate Strategies for United Life (March
Aetna Inc. (July 1995 to 2001 to Present); and
April 1996), and has held a a Trustee of The GCG
variety of line and Trust (February 2002
corporate staff positions to Present). Mr.
since 1978. McInerney is a member
of the Board of the
National Commission on
Retirement Policy; the
Governor's Council on
Economic
Competitiveness and
Technology of
Connecticut; the Board
of Directors of the
Connecticut Business
and Industry
Association; the Board
of Trustees of the
Bushnell; the Board
for the Connecticut
Forum; and the Board
of the Metro Hartford
Chamber of Commerce;
and is Chairman of
Concerned Citizens for
Effective Government.
46
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TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
--------------------------------------------------------------------------------
NUMBER OF
PRINCIPAL PORFOLIOS IN OTHER
TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE OVERSEEN BY HELD BY
AND AGE HELD WITH TRUST TIME SERVED PAST FIVE YEARS TRUSTEE TRUSTEE
------- --------------- ----------- --------------- ------- -------
INTERESTED TRUSTEES:
John G. Turner(3) Chairman and 10-29-99 to President, Turner 102 Mr. Turner serves as a
7337 E. Doubletree Ranch Rd. Trustee Present Investment Company member of the Board of
Scottsdale, Arizona 85258 (January 2002 to Present). The GCG Trust. Mr.
Age: 63 Mr. Turner was formerly Turner also serves as
Vice Chairman of ING Director of the Hormel
Americas (2000 to 2001); Foods Corporation (May
Chairman and Chief 2000 to Present);
Executive Officer of Shopko Stores, Inc.
ReliaStar Financial Corp. (August 1999 to
and ReliaStar Life Present); and M.A.
Insurance Company (1993 Mortenson Co. (March
to 2000); Chairman of 2002 to Present).
ReliaStar United Services
Life Insurance Company
(1995 to 1998); Chairman
of ReliaStar Life Insurance
Company of New York
(1995 to 2001); Chairman
of Northern Life Insurance
Company (1992 to 2001);
Chairman and
Director/Trustee of the
Northstar affiliated
investment companies
(1993 to 2001) and
Director, Northstar
Investment Management
Corporation and its
affiliates (1993 to 1999).
----------
(1) Mr. Hilliard is an "interested person," as defined in the 1940 Act, because
of his relationship with ING Americas, an affiliate of ING Investments,
LLC.
(2) Mr. McInerney is an "interested person," as defined in the 1940 Act,
because of his affiliation with ING U.S. Financial Services, an affiliate
of ING Investments, LLC.
(3) Mr. Turner is an "interested person," as defined in the 1940 Act, because
of his former affiliation with ING Americas, an affiliate of ING
Investments, LLC.
47
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TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
--------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED PAST FIVE YEARS
------- ------------------- ----------- ---------------
OFFICERS:
James M. Hennessy President and Chief February 2001 - Present President and Chief Executive Officer,
7337 E. Doubletree Ranch Rd. Executive Officer ING Capital Corporation, LLC, ING
Scottsdale, Arizona 85258 Funds Services, LLC, ING Advisors, Inc.,
Age: 53 Chief Operating Officer June 2000 - Present ING Investments, LLC, Lexington Funds
Distributor, Inc., Express America TC,
Senior Executive June 2000 - February Inc. and EAMC Liquidation Corp. (since
Vice President 2001 December 2001); Executive Vice
President and Chief Operating Officer
Secretary April 1995 - February ING Quantitative Management, Inc.
2001 (since October 2001) and ING Funds
Distributor, LLC (since June 2000).
Formerly, Senior Executive Vice
President (June 2000 - December 2000)
and Secretary (April 1995 - December
2000) ING Capital Corporation, LLC, ING
Funds Services, LLC, ING Investments,
LLC, ING Advisors, Inc., Express America
TC Inc. and EAMC Liquidation Corp.;
and Executive Vice President, ING
Capital Corporation, LLC and its
affiliates (May 1998 - June 2000) and
Senior Vice President, ING Capital
Corporation, LLC and its affiliates (April
1995 - April 1998).
Michael J. Roland Executive Vice President February 2002 - Present Executive Vice President, Chief Financial
7337 E. Doubletree Ranch Rd. and Assistant Secretary Officer and Treasurer, ING Funds
Scottsdale, Arizona 85258 Services, LLC, ING Funds Distributor,
Age: 44 Chief Financial Officer June 1998 - Present LLC, ING Advisors, Inc., ING
Investments, LLC, ING Quantitative
Senior Vice President June 1998 - February Management, Inc., Lexington Funds
2002 Distributor, Inc., Express America TC,
Inc. and EAMC Liquidation Corp. (since
December 2001). Formerly, Senior Vice
President, ING Funds Services, LLC, ING
Investments, LLC and ING Funds
Distributor, LLC (June 1998 - December
2001) and Chief Financial Officer of
Endeavor Group (April 1997 - June
1998).
Daniel Norman Senior Vice President April 1995 - Present Senior Vice President, ING Investments,
7337 E. Doubletree Ranch Rd. Co-Senior Portfolio LLC (since December 1994); ING Funds
Scottsdale, Arizona 85258 Manager Distributor, LLC (since December 1995);
Age: 44 has served as an officer of other
Treasurer June 1997 - Present affiliates of ING since February 1992.
Jeffrey A. Bakalar Senior Vice President November 1999 - Present Senior Vice President, ING Investments,
7337 E. Doubletree Ranch Rd. Co-Senior Portfolio LLC (since November 1999). Formerly
Scottsdale, Arizona 85258 Manager Vice President and Assistant Portfolio
Age: 42 Manager, ING Investments, LLC
(February 1998 - November 1999); Vice
President of First National Bank of
Chicago (July 1994 - January 1998).
Curtis F. Lee Senior Vice President and January 2001- Present Senior Vice President and Chief Credit
7337 E. Doubletree Ranch Rd. Chief Credit Officer Officer of Senior Loans of ING
Scottsdale, Arizona 85258 Investments, LLC (since August 1999).
Age: 48 Formerly, held a series of positions with
Standard Chartered Bank in the credit
approval and problem loan
management functions (August 1992 -
June 1999)
48
ING Prime Rate Trust
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TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
--------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED PAST FIVE YEARS
------- ------------------- ----------- ---------------
OFFICERS:
Robert S. Naka Senior Vice President November 1999 - Present Senior Vice President and Assistant
7337 E. Doubletree Ranch Rd. Secretary, ING Funds Services, LLC, ING
Scottsdale, Arizona 85258 Assistant Secretary July 1996 - Present Funds Distributor, LLC, ING Advisors,
Age: 39 Inc., ING Capital Corporation, LLC, ING
Investments, LLC, ING Quantitative
Management, Inc. (since October 2001)
and Lexington Funds Distributor, Inc.
(since December 2001). Formerly, Vice
President, ING Investments, LLC (April
1997 - October 1999), ING Funds
Services, LLC (February 1997 - August
1999) and Assistant Vice President, ING
Funds Services, LLC (August 1995 -
February 1997).
Robyn L. Ichilov Vice President November 1997 - Present Vice President of ING Funds Services,
7337 E. Doubletree Ranch Rd. LLC (since October 2001) and ING
Scottsdale, Arizona 85258 Investments, LLC (since August 1997);
Age: 35 Accounting Manager, ING Investments,
LLC (since November 1995).
Kimberly A. Anderson Vice President and February 2001 - Present Vice President for ING Quantitative
7337 E. Doubletree Ranch Rd. Secretary Management, Inc. (since October 2001);
Scottsdale, Arizona 85258 Vice President and Assistant Secretary
Age: 38 Assistant Vice President November 1999 - of ING Funds Services, LLC, ING Funds
and Assistant Secretary February 2001 Distributor, LLC, ING Advisors, Inc., ING
Investments, LLC (since October 2001)
and Lexington Funds Distributor, Inc.
(since December 2001). Formerly,
Assistant Vice President of ING Funds
Services, LLC (November 1999 - January
2001) and has held various other
positions with ING Funds Services, LLC
for more than the last five years
Lourdes R. Bernal Vice President February 2002 - Present Vice President of ING Investments, LLC
7337 E. Doubletree Ranch Rd. (since January 2002). Prior to joining
Scottsdale, Arizona 85258 ING Investments, LLC in 2002, Ms.
Age: 32 Bernal was a Senior Manager in the
Investment Management Practice,
PricewaterhouseCoopers LLP (July 2000
- December 2001); Manager,
PricewaterhouseCoopers LLP (July 1998
- July 2000); Manager, Coopers &
Lybrand LLP (July 1996 - June 1998).
Todd Modic Assistant Vice President August 2001- Present Assistant Vice President and Director of
7337 E. Doubletree Ranch Rd. Financial Reporting of ING Investments,
Scottsdale, Arizona 85258 LLC (since March 2001). Formerly,
Age: 34 Director of Financial Reporting, Axient
Communications, Inc. (May 2000 -
January 2001) and Director of Finance,
Rural/Metro Corporation (March 1995 -
May 2000).
Maria M. Anderson Assistant Vice President August 2001 - Present Assistant Vice President of ING Funds
7337 E. Doubletree Ranch Rd. Services, LLC (since October 2001).
Scottsdale, Arizona 85258 Formerly, Manager of Fund Accounting
Age: 44 and Fund Compliance, ING Investments,
LLC (September 1999 - November
2001); Section Manager of Fund
Accounting, Stein Roe Mutual Funds
(July 1998 - August 1999); and Financial
Reporting Analyst, Stein Roe Mutual
Funds (August 1997 - July 1998).
Elliot Rosen Senior Vice President May 2002 - Present Senior Vice President, ING Investments,
7337 E. Doubletree Ranch Rd. LLC (since February 1999). Formerly,
Scottsdale, Arizona 85258 Senior Vice President IPS-Sendero (May
Age: 49 1997 - February 1999) and President of
Sendero, which merged into IPS
(August 1993 - May 1997). .
49
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TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
--------------------------------------------------------------------------------
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED PAST FIVE YEARS
------- ------------------- ----------- ---------------
OFFICERS:
William H. Rivoir III Senior Vice President and February 2001 - Present Senior Vice President and Secretary of
7337 E. Doubletree Ranch Rd. Assistant Secretary ING Capital Corporation, LLC and ING
Scottsdale, Arizona 85258 Funds Services, LLC (since February
Age: 51 2001), ING Funds Distributor, LLC, ING
Advisors, Inc., ING Investments, LLC,
and ING Quantitative Management,
Inc. (since October 2001), Lexington
Funds Distributor, Inc., ING Pilgrim
Funding, Inc., Pilgrim America Financial,
Inc., Express America TC, Inc. and EAMC
Liquidation Corp. (since December
2001). Formerly, Senior Vice President
and Assistant Secretary of ING Funds
Services, LLC (since June 1998), ING
Investments, LLC, and Pilgrim America
Financial, Inc. (since February 1999),
Senior Vice President of ING
Investments, LLC (since December 1998)
and Assistant Secretary of ING Funds
Distributor, LLC (since February 1999)
and ING Investments, LLC (since June
1998)
50
INVESTMENT MANAGER
ING Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
ADMINISTRATOR
ING Fund Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180
INSTITUTIONAL INVESTORS AND ANALYSTS
Call ING Prime Rate Trust
1-800-336-3436,
Extension 2217
DISTRIBUTOR
ING Funds Distributor, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-334-3444
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 219368
Kansas City, Missouri 64141-9368
CUSTODIAN
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, Missouri 64105
LEGAL COUNSEL
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
KPMG LLP
355 South Grand Avenue
Los Angeles, California 90071
WRITTEN REQUESTS
Please mail all account inquiries and other comments to:
ING Prime Rate Trust Account
c/o ING Fund Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
TOLL-FREE SHAREHOLDER INFORMATION
Call us from 9:00 a.m. to 7:00 p.m. Eastern time on any business day for account
or other information, at 1-800-992-0180
A prospectus containing more complete information regarding the Trust, including
charges and expenses, may be obtained by calling ING Funds Distributor, LLC,
Distributor, at 1-800-992-0180. Please read the prospectus carefully before you
invest or send money.
[LION LOGO]
ING FUNDS PRTSAR 083102-102902