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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5410
---------------------------------------------
ING Prime Rate Trust
-------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
C T CORPORATION, 101 Federal Street, Boston, MA 02110
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-992-0180
----------------------------
Date of fiscal year end: February 28
--------------------------
Date of reporting period: March 1, 2004 to August 31, 2004
---------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
The following is a copy of the report transmitted to stockholders pursuant to
Rule 30e-1 under the Act (17 CFR 270.30e-1):
SEMI-ANNUAL REPORT
[GRAPHIC]
FUNDS
SEMI-ANNUAL REPORT
AUGUST 31, 2004
ING PRIME RATE TRUST
[ING LOGO]
ING PRIME RATE TRUST
SEMI-ANNUAL REPORT
August 31, 2004
Table of Contents
Portfolio Managers' Report 2
Statement of Assets and Liabilities 7
Statement of Operations 8
Statements of Changes in Net Assets 9
Statement of Cash Flows 10
Financial Highlights 11
Notes to Financial Statements 12
Portfolio of Investments 19
Shareholder Meeting Information 39
Additional Information 40
ING Prime Rate Trust
PORTFOLIO MANAGERS' REPORT
Dear Shareholders:
ING Prime Rate Trust (the "Trust") is a diversified, closed-end management
investment company that seeks to provide investors with as high a level of
current income as is consistent with the preservation of capital. The Trust
seeks to achieve this objective by investing in a professionally managed
portfolio comprised primarily of senior loans.
PORTFOLIO CHARACTERISTICS
AS OF AUGUST 31, 2004
Net Assets $ 1,037,826,321
Total Assets $ 2,019,939,151
Assets Invested in Senior Loans $ 1,945,548,616
Senior Loans Represented 414
Average Amount Outstanding per Loan $ 4,699,393
Industries Represented 37
Average Loan Amount per Industry $ 52,582,395
Portfolio Turnover Rate (YTD) 50%
Weighted Average Days to Interest Rate Reset 41
Average Loan Final Maturity 62 months
Total Leverage as a Percentage of Total Assets
(including Preferred Shares) 45.69%
PEFORMANCE SUMMARY
The Trust declared $0.11 of dividends during the second fiscal quarter and $0.21
for the six months ended August 31, 2004. Based on the average month-end net
asset value ("NAV") per share of $7.38, this resulted in an annualized
distribution rate of 5.74%(1) for the quarter and 5.68%(1) for the six months.
The Trust's total return for the second fiscal quarter, based on NAV, was 1.70%,
versus a total return on the S&P/LSTA Leveraged Loan Index of 1.11% for the same
quarter. For the six months, the total return, based on NAV, was 3.36%, versus
2.08% for the S&P/LSTA Leveraged Loan Index. The total market value return
(based on full reinvestment of dividends) for the Trust's common shares during
the second fiscal quarter was 2.96% and 5.03% for the six months ended August
31, 2004.
MARKET OVERVIEW
The non-investment grade loan market continued to exhibit both technical and
fundamental strength during the most recent quarter. The primary drivers of loan
performance continue to be credit market conditions and liquidity, the overall
vigor of the U.S. economy, and the directional nature of short-term interest
rates. Each of these elements has been favorably aligned for virtually all of
this year; the most recent quarter offered no exception.
During the second calendar quarter of 2004, domestic GDP expanded at an
approximate 2.8% pace. While revised downward from earlier estimates, this pace
provides a solid footing from which most economists envision renewed
acceleration into 2005. Clearly, a vigorous economic backdrop is an essential
ingredient to a sustained level of corporate merger and acquisition ("M&A")
activity, and in turn, a hearty pipeline of new loan transactions. Coinciding
with increasingly robust growth, third quarter M&A-related loan volumes posted
their highest totals
----------
(1) The distribution rate is calculated by annualizing dividends declared
during the period 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
ING Prime Rate Trust
PORTFOLIO MANAGERS' REPORT (continued)
since the second quarter of 2000. Further, as the economy continues to expand,
even at a somewhat uneven pace, and as commodity prices move ever upward, so has
the expectation of a continued rise in short-term interest rates. Importantly,
unlike fixed rate bonds, returns for which are inversely related to changes in
interest rates, the loan asset class, by way of its floating rate profile, is
expected to benefit as rates rise. Rounding out the triumvirate of positive
factors affecting the loan market, credit trends continue to look relatively
stable. Trailing default rates continue to hover near historical lows, and the
percentage of the market comprised of loans rated CCC+ or lower by Standard &
Poor's recently fell to a level not seen in roughly six years.
TOP TEN SENIOR LOAN INDUSTRY
SECTORS AS OF AUGUST 31, 2004
AS A PERCENTAGE OF:
TOTAL NET
ASSETS ASSETS
------ ------
Cable Television 9.1% 17.7%
Healthcare, Education and Childcare 7.3% 14.2%
Printing and Publishing 6.2% 12.1%
Automobile 5.6% 10.9%
Chemicals, Plastics and Rubber 5.4% 10.5%
Cellular 5.2% 10.1%
Containers, Packaging and Glass 4.5% 8.7%
Leisure, Amusement, Entertainment 4.3% 8.4%
Radio and TV Broadcasting 3.7% 7.2%
Retail Stores 3.7% 7.1%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
For the considerable number of favorable trends impacting the loan market, there
are a small number of emerging issues that offer a degree of pause. The price of
oil, for one, if sustained at current levels, will certainly have a crimping
effect on the pace of economic growth, and more specifically, those corporations
that use crude oil as a direct or indirect input. Moreover, strong demand for
loans, coupled with high levels of uninvested cash in the hands of investors,
has bred a bit of an issuer's market. Not unexpectedly, as a result, we've seen
both the compression of borrowing spreads to historical lows over the last few
quarters and an increasing inflow of slightly lower quality loans coming to
market. We are actively monitoring each of these developments.
TOP TEN SENIOR LOAN ISSUERS AS
OF AUGUST 31, 2004
AS A PERCENTAGE OF:
TOTAL NET
ASSETS ASSETS
------ ------
Charter Communications Operating, LLC 2.8% 5.4%
Nextel Finance Company 1.4% 2.8%
Dex Media West, LLC 1.3% 2.5%
Century Cable Holdings, LLC 1.3% 2.5%
Olympus Cable Holdings, LLC 1.3% 2.4%
GGPLP, LLC 1.1% 2.1%
Insight Midwest Holdings, LLC 1.0% 2.0%
Federal-Mogul Corporation 1.0% 1.9%
Davita, Inc. 1.0% 1.9%
Allegheny Energy Supply Company 1.0% 1.9%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
PORTFOLIO OVERVIEW
The Trust during the quarter benefited from the robust supply of new loans
(permitting continued full investment), ongoing broad-based price support due to
strong demand for floating rate assets, and solid performance by several of the
Trust's larger individual holdings. Early in the quarter, the Trust increased
its exposure to the healthcare sector to 7.3% of total assets at quarter-end, as
several large cap issuers in the medical device sub-sector came to market. We
continue to view favorably this component of the healthcare industry due to high
barriers to entry and relative stability of cash flows. Conversely, exposure to
the cellular industry declined to 5.2% of total assets as Nextel Finance
Company, the bellwether issuer in the sector, significantly reduced its loan
facility. Following in Nextel's path, several other issuers in the sector also
took advantage of robust market conditions to refinance existing debt balances
and improve liquidity.
We continue to maintain a high level of diversification of the portfolio, across
both issuer and industry lines. As of August 31, 2004, the average individual
position accounted for approximately
3
ING Prime Rate Trust
PORTFOLIO MANAGERS' REPORT (continued)
0.23% of the Trust's total assets, while the average amount invested per
industry amounted to approximately 2.60% of total assets.
USE OF LEVERAGE
The Trust utilizes financial leverage to seek to increase the yield to the
holders of common shares. As of August 31, 2004, the Trust had $450 million of
"Aaa/AAA(2)" rated cumulative auction rate preferred shares outstanding, and
$473 million of borrowings outstanding under $525 million in available credit
facilities. Total leverage, as a percentage of total assets (including preferred
shares), was 45.69% at period end. The use of leverage for investment purposes
increases both investment opportunity and investment risk.
[CHART]
INVESTMENT TYPES
AS OF AUGUST 31, 2004
(AS A PERCENT OF TOTAL INVESTMENTS)
Equities and Other Assets 1.4%
Other Corporate Debt 0.5%
Senior Loans 98.1%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
OUTLOOK
Fundamentally, our near-term outlook for the loan asset class remains positive.
Investor demand for floating rate loans, already at a level not seen in several
years, is expected to remain quite healthy if the Federal Reserve continues on
its path of systematically increasing short-term interest rates. Strong demand
typically translates into firm loan prices and stable net asset values. Further,
at this point, there appears to be little on the immediate horizon that would
threaten what is currently viewed as a fairly benign non-investment grade credit
environment. We are on watch, however, for increasingly aggressive transaction
structures (e.g., second lien and covenant-light loan facilities). Our strategy
remains focused on delivering attractive risk-adjusted returns. As in the past,
we will continue to forfeit yield in order to maintain credit discipline.
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
SENIOR PORTFOLIO MANAGER SENIOR PORTFOLIO MANAGER
ING INVESTMENT MANAGEMENT CO. ING INVESTMENT MANAGEMENT CO.
ING Prime Rate Trust
September 27, 2004
----------
(2) Obligations rated Aaa by Moody's Investors Service are judged to be of the
highest quality, with minimal credit risk. An obligator rated `AAA' has
extremely strong capacity to meet its financial commitments. `AAA' is the
highest Issuer Credit Rating assigned by Standard & Poor's. Credit quality
refers to the Trust's underlying investments, not to the stability or safety
of this Trust.
4
ING Prime Rate Trust
PORTFOLIO MANAGERS' REPORT (continued)
AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED AUGUST 31, 2004
---------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Based on Net Asset Value (NAV) 11.24% 5.42% 3.70% 5.83%
Based on Market Value 13.16% 9.00% 4.67% 6.54%
Credit Suisse First Boston Leveraged Loan Index 7.04% 4.85% 4.82% 5.98%
S&P/LSTA Leveraged Loan Index(a) 6.55% 4.78% 4.99% --
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. THE TRUST'S PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA
SHOWN. PLEASE LOG ON TO www.ingfunds.com OR CALL (800) 992-0180 TO GET
PERFORMANCE THROUGH THE MOST RECENT MONTH END.
ASSUMES RIGHTS WERE EXERCISED AND EXCLUDES SALES CHARGES AND
COMMISSIONS(b),(c),(d)
(a) Performance since inception for the index is 5.30% from January 1, 1997.
(b) 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 Value) on the last business day before the
first day of the stated period, with all dividends and distributions
reinvested at the actual reinvestment price.
(c) 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.
(d) 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.
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 REPORT 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 REPORT 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.
INDEX DESCRIPTIONS
The CREDIT SUISSE FIRST BOSTON LEVERAGED LOAN INDEX is an unmanaged index of
below investment grade loans designed to mirror the investable universe of the
U.S. dollar-denominated leveraged loan market. An investor cannot invest
directly in an index.
The S&P/LSTA LEVERAGED LOAN INDEX ("LLI") is an unmanaged total return index
that captures accrued interest, repayments, and market value changes. It
represents a broad cross section of leveraged loans syndicated in the United
States, including dollar-denominated loans to overseas issuers. Standard &
Poor's and the Loan Syndications & Trading Association ("LSTA") conceived the
LLI to establish a performance benchmark for the syndicated leveraged loan
industry. An investor cannot invest directly in an index.
5
ING Prime Rate Trust
PORTFOLIO MANAGERS' REPORT (continued)
YIELDS AND DISTRIBUTIONS RATES
NET ASSET AVERAGE AVERAGE
VALUE ("NAV") MARKET ANNUALIZED ANNUALIZED
PRIME 30-DAY SEC 30-DAY SEC DISTRIBUTION DISTRIBUTION
QUARTER ENDED RATE YIELD(A) YIELD(A) RATE AT NAV(B) RATE AT MARKET(B)
----------------------- --------- --------------- ------------ --------------- ------------------
August 31, 2004 4.50% 6.03% 5.55% 5.74% 5.31%
May 31, 2004 4.00% 5.83% 5.44% 5.62% 5.17%
February 29, 2004 4.00% 5.56% 5.20% 5.82% 5.35%
November 30, 2003 4.00% 6.51% 6.30% 5.83% 5.68%
(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 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.
PRINCIPAL RISK FACTOR(s): This closed-end Fund may invest in below investment
grade senior loans. Investment in the Fund involves the risk that borrowers may
default on obligations, or that lenders may have difficulty liquidating the
collateral securing the loans or enforcing their rights under the terms of the
senior loans. 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 Fund's NAV. The use of leverage for investment purposes
increases both investment opportunity and investment risk. In the event of a
general market decline in the value of assets such as those in which the Fund
invests, the effect of that decline will be magnified in the Fund because of the
additional assets purchased with the proceeds of the leverage.
INTEREST RATE RISK: Changes in market interest rates will affect the yield on
the Fund's Common Shares. If market interest rates fall, the yield on the Fund's
Common Shares will also fall. In addition, changes in market interest rates may
cause the Fund's NAV to experience moderate volatility because of the lag
between changes in market rates and the resetting of the floating rates on
assets in the Fund's portfolio. To the extent that market interest rate changes
are reflected as a change in the market spreads for loans of the type and
quality in which the Fund invests, the value of the Fund's portfolio may
decrease in response to an increase in such spreads. Finally, substantial
increases in interest rates may cause an increase in loan defaults as borrowers
may lack the resources to meet higher debt service requirements.
6
ING Prime Rate Trust
STATEMENT OF ASSETS AND LIABILITIES as of August 31, 2004 (Unaudited)
ASSETS:
Investments in securities at value (Cost $1,971,365,393) $ 1,982,378,796
Cash 14,021,539
Receivables:
Investment securities sold 14,590,057
Interest 8,694,507
Other 43,088
Prepaid expenses 211,164
-----------------
Total assets 2,019,939,151
-----------------
LIABILITIES:
Notes payable 473,000,000
Payable for investments purchased 52,877,660
Deferred arrangement fees on senior loans 2,515,587
Dividends payable - preferred shares 84,103
Payable to affiliates 1,729,692
Accrued trustee fees 53,414
Other accrued expenses and liabilities 1,852,374
-----------------
Total liabilities 532,112,830
-----------------
Preferred shares, $25,000 stated value per share at liquidation
value (18,000 shares outstanding) 450,000,000
-----------------
NET ASSETS $ 1,037,826,321
=================
Net assets value per common share outstanding (net assets less preferred shares
at liquidation value, divided by 140,648,915 shares of beneficial interest
authorized and outstanding, no par value) $ 7.38
NET ASSETS CONSIST OF:
Paid-in capital $ 1,312,160,474
Undistributed net investment income 7,407,132
Accumulated net realized loss on investments (292,754,688)
Net unrealized appreciation on investments 11,013,403
-----------------
NET ASSETS $ 1,037,826,321
=================
See Accompanying Notes to Financial Statements
7
ING Prime Rate Trust
STATEMENT OF OPERATIONS for the Six Months Ended August 31, 2004 (Unaudited)
INVESTMENT INCOME:
Interest $ 42,224,437
Arrangement fees earned 1,097,042
Dividends 106,482
Other 1,288,723
-----------------
Total investment income 44,716,684
-----------------
EXPENSES:
Investment management fees 7,480,440
Administration fees 2,337,638
Transfer agent and registrar fees 117,621
Interest 3,421,322
Shareholder reporting expense 74,204
Custodian fees 451,332
Professional fees 460,774
Preferred Shares - Dividend disbursing agent fees 596,059
Pricing expense 21,412
ICI fees 23,213
Postage expense 112,232
Trustee fees 36,600
Miscellaneous expense 105,679
-----------------
Total expenses 15,238,526
-----------------
Net investment income 29,478,158
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS:
Net realized loss on investments (10,460,747)
Net change in unrealized appreciation or depreciation on investments 16,183,967
-----------------
Net realized and unrealized gain on investments 5,723,220
-----------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
From net investment income (2,929,980)
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 32,271,398
=================
See Accompanying Notes to Financial Statements
8
ING Prime Rate Trust
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, FEBRUARY 29,
2004 2004
---- ----
FROM OPERATIONS:
Net investment income $ 29,478,158 $ 64,881,220
Net realized loss on investments (10,460,747) (45,502,509)
Net change in unrealized appreciation or
depreciation on investments 16,183,967 126,661,233
Distributions to preferred shareholders from net
investment income (2,929,980) (5,199,537)
----------------- -----------------
Net increase in net assets resulting from operations 32,271,398 140,840,407
----------------- -----------------
FROM DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From net investment income (28,802,518) (57,649,691)
----------------- -----------------
Total Distributions (28,802,518) (57,649,691)
----------------- -----------------
FROM CAPITAL SHARE TRANSACTIONS:
Dividends reinvested for common shares 3,755,812 4,364,604
Sales of shares in connection with shelf offering 20,276,188 386,779
----------------- -----------------
Net increase from capital share transactions 24,032,000 4,751,383
----------------- -----------------
Net increase in net assets 27,500,880 87,942,099
----------------- -----------------
NET ASSETS:
Beginning of period 1,010,325,441 922,383,342
----------------- -----------------
End of period (including undistributed net investment
income of $7,407,132 and $9,661,472, respectively) $ 1,037,826,321 $ 1,010,325,441
================= =================
SUMMARY OF CAPITAL SHARE TRANSACTIONS:
Shares issued in payment of distributions from net
investments income 164,979 612,173
Shares sold in connection with shelf offering 2,845,665 53,184
----------------- -----------------
Net increase in shares outstanding 3,010,644 665,357
================= =================
See Accompanying Notes to Financial Statements
9
ING Prime Rate Trust
STATEMENT OF CASH FLOWS for the Six Months Ended August 31, 2004 (Unaudited)
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 40,151,066
Dividends received 106,482
Dividends paid to preferred shareholders (2,913,156)
Arrangement fee paid (618,389)
Other income received 1,338,952
Interest paid (3,421,322)
Other operating expenses paid (11,242,187)
Purchases of securities (1,175,160,962)
Proceeds from sales of securities 920,083,489
------------------
Net cash used in operating activities (231,676,027)
------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to common shareholders (25,046,706)
Proceeds from shelf offerings 20,276,188
Net issuance of notes payable 248,000,000
------------------
Net cash flows provided by financing activities 243,229,482
------------------
Net increase in cash 11,553,455
Cash at beginning of period 2,468,084
------------------
Cash at end of period $ 14,021,539
==================
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET
CASH USED IN OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 32,271,398
------------------
Adjustments to reconcile net increase in net assets resulting from operations to
net cash provided by operating activities:
Change in unrealized depreciation on securities (16,183,967)
Net accretion of discounts on securities (1,118,152)
Realized loss on sale of securities 10,460,747
Purchase of securities (1,175,160,962)
Proceeds on sale of securities 920,083,489
Increase in other assets 50,229
Decrease in interest receivable (955,219)
Increase in prepaid expenses (173,874)
Decrease in deferred arrangement fees on senior loans (1,715,431)
Increase in preferred shareholder dividend payable 16,824
Increase in affiliate payable 345,274
Increase in accrued trustee fees 11,212
Increase in accrued expenses 392,405
------------------
Total adjustments (263,947,425)
------------------
Net cash used in operating activities $ (231,676,027)
==================
NONCASH FINANCING ACTIVITIES
Reinvestment of dividends $ 3,755,812
See Accompanying Notes to Financial Statements
10
ING PRIME RATE TRUST FINANCIAL HIGHLIGHTS
For a common share outstanding throughout the period
SIX MONTHS
ENDED
AUGUST 31, YEARS ENDED FEBRUARY 28 OR FEBRUARY 29,
2004 ------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 7.34 6.73 7.20 8.09 8.95 9.24
Income from investment operations:
Net investment income $ 0.23 0.46 0.50 0.74 0.88 0.79
Net realized and unrealized gain (loss) on
investments $ 0.04 0.61 (0.47) (0.89) (0.78) (0.30)
Total from investment operations $ 0.27 1.07 0.03 (0.15) 0.10 0.49
Distributions to Common Shareholders from net
investment income $ (0.21) (0.42) (0.45) (0.63) (0.86) (0.78)
Distribution to Preferred Shareholders $ (0.02) (0.04) (0.05) (0.11) (0.06) --
Reduction in net asset value from Preferred Shares
offerings $ -- -- -- -- (0.04) --
Net asset value, end of year $ 7.38 7.34 6.73 7.20 8.09 8.95
Closing market price at end of period $ 8.01 7.84 6.46 6.77 8.12 8.25
Total Investment Return(1)
Total investment return at closing market price(2) % 5.03 28.77 2.53 (9.20) 9.10 (5.88)
Total investment return at net asset value(3) % 3.36 15.72 0.44 (3.02) 0.19 5.67
RATIOS/SUPPLEMENTAL DATA
Net assets end of year (000's) $ 1,037,826 1,010,325 922,383 985,982 1,107,432 1,217,339
Preferred Shares-Aggregate amount outstanding (000's) $ 450,000 450,000 450,000 450,000 450,000 --
Liquidation and market value per share of Preferred
Shares $ 25,000 25,000 25,000 25,000 25,000 --
Borrowings at end of year (000's) $ 473,000 225,000 167,000 282,000 510,000 484,000
Asset coverage per $1,000 of debt(4) $ 2,120 2,500 2,500 2,350 2,150 3,520
Average borrowings (000's) $ 387,448 143,194 190,671 365,126 450,197 524,019
RATIOS TO AVERAGE NET ASSETS INCLUDING PREFERRED
SHARES(5)
Expenses (before interest and other fees related to
revolving credit facility)(6) % 1.61 1.45 1.49 1.57 1.62 --
Expenses(6) % 2.06 1.65 1.81 2.54 3.97 --
Net investment income(6) % 2.01 4.57 4.97 6.83 9.28 --
RATIOS TO AVERAGE NET ASSETS PLUS BORROWINGS
Expenses (before interest and other fees related to
revolving credit facility)(6) % 1.67 1.84 1.82 1.66 1.31 1.00(7)
Expenses(6) % 2.16 2.09 2.23 2.70 3.21 2.79(7)
Net investment income(6) % 4.17 5.82 6.10 7.24 7.50 6.12
RATIOS TO AVERAGE NET ASSETS
Expenses (before interest and other fees related to
revolving credit facility)(6) % 2.30 2.11 2.19 2.25 1.81 1.43(7)
Expenses(6) % 2.98 2.40 2.68 3.64 4.45 4.00(7)
Net investment income(6) % 5.75 6.68 7.33 9.79 10.39 8.77
Portfolio turnover rate % 50 87 48 53 46 71
Common shares outstanding at end of period (000's) 140,649 137,638 136,973 136,973 136,847 136,036
(1) Total investment return calculations are attributable to common shares.
(2) 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 Trust's
dividend reinvestment plan.
(3) 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.
(4) 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.
(5) Ratios do not reflect the effect of dividend payments to Preferred
Shareholders; income ratios reflect income earned on assets attributable to
the Preferred Shares.
(6) Annualized for periods less than one year.
(7) Calculated on total expenses before impact on earnings credits.
See Accompanying Notes to Financial Statements
11
ING Prime Rate Trust
NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited)
NOTE 1 -- ORGANIZATION
ING Prime Rate Trust (the "Trust"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a diversified, closed-end, management investment company. The Trust
invests primarily in senior loans which are exempt from registration under the
Securities Act of 1933, as amended (the "`33 Act"), but which 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.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with accounting principals generally accepted in the
United States of America for investment companies.
A. SENIOR LOAN AND OTHER SECURITY VALUATION. Senior loans held by the Trust
are normally valued at the mean of the means of one or more bid and ask
quotations obtained from an independent pricing service or other sources
determined by the Board of Trustees to be independent and believed to be
reliable. Loans for which reliable market value quotations are not readily
available may be valued with reference to another loan or a group of loans
for which reliable quotations are 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 of the loan being valued.
The Trust has engaged an independent pricing service to provide readily
available, reliable market value quotations from dealers in loans and, when
such quotations are not readily available, to calculate values under the
proxy procedure described above. As of August 31, 2004, 98.4% of total
investments were valued based on these procedures. It is expected that most
of the loans held by the Trust will continue to be valued with reference to
quotations from the independent pricing service or with reference to the
proxy procedure described above.
Prices from a pricing source may not be available for all loans and ING
Investments, LLC (the "Investment Manager") or ING Investment Management
Co. (formerly, Aeltus Investment Management, Inc.) ("ING IM" the
"Sub-Adviser"), 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 or the
Sub-Adviser that the Investment Manager or the Sub-Adviser 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 and Proxy Voting Committee. In fair valuing
a loan, consideration is given to several factors, which may include, among
others, the following: (i) the characteristics 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;
12
ING Prime Rate Trust
NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 are valued at the last reported sale price. Securities
reported by NASDAQ will be valued at the NASDAQ official closing price.
Securities traded in the over-the-counter market and listed securities for
which no sale was reported on a valuation date are valued at the mean
between the last reported bid and ask price on such exchange. Securities
other than senior loans for which reliable market value quotations are not
readily available and all other assets will be valued at their respective
fair values as determined in good faith by, and under procedures
established by, the Board of Trustees of the Trust. Investments in
securities maturing in less than 60 days from the date of valuation 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 subchapter M
of the Internal Revenue Code and related excise tax provisions applicable
to regulated investment companies and to distribute substantially all of
its net investment income and net realized capital gains to its
shareholders. Therefore, no federal income tax provision is required. No
capital gain distributions will be made by the Trust until any capital loss
carryforwards have been fully utilized or expire.
C. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Revolver and delayed draw
loans are booked on a settlement date basis. Security transactions and
senior loans 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 sold. 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 non-accrual senior loans are generally applied as a
reduction to the recorded investment of the loan. Senior loans are
generally returned to accrual status only after all past due amounts have
been received. For all loans acquired prior to March 1, 2001, arrangement
fees received, 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, fees received
are treated as discounts and are accreted whereas premiums are amortized.
Fees associated with revolving credit facilities acquired subsequent to
February 28, 2001 are deferred and recognized over the shorter of four
years or the actual term of the loan.
D. DISTRIBUTIONS TO COMMON SHAREHOLDERS. The Trust declares dividends monthly
for net investment income. Distributions from capital gains, if any, are
declared and paid annually. The Trust may make additional distributions to
comply with the distribution requirements of the Internal Revenue Code. The
character and amounts of income and gains to be distributed are determined
in accordance with federal income tax regulations, which may differ from
accounting principles generally accepted in the United States of America
for investment companies. Dividends paid by the Trust from net investment
income and distributions of net realized short-term capital gains are, for
federal income tax purposes, taxable as ordinary income to shareholders.
The Trust records distributions to its shareholders on the ex-dividend
date.
13
ING Prime Rate Trust
NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. DIVIDEND REINVESTMENTS. Pursuant to the Trust's 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 on the open market only when the
closing sale or bid price plus commission is less than the net asset value
per share of the Trust's common shares on the valuation date. If the market
price plus commissions is equal to or exceeds the net asset value, new
shares are issued by the Trust 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 for investment companies. Actual results could differ
from these estimates.
G. SHARE OFFERINGS. Beginning in 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.
NOTE 3 -- INVESTMENTS
For the six months ended August 31, 2004, the cost of purchases and the proceeds
from principal repayment and sales of investments, excluding short-term notes,
totaled $1,217,889,982 and $934,673,546, respectively. At August 31, 2004, the
Trust held senior loans valued at $1,945,548,616 representing 98.1% of its total
investments. The market value of these assets is established as set forth in
Note 2.
The senior loans acquired by the Trust typically take the form of a direct
lending relationship with the borrower, and are typically acquired through an
assignment of another lender's interest in a loan. The lead lender in a typical
corporate loan syndicate administers the loan and monitors the collateral
securing the loan.
Common and preferred shares, and stock purchase warrants held in the portfolio
were acquired in conjunction with loans held by the Trust. Certain of these
stocks and warrants are restricted and may not be publicly 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 shares or warrants.
14
ING Prime Rate Trust
NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued)
NOTE 3 -- INVESTMENTS (CONTINUED)
Dates of acquisition and cost or assigned basis of restricted securities are as
follows:
DATE OF COST OR
ACQUISITION ASSIGNED BASIS
----------- --------------
Acterna, LLC -- Common Shares 11/24/03 $ 1,090,731
Acterna, Inc. -- Contingent Right 11/24/03 --
Allied Digital Technologies Corporation -- Residual Interest in
Bankruptcy Estate 06/05/02 186,961
AM Cosmetics Corporation -- Liquidation Interest 03/07/03 50
Block Vision Holdings Corporation -- Common Shares 09/30/02 --
Boston Chicken, Inc. -- Residual Interest in Boston Chicken Plan Trust 12/26/00 6,728,959
Cedar Chemical -- Liquidation Interest 12/31/02 --
Covenant Care, Inc. -- Warrants 12/22/95 --
Covenant Care, Inc. -- Warrants 01/18/02 --
Decision One Corporation -- Common Shares 06/16/00 --
Electro Mechanical Solutions -- Residual Interest in Bankruptcy Estate 10/02/02 15
Enginen Realty -- Common Shares 11/24/03 --
Enterprise Profit Solutions -- Liquidation Interest 10/21/02 --
Euro United Corporation -- Residual Interest in Bankruptcy Estate 06/21/02 2,335,366
Exide Technologies -- Warrants 11/30/01 --
Galey & Lord -- Common Shares 03/31/04 --
Gate Gourment Borrower, LLC -- Common Shares 12/04/03 --
Gemini Leasing, Inc. -- Common Shares 01/08/04 --
Grand Union Company -- Residual Interest in Bankruptcy Estate 07/01/02 2,576
Holmes Group -- Common Shares 05/26/04 --
Humphreys, Inc. -- Residual Interest in Bankruptcy Estate 05/15/02 100
Imperial Home Decor Group, Inc. -- Common Shares 05/02/01 1,654,378
Imperial Home Decor Group, Inc. -- Liquidation Interest 01/22/04 --
Insilco Technologies -- Residual Interest in Bankruptcy Estate 05/02/03 21,140
Intera Group, Inc. -- Common Shares 11/29/02 --
IT Group, Inc. -- Residual Interest in Bankruptcy Estate 09/12/03 117,878
Kevco, Inc. -- Residual Interest in Bankruptcy Estate 06/05/02 147,443
Lincoln Paper And Tissue, LLC -- Residual Interest in Bankruptcy Estate 06/08/04 --
Malden Mills Industries, Inc. -- Common Shares 11/04/03 --
Malden Mills Industries, Inc. -- Preferred Shares 11/04/03 --
Morris Material Handling, Inc. -- Common Shares 10/09/01 3,009,059
MP Holdings, Inc. -- Common Shares 04/16/01 6
Murray's Discount Auto Stores, Inc. -- Escrow 08/11/03 510,279
Neoplan USA Corporation -- Common Shares 08/29/03 --
Neoplan USA Corporation -- Series B Preferred Shares 08/29/03 --
Neoplan USA Corporation -- Series C Preferred Shares 08/29/03 428,603
Neoplan USA Corporation -- Series D Preferred Shares 08/29/03 3,524,300
New Piper Aircraft -- Residual Interest in Litigation Proceeds 07/02/03 --
New World Restaurant Group, Inc. -- Warrants 09/27/01 40
Norwood Promotional Products, Inc. -- Common Shares 08/23/04 32,939
Safelite Glass Corporation -- Common Shares 10/17/00 --
Safelite Realty -- Common Shares 10/17/00 --
Scientific Games Corporation -- Common Shares 10/30/03 554,457
Soho Publishing -- Common Shares 01/10/02 133
Stellex Aerostructures, Inc. -- Common Shares 10/17/01 275,767
Targus Group, Inc. -- Common Shares 03/11/03 --
Tartan Textile Services, Inc. -- Series D Preferred Shares 07/16/01 2,227,655
Tartan Textile Services, Inc. -- Series E Preferred Shares 07/16/01 2,333,852
Telinget, Inc. -- Common Shares 09/18/02 --
Tembec, Inc. -- Common Shares 01/08/02 1,442,942
Transtar Metals -- Residual Interest in Bankruptcy Estate 01/09/03 80,459
TSR Wireless, LLC -- Residual Interest in Bankruptcy Estate 10/15/02 --
U.S. Aggregates -- Residual Interest in Bankruptcy Estate 04/07/03 --
U.S. Office Products Company -- Residual Interest in Bankruptcy Estate 02/11/04 --
-------------
TOTAL RESTRICTED SECURITIES EXCLUDING SENIOR LOANS (MARKET VALUE OF
$25,445,720 WAS 2.5% OF NET ASSETS AT AUGUST 31, 2004) $ 26,706,088
=============
15
ING Prime Rate Trust
NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued)
NOTE 4 -- MANAGEMENT AND ADMINISTRATION AGREEMENTS
The Trust has entered into an Investment Management Agreement with the
Investment Manager, a wholly-owned subsidiary of ING Fund 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 Managed
Assets. For purposes of this Agreement, "Managed Assets" shall mean the Trust's
average daily gross asset value, minus the sum of the Trust's accrued and unpaid
dividends on any outstanding preferred shares and accrued liabilities (other
than liabilities for the principal amount of any borrowings incurred, commercial
paper or notes issued by the Trust and the liquidation preference of any
outstanding preferred shares).
The Investment Manager entered into a Sub-Advisory Agreement with ING IM, a
wholly-owned subsidiary of ING Groep N.V., effective August 19, 2003. Subject to
such policies as the Board or the Investment Manager may determine, ING IM
manages the Trust's assets in accordance with the Trust's investment objectives,
policies, and limitations.
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.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
At August 31, 2004, the Trust had the following amounts recorded in payables to
affiliates on the accompanying Statement of Assets and Liabilities:
ACCRUED INVESTMENT ACCRUED
MANAGEMENT FEES ADMINISTRATIVE FEES TOTAL
------------------ ------------------- -----
$ 1,317,860 $ 411,832 $ 1,729,692
The Trust has adopted a Retirement Policy covering all independent trustees of
the Trust who will have served as a independent trustee for at least five years
at the time of retirement. Benefits under this plan are based on an annual rate
as defined in the plan agreement.
NOTE 6 -- COMMITMENTS
The Trust has entered into both a $90 million 364-day revolving credit agreement
which matures on August 25, 2005 and a $435 million 364-day revolving
securitization facility which matures on June 13, 2005, collateralized by assets
of the Trust. 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 these facilities are amortized over the term of the
agreements. The amount of borrowings outstanding at August 31, 2004, was $473
million. Weighted average interest rate on outstanding borrowings was 1.99%,
excluding fees related to the unused portion of the facilities, and other fees.
The amount of borrowings represented 23.42% of total assets at August 31, 2004.
Average borrowings for the six months ended August 31, 2004 were $387,448,370
and the average annualized interest rate was 1.93% excluding other fees related
to the unused portion of the facilities, and other fees.
16
ING Prime Rate Trust
NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued)
NOTE 6 -- COMMITMENTS (CONTINUED)
As of August 31, 2004, the Trust had unfunded loan commitments pursuant to the
terms of the following loan agreements:
Allied Waste North America, Inc. $ 1,440,650
Apria Healthcare Group, Inc. 2,000,000
Baker & Taylor, Inc. 525,000
Block Vision Holdings Corporation 118,771
Cincinnati Bell, Inc. 2,918,429
Entravision Communications Corporation 750,000
Envirosolutions, Inc. 1,363,636
Federal-Mogul Corporation 437,903
Geo Specialty Chemicals, Inc. 670,000
Green Valley Ranch Gaming, LLC 800,000
IESI Corporation 1,055,625
Innophos, Inc. 286,364
Neoplan USA Corporation 427,500
Nutrasweet Acquisition Company $ 472,250
Outsourcing Solutions, Inc. 63,692
Peabody Energy Corporation 2,500,000
Pinnacle Entertainment 778,812
Ply Gem Industries 991,883
Primedia Inc. 4,714,105
Saguaro Utility Group 4,500,000
SBA Senior Finance, Inc. 780,769
Six Flags Theme Parks, Inc. 3,000,000
United Defense Industries, Inc. 3,000,000
United Industries Corporation 1,796,923
Venetian Casino Resorts, LLC 1,363,636
------------
$ 36,755,948
============
NOTE 7 -- RIGHTS AND OTHER OFFERINGS
As of August 31, 2004, outstanding share offerings pursuant to shelf
registrations were as follows:
REGISTRATION SHARES SHARES
DATE REGISTERED REMAINING
------------ ---------- ---------
9/15/98 25,000,000 19,055,149
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 and to purchase additional senior loans. Preferred Shares pay
dividends based on a rate set at auctions, normally held every 7 days. In most
instances dividends are also payable every 7 days, on the first business day
following the end of the rate period.
NOTE 8 -- 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, 2004.
NOTE 9 -- SUBORDINATED LOANS AND UNSECURED LOANS
The Trust may invest in subordinated loans and in 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 acquisition,
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, 2004, the Trust held 0.48% of its total assets in
subordinated loans and unsecured loans.
17
ING Prime Rate Trust
NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued)
NOTE 10 -- FEDERAL INCOME TAXES
Permanent differences are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences are not reclassified.
Key differences include the treatment of short-term capital gains and wash sale
deferrals. Distributions in excess of net investment income and/or net realized
capital gains for tax purposes are reported as distributions of paid-in capital.
Dividends paid by the Trust from net investment income and distributions of net
realized short-term capital gains are, for federal income tax purposes, taxable
as ordinary income to shareholders.
The tax composition of dividends and distributions to shareholders was as
follows:
SIX MONTHS ENDED AUGUST 31, 2004 YEAR ENDED FEBRUARY 29, 2004
-------------------------------- ----------------------------
ORDINARY INCOME ORDINARY INCOME
--------------- ---------------
$ 31,732,499 $ 62,849,228
The tax-basis components of distributable earnings and the expiration dates of
the capital loss carryforwards which may be used to offset future realized
capital gains for federal income tax purposes as of February 29, 2004 were as
follows:
UNDISTRIBUTED POST-OCTOBER
UNDISTRIBUTED LONG-TERM UNREALIZED CAPITAL LOSSES CAPITAL LOSS EXPIRATION
ORDINARY INCOME CAPITAL GAINS DEPRECIATION DEFERRED CARRYFORWARDS DATES
--------------- ------------- ------------ -------- ------------- -----
$ 8,429,077 $ -- $ (6,655,665) $ (15,388,435) $ (12,542,170) 2006
(10,485,033) 2007
(38,118,850) 2008
(847,193) 2009
(47,376,376) 2010
(97,064,717) 2011
(57,686,392) 2012
--------------
$ (264,120,731)
==============
NOTE 11 -- SUBSEQUENT EVENTS
Subsequent to August 31, 2004, the Trust paid to Common Shareholders the
following dividends from net investment income:
PER SHARE AMOUNT DECLARATION DATE RECORD DATE PAYABLE DATE
---------------- ---------------- ----------- ------------
$ 0.036 8/31/04 9/10/04 9/22/04
Subsequent to August 31, 2004, 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 $ 52.60 09/03/04 to 10/08/04 09/13/04 to 10/18/04 09/15/04 to 10/19/04
Series T $ 52.69 09/07/04 to 10/12/04 09/14/04 to 10/19/04 09/09/04 to 10/20/04
Series W $ 50.94 09/01/04 to 10/06/04 09/08/04 to 10/13/04 09/10/04 to 10/14/04
Series Th $ 52.48 09/02/04 to 10/07/04 09/09/04 to 10/14/04 09/14/04 to 10/15/04
Series F $ 50.84 09/03/04 to 10/08/04 09/10/04 to 10/15/04 09/14/04 to 10/18/04
18
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited)
SENIOR LOANS*: 187.5% BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE: 1.8%
ALLIANT TECHSYSTEMS, INC. Ba2 BB
$ 1,995,000 Term Loan, maturing March 31, 2011 $ 2,016,197
ARINC, INC. Ba3 BB
997,500 Term Loan, maturing March 10, 2011 1,012,463
CERADYNE, INC. Ba3 BB-
2,500,000 Term Loan, maturing August 18, 2011 2,525,000
STANDARD AERO HOLDINGS, INC. B2 B+
4,500,000 Term Loan, maturing August 20, 2012 4,553,438
TRANSDIGM, INC. B1 B+
1,990,013 Term Loan, maturing July 22, 2010 2,020,486
UNITED DEFENSE INDUSTRIES, INC. Ba2 BB
6,054,771 Term Loan, maturing August 13, 2009 6,112,163
---------------
18,239,747
---------------
AUTOMOBILE: 10.9%
AFTERMARKET TECHNOLOGY CORPORATION Ba3 BB-
956,171 Term Loan, maturing February 08, 2008 959,671
1,314,797 Term Loan, maturing February 08, 2008 1,324,658
CCC INFORMATION SERVICES, INC. B1 B+
3,000,000 Term Loan, maturing August 20, 2010 3,022,500
COLLINS & AIKMAN PRODUCTS B1 B+
1,229,416 Term Loan, maturing December 31, 2005 1,231,721
DAYCO PRODUCTS, LLC B1 BB-
6,500,000 Term Loan, maturing June 23, 2011 6,607,660
DURA OPERATING CORPORATION Ba3 BB
3,136,000 Term Loan, maturing December 31, 2008 3,162,462
(2) FEDERAL-MOGUL CORPORATION Ca NR
8,502,361 Revolver, maturing February 24, 2004 7,912,510
4,583,621 Term Loan, maturing February 24, 2004 4,279,956
7,975,500 Term Loan, maturing February 24, 2005 7,454,604
GOODYEAR TIRE & RUBBER COMPANY B1 BB
5,500,000 Term Loan, maturing March 31, 2006 5,584,222
GOODYEAR TIRE & RUBBER COMPANY B2 B
1,500,000 Term Loan, maturing March 31, 2006 1,519,688
GRAND VEHICLE WORKS HOLDINGS CORPORATION B2 B+
3,000,000 Term Loan, maturing July 31, 2010 2,990,625
GUILFORD MILLS, INC. B2 B+
2,739,130 Term Loan, maturing May 31, 2010 2,698,043
HLI OPERATING COMPANY, INC. Ba3 BB-
4,772,222 Term Loan, maturing June 03, 2009 4,870,649
JL FRENCH AUTOMOTIVE CASTINGS B3 B
3,500,000 Term Loan, maturing July 31, 2011 3,530,625
JL FRENCH AUTOMOTIVE CASTINGS Caa1 CCC+
1,500,000 Term Loan, maturing July 31, 2012 1,501,875
KEY AUTOMOTIVE GROUP B1 BB-
1,500,000 Term Loan, maturing June 29, 2010 1,518,750
KEYSTONE AUTOMOTIVE INDUSTRIES, INC. B1 B+
1,428,261 Term Loan, maturing October 30, 2009 1,447,230
See Accompanying Notes to Financial Statements
19
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
AUTOMOBILE: (CONTINUED)
MERIDIAN AUTOMOTIVE SYSTEMS, INC. B2 B+
$ 2,995,000 Term Loan, maturing April 28, 2010 $ 2,955,068
METALDYNE COMPANY, LLC B2 BB-
4,397,435 Term Loan, maturing December 31, 2009 4,409,343
PLASTECH, INC. Ba3 BB-
1,979,310 Term Loan, maturing February 12, 2010 2,009,000
RJ TOWER CORPORATION B1 B+
6,000,000 Term Loan, maturing May 21, 2009 6,011,250
SAFELITE GLASS CORPORATION B3 B+
6,729,690 Term Loan, maturing September 30, 2007 6,325,909
10,823,607 Term Loan, maturing September 30, 2007 10,174,190
TENNECO AUTOMOTIVE, INC. B1 B+
2,059,650 Term Loan, maturing December 12, 2010 2,098,268
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. B2 B
2,493,750 Term Loan, maturing March 14, 2009 2,514,530
TRW AUTOMOTIVE ACQUISITIONS CORPORATION Ba2 BB+
1,600,000 Term Loan, maturing February 28, 2009 1,617,166
9,888,261 Term Loan, maturing February 28, 2011 10,067,486
UNITED COMPONENTS, INC. B1 BB-
2,998,333 Term Loan, maturing June 30, 2010 3,041,434
---------------
112,841,093
---------------
BANKING: 0.1%
OUTSOURCING SOLUTIONS, INC. NR NR
2,978 Revolver, maturing December 09, 2008 2,918
1,426,801 Term Loan, maturing December 09, 2008 1,419,667
---------------
1,422,585
---------------
BEVERAGE, FOOD AND TOBACCO: 5.3%
B & G FOODS, INC. B1 B
1,488,750 Term Loan, maturing August 31, 2009 1,497,434
BIRDS EYE FOODS, INC. B1 B+
6,549,838 Term Loan, maturing June 30, 2008 6,639,898
COMMONWEALTH BRANDS, INC. Ba3 BB-
5,296,417 Term Loan, maturing August 28, 2007 5,359,312
CONSTELLATION BRANDS, INC. Ba1 BB
5,250,000 Term Loan, maturing November 30, 2008 5,278,712
DEL MONTE CORPORATION Ba3 BB-
3,187,850 Term Loan, maturing December 20, 2010 3,239,155
DR. PEPPER BOTTLING COMPANY OF TEXAS B1 BB-
3,760,822 Term Loan, maturing December 19, 2010 3,803,718
DS WATERS ENTERPRISES, L.P. B3 B+
2,437,500 Term Loan, maturing November 07, 2009 2,326,289
GOLDEN STATE FOODS CORPORATION B1 B+
3,990,000 Term Loan, maturing February 28, 2011 4,042,369
INTERSTATE BRANDS CORPORATION B2 CCC+
2,447,157 Term Loan, maturing July 19, 2007 2,281,974
KEYSTONE FOODS HOLDINGS, LLC Ba3 B+
4,500,000 Term Loan, maturing June 16, 2011 4,539,375
MAFCO WORLDWIDE CORPORATION B1 B
843,929 Term Loan, maturing March 31, 2006 835,490
See Accompanying Notes to Financial Statements
20
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
BEVERAGE, FOOD AND TOBACCO: (CONTINUED)
MICHAEL FOODS, INC. B1 B+
$ 3,970,000 Term Loan, maturing November 21, 2010 $ 4,031,412
PIERRE FOODS, INC. B1 B+
5,000,000 Term Loan, maturing June 30, 2010 5,040,625
PINNACLE FOODS CORPORATION B1 BB-
2,992,500 Term Loan, maturing November 25, 2010 3,029,906
SOUTHERN WINE & SPIRITS OF AMERICA, INC. Ba3 BB+
2,952,486 Term Loan, maturing July 02, 2008 2,988,471
---------------
54,934,140
---------------
BUILDINGS AND REAL ESTATE: 5.9%
ASSOCIATED MATERIALS, INC. Ba3 B+
1,473,684 Term Loan, maturing August 02, 2010 1,493,333
ATRIUM COMPANIES, INC. B1 B+
2,985,000 Term Loan, maturing December 10, 2008 3,021,068
BUILDERS FIRSTSOURCE, INC. B1 B+
3,990,000 Term Loan, maturing February 25, 2010 4,024,912
BUILDING MATERIALS HOLDING CORPORATION Ba2 BB-
1,980,000 Term Loan, maturing August 21, 2010 1,987,425
CRESCENT REAL ESTATE EQUITIES, L.P. B1 BB+
2,876,806 Term Loan, maturing January 12, 2006 2,910,071
DMB NEWCO, LLC NR NR
7,443,993 Term Loan, maturing February 28, 2009 7,462,603
GGPLP, LLC Ba1 BBB-
6,472,265 Term Loan, maturing April 16, 2006 6,512,716
15,101,952 Term Loan, maturing April 16, 2006 15,196,338
NCI BUILDING SYSTEMS, INC. Ba2 BB
1,500,000 Term Loan, maturing September 15, 2008 1,519,220
NORTEK, INC. B1 B+
6,000,000 Term Loan, maturing August 25, 2011 6,066,750
PLY GEM INDUSTRIES B1 B+
258,117 Revolver, maturing February 12, 2009 252,632
748,125 Term Loan, maturing March 15, 2010 751,165
1,500,000 Term Loan, maturing February 12, 2011 1,510,782
4,239,375 Term Loan, maturing October 01, 2011 4,256,600
ST. MARYS CEMENT, INC. B1 BB-
2,985,000 Term Loan, maturing December 04, 2009 3,011,119
WERNER HOLDINGS COMPANY, INC. B1 B
916,667 Term Loan, maturing June 11, 2009 895,326
---------------
60,872,060
---------------
CABLE TELEVISION: 17.8%
(2) ADELPHIA COMMUNICATIONS CORPORATION NR BBB
2,956,684 Debtor In Possession Term Loan,
maturing March 31, 2005 2,970,852
ATLANTIC BROADBAND FINANCE, LLC B2 B
2,000,000 Term Loan, maturing September 01, 2011 2,027,500
BRAGG COMMUNICATIONS, INC.
2,500,000 Term Loan, maturing August 31, 2011 2,525,000
BRESNAN COMMUNICATIONS, LLC B1 BB-
5,000,000 Term Loan, maturing December 31, 2007 5,073,440
See Accompanying Notes to Financial Statements
21
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
CABLE TELEVISION: (CONTINUED)
CEBRIDGE CONNECTIONS, INC. NR NR
$ 4,488,750 Term Loan, maturing February 04, 2009 $ 4,365,309
1,496,250 Term Loan, maturing February 23, 2009 1,502,796
(2) CENTURY CABLE HOLDINGS, LLC Caa1 NR
1,230,000 Revolver, maturing March 31, 2009 1,186,950
19,357,940 Term Loan, maturing June 30, 2009 18,913,753
5,500,000 Term Loan, maturing December 31, 2009 5,363,644
CHARTER COMMUNICATIONS OPERATING, LLC B2 B
7,000,000 Term Loan, maturing April 27, 2010 6,837,964
50,000,000 Term Loan, maturing April 27, 2011 49,411,452
(2) HILTON HEAD COMMUNICATIONS, L.P. Caa1 NR
7,000,000 Revolver, maturing September 30, 2007 6,739,250
6,500,000 Term Loan, maturing March 31, 2008 6,283,875
INSIGHT MIDWEST HOLDINGS, LLC Ba3 BB+
1,880,000 Term Loan, maturing June 30, 2009 1,881,645
1,990,000 Term Loan, maturing December 31, 2009 2,021,249
16,417,500 Term Loan, maturing December 31, 2009 16,675,304
MEDIACOM COMMUNICATIONS CORPORATION Ba3 BB+
16,000,000 Term Loan, maturing September 30, 2010 16,123,744
(2) OLYMPUS CABLE HOLDINGS, LLC B2 NR
5,000,000 Term Loan, maturing June 30, 2010 4,855,355
21,000,000 Term Loan, maturing September 30, 2010 20,527,500
PERSONA COMMUNICATION, INC. B2 B+
3,500,000 Term Loan, maturing May 31, 2011 3,533,908
---------------
178,820,490
---------------
CARGO TRANSPORT: 3.3%
(2) AMERICAN COMMERCIAL LINES, LLC Caa1 D
565,187 Debtor In Possession Term Loan,
maturing December 31, 2004 564,127
ATLANTIC EXPRESS TRANSPORT B3 B
6,000,000 Floating Rate Note, maturing April 15, 2008 5,820,000
BAKER TANKS, INC. B1 B+
971,000 Term Loan, maturing January 30, 2011 979,193
GEMINI LEASING, INC. NR NR
1,942,090 Term Loan, maturing December 31, 2011 1,553,672
HELM HOLDING CORPORATION B2 B+
3,500,000 Term Loan, maturing July 02, 2010 3,545,210
HORIZON LINES, LLC B2 B+
2,500,000 Term Loan, maturing July 04, 2011 2,542,708
NEOPLAN USA CORPORATION NR NR
1,822,500 Revolver, maturing June 30, 2006 1,822,500
5,387,690 Term Loan, maturing June 30, 2006 5,387,690
PACER INTERNATIONAL, INC. B1 BB-
2,105,882 Term Loan, maturing June 10, 2010 2,136,154
TEREX CORPORATION B1 BB-
945,013 Term Loan, maturing July 03, 2009 958,007
1,312,266 Term Loan, maturing December 31, 2009 1,332,361
See Accompanying Notes to Financial Statements
22
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
CARGO TRANSPORT: (CONTINUED)
TRANSPORT INDUSTRIES, L.P. B2 B+
$ 3,000,000 Term Loan, maturing June 13, 2010 $ 3,005,625
UNITED STATES SHIPPING, LLC Ba2 BB
3,424,383 Term Loan, maturing April 14, 2010 3,460,766
YELLOW ROADWAY CORPORATION Baa3 BBB
584,416 Term Loan, maturing June 11, 2008 589,713
---------------
33,697,726
---------------
CELLULAR: 10.1%
AIRGATE PCS, INC. B2 CCC+
673,945 Term Loan, maturing June 06, 2007 672,260
9,664,033 Term Loan, maturing September 30, 2008 9,639,873
CELLULAR SOUTH, INC. Ba3 B+
2,000,000 Term Loan, maturing May 04, 2011 2,025,000
CENTENNIAL CELLULAR OPERATING COMPANY B2 B-
10,947,494 Term Loan, maturing February 09, 2011 10,985,985
DOBSON CELLULAR SYSTEMS, INC. B1 B-
4,955,044 Term Loan, maturing March 31, 2010 4,953,186
INDEPENDENT WIRELESS ONE CORPORATION Caa1 NR
3,250,538 Term Loan, maturing December 20, 2007 3,144,896
10,912,873 Term Loan, maturing June 20, 2008 10,558,205
MICROCELL SOLUTIONS, INC. B3 B-
6,912,500 Term Loan, maturing March 17, 2011 6,949,945
MICROCELL SOLUTIONS, INC. Caa2 CCC-
997,500 Term Loan, maturing February 15, 2011 1,022,438
NEXTEL FINANCE COMPANY Ba1 BBB
28,859,987 Term Loan, maturing December 15, 2010 29,044,805
NEXTEL PARTNERS OPERATING CORPORATION B1 B+
8,000,000 Term Loan, maturing May 31, 2011 8,113,000
RURAL CELLULAR CORPORATION B2 B-
2,500,000 Floating Rate Note, maturing March 15, 2010 2,537,500
WESTERN WIRELESS CORPORATION B2 B-
15,000,000 Term Loan, maturing May 31, 2011 15,227,685
---------------
104,874,778
---------------
CHEMICALS, PLASTICS AND RUBBER: 10.5%
ACADIA ELASTOMERS CORPORATION NR NR
8,430,657 Term Loan, maturing March 31, 2004 8,009,124
BRENNTAG, AG B1 BB-
4,000,000 Term Loan, maturing December 09, 2011 4,052,500
CP KELCO APS B3 B
2,190,168 Term Loan, maturing March 31, 2008 2,202,943
718,760 Term Loan, maturing September 30, 2008 722,354
FMC CORPORATION Ba1 BBB-
3,877,824 Term Loan, maturing December 22, 2007 3,923,268
(2) GEO SPECIALTY CHEMICALS, INC. Caa1 NR
1,740,101 Term Loan, maturing December 31, 2007 1,668,322
HERCULES, INC. Ba1 BB
9,301,688 Term Loan, maturing October 08, 2010 9,380,176
HUNTSMAN INTERNATIONAL, LLC B1 B
18,500,000 Term Loan, maturing December 31, 2010 18,777,500
See Accompanying Notes to Financial Statements
23
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
CHEMICALS, PLASTICS AND RUBBER: (CONTINUED)
HUNTSMAN, LLC B2 B
$ 7,372,482 Term Loan, maturing March 31, 2007 $ 7,410,664
1,165,620 Term Loan, maturing March 31, 2007 1,171,657
INNOPHOS, INC. B1 B+
1,213,636 Term Loan, maturing August 13, 2010 1,223,497
JOHNSONDIVERSEY, INC. Ba3 BB-
3,094,700 Term Loan, maturing November 03, 2009 3,147,697
KRATON POLYMERS B1 BB-
2,942,502 Term Loan, maturing December 23, 2010 2,946,180
NALCO COMPANY B1 BB-
15,606,138 Term Loan, maturing November 04, 2010 15,863,920
NUTRASWEET ACQUISITION CORPORATION Ba3 NR
243,787 Term Loan, maturing May 24, 2005 232,817
207,979 Term Loan, maturing June 30, 2006 208,499
2,852,564 Term Loan, maturing May 25, 2009 2,824,038
POLYPORE, INC. B1 B+
10,000,000 Term Loan, maturing November 12, 2011 10,081,250
RIPPLEWOOD HOLDINGS, LLC NR B+
2,750,000 Term Loan, maturing June 21, 2011 2,777,500
ROCKWOOD SPECIALTIES GROUP, INC. B1 B+
12,000,000 Term Loan, maturing July 30, 2012 12,099,648
---------------
108,723,554
---------------
CONTAINERS, PACKAGING AND GLASS: 8.7%
APPLETON PAPERS, INC. Ba3 BB
1,500,000 Term Loan, maturing June 11, 2010 1,517,813
BERRY PLASTICS CORPORATION B1 B+
3,834,944 Term Loan, maturing June 30, 2010 3,884,480
BWAY CORPORATION B1 B+
1,500,000 Term Loan, maturing June 30, 2011 1,522,500
CROWN CORK & SEAL COMPANY, INC. Ba3 BB-
3,325,000 Term Loan, maturing September 15, 2008 3,330,197
GRAPHIC PACKAGING INTERNATIONAL, INC. B1 B+
9,850,000 Term Loan, maturing August 09, 2010 9,997,750
GREIF BROS. CORPORATION Ba3 BB
2,142,250 Term Loan, maturing August 23, 2009 2,167,421
INTERTAPE POLYMER GROUP Ba3 B+
2,750,000 Term Loan, maturing July 28, 2011 2,780,938
JEFFERSON SMURFIT CORPORATION B1 B+
1,647,273 Term Loan, maturing March 31, 2007 1,661,430
KERR GROUP, INC. B1 BB-
2,178,547 Term Loan, maturing August 13, 2010 2,200,605
KOCH CELLULOSE B1 BB
1,808,148 Term Loan, maturing May 07, 2011 1,825,099
LINCOLN PAPER AND TISSUE, LLC NR NR
117,581 Term Loan, maturing November 28, 2005 117,581
6,700,000 Term Loan, maturing May 01, 2009 6,700,000
1,800,000 Term Loan, maturing May 01, 2009 1,800,000
12,239,568 (3) Term Loan, maturing August 28, 2009 2,921,418
See Accompanying Notes to Financial Statements
24
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
CONTAINERS, PACKAGING AND GLASS: (CONTINUED)
OWENS-ILLINOIS GROUP, INC. B1 BB-
$ 7,000,000 Term Loan, maturing April 01, 2008 $ 7,011,669
12,000,000 Term Loan, maturing April 01, 2008 12,186,251
SILGAN HOLDINGS, INC. Ba3 BB
5,929,950 Term Loan, maturing November 30, 2008 5,992,031
SMURFIT-STONE CONTAINER CANADA, INC. B1 B+
1,198,030 Term Loan, maturing June 30, 2009 1,211,508
SOLO CUP, INC. B1 B+
9,452,500 Term Loan, maturing February 27, 2011 9,560,807
STONE CONTAINER CORPORATION B1 B+
9,113,533 Term Loan, maturing June 30, 2009 9,198,972
TEKNI-PLEX, INC. B1 B+
253,054 Term Loan, maturing June 21, 2008 254,636
U.S. CAN COMPANY B2 B
2,493,750 Term Loan, maturing June 21, 2011 2,499,984
---------------
90,343,090
---------------
DATA AND INTERNET SERVICES: 0.3%
MCLEODUSA, INC. Caa2 NR
1,316,118 Term Loan, maturing May 30, 2008 617,259
MITCHELL INTERNATIONAL, INC. B1 B+
2,500,000 Term Loan, maturing August 15, 2011 2,518,750
---------------
3,136,009
---------------
DIVERSIFIED / CONGLOMERATE MANUFACTURING: 4.2%
AXIA, INC. B2 B
1,916,667 Term Loan, maturing November 30, 2010 1,939,427
BRAND SERVICES, INC. B1 B
3,173,490 Term Loan, maturing October 16, 2009 3,199,275
CINRAM INTERNATIONAL, INC. Ba3 BB
3,000,000 Term Loan, maturing September 30, 2009 3,008,907
DRESSER, INC. Ba3 BB-
2,941,579 Term Loan, maturing April 10, 2009 2,986,162
FLOWSERVE CORPORATION Ba3 BB-
1,062,588 Term Loan, maturing June 30, 2006 1,071,443
3,270,900 Term Loan, maturing June 30, 2009 3,315,875
ITRON, INC. Ba3 BB-
1,000,000 Term Loan, maturing June 28, 2011 1,010,000
MUELLER GROUP, INC. B2 B+
9,449,541 Term Loan, maturing April 23, 2011 9,496,788
NORCROSS SAFETY PRODUCTS, LLC B1 B+
945,913 Term Loan, maturing March 20, 2009 953,895
RLC INDUSTRIES COMPANY B1 BB+
2,980,000 Term Loan, maturing February 26, 2010 3,009,800
ROPER INDUSTRIES, INC. Ba2 BB+
3,266,250 Term Loan, maturing December 29, 2008 3,315,244
SENSUS METERING SYSTEMS, INC. B2 B+
1,713,043 Term Loan, maturing December 17, 2010 1,731,244
256,957 Term Loan, maturing December 17, 2010 259,687
See Accompanying Notes to Financial Statements
25
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
DIVERSIFIED / CONGLOMERATE MANUFACTURING: (CONTINUED)
SPX CORPORATION Ba2 BBB-
$ 8,444,726 Term Loan, maturing September 30, 2009 $ 8,572,714
---------------
43,870,461
---------------
DIVERSIFIED / CONGLOMERATE SERVICE: 1.8%
AMERCO, INC. NR BB
12,967,280 Term Loan, maturing February 27, 2009 13,259,044
IRON MOUNTAIN, INC. B1 BB-
1,496,250 Term Loan, maturing April 02, 2011 1,506,070
RELIZON COMPANY B1 BB-
4,061,146 Term Loan, maturing February 20, 2011 4,083,990
---------------
18,849,104
---------------
ECOLOGICAL: 2.5%
ALLIED WASTE NORTH AMERICA, INC. Ba3 BB
59,350 Revolver, maturing June 30, 2010 58,682
13,072,321 Term Loan, maturing January 15, 2010 13,288,512
1,000,000 Term Loan, maturing January 15, 2010 1,015,625
2,000,000 Term Loan, maturing January 15, 2010 2,033,126
ENVIROSOLUTIONS, INC. NR NR
3,559,091 Term Loan, maturing March 01, 2009 3,559,091
77,273 Term Loan, maturing March 31, 2009 77,273
GREAT LAKES DREDGE & DOCK CORPORATION B2 B-
1,917,081 Term Loan, maturing December 22, 2010 1,917,081
IESI COPRORATION B1 B+
194,375 Revolver, maturing September 30, 2008 191,945
992,500 Term Loan, maturing September 30, 2010 1,009,248
WASTE CONNECTIONS, INC. Ba2 BB+
3,000,000 Term Loan, maturing October 22, 2010 3,030,000
---------------
26,180,583
---------------
ELECTRONICS: 1.1%
ACTERNA, LLC NR NR
635,216 Term Loan, maturing October 14, 2008 635,216
ANTEON CORPORATION Ba3 BB
995,000 Term Loan, maturing December 31, 2010 1,007,231
DECISION ONE CORPORATION B3 CCC
10,541,011 (3) Term Loan, maturing April 18, 2005 5,428,621
INVENSYS INTERNATIONAL HOLDINGS, LTD. Ba3 B+
1,995,845 Term Loan, maturing September 05, 2009 2,023,287
KNOWLES ELECTRONICS, INC. B3 B-
2,121,197 Term Loan, maturing June 29, 2007 2,142,850
WORLDSPAN, L.P. B1 BB+
597,950 Term Loan, maturing June 30, 2007 602,061
---------------
11,839,266
---------------
FARMING AND AGRICULTURE: 2.1%
AGCO CORPORATION Ba1 BB+
4,615,833 Term Loan, maturing January 31, 2006 4,646,127
SCOTTS COMPANY Ba1 BB
1,000,000 Term Loan, maturing September 30, 2010 1,000,000
See Accompanying Notes to Financial Statements
26
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
FARMING AND AGRICULTURE: (CONTINUED)
UNITED INDUSTRIES CORPORATION B1 B+
$ 203,077 Revolver, maturing April 30, 2010 $ 200,031
9,982,500 Term Loan, maturing April 29, 2011 10,113,520
VICAR OPERATING, INC. Ba3 BB-
5,896,938 Term Loan, maturing June 30, 2009 5,985,392
---------------
21,945,070
---------------
FINANCE: 1.1%
REFCO GROUP B1 BB-
5,000,000 Term Loan, maturing August 05, 2011 4,991,145
RENT-A-CENTER, INC. Ba2 BB+
6,000,000 Term Loan, maturing June 30, 2010 6,074,250
---------------
11,065,395
---------------
GAMING: 5.9%
(2) ALADDIN GAMING, LLC Caa1 NR
3,869,336 (3) Term Loan, maturing August 26, 2006 3,937,049
10,377,506 (3) Term Loan, maturing February 26, 2008 10,559,112
ALLIANCE GAMING CORPORATION Ba3 BB-
7,277,303 Term Loan, maturing September 04, 2009 7,374,331
AMERISTAR CASINOS, INC. Ba3 BB-
2,625,066 Term Loan, maturing December 20, 2006 2,660,342
ARGOSY GAMING COMPANY Ba2 BB
4,365,000 Term Loan, maturing July 31, 2008 4,415,472
BOYD GAMING CORPORATION Ba2 BB
6,500,000 Term Loan, maturing June 30, 2011 6,572,111
GLOBAL CASH ACCESS, LLC B2 B+
2,962,500 Term Loan, maturing March 10, 2010 3,006,938
GREEN VALLEY RANCH GAMING, LLC B1 B+
200,000 Revolver, maturing December 23, 2008 199,500
1,990,000 Term Loan, maturing December 22, 2010 2,019,850
ISLE OF CAPRI CASINOS, INC. Ba2 BB-
2,158,895 Term Loan, maturing April 26, 2008 2,185,881
PENN NATIONAL GAMING Ba3 BB-
2,206,377 Term Loan, maturing September 01, 2007 2,242,231
RUFFIN GAMING, LLC NR NR
4,000,000 Term Loan, maturing July 14, 2007 4,032,500
UNITED AUBURN INDIAN COMMUNITY Ba3 BB
2,957,529 Term Loan, maturing January 24, 2009 2,972,317
VENETIAN CASINO RESORTS, LLC B1 B+
8,636,364 Term Loan, maturing August 06, 2011 8,755,114
---------------
60,932,748
---------------
GROCERY: 0.3%
GIANT EAGLE, INC. Ba2 BB+
1,904,667 Term Loan, maturing August 02, 2009 1,927,285
1,039,349 Term Loan, maturing August 06, 2009 1,051,691
---------------
2,978,976
---------------
HEALTHCARE, EDUCATION AND CHILDCARE: 14.2%
ACCREDO HEALTH, INC. Ba2 BB
8,500,000 Term Loan, maturing March 31, 2009 8,553,125
See Accompanying Notes to Financial Statements
27
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
HEALTHCARE, EDUCATION AND CHILDCARE: (CONTINUED)
ADVANCED MEDICAL OPTICS, INC. B1 BB-
$ 3,825,000 Term Loan, maturing June 25, 2009 $ 3,882,375
ALLIANCE IMAGING, INC. B1 B+
4,612,436 Term Loan, maturing June 10, 2008 4,595,139
APRIA HEALTHCARE GROUP, INC. Ba1 BBB-
2,506,849 Term Loan, maturing July 20, 2006 2,529,569
4,862,500 Term Loan, maturing July 20, 2008 4,919,027
ARDENT HEALTHCARE B1 B+
6,000,000 Term Loan, maturing August 12, 2011 6,015,000
COMMUNITY HEALTH SYSTEMS, INC. Ba3 BB-
18,420,900 Term Loan, maturing August 19, 2011 18,420,900
CONCENTRA OPERATING CORPORATION B1 B+
1,496,250 Term Loan, maturing June 30, 2009 1,504,042
DAVITA, INC. Ba2 BB
3,750,000 Term Loan, maturing March 31, 2007 3,787,500
12,388,124 Term Loan, maturing March 31, 2009 12,513,107
3,000,000 Term Loan, maturing June 30, 2010 3,023,439
DJ ORTHOPEDICS, LLC Ba3 BB-
975,000 Term Loan, maturing May 15, 2009 985,969
EMPI CORPORATION B1 B+
1,400,795 Term Loan, maturing November 24, 2009 1,404,297
EXPRESS SCRIPTS, INC. Ba1 BBB
2,992,500 Term Loan, maturing February 13, 2010 3,021,803
FISHER SCIENTIFIC INTERNATIONAL, INC. Ba2 BBB
2,500,000 Term Loan, maturing August 02, 2011 2,524,220
FRESENIUS MEDICAL CARE HOLDINGS, INC. Ba1 BB+
9,204,431 Term Loan, maturing February 21, 2010 9,281,132
IASIS HEALTHCARE CORPORATION B1 B+
9,000,000 Term Loan, maturing June 30, 2011 9,122,346
INSIGHT HEALTH SERVICES CORPORATION B1 B+
866,667 Term Loan, maturing October 17, 2008 864,500
200,000 Term Loan, maturing October 17, 2008 199,500
100,000 Term Loan, maturing October 17, 2008 99,750
5,275,682 Term Loan, maturing October 17, 2008 5,315,250
KINETIC CONCEPTS, INC. B1 BB-
7,091,250 Term Loan, maturing August 11, 2010 7,188,755
LEINER HEALTH PRODUCTS GROUP, INC. B1 B
4,500,000 Term Loan, maturing May 27, 2011 4,556,250
MAGELLAN HEALTH SERVICES, INC. B1 B+
1,541,667 Term Loan, maturing August 15, 2008 1,562,865
MEDCATH CORPORATION B2 B+
1,000,000 Term Loan, maturing June 30, 2011 1,014,375
MEDICAL DEVICE MANUFACTURING, INC. B2 B+
1,750,000 Term Loan, maturing June 30, 2010 1,767,500
PACIFICARE HEALTH SYSTEMS, INC. Ba3 BBB-
990,000 Term Loan, maturing June 03, 2008 1,004,025
SKILLED HEALTHCARE GROUP B1 B
4,000,000 Term Loan, maturing June 28, 2010 4,038,752
See Accompanying Notes to Financial Statements
28
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
HEALTHCARE, EDUCATION AND CHILDCARE: (CONTINUED)
SOLA INTERNATIONAL, INC. Ba3 BB-
$ 1,975,000 Term Loan, maturing December 11, 2009 $ 2,002,156
STERIGENICS INTERNATIONAL, INC. B2 B+
4,500,000 Term Loan, maturing June 14, 2011 4,556,250
SYBRON DENTAL MANAGEMENT, INC. Ba2 BB+
626,706 Term Loan, maturing June 06, 2009 631,406
TRIAD HOSPITALS, INC. Ba3 BB
1,485,828 Term Loan, maturing September 30, 2008 1,512,201
VANGUARD HEALTH SYSTEMS, INC. Ba3 B
10,000,000 Term Loan, maturing May 18, 2009 10,000,000
VWR INTERNATIONAL, INC. B1 BB-
5,034,334 Term Loan, maturing April 07, 2011 5,115,513
---------------
147,512,038
---------------
HOME AND OFFICE FURNISHINGS: 3.9%
BUHRMANN U.S., INC. Ba3 BB-
3,985,000 Term Loan, maturing December 31, 2010 4,038,965
GLOBAL IMAGING SYSTEMS, INC. Ba3 BB-
2,496,250 Term Loan, maturing May 10, 2010 2,524,333
HILLMAN GROUP, INC. B2 B
2,992,500 Term Loan, maturing March 30, 2011 3,026,166
HOLMES GROUP, INC. B1 B
5,000,000 Term Loan, maturing November 08, 2010 4,975,000
IDENTITY GROUP, INC. NR NR
4,016,757 Term Loan, maturing April 30, 2006 2,731,395
MAAX CORPORATION B1 B+
4,000,000 Term Loan, maturing June 04, 2011 4,022,500
SEALY MATTRESS COMPANY B2 B+
8,598,214 Term Loan, maturing August 06, 2012 8,696,732
SIMMONS COMPANY B2 B+
8,323,704 Term Loan, maturing December 19, 2011 8,400,440
XEROX CORPORATION Ba1 BB-
2,000,000 Term Loan, maturing September 30, 2008 2,010,416
---------------
40,425,947
---------------
INSURANCE: 1.5%
CONSECO, INC. B2 BB-
15,000,000 Term Loan, maturing June 22, 2010 15,228,120
---------------
15,228,120
---------------
LEISURE, AMUSEMENT, ENTERTAINMENT: 8.4%
AMF BOWLING WORLDWIDE, INC. B1 B
2,493,750 Term Loan, maturing August 27, 2009 2,516,351
CINEMARK USA, INC. Ba3 BB-
1,496,250 Term Loan, maturing March 31, 2011 1,507,472
FITNESS HOLDINGS WORLDWIDE, INC. B1 B
4,975,000 Term Loan, maturing July 01, 2009 5,037,188
LODGENET ENTERTAINMENT CORPORATION B1 B+
3,729,479 Term Loan, maturing June 30, 2006 3,752,788
LOEWS CINEPLEX ENTERTAINMENT CORPORATION B1 B
7,500,000 Term Loan, maturing July 31, 2011 7,564,845
See Accompanying Notes to Financial Statements
29
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
LEISURE, AMUSEMENT, ENTERTAINMENT: (CONTINUED)
METRO-GOLDWYN-MAYER STUDIOS, INC. Ba3 B+
$ 19,000,000 Term Loan, maturing April 30, 2011 $ 19,092,624
PURE FISHING B1 BB-
2,992,500 Term Loan, maturing September 30, 2010 3,033,647
REGAL CINEMAS, INC. Ba3 BB-
13,540,758 Term Loan, maturing November 10, 2010 13,710,017
SIX FLAGS THEME PARKS, INC. Ba3 B
7,959,870 Term Loan, maturing June 30, 2009 8,002,161
UNIVERSAL CITY DEVELOPMENT PARTNERS, L.P. B1 B+
5,000,000 Term Loan, maturing June 30, 2007 5,018,750
WALLACE THEATERS B2 B
2,750,000 Term Loan, maturing July 15, 2009 2,763,750
WARNER MUSIC GROUP B1 B+
14,925,000 Term Loan, maturing February 28, 2011 15,138,219
---------------
87,137,812
---------------
LODGING: 3.2%
BOCA RESORTS HOTEL CORPORATION NR NR
7,000,000 Term Loan, maturing July 22, 2009 7,000,000
CNL HOSPITALITY PARTNERS, L.P. NR NR
12,323,944 Term Loan, maturing January 02, 2005 12,323,944
WYNDHAM INTERNATIONAL, INC. NR NR
14,606,929 Term Loan, maturing June 30, 2006 14,311,752
---------------
33,635,696
---------------
MACHINERY: 4.4%
ALLIANCE LAUNDRY HOLDINGS, LLC B1 B
3,017,102 Term Loan, maturing August 02, 2007 3,028,416
(2) ANTHONY CRANE RENTAL, L.P. Caa2 CC
11,757,427 Term Loan, maturing July 20, 2006 9,405,941
BLOUNT, INC. B2 B+
2,000,000 Term Loan, maturing July 31, 2010 2,030,000
BUCYRUS INTERNATIONAL, INC. Ba3 BB-
2,500,000 Term Loan, maturing July 28, 2010 2,523,438
ENERSYS, INC. Ba3 BB
4,276,622 Term Loan, maturing March 17, 2011 4,326,740
JUNO LIGHTING, INC. B1 B+
2,372,538 Term Loan, maturing November 21, 2010 2,408,126
MORRIS MATERIAL HANDLING, INC. NR NR
249,574 Term Loan, maturing September 28, 2004 237,095
NATIONAL WATERWORKS, INC. B1 BB-
2,846,939 Term Loan, maturing November 22, 2009 2,891,422
REXNORD CORPORATION B1 B+
6,222,222 Term Loan, maturing November 25, 2009 6,285,738
UNITED RENTALS (NORTH AMERICA), INC. Ba3 BB
10,307,500 Term Loan, maturing February 14, 2011 10,427,326
VUTEK, INC. B1 B+
2,000,000 Term Loan, maturing June 25, 2010 1,995,000
---------------
45,559,242
---------------
See Accompanying Notes to Financial Statements
30
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
MINING, STEEL, IRON AND NONPRECIOUS METALS: 0.9%
FOUNDATION COAL CORPORATION Ba3 BB-
$ 3,750,000 Term Loan, maturing July 30, 2011 $ 3,791,719
PEABODY ENERGY CORPORATION Ba1 BB+
5,887,500 Term Loan, maturing March 21, 2010 5,956,495
---------------
9,748,214
---------------
OIL AND GAS: 2.6%
GETTY PETROLEUM MARKETING, INC. B1 BB-
6,000,000 Term Loan, maturing May 19, 2010 6,099,377
LA GRANGE ACQUISTION, L.P. NR NR
5,500,000 Term Loan, maturing January 18, 2008 5,582,500
LYONDELL-CITGO REFINING, L.P. Ba3 BB
2,000,000 Term Loan, maturing May 21, 2007 2,033,750
SEMCRUDE, L.P. B1 NR
2,625,000 Term Loan, maturing August 31, 2010 2,652,891
TRANSWESTERN PIPELINE COMPANY B1 BB
2,000,000 Term Loan, maturing April 30, 2009 2,018,334
VULCAN ENERGY CORPORATION B1 BB
4,000,000 Term Loan, maturing March 31, 2010 4,057,500
WILLIAMS PRODUCTION RMT COMPANY B2 BB
3,971,303 Term Loan, maturing May 30, 2007 4,032,529
---------------
26,476,881
---------------
OTHER BROADCASTING AND ENTERTAINMENT: 4.7%
DIRECTV HOLDINGS, LLC Ba2 BB
7,020,306 Term Loan, maturing March 06, 2010 7,121,223
ECHOSTAR DBS CORPORATION Ba3 BB-
12,000,000 Floating Rate Note, maturing
October 01, 2008 12,480,000
LIBERTY MEDIA CORPORATION Baa3 BBB-
15,000,000 Floating Rate Note, maturing
September 17, 2006 15,180,300
RAINBOW NATIONAL SERVICES, LLC B1 B+
10,000,000 Term Loan, maturing March 31, 2012 10,130,000
YANKEENETS, LLC NR NR
2,742,857 Term Loan, maturing June 25, 2007 2,777,143
YANKEES HOLDINGS, L.P. NR NR
1,257,143 Term Loan, maturing June 25, 2007 1,272,857
---------------
48,961,523
---------------
OTHER TELECOMMUNICATIONS: 5.8%
CINCINNATI BELL, INC. B1 B+
52,409 Revolver, maturing November 09, 2004 51,839
9,353,260 Term Loan, maturing June 30, 2008 9,452,638
CONSOLIDATED COMMUNICATIONS, INC. B1 B+
3,500,000 Term Loan, maturing March 31, 2010 3,508,750
2,500,000 Term Loan, maturing October 14, 2011 2,534,375
D&E COMMUNICATIONS, INC. Ba3 BB-
2,984,921 Term Loan, maturing March 05, 2012 3,030,629
FAIRPOINT COMMUNICATIONS, INC. B2 B+
2,500,000 Term Loan, maturing March 31, 2009 2,519,533
See Accompanying Notes to Financial Statements
31
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
OTHER TELECOMMUNICATIONS: (CONTINUED)
GCI HOLDINGS, INC. Ba3 BB+
$ 2,087,144 Term Loan, maturing October 31, 2007 $ 2,106,060
INTERA GROUP, INC. NR NR
2,613,674 (3) Term Loan, maturing December 31, 2005 1,199,884
1,020,533 (3) Term Loan, maturing December 31, 2005 -
1,991,408 (3) Term Loan, maturing December 31, 2005 -
PANAMSAT CORPORATION Ba3 BB+
12,000,000 Term Loan, maturing August 20, 2011 12,023,628
QWEST COMMUNICATIONS INTERNATIONAL, INC. B3 CCC+
15,000,000 Floating Rate Note, maturing February 15, 2009 13,950,000
QWEST CORPORATION B2 BB-
2,000,000 Term Loan, maturing June 30, 2007 2,069,500
TIME WARNER TELECOM HOLDINGS B1 B
3,000,000 Floating Rate Note, maturing February 15, 2011 2,925,000
VALOR COMMUNICATIONS GROUP B2 B+
5,000,000 Term Loan, maturing June 15, 2010 5,062,500
---------------
60,434,336
---------------
PERSONAL AND NONDURABLE CONSUMER PRODUCTS: 3.9%
AMSCAN HOLDINGS, INC. B1 B+
3,000,000 Term Loan, maturing April 30, 2012 3,037,500
CHURCH & DWIGHT COMPANY, INC. Ba2 BB
6,500,000 Term Loan, maturing May 30, 2011 6,586,326
JARDEN CORPORATION Ba3 B+
1,333,333 Term Loan, maturing April 08, 2008 1,342,500
1,985,000 Term Loan, maturing April 24, 2008 1,998,647
JOSTENS, INC. Ba3 B+
3,879,576 Term Loan, maturing July 29, 2010 3,937,770
NORWOOD PROMOTIONAL PRODUCTS, INC. NR NR
12,826,076 Term Loan, maturing August 16, 2009 12,441,293
NORWOOD PROMOTIONAL PRODUCTS HOLDINGS, INC. NR NR
7,300,828 (3) Term Loan, maturing August 16, 2011 3,285,373
PRESTIGE BRANDS HOLDINGS, INC. B1 B
3,985,000 Term Loan, maturing April 06, 2011 3,998,282
RAYOVAC CORPORATION B1 B+
3,607,729 Term Loan, maturing September 30, 2009 3,649,066
---------------
40,276,757
---------------
PERSONAL, FOOD AND MISCELLANEOUS: 3.0%
AFC ENTERPRISES, INC. B1 B
1,474,858 Term Loan, maturing May 23, 2009 1,480,389
ALDERWOODS GROUP, INC. B1 BB-
3,621,824 Term Loan, maturing August 19, 2009 3,665,398
ALLIED SECURITY HOLDINGS B2 B+
2,000,000 Term Loan, maturing June 30, 2010 2,020,000
COINMACH CORPORATION B1 B+
4,875,000 Term Loan, maturing July 25, 2009 4,931,672
COINSTAR, INC. Ba3 BB-
3,250,000 Term Loan, maturing July 07, 2011 3,304,844
DOMINO'S, INC. Ba3 B+
7,864,963 Term Loan, maturing June 25, 2010 7,998,910
See Accompanying Notes to Financial Statements
32
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
PERSONAL, FOOD AND MISCELLANEOUS: (CONTINUED)
JACK IN THE BOX, INC. Ba2 BB
$ 5,480,000 Term Loan, maturing January 09, 2010 $ 5,555,350
N.E.W. CUSTOMER SERVICES COMPANIES, INC. B1 B+
1,666,667 Term Loan, maturing August 01, 2009 1,677,084
---------------
30,633,647
---------------
PRINTING AND PUBLISHING: 12.1%
ADAMS OUTDOOR ADVERTISING, L.P. B1 B+
5,000,000 Term Loan, maturing October 15, 2011 5,060,415
AMERICAN ACHIEVEMENT CORPORATION B1 B+
995,000 Term Loan, maturing March 25, 2011 1,003,706
AMERICAN MEDIA OPERATIONS, INC. Ba3 B+
3,767,544 Term Loan, maturing April 01, 2007 3,823,586
AMERICAN REPROGRAPHICS COMPANY B1 BB
2,487,500 Term Loan, maturing June 18, 2009 2,524,813
AMERICAN REPROGRAPHICS COMPANY B3 B
948,284 Term Loan, maturing December 18, 2009 993,327
CANWEST MEDIA, INC. Ba3 B+
7,530,465 Term Loan, maturing August 15, 2009 7,629,302
DEX MEDIA EAST, LLC Ba2 BB-
7,227,230 Term Loan, maturing November 08, 2008 7,314,557
4,019,135 Term Loan, maturing May 08, 2009 4,075,234
DEX MEDIA WEST, LLC Ba2 BB-
6,118,520 Term Loan, maturing September 09, 2009 6,200,098
19,570,173 Term Loan, maturing March 09, 2010 19,871,886
FREEDOM COMMUNICATIONS Ba3 BB
12,000,000 Term Loan, maturing May 18, 2012 12,185,628
LAMAR MEDIA CORPORATION Ba2 BB-
12,370,370 Term Loan, maturing June 30, 2010 12,494,074
MC COMMUNICATIONS, LLC B2 B
3,500,000 Term Loan, maturing December 31, 2010 3,465,000
PRIMEDIA, INC. B3 B
2,179,466 Revolver, maturing June 30, 2008 2,045,294
7,117,339 Term Loan, maturing June 30, 2009 6,845,101
1,500,000 Term Loan, maturing December 31, 2009 1,477,500
R.H. DONNELLEY, INC. Ba3 BB
7,882,074 Term Loan, maturing June 30, 2010 7,951,042
READER'S DIGEST ASSOCIATIONS, INC. Ba1 BB
1,995,000 Term Loan, maturing May 20, 2008 2,021,809
TRANSWESTERN PUBLISHING COMPANY B1 B+
6,207,500 Term Loan, maturing February 25, 2011 6,259,879
TRANSWESTERN PUBLISHING COMPANY B3 B-
3,990,000 Term Loan, maturing February 25, 2012 4,019,303
ZIFF DAVIS MEDIA, INC. B3 CCC
8,797,982 Term Loan, maturing March 31, 2007 8,751,247
---------------
126,012,801
---------------
RADIO AND TV BROADCASTING: 7.2%
BLOCK COMMUNICATIONS, INC. Ba2 BB-
2,797,328 Term Loan, maturing November 15, 2009 2,818,308
See Accompanying Notes to Financial Statements
33
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
RADIO AND TV BROADCASTING: (CONTINUED)
CUMULUS MEDIA, INC. Ba3 B+
$ 2,000,000 Term Loan, maturing March 28, 2009 $ 2,013,750
3,500,000 Term Loan, maturing March 28, 2010 3,529,533
EMMIS OPERATING COMPANY Ba2 B+
10,000,000 Term Loan, maturing November 10, 2011 10,081,249
ENTRAVISION COMMUNICATIONS CORPORATION B1 B+
2,500,000 Term Loan, maturing February 24, 2012 2,519,793
FISHER BROADCASTING, INC. Ba3 B+
1,266,221 Term Loan, maturing February 28, 2010 1,271,761
GRAY TELEVISION, INC. Ba2 B+
6,000,000 Term Loan, maturing June 30, 2011 6,048,749
LIN TELEVISION CORPORATION Ba1 BB
1,994,286 Term Loan, maturing December 31, 2007 2,020,104
MISSION BROADCASTING, INC. Ba3 B+
3,072,340 Term Loan, maturing December 31, 2010 3,080,021
NEP BROADCASTING B1 B
3,000,000 Term Loan, maturing November 30, 2010 3,033,750
NEXSTAR BROADCASTING Ba3 B+
1,677,660 Term Loan, maturing December 31, 2010 1,681,854
PAXSON COMMUNICATIONS CORPORATION B1 B
18,000,000 Floating Rate Note, maturing January 15, 2010 17,910,000
SINCLAIR BROADCAST GROUP, INC. Ba2 BB
3,000,000 Term Loan, maturing June 30, 2009 3,018,750
5,000,000 Term Loan, maturing December 31, 2009 5,057,290
SPANISH BROADCASTING SYSTEMS B1 B+
1,990,000 Term Loan, maturing October 30, 2009 2,022,338
SUSQUEHANNA MEDIA COMPANY Ba2 BB-
7,000,000 Term Loan, maturing March 31, 2012 7,098,441
TELEVICENTRO OF PUERTO RICO, LLC Ba1 BB
1,845,714 Term Loan, maturing December 31, 2007 1,869,609
---------------
75,075,300
---------------
RETAIL STORES: 7.1%
ADVANCE STORES COMPANY, INC. Ba2 BB
5,098,445 Term Loan, maturing November 30, 2007 5,168,549
ALIMENTATION COUCHE-TARD, INC. Ba2 BB
1,218,367 Term Loan, maturing December 17, 2010 1,226,743
BAKER & TAYLOR, INC. B1 B
975,000 Revolver, maturing May 06, 2009 965,250
1,000,000 Term Loan, maturing May 06, 2011 1,012,500
BLOCKBUSTER ENTERTAINMENT CORPORATION Ba2 BB
15,000,000 Term Loan, maturing August 19, 2011 15,004,697
CH OPERATING, LLC B2 B+
1,663,339 Term Loan, maturing June 21, 2007 1,667,497
CSK AUTOMOTIVE, INC. Ba3 B+
2,492,500 Term Loan, maturing June 19, 2009 2,522,098
HARBOR FREIGHT TOOLS B1 B+
5,000,000 Term Loan, maturing June 24, 2010 5,028,125
JEAN COUTU GROUP, INC. B1 BB
10,000,000 Term Loan, maturing July 30, 2011 10,097,730
See Accompanying Notes to Financial Statements
34
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
RETAIL STORES: (CONTINUED)
NEBRASKA BOOK COMPANY, INC. B2 B
$ 2,493,750 Term Loan, maturing March 04, 2011 $ 2,528,039
ORIENTAL TRADING COMPANY, INC. B1 B+
2,866,019 Term Loan, maturing August 06, 2010 2,906,622
ORIENTAL TRADING COMPANY, INC. B2 B-
1,000,000 Term Loan, maturing January 08, 2011 1,019,167
PANTRY, INC. B1 B+
8,895,652 Term Loan, maturing March 12, 2011 9,029,087
PETCO ANIMAL SUPPLIES, INC. Ba3 BB
2,533,747 Term Loan, maturing October 26, 2008 2,567,795
RITE AID CORPORATION Ba3 BB
10,945,000 Term Loan, maturing April 30, 2008 11,081,814
TRAVELCENTERS OF AMERICA, INC. Ba3 BB
2,187,166 Term Loan, maturing November 14, 2008 2,216,327
---------------
74,042,040
---------------
TELECOMMUNICATIONS EQUIPMENT: 3.7%
AAT COMMUNICATIONS CORPORATION B1 B-
3,500,000 Term Loan, maturing January 16, 2012 3,543,750
AMERICAN TOWER, L.P. B1 B
10,000,000 Term Loan, maturing August 31, 2011 10,151,560
CROWN CASTLE OPERATING COMPANY B1 B-
3,878,996 Term Loan, maturing September 15, 2007 3,888,694
SBA SENIOR FINANCE, INC. B2 CCC+
6,469,231 Term Loan, maturing October 31, 2008 6,526,846
SPECTRASITE COMMUNICATIONS, INC. B1 B+
8,263,258 Term Loan, maturing December 31, 2007 8,387,207
4,896,488 Term Loan, maturing December 31, 2007 4,921,989
TRIPOINT GLOBAL COMMUNICATIONS, INC. NR NR
753,471 Term Loan, maturing May 31, 2006 727,100
---------------
38,147,146
---------------
TEXTILES AND LEATHER: 0.7%
(2) GALEY & LORD, INC. NR NR
2,653,074 (3) Term Loan, maturing September 05, 2009 1,094,393
MALDEN MILLS INDUSTRIES, INC. NR NR
2,573,615 Term Loan, maturing October 01, 2008 2,061,466
735,319 (3) Term Loan, maturing October 01, 2008 --
POLYMER GROUP, INC. B2 B+
3,000,000 Term Loan, maturing April 27, 2010 3,021,875
WILLIAM CARTER COMPANY Ba3 BB+
1,512,165 Term Loan, maturing September 08, 2008 1,526,342
---------------
7,704,076
---------------
UTILITIES: 7.0%
ALLEGHENY ENERGY SUPPLY COMPANY B1 B+
12,631,667 Term Loan, maturing March 08, 2011 12,832,195
6,315,833 Term Loan, maturing June 08, 2011 6,425,703
ASTORIA ENERGY, LLC Ba3 B+
14,500,000 Term Loan, maturing April 15, 2012 14,729,579
See Accompanying Notes to Financial Statements
35
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN
RATINGS+
PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------
UTILITIES: (CONTINUED)
CALPINE CONSTRUCTION FINANCE COMPANY, L.P. NR B+
$ 1,980,000 Term Loan, maturing August 26, 2009 $ 2,120,580
CALPINE CORPORATION B2 B
7,415,050 Term Loan, maturing July 16, 2007 7,444,398
3,952,569 Term Loan, maturing July 16, 2007 3,359,684
CALPINE GENERATING COMPANY, LLC B1 B+
2,500,000 Term Loan, maturing March 23, 2009 2,508,283
CENTERPOINT ENERGY, INC. Ba1 BBB
3,471,622 Term Loan, maturing October 07, 2006 3,488,546
COLETO CREEK WLE, L.P.
1,000,000 Term Loan, maturing June 30, 2011 Ba2 BB 1,015,625
1,000,000 Term Loan, maturing June 30, 2012 Ba3 BB 1,016,250
DYNEGY HOLDINGS, INC. B2 BB-
3,000,000 Term Loan, maturing May 27, 2010 3,057,189
PIKE ELECTRIC, INC. Ba3 BB
4,428,750 Term Loan, maturing July 01, 2012 4,510,868
RIVERSIDE ENERGY CENTER, LLC Ba3 BB-
276,115 Term Loan, maturing June 24, 2010 278,876
2,602,945 Term Loan, maturing June 24, 2011 2,628,974
3,620,937 Term Loan, maturing June 24, 2011 3,657,146
TETON POWER FUNDING Ba3 B+
3,857,692 Term Loan, maturing March 12, 2011 3,896,269
---------------
72,970,165
---------------
TOTAL SENIOR LOANS
(COST $1,928,528,533) 1,945,548,616
---------------
OTHER CORPORATE DEBT: 0.9%
FINANCE: 0.7%
VALUE ASSET MANAGEMENT, INC. B3 B
7,794,118 Senior Subordinated Bridge Note,
maturing August 31, 2005 7,638,235
---------------
7,638,235
---------------
HEALTHCARE, EDUCATION AND CHILDCARE: 0.0%
BLOCK VISION HOLDINGS CORPORATION NR NR
13,365 Junior Term Loan, maturing July 30, 2007 --
---------------
--
---------------
HOME AND OFFICE FURNISHINGS: 0.2%
MP HOLDINGS, INC. NR NR
45,229 Subordinated Note, maturing March 14, 2007 42,968
SEALY MATTRESS COMPANY B3 B-
2,000,000 Unsecured Term Loan, maturing April 05, 2013 2,045,000
---------------
2,087,968
---------------
TOTAL OTHER CORPORATE DEBT
(COST $8,916,961) 9,726,203
---------------
See Accompanying Notes to Financial Statements
36
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
SECURITY DESCRIPTION VALUE
-----------------------------------------------------------------------------------------------------------------------
EQUITIES AND OTHER ASSETS: 2.6%
(@), (R) Acterna, LLC (85,722 Common Shares) $ 1,090,731
(@), (R) Acterna, Inc. - Contingent Stock Value Right --
(1), (@), (R) Allied Digital Technologies Corporation
(Residual Interest in Bankruptcy Estate) 186,961
(@), (R) AM Cosmetics Corporation (Liquidation Interest) 50
(@), (R) Block Vision Holdings Corporation (571 Common Shares) --
(2), (@), (R) Boston Chicken, Inc. (Residual Interest in Boston Chicken Plan Trust) 6,728,959
(@), (R) Cedar Chemical (Liquidation Interest) --
(@), (R) Covenant Care, Inc. (Warrants for 19,000 Common Shares,
Expires January 13, 2005) --
(@), (R) Covenant Care, Inc. (Warrants for 26,901 Common Shares,
Expires March 31, 2013) --
(@), (R) Decision One Corporation (350,065 Common Shares) --
(2), (@), (R) Electro Mechanical Solutions (Residual Interest in Bankruptcy Estate) 1,112
(@), (R) Enginen Realty (857 Common Shares) --
(@), (R) Enterprise Profit Solutions (Liquidation Interest) --
(4), (@), (R) Euro United Corporation (Residual Interest in Bankruptcy Estate) 2,335,366
(2), (@), (R) Exide Technologies (Warrants for 16,501 Common Shares,
March 16, 2006) 165
(@), (R) Galey & Lord (203,345 Common Shares) --
(@), (R) Gate Gourmet Borrower, LLC (Warrants for 101 Common Shares) --
(@), (R) Gemini Leasing, Inc. (143,079 common shares) --
(2), (@), (R) Grand Union Company (Residual Interest in Bankruptcy Estate) 54,523
(@) Hayes Lemmerz (73,835 Common Shares) 948,780
(@) Hayes Lemmerz (246 Preferred Shares) 3,161
(@), (R) Holmes Group (2,303, Common Shares) 16,052
(2), (@), (R) Humphreys, Inc. (Residual Interest in Bankruptcy Estate) --
(2), (@), (R) Imperial Home Decor Group, Inc. (300,141 Common Shares) 1
(2), (@), (R) Imperial Home Decor Group, Inc. (Liquidation Interest) --
(2), (@), (R) Insilco Technologies (Residual Interest in Bankruptcy Estate) 43,482
(@), (R) Intera Group, Inc. (864 Common Shares) --
(2), (@), (R) IT Group, Inc. (Residual Interest in Bankruptcy Estate) 117,878
(2), (@), (R) Kevco, Inc. (Residual Interest in Bankruptcy Estate) 147,443
(2), (@), (R) Lincoln Paper And Tissue, LLC (Residual Interest in Bankruptcy Estate) --
(@), (R) Malden Mills Industries, Inc. (436,865 Common Shares) --
(@), (R) Malden Mills Industries, Inc. (1,427,661 Preferred Shares) --
(@), (R) Morris Material Handling, Inc. (481,373 Common Shares) 813,520
(@), (R) MP Holdings, Inc. (590 Common Shares) 6
(@), (R) Murray's Discount Auto Stores, Inc. (Escrow Interest) 510,279
(@), (R) Neoplan USA Corporation (17,348 Common Shares) --
(@), (R) Neoplan USA Corporation (1,814,180 Series B Preferred Shares) --
(@), (R) Neoplan USA Corporation (1,084,000 Series C Preferred Shares) 205,960
(@), (R) Neoplan USA Corporation (3,524,300 Series D Preferred Shares) 3,524,300
(@), (R) New Piper Aircraft (Residual Interest in Litigation Proceeds) --
See Accompanying Notes to Financial Statements
37
ING Prime Rate Trust
PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
SECURITY DESCRIPTION VALUE
-----------------------------------------------------------------------------------------------------------------------
(@), (R) New World Restaurant Group, Inc. (Warrants for 4,489
Common Shares, Expires June 15, 2006) $ 61,589
(@), (R) Norwood Promotional Products, Inc. (72,238 Common Shares) --
(@) Outsourcing Solutions, Inc. (31,129 Common Shares) 706,316
(@), (R) Safelite Glass Corporation (660,808 Common Shares) 7,348,185
(@), (R) Safelite Realty (44,605 Common Shares) 245,328
(@), (R) Scientific Games Corporation (48,930 Non-Voting Common Shares) 833,278
(@), (R) Soho Publishing (17,582 Common Shares) 176
(@), (R) Stellex Aerostructures, Inc. (11,130 Common Shares) --
(@), (R) Targus Group, Inc. (Warrants for 66,824 Common Shares,
Expires December 6, 2012) --
(@), (R) Tartan Textile Services, Inc. (23,449 Shares of Series D Preferred Stock) --
(@), (R) Tartan Textile Services, Inc. (36,775 Shares of Series E Preferred Stock) --
(@), (R) Tembec, Inc. (167,239 Common Shares) 1,180,376
(1), (@), (R) Transtar Metals (Residual Interest in Bankruptcy Estate) --
(1), (@), (R) TSR Wireless, LLC (Residual Interest in Bankruptcy Estate) --
(2), (@), (R) U.S. Aggregates (Residual Interest in Bankruptcy Estate) --
(2), (@), (R) U.S. Office Products Company (Residual Interest in Bankruptcy Estate) --
---------------
TOTAL FOR EQUITY AND OTHER ASSETS
(COST $33,919,899) 27,103,977
---------------
TOTAL INVESTMENTS 191.0% $ 1,982,378,796
(COST $1,971,365,393)
PREFERRED SHARES AND LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS, NET (91.0) (944,552,475)
----- ---------------
NET ASSETS 100.0% $ 1,037,826,321
===== ===============
----------
(@) Non-income producing security.
(R) Restricted security.
* Senior loans, while exempt from registration under the Security Act of
1933, as amended contain certain restrictions on resale and cannot be sold
publicly. These senior loans bear interst (unless otherwise noted) at rates
that float periodically at a margin above the London Inter-Bank Offered
Rate ("LIBOR") and other short-term rates.
NR Not Rated
+ Bank Loans rated below Baa3 by Moody's Investor 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 $1,972,850,494.
Net unrealized appreciation consists of the following:
Gross Unrealized Appreciation $ 38,709,633
Gross Unrealized Depreciation (29,181,331)
-------------
Net Unrealized Appreciation $ 9,528,302
=============
See Accompanying Notes to Financial Statements
38
ING Prime Rate Trust
SHAREHOLDER MEETING INFORMATION (Unaudited)
A special meeting of shareholders of the ING Prime Rate Trust was held June 15,
2004, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale,
AZ 85258.
A brief description of each matter voted upon as well as the results are
outlined below:
MATTERS:
ING PRIME RATE TRUST, COMMON SHARES
1. To elect nine members of the Board of Trustees to represent the
interests of the holders of Common Shares of the Trust until the
election and qualifications of their successors.
ING PRIME RATE TRUST, PREFERRED SHARES
2. To elect two members of the Board of Trustees to represent the
interests of the holders of Auction Rate Cumulative Preferred Shares -
Series M, T, W, TH, and F of the Trust - until the election and
qualification of their successors.
RESULTS:
SHARES VOTED
SHARES AGAINST OR SHARES BROKER TOTAL
PROPOSAL VOTED FOR WITHHELD ABSTAINED NON-VOTE SHARES VOTED
-------------------------------------------------------------------------------------------------------------
Common Paul S. Doherty 117,790,259 2,558,077 -- -- 120,348,336
Shares J. Michael Earley 117,897,099 2,451,237 -- -- 120,348,336
Trustees R. Barbara Gitenstein 117,787,359 2,560,977 -- -- 120,348,336
Thomas J. McInerney 117,807,436 2,540,899 -- -- 120,348,336
David W.C. Putnam 117,655,942 2,692,393 -- -- 120,348,336
Blaine E. Rieke 117,747,937 2,600,399 -- -- 120,348,336
John G. Turner 117,870,513 2,477,823 -- -- 120,348,336
Roger B. Vincent 117,888,751 2,459,585 -- -- 120,348,336
Richard A. Wedemeyer 117,806,444 2,541,892 -- -- 120,348,336
Preferred
Shares Walter H. May 17,399 47 -- -- 17,446
Trustees Jock Patton 17,396 50 -- -- 17,446
39
ING Prime Rate Trust
ADDITIONAL INFORMATION (Unaudited)
SHAREHOLDER INVESTMENT PROGRAM
The Trust offers a Shareholder Investment Program (the "Program," formerly known
as the Dividend Reinvestment and Cash Purchase Plan) which allows holders of the
Trust's common shares a simple way to reinvest dividends and capital gains
distributions, if any, in additional common shares of the Trust. The Program
also offers holders of the Trust's common shares the ability to make optional
cash investments in any amount from $100 to $100,000 on a monthly basis.
For dividend reinvestment purposes, DST Systems, Inc. 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 will issue new
shares for dividend reinvestment purchases 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 DST Systems, Inc. when the market price plus estimated commissions is less
than the net asset value on the valuation date. New shares will be issued by the
Trust for optional cash investments when the market price plus estimated
commissions is equal to or exceeds the net asset value on the valuation date.
Such shares will be issued at a discount to market, determined by the Trust,
between 0% and 5%.
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 PRORATA 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 the Trust's Shareholder Services Department at (800) 992-0180.
KEY FINANCIAL DATES -- CALENDAR 2004 DIVIDENDS:
DECLARATION DATE EX-DIVIDEND DATE PAYABLE DATE
---------------- ---------------- ------------
January 30 February 6 February 24
February 27 March 8 March 22
March 31 April 7 April 22
April 30 May 6 May 24
May 28 June 8 June 22
June 30 July 8 July 22
July 30 August 6 August 23
August 31 September 8 September 22
September 30 October 7 October 22
October 29 November 8 November 22
November 30 December 8 December 22
December 20 December 29 January 12
RECORD DATE WILL BE TWO BUSINESS DAYS AFTER EACH EX-DIVIDEND DATE.
THESE DATES ARE SUBJECT TO CHANGE.
40
ING Prime Rate Trust
ADDITIONAL INFORMATION (Unaudited) (continued)
STOCK DATA
The Trust's common 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. 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.
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.
NUMBER OF SHAREHOLDERS
The approximate number of record holders of Common Stock as of August 31, 2004
was 7,300 which does not include approximately 49,797 beneficial owners of
shares held in the name of brokers of other nominees.
PROXY VOTING INFORMATION
A description of the policies and procedures that the Registrant uses to
determine how to vote proxies related to portfolio securities is available (1)
without charge, upon request, by calling Shareholder Services toll-free at
800-992-0180; (2) on the Registrant's website at www.ingfunds.com and (3) on the
SEC's website at www.sec.gov.
Information regarding how the Registrant voted proxies related to portfolio
securities during the most recent 12-month period ended June 30 is available
without charge on the Registrant's website at www.ingfunds.com and on the SEC
website at www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS
The Registrant files its complete schedule of portfolio holdings with the
Commission for the first and third quarters of each fiscal year on Form N-Q. The
Registrant's Forms N-Q are available on the SEC's website at www.sec.gov. The
Registrant's Forms N-Q may be reviewed and copied at the Commissions Public
Reference Room in Washington, DC, and information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330; and is available upon
request from the Registrant by calling Shareholder Services toll-free at
800-992-0180.
41
INVESTMENT MANAGER
ING Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
SUB-ADVISER
ING Investment Management Co.
230 Park Avenue
New York, New York 10169
ADMINISTRATOR
ING Fund Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
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
1-800-334-3444
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 219368
Kansas City, Missouri 64141
CUSTODIAN
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, Missouri 64105
LEGAL COUNSEL
Dechert LLP
1775 I Street, N.W.
Washington, D.C. 20006
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
355 S. Grand Avenue, Suite 2000
Los Angeles, CA 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
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 (800)-992-0180
FOR MORE COMPLETE INFORMATION, OR TO OBTAIN A PROSPECTUS ON ANY ING FUND, PLEASE
CALL YOUR INVESTMENT PROFESSIONAL OR ING FUNDS DISTRIBUTOR, LLC AT (800)
992-0180 OR LOG ON TO www.ingfunds.com. THE PROSPECTUS SHOULD BE READ CAREFULLY
BEFORE INVESTING. CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS INFORMATION
AND OTHER INFORMATION ABOUT THE FUND.
[ING FUNDS LOGO]
PRSAR-PRT (0804-102904)
ITEM 2. CODE OF ETHICS.
Not required for semi-annual filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required for semi-annual filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required for semi-annual filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not required for semi-annual filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule is included as part of the report to shareholders filed under Item 1 of
this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not required for semi-annual filing.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board has a Nominating Committee for the purpose of considering and
presenting to the Board candidates it proposes for nomination to fill
Independent Trustee vacancies on the Board. The Committee currently consists of
all Independent Trustees of the Board (6 individuals). The Nominating Committee
operates pursuant to a Charter approved by the Board. The primary purpose of the
Nominating Committee is to consider and present to the Board the candidates it
proposes for nomination to fill vacancies on the Board. In evaluating
candidates, the Nominating Committee may consider a variety of factors, but it
has not at this time set any specific minimum qualifications that must be met.
Specific qualifications of candidates for Board membership will be based on the
needs of the Board at the time of nomination.
The Nominating Committee is willing to consider nominations received from
shareholders and shall assess shareholder nominees in the same manner as it
reviews its own nominees. A shareholder nominee for director should be submitted
in writing to the Fund's Secretary. Any such shareholder nomination should
include at a minimum the following information as to each individual proposed
for nomination as trustee: such individual's written consent to be named in the
proxy statement as a nominee (if nominated) and to serve as a trustee (if
elected), and all information relating to such individual that is required to be
disclosed in the solicitation of proxies for election of trustees, or is
otherwise required, in each case under applicable federal securities laws, rules
and regulations.
The Secretary shall submit all nominations received in a timely manner to the
Nominating Committee. To be timely, any such submission must be delivered to the
Fund's Secretary not
earlier than the 90th day prior to such meeting and not later than the close of
business on the later of the 60th day prior to such meeting or the 10th day
following the day on which public announcement of the date of the meeting is
first made, by either disclosure in a press release or in a document publicly
filed by the Fund with the Securities and Exchange Commission.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based on our evaluation conducted within 90 days of the filing date,
hereof, the design and operation of the registrant's disclosure controls
and procedures are effective to ensure that material information
relating to the registrant is made known to the certifying officers by
others within the appropriate entities, particularly during the period
in which Forms N-CSR are being prepared, and the registrant's disclosure
controls and procedures allow timely preparation and review of the
information for the registrant's Form N-CSR and the officer
certifications of such Form N-CSR.
(b) There were no significant changes in the registrant's internal controls
that occurred during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) The Code of Ethics is not required for the semi-annual filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT.
(a)(3) Not required for semi-annual filing.
(b) The officer certifications required by Section 906 of the Sarbanes-Oxley
Act of 2002 are attached hereto as EX-99.906CERT
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): ING PRIME RATE TRUST
By /s/ James M. Hennessy
---------------------
James M. Hennessy
President and Chief Executive Officer
Date: November 5, 2004
----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James M. Hennessy
---------------------
James M. Hennessy
President and Chief Executive Officer
Date: November 5, 2004
----------------
By /s/ Michael J. Roland
---------------------
Michael J. Roland
Executive Vice President and Chief Financial Officer
Date: November 5, 2004
----------------