As filed with the Securities and Exchange Commission on June 21, 2002
                                                     1933 Act File No. 333-68239
                                                     1940 Act File No. 811-05410
================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM N-2
                        (Check appropriate box or boxes)

[X]  REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ]  Pre-Effective Amendment No.
[X]  Post-Effective Amendment No. 7
and
[X]  REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]  Amendment No. 48

                              ING PRIME RATE TRUST
                       (formerly Pilgrim Prime Rate Trust)
                  Exact Name of Registrant Specified in Charter

                          7337 E. Doubletree Ranch Road
                            Scottsdale, Arizona 85258
 Address of Principal Executive Offices (Number, Street, City, State, Zip Code)

                                 (800) 992-0180
               Registrant's Telephone Number, Including Area Code

                              Kimberly A. Anderson
                              ING Investments, LLC
                          7337 E. Doubletree Ranch Road
                            Scottsdale, Arizona 85258
     Name and Address (Number, Street, State, Zip Code) of Agent for Service

                                 With copies to:

                             Jeffrey S. Puretz, Esq.
                                     Dechert
                               1775 Eye Street, NW
                              Washington, DC 20006

Approximate Date of Proposed Public Offering: As soon as practical after the
effective date of this Registration Statement.

If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
the following box. [X]

It is proposed that this filing will become effective:

[X]  When declared effective pursuant to Section 8(c) of the Securities Act of
     1933.

================================================================================

PROSPECTUS

July 1, 2002                                      5,000,000
                                                  Common Shares


                                                  ING PRIME RATE TRUST


[PHOTO]


This Prospectus contains important information about investing in the ING Prime
Rate Trust (the Trust). You should read it carefully before you invest, and keep
it for future reference.

The Trust has filed with the Securities and Exchange Commission (the SEC) a
Statement of Additional Information dated July 1, 2002 (the SAI) containing
additional information about the Trust. The SAI is incorporated by reference in
its entirety into this Prospectus. You may obtain a free copy of the SAI by
contacting the Trust at (800) 992-0180 or by writing to the Trust at 7337 E.
Doubletree Ranch Road, Scottsdale, Arizona 85258. The Prospectus, SAI and other
information about the Trust are available on the SEC's website
(http://www.sec.gov).

Common Shares of the Trust trade on the New York Stock Exchange (the NYSE) under
the symbol PPR.

Market fluctuations and general economic conditions can adversely affect the
Trust. There is no guarantee that the Trust will achieve its investment
objective. Investment in the Trust involves certain risks and special
considerations, including risks associated with the Trust's use of leverage. See
"Risk Factors and Special Considerations" beginning on page 11. Neither the SEC
nor any state securities commission has approved or disapproved these
securities, or determined that this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

                                                            [LION LOGO]
                                                             ING FUNDS
                                                    (formerly the Pilgrim Funds)

                                                                 WHAT'S INSIDE
--------------------------------------------------------------------------------
[GRAPHIC] OBJECTIVE

[GRAPHIC] INVESTMENT STRATEGY

[GRAPHIC] RISKS

This Prospectus describes the Trust's objective, investment strategy and risks.


You'll also find:


[GRAPHIC] WHAT YOU PAY TO INVEST


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


Introduction to the Trust                                                      1
Prospectus Summary                                                             2
Investment Objective and Policies                                              6
The Trust's Investments                                                        8
Trading and NAV Information                                                   10
Risk Factors and Special Considerations                                       11
What You Pay To Invest -- Trust Expenses                                      16
Transaction Policies                                                          18
Plan of Distribution                                                          19
Use of Proceeds                                                               20
Dividends and Distributions                                                   20
Investment Management and Other Services                                      21
Description of the Trust                                                      23
Description of Capital Structure                                              25
Tax Matters                                                                   26
More Information                                                              27
Financial Highlights                                                          28
Statement of Additional Information
 Table of Contents                                                            30


                                                       INTRODUCTION TO THE TRUST
--------------------------------------------------------------------------------

Risk is the potential that your investment will lose money or not earn as much
as you hope. All funds have varying degrees of risk, depending upon the
securities they invest in.

This Trust involves certain risks and special considerations, including risks
associated with investing in below investment grade assets and risks associated
with the Trust's use of borrowing and other leverage strategies. See "Risk
Factors and Special Considerations" beginning on page 11.

Please read this Prospectus carefully to be sure you understand the principal
risks and strategies associated with the Trust. You should consult the SAI for a
complete list of the risks and strategies.

[GRAPHIC]

If you have any questions about the Trust, please call your financial consultant
or us at 1-800-992-0180.

THIS PROSPECTUS IS DESIGNED TO HELP YOU MAKE INFORMED DECISIONS ABOUT YOUR
INVESTMENTS. PLEASE READ IT CAREFULLY.

Who should invest in the Trust?

ING PRIME RATE TRUST MAY SUIT YOU IF YOU:

     *    are seeking a high level of current income and
     *    are willing to accept the risks associated with an investment in a
          leveraged portfolio of senior loans that are typically below
          investment grade credit quality

DESCRIPTION OF THE TRUST

     The Trust is a diversified, closed-end 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, an investment typically not available directly to individual
     investors. The Trust cannot guarantee that it will achieve its investment
     objective. In addition, since the senior loans in the Trust's portfolio
     typically are below investment grade credit quality and the portfolio is
     leveraged, the Trust has speculative characteristics.

     Common Shares of the Trust trade on the NYSE under the symbol PPR.

     The Trust's investment manager is ING Investments, LLC.






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

                                                 Introduction to the Trust     1


PROSPECTUS SUMMARY
--------------------------------------------------------------------------------

The  following  summary is  qualified  in its  entirety by reference to the more
detailed information appearing elsewhere in this prospectus.


DESCRIPTION OF THE TRUST

THE TRUST

The Trust is a diversified, closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the 1940 Act). It is
organized as a Massachusetts business trust. As of June 14, 2002, the Trust's
net asset value (NAV) per Common Share was $7.17.

NYSE LISTED

As of June 14, 2002, the Trust had 136,972,914 Common Shares outstanding, which
are traded on the NYSE under the symbol PPR. As of June 14, 2002, the last
reported sales price of a Common Share of the Trust was $6.66.

INVESTMENT OBJECTIVE

To provide investors with as high a level of current income as is consistent
with the preservation of capital. There is no assurance that the Trust will
achieve its investment objective.

INVESTMENT MANAGER

The Trust's investment manager is ING Investments, LLC (ING Investments or the
Investment Manager, an Arizona limited liability company, (formerly ING Pilgrim
Investments, LLC). The Investment Manager had assets under management of over
$35.7 billion as of May 31, 2002.


The Investment Manager is an indirect wholly-owned subsidiary of ING Groep N.V.
(NYSE: ING) (ING Groep). ING Groep is a global financial institution active in
the fields of insurance, banking and asset management in more than 65 countries
with more than 100,000 employees.

The Investment Manager receives an annual fee, payable monthly, in a maximum
amount equal to 0.80% of 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) (Managed
Assets). This definition includes the assets acquired through the Trust's use of
leverage.

PRIMARY INVESTMENT STRATEGY


The Trust seeks to achieve its investment objective by investing under normal
circumstances at least 80% of its Managed Assets in higher yielding, U.S. dollar
denominated, floating rate secured senior loans (Senior Loans). The Trust only
invests in Senior Loans made to corporations or other business entities
organized under U.S. or Canadian law and which are domiciled in the U.S., Canada
or in U.S. territories or possessions.


Senior Loans either hold the most senior position in the capital structure of
the borrower or hold an equal ranking with other senior debt or have
characteristics that the Investment Manager believes justify treatment as senior
debt.

2     Prospectus Summary

                                                             PROSPECTUS SUMMARY
--------------------------------------------------------------------------------


OTHER INVESTMENT STRATEGIES AND POLICIES

Assets not invested in Senior Loans may be invested in unsecured loans,
subordinated loans, short-term debt securities, and equities acquired in
connection with investments in loans. See "Investment Objective and Policies" at
page 6.


Loans in which the Trust invests typically have interest rates which reset at
least quarterly and may reset as frequently as daily. The maximum duration of an
interest rate reset on any loan in which the Trust can invest is one year. In
order to achieve overall reset balance, the Trust will ordinarily maintain a
dollar-weighted average time to next interest rate adjustment on its loans of 90
days or less.

Normally at least 80% of the Trust's portfolio will be invested in Senior Loans
with maturities of one to ten years. The maximum maturity on any loan in which
the Trust can invest is ten years.


To seek to increase the yield on the Common Shares, the Trust may engage in
lending its portfolio securities. Such lending will be fully secured by
investment grade collateral held by an independent agent.


The Trust may hold a portion of its assets in short-term interest bearing
instruments. Moreover, in periods when, in the opinion of the Investment
Manager, a temporary defensive position is appropriate, up to 100% of the
Trust's assets may be held in cash or short-term interest bearing instruments.
The Trust may not achieve its investment objective when pursuing a temporary
defensive position.

The Trust may not invest in Senior Loans made to foreign borrowers other than
borrowers organized under Canadian law and which are domiciled in the U.S.,
Canada or in U.S. territories or possessions.


The Trust can engage in executing repurchase and reverse repurchase agreements.


LEVERAGE

To seek to increase the yield on the Common Shares, the Trust employs financial
leverage by borrowing money and issuing preferred shares. See "Risk Factors and
Special Considerations -- Leverage" at page 12.

BORROWINGS

Under the 1940 Act, the Trust may borrow up to 33 1/3% of its total assets
(including the proceeds of the borrowings) less all liabilities other than
borrowings. The Trust's obligations to holders of its debt are senior to its
ability to pay dividends on, or redeem or repurchase, Common Shares and
preferred shares, or to pay holders of Common Shares and preferred shares in the
event of liquidation.

PREFERRED SHARES

The Trust is authorized to issue an unlimited number of shares of a class of
preferred stock in one or more series. In November 2000, the Trust issued 3,600
shares each of Series M, T, W, Th and F Auction Rate Cumulative Preferred
Shares, $0.01 par value, $25,000 liquidation preference per share, for a total
issuance of $450 million (the Preferred Shares). The Trust's obligations to
holders of the Preferred Shares and holders of any other preferred shares, are
senior to its ability to pay dividends on, or redeem or repurchase, Common
Shares, or to pay holders of Common Shares in the event of liquidation.

The 1940 Act also requires that the holders of the Preferred Shares and holders
of any other preferred shares of the Trust, voting as a separate class, have the
right to:

     *    elect at least two trustees at all times

     *    elect a majority of the trustees at any time when dividends on any
          series of Preferred Shares are unpaid for two full years.

In each case, the holders of Common Shares voting separately as a class will
elect the remaining trustees.

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

                                                        Prospectus Summary     3

PROSPECTUS SUMMARY
--------------------------------------------------------------------------------

DIVERSIFICATION

The Trust maintains a diversified investment portfolio, a strategy which seeks
to limit exposure to any one issuer or industry.

As a diversified investment company, the Trust may not make investments in any
one issuer (other than the U.S. government) if, immediately after such purchase
or acquisition, more than 5% of the value of the Trust's total assets would be
invested in such issuer, or the Trust would own more than 25% of any outstanding
issue. The Trust will consider a borrower on a loan, including a loan
participation, to be the issuer of that loan. This strategy is a fundamental
policy that cannot be changed without shareholder approval. With respect to no
more than 25% of its total assets, the Trust may make investments that are not
subject to the foregoing restrictions.

In addition, a maximum of 25% of the Trust's total assets, measured at the time
of investment, can be invested in any one industry. This strategy is also a
fundamental policy that cannot be changed without shareholder approval.

PLAN OF DISTRIBUTION


Common Shares of the Trust may be issued and sold from time to time by the Trust
(the Offering) through ING Funds Distributor, Inc. (ING Funds Distributor), as
distributor and principal underwriter, through broker-dealers who have entered
into selected dealer agreements with ING Funds Distributor. See "Plan of
Distribution" at page 19. The Common Shares will be sold at market prices, which
will be determined with reference to trades on the NYSE, subject to a minimum
price to be established each day by the Trust. The minimum price on any day will
not be less than the current NAV per Common Share plus the per share amount of
the sales commission to be paid to ING Funds Distributor. Any shares sold
pursuant to this prospectus will be subject to a commission of 4% of the gross
sales price of the shares sold.


DISTRIBUTIONS

Dividends on Common Shares accrue and are declared and paid monthly. Income
dividends may be distributed in cash or reinvested in additional full and
fractional shares through the Trust's Shareholder Investment Program.

ADMINISTRATOR

The Trust's administrator is ING Funds Services, LLC (the Administrator). The
Administrator is an affiliate of the Investment Manager. The Administrator
receives an annual fee, payable monthly, in a maximum amount equal to 0.25% of
the Trust's Managed Assets.

RISK FACTORS AND SPECIAL CONSIDERATIONS

CREDIT RISK ON LOANS

Loans in the Trust's portfolio will typically be below investment grade credit
quality. As a result, investment in the Trust involves the risk that borrowers
may default on obligations to pay principal or interest when due, that lenders
may have difficulty liquidating the collateral securing the loans or enforcing
their rights under the terms of the loans, and that the Trust's investment
objective may not be realized.

INTEREST RATE RISK

Changes in market interest rates will affect the yield on the Trust's Common
Shares. If market interest rates fall, the yield on the Trust's Common Shares
will also fall. In addition, changes in market interest rates may cause the
Trust'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 Trust'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
Trust invests, the value of the Trust'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.

DISCOUNT FROM OR PREMIUM TO NAV

As with any security, the market value of the Common Shares may increase or
decrease from the amount that you paid for the Common Shares.

The Trust's Common Shares may trade at a discount to NAV. This is a risk
separate and distinct from the risk that the Trust's NAV per Common Share may
decrease.

4     Prospectus Summary

                                                              PROSPECTUS SUMMARY
--------------------------------------------------------------------------------

LEVERAGE

The Trust's use of leverage through borrowings and the issuance of preferred
shares can adversely affect the yield on the Trust's Common Shares. To the
extent that the Trust is unable to invest the proceeds from the use of leverage
in assets which pay interest at a rate which exceeds the rate paid on the
leverage, the yield on the Trust's Common Shares will decrease. In addition, in
the event of a general market decline in the value of assets such as those in
which the Trust invests, the effect of that decline will be magnified in the
Trust because of the leverage.

LIMITED SECONDARY MARKET FOR LOANS

Because of the limited secondary market for loans, the Trust may be limited in
its ability to sell loans in its portfolio in a timely fashion and/or at a
favorable price.

DEMAND FOR LOANS

An increase in demand for loans may adversely affect the rate of interest
payable on new loans acquired by the Trust, and the price of loans acquired in
the secondary market.

SECONDARY MARKET FOR THE TRUST'S COMMON SHARES

The issuance of Common Shares through the Offering may have an adverse effect on
prices in the secondary market for the Trust's Common Shares by increasing the
number of Common Shares available for sale. In a separate offering, the Trust
also may issue Common Shares of the Trust through its Shareholder Investment
Program and through privately negotiated transactions at a discount to the
market price for such Common Shares, which may put downward pressure on the
market price for Common Shares of the Trust.

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

                                                        Prospectus Summary     5

INVESTMENT OBJECTIVE AND POLICIES
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The Trust's investment objective is 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  investment  objective by investing in the types of assets
described below:


1.   SENIOR LOANS. Under normal circumstances, at least 80% of the Trust's
     Managed Assets will be invested in higher yielding, U.S. dollar
     denominated, floating rate secured senior loans (Senior Loans). The Trust
     only invests in Senior Loans made to corporations or other business
     entities organized under U.S. or Canadian law and which are domiciled in
     the U.S., Canada or in U.S. territories or possessions.

     Senior Loans either hold the most senior position in the capital structure
     of the borrower or hold an equal ranking with other senior debt or have
     characteristics that the Investment Manager believes justify treatment as
     senior debt.


     The Trust does not invest in Senior Loans whose interest rates are tied to
     non-domestic interest rates other than the London Inter-Bank Offered Rate
     (LIBOR).

2.   OTHER INVESTMENTS. Under normal circumstances the Trust can also invest up
     to 20% of its total assets in the following types of investments (Other
     Investments):

     *    unsecured loans

     *    subordinated loans

     *    short-term debt securities

     *    equity securities incidental to investment in loans

3.   CASH AND SHORT-TERM INSTRUMENTS. Under normal circumstances, the Trust may
     invest in cash and/or short-term instruments. During periods when, in the
     opinion of the Investment Manager, a temporary defensive posture in the
     market is appropriate, the Trust may hold up to 100% of its assets in cash
     and/or short-term instruments.

FUNDAMENTAL DIVERSIFICATION POLICIES

1.   INDUSTRY DIVERSIFICATION. The Trust may invest in any industry. The Trust
     may not invest more than 25% of its total assets in any single industry.

2.   BORROWER DIVERSIFICATION. As a diversified investment company, the Trust
     may not make investments in any one issuer (other than the U.S. government)
     if, immediately after such purchase or acquisition, more than 5% of the
     value of the Trust's total assets would be invested in such issuer, or the
     Trust would own more than 25% of any outstanding issue. The Trust will
     consider the borrower on a loan, including a loan participation, to be the
     issuer of such loan. With respect to no more than 25% of its total assets,
     the Trust may make investments that are not subject to the foregoing
     restrictions.

     These fundamental diversification policies may only be changed with
     approval by a majority of all shareholders, including the vote of a
     majority of the holders of Preferred Shares, and holders of any other
     preferred shares, voting separately as a class.

INVESTMENT POLICIES

The Investment Manager follows certain investment policies set by the Trust's
Board of Trustees. Some of those policies are set forth below. Please refer to
the SAI for additional information on these and other investment policies.

1.   PAYABLE IN U.S. DOLLARS. All investments purchased by the Trust must be
     denominated in U.S. dollars.

2.   MATURITY. Normally at least 80% of the Trust's total assets will be
     invested in Senior Loans with maturities of one to ten years. The maximum
     maturity on any loan in which the Trust can invest is ten years.

3.   INTEREST RATE RESETS. Normally, at least 80% of the Trust's total assets
     will be invested in assets with rates of interest which reset either daily,
     monthly, or quarterly. The maximum duration of an interest rate reset on
     any loan investment in which the Trust may invest is one year. In addition,
     the Trust will ordinarily maintain a dollar-weighted average time to next
     interest rate adjustment on its loan investments of 90 days or less.

4.   LIMITATIONS ON SUBORDINATED AND UNSECURED LOANS. The Trust may also invest
     up to 5% of its total assets, measured at the time of investment, in
     subordinated and unsecured 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 maximum of 5% of the Trust's assets invested in
     subordinated and unsecured loans will constitute part of the 20% of the
     Trust's assets that may be invested in "Other Investments" as described
     above, and will not count toward the 80% of the Trust's assets that are
     normally invested in Senior Loans.

5.   INVESTMENT QUALITY; CREDIT ANALYSIS. Loans in which the Trust invests
     generally are rated below investment grade credit quality or are unrated.
     In acquiring a loan, the Investment Manager will consider some or all of
     the following factors concerning the borrower: ability to service debt from
     internally generated funds; adequacy of liquidity and working capital;
     appropriateness of capital structure; leverage consistent with industry
     norms; historical experience of achieving


6    Investment Objective and Policies

                                               INVESTMENT OBJECTIVE AND POLICIES
--------------------------------------------------------------------------------

     business and financial projections; the quality and experience of
     management; and adequacy of collateral coverage. The Investment Manager
     performs its own independent credit analysis of each borrower. In so doing,
     the Investment Manager may utilize information and credit analyses from
     agents that originate or administer loans, other lenders investing in a
     loan, and other sources. The Investment Manager also may communicate
     directly with management of the borrowers. These analyses continue on a
     periodic basis for any Senior Loan held by the Trust. See "Risk Factors and
     Special Considerations -- Credit Risk on Senior Loans."

6.   USE OF LEVERAGE. The Trust may borrow money and issue preferred shares to
     the fullest extent permitted by the 1940 Act. See "Policy on Borrowing" and
     "Policy on Issuance of Preferred Shares" below.

7.   SHORT-TERM INSTRUMENTS. Short-term instruments in which the Trust invests
     may include (i) commercial paper rated A-1 by Standard and Poor's or P-1 by
     Moody's Investors Service, Inc., or of comparable quality as determined by
     the Investment Manager, (ii) certificates of deposit, banker's acceptances,
     and other bank deposits and obligations, and (iii) securities issued or
     guaranteed by the U.S. Government, its agencies or instrumentalities.

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

POLICY ON BORROWING

Beginning in May of 1996, the Trust began a policy of borrowing for investment
purposes. The Trust seeks to use proceeds from borrowing to acquire loans and
other investments which pay interest at a rate higher than the rate the Trust
pays on borrowings. Accordingly, borrowing has the potential to increase the
Trust's total income available to holders of its Common Shares.

The Trust may issue notes, commercial paper, or other evidences of indebtedness
and may be required to secure repayment by mortgaging, pledging, or otherwise
granting a security interest in the Trust's assets. The terms of any such
borrowings are subject to the provisions of the 1940 Act, and also subject to
the more restrictive terms of the credit agreements relating to borrowings and
additional guidelines imposed by rating agencies which are more restrictive than
the provisions of the 1940 Act. The Trust is permitted to borrow up to 33 1/3%,
or such other percentage permitted by law, of its total assets (including the
amount borrowed) less all liabilities other than borrowings. See "Risk Factors
and Special Considerations -- Leverage" and "Risk Factors and Special
Considerations -- Restrictive Covenants and 1940 Act Restrictions."

POLICY ON ISSUANCE OF PREFERRED SHARES

The Trust has a policy of issuing preferred shares for investment purposes. The
Trust seeks to use the proceeds from preferred shares to acquire loans and other
investments which pay interest at a rate higher than the dividends payable on
preferred shares. The terms of the issuance of preferred shares are subject to
the 1940 Act and to additional guidelines imposed by rating agencies, which are
more restrictive than the provisions of the 1940 Act. The Trust is permitted to
issue preferred shares with an aggregate liquidation value of up to 50% of the
Trust's total assets (including the proceeds of the preferred shares and any
borrowings). In November 2000, the Trust issued 18,000 Preferred Shares for a
total of $450 million. See "Risk Factors and Special Considerations --
Leverage."

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

                                         Investment Objective and Policies     7

THE TRUST'S INVESTMENTS
--------------------------------------------------------------------------------

As stated above under Investment Objective and Policies, the Trust will invest
primarily in Senior Loans. This section contains a discussion of the
characteristics of Senior Loans, the manner in which those investments are made
and the market for Senior Loans.

SENIOR LOAN CHARACTERISTICS

Senior Loans are loans that are typically made to business borrowers to finance
leveraged buy-outs, recapitalizations, mergers, stock repurchases and to finance
internal growth. Senior Loans generally hold the most senior position in the
capital structure of a borrower and are usually secured by liens on the assets
of the borrowers, including tangible assets such as cash, accounts receivable,
inventory, property, plant and equipment, common and/or preferred stock of
subsidiaries, and intangible assets including trademarks, copyrights, patent
rights and franchise value. The Trust may also receive guarantees as a form of
collateral.


Senior Loans that the Trust may acquire include participation interests in lease
financings (Lease Participations) where the collateral quality, credit quality
of the borrower and the likelihood of payback are believed by ING Investments to
be the same as those applied to conventional Senior Loans. A Lease Participation
is also required to have a floating interest rate that is indexed to a benchmark
indicator of prevailing interest rates, such as LIBOR or the Prime Rate.


By virtue of their senior position and collateral, Senior Loans typically
provide lenders with the first right to cash flows or proceeds from the sale of
a borrower's collateral if the borrower becomes insolvent (subject to the
limitations of bankruptcy law, which may provide higher priority to certain
claims such as, for example, employee salaries, employee pensions and taxes).
This means Senior Loans are generally repaid before unsecured bank loans,
corporate bonds, subordinated debt, trade creditors, and preferred or common
stockholders.

Senior Loans typically pay interest at least quarterly at rates which equal a
fixed percentage spread over a base rate such as LIBOR. For example, if LIBOR
were 4.00% and the borrower were paying a fixed spread of 3.00%, the total
interest rate paid by the borrower would be 7.00%. Base rates and, therefore,
the total rates paid on Senior Loans float, I.E., they change as market rates of
interest change.

Although a base rate such as LIBOR can change every day, loan agreements for
Senior Loans typically allow the borrower the ability to choose how often the
base rate for the loan will change. Such periods can range from one day to one
year, with most borrowers choosing monthly or quarterly reset periods. During
periods of rising interest rates, borrowers will tend to choose longer reset
periods, and during periods of declining interest rates, borrowers will tend to
choose shorter reset periods. The fixed spread over the base rate on a Senior
Loan typically does not change.

Senior Loans generally are arranged through private negotiations between a
borrower and several financial institutions represented by an agent who is
usually one of the originating lenders. In larger transactions, it is common to
have several agents; however, generally only one such agent has primary
responsibility for ongoing administration of a Senior Loan. Agents are typically
paid fees by the borrower for their services. The agent is primarily responsible
for negotiating the loan agreement which establishes the terms and conditions of
the Senior Loan and the rights of the borrower and the lenders. The agent also
is responsible for monitoring collateral and for exercising remedies available
to the lenders such as foreclosure upon collateral.

Loan agreements may provide for the termination of the agent's agency status in
the event that it fails to act as required under the relevant loan agreement,
becomes insolvent, enters FDIC receivership or, if not FDIC insured, enters into
bankruptcy. Should such an agent, lender or assignor with respect to an
assignment interpositioned between the Trust and the borrower become insolvent
or enter FDIC receivership or bankruptcy, any interest in the Senior Loan of
such person and any loan payment held by such person for the benefit of the
Trust should not be included in such person's or entity's bankruptcy estate. If,
however, any such amount were included in such person's or entity's bankruptcy
estate, the Trust would incur certain costs and delays in realizing payment or
could suffer a loss of principal or interest. In this event, the Trust could
experience a decrease in NAV.

The Trust acquires Senior Loans from lenders such as banks, insurance companies,
finance companies, other investment companies and private investment funds. The
Trust may also acquire Senior Loans from U.S. branches of foreign banks that are
regulated by the Federal Reserve System or appropriate state regulatory
authorities.

INVESTMENT BY THE TRUST

The Trust's investment in Senior Loans may take one of several forms including:
acting as one of the group of lenders originating a Senior Loan, purchasing an
assignment of a portion of a Senior Loan from a third party, or acquiring a
participation in a Senior Loan. When the Trust is a member of the originating
syndicate for a Senior Loan, it may share in a fee paid to the syndicate. When
the Trust acquires a participation in, or an assignment of, a Senior Loan, it
may pay a fee to, or forego a portion of interest payments from, the lender
selling the participation or assignment. The Trust will act as lender, or
purchase an assignment or participation, with respect to a Senior Loan only if
the

8     The Trust's Investments

                                                         THE TRUST'S INVESTMENTS
--------------------------------------------------------------------------------

agent is determined by the Investment Manager to be creditworthy.

Except for rating agency guidelines imposed on the Trust's portfolio while it
has outstanding Preferred Shares, there is no minimum rating or other
independent evaluation of a borrower limiting the Trust's investments and most
Senior Loans that the Trust may acquire, if rated, will be rated below
investment grade credit quality. See "Risk Factors and Special
Considerations-Credit Risk on Senior Loans."

ORIGINAL LENDER. When the Trust is one of the original lenders, it will have a
direct contractual relationship with the borrower and can enforce compliance by
the borrower with the terms of the loan agreement. It also may have negotiated
rights with respect to any funds acquired by other lenders through set-off.
Original lenders also negotiate voting and consent rights under the loan
agreement. Actions subject to lender vote or consent generally require the vote
or consent of the holders of some specified percentage of the outstanding
principal amount of the Senior Loan. Certain decisions, such as reducing the
amount or increasing the time for payment of interest on or repayment of
principal of a Senior Loan, or releasing collateral therefore, frequently
require the unanimous vote or consent of all lenders affected.

ASSIGNMENTS. When the Trust is a purchaser of an assignment, it typically
succeeds to all the rights and obligations under the loan agreement of the
assigning lender and becomes a lender under the loan agreement with the same
rights and obligations as the assigning lender. Assignments are, however,
arranged through private negotiations between potential assignees and potential
assignors, and the rights and obligations acquired by the purchaser of an
assignment may be more limited than those held by the assigning lender.

PARTICIPATIONS. The Trust may also invest in participations in Senior Loans. The
rights of the Trust when it acquires a participation are likely to be more
limited than the rights of an original lender or an investor who acquired an
assignment. Participation by the Trust in a lender's portion of a Senior Loan
typically means that the Trust has a contractual relationship only with the
lender, not with the borrower. This means that the Trust has the right to
receive payments of principal, interest and any fees to which it is entitled
only from the lender selling the participation and only upon receipt by the
lender of payments from the borrower.

With a participation, the Trust will have no right to enforce compliance by the
borrower with the terms of the loan agreement or any rights with respect to any
funds acquired by other lenders through set-off against the borrower. In
addition, the Trust may not directly benefit from the collateral supporting the
Senior Loan because it may be treated as a general creditor of the lender
instead of the borrower. As a result, the Trust may be subject to delays,
expenses and risks that are greater than those that exist when the Trust is the
original lender or holds an assignment. This means the Trust must assume the
credit risk of both the borrower and the lender selling the participation.

In the event of bankruptcy or insolvency of a borrower, the obligation of the
borrower to repay the Senior Loan may be subject to certain defenses that can be
asserted by such borrower against the Trust as a result of improper conduct of
the lender selling the participation. A participation in a Senior Loan will be
deemed to be a Senior Loan for the purposes of the Trust's investment objective
and policies.

SENIOR LOAN MARKET

The primary market for Senior Loans has become much larger in recent years even
though overall syndicated loan volume was down in 2001 from year 2000 levels by
approximately 7.4%, reflecting volatility in U.S. capital markets. Demand has
remained strong. Institutional investors other than banks, such as investment
companies, insurance companies and private investment vehicles are continuing to
grow as investors in the Senior Loan market. The entrance of new investors has
helped create an active trading market in Senior Loans with approximately $121
billion in trading volume during 2001. The active secondary market, coupled with
lender focus on portfolio management and the move toward standard market
practices, has helped increase the liquidity for Senior Loans.

Credit quality is the primary issue currently impacting the loan market. The
industry has experienced deteriorating credit quality, high profile corporate
bankruptcies, rising defaults and concerns about the direction of the general
economy.

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                                                   The Trust's Investments     9

TRADING AND NAV INFORMATION
--------------------------------------------------------------------------------

The following table shows for the Trust's Common Shares for the periods
indicated: (1) the high and low closing prices as shown on the NYSE Composite
Transaction Tape; (2) the NAV per Common Share represented by each of the high
and low closing prices as shown on the NYSE Composite Transaction Tape; and (3)
the discount from or premium to NAV per Share (expressed as a percentage)
represented by these closing prices. The table also sets forth the aggregate
number of shares traded as shown on the NYSE Composite Transaction Tape during
the respective quarter.




                                                                                 PREMIUM/(DISCOUNT)
                                         PRICE                  NAV                   TO NAV
                                 -------------------     ------------------     -------------------     REPORTED
                                   HIGH        LOW        HIGH         LOW       HIGH         LOW     NYSE VOLUME
       CALENDAR QUARTER ENDED    -------     -------     ------      ------     ------      -------   ------------
                                                                                  
       March 31, 1999            $ 9.563     $ 9.188     $ 9.25      $ 9.25      3.38%       (0.67)%   19,292,300
       June 30, 1999               9.688       9.125       9.12        9.15      6.22        (0.27)    19,143,900
       September 30, 1999          9.563       9.313       9.11        9.04      4.97         3.02     19,130,000
       December 31, 1999           9.563       7.875       9.10        8.93      5.09       (11.81)    18,387,700
       March 31, 2000              9.000       7.938       8.94        8.92      0.67       (11.00)    22,230,000
       June 30, 2000               8.938       8.063       8.93        8.89      0.08        (9.34)    18,570,000
       September 30, 2000          9.063       8.563       8.90        8.85      1.83        (3.25)    14,119,000
       December 31, 2000           8.812       7.375       8.55        8.08      3.04        (8.66)    22,793,300
       March 31, 2001              8.400       7.500       8.08        8.06      3.96        (6.95)    16,921,900
       June 30, 2001               7.990       7.470       7.87        7.83      1.52        (4.60)    14,967,500
       September 30, 2001          7.750       6.100       7.76        7.58     (0.13)      (19.53)    15,471,500
       December 31, 2001           6.820       6.350       7.46        7.30     (8.58)      (13.01)    17,475,300
       March 31, 2002              6.950       6.640       7.29        7.25     (4.66)       (8.41)    11,781,400


On June 14, 2002, the last reported sale price of a Common Share of the Trust's
Common Shares on the NYSE was $6.66. The Trust's NAV on June 14, 2002 was $7.17.
See "Transaction Policies -- Net Asset Value." On June 14, 2002, the last
reported sale price of a share of the Trust's Common Shares on the NYSE ($6.66)
represented a 7.11% discount below NAV ($7.17) as of that date.


The Trust's Common Shares have traded in the market above, at, and below NAV
since March 9, 1992, when the Trust's Common Shares were listed on the NYSE. The
Trust cannot predict whether its Common Shares will trade in the future at a
premium or discount to NAV, and if so, the level of such premium or discount.
Shares of closed-end investment companies frequently trade at a discount from
NAV.

10     Trading and NAV Information

                                         RISK FACTORS AND SPECIAL CONSIDERATIONS
--------------------------------------------------------------------------------

RISK IS INHERENT IN ALL INVESTING. THE FOLLOWING DISCUSSION SUMMARIZES SOME OF
THE RISKS THAT YOU SHOULD CONSIDER BEFORE DECIDING WHETHER TO INVEST IN THE
TRUST. FOR ADDITIONAL INFORMATION ABOUT THE RISKS ASSOCIATED WITH INVESTING IN
THE TRUST, SEE "ADDITIONAL INFORMATION ABOUT INVESTMENTS AND INVESTMENT
TECHNIQUES" IN THE SAI.

CREDIT RISK ON SENIOR LOANS

The Trust's ability to pay dividends and repurchase its Common Shares is
dependent upon the performance of the assets in its portfolio. That performance,
in turn, is subject to a number of risks, chief among which is credit risk on
the underlying assets.

Credit risk is the risk of nonpayment of scheduled interest or principal
payments. In the event a borrower fails to pay scheduled interest or principal
payments on a Senior Loan held by the Trust, the Trust will experience a
reduction in its income and a decline in the market value of the Senior Loan,
which will likely reduce dividends and lead to a decline in the NAV of the
Trust's Common Shares. If the Trust acquires a Senior Loan from another lender,
either by means of assignment or by acquiring a participation, the Trust may
also be subject to credit risks with respect to that lender. See "The Trust's
Investments - Investment by the Trust."

Senior Loans generally involve less risk than unsecured or subordinated debt and
equity instruments of the same issuer because the payment of principal of and
interest on Senior Loans is a contractual obligation of the issuer that, in most
instances, takes precedence over the payment of dividends, or the return of
capital, to the issuer's shareholders and payments to bond holders. The Trust
generally invests in Senior Loans that are usually secured with specific
collateral. However, the value of the collateral may not equal the Trust's
investment when the loan is acquired or may decline below the principal amount
of the Senior Loan subsequent to the Trust's investment. Also, to the extent
that collateral consists of stock of the borrower or its subsidiaries or
affiliates, the Trust bears the risk that the stock may decline in value, be
relatively illiquid, or may lose all or substantially all of its value, causing
the Senior Loan to be undercollateralized. Therefore, the liquidation of the
collateral underlying a Senior Loan may not satisfy the issuer's obligation to
the Trust in the event of non-payment of scheduled interest or principal, and
the collateral may not be readily liquidated.

In the event of the bankruptcy of a borrower, the Trust could experience delays
and limitations on its ability to realize the benefits of the collateral
securing the Senior Loan. Among the credit risks involved in a bankruptcy are
assertions that the pledge of collateral to secure a loan constitutes a
fraudulent conveyance or preferential transfer that would have the effect of
nullifying or subordinating the Trust's rights to the collateral.

The Senior Loans in which the Trust invests are generally rated lower than
investment grade credit quality, I.E., rated lower than "Baa" by Moody's or
"BBB" by S&P, or have been issued by issuers who have issued other debt
securities which, if unrated, would be rated lower than investment grade credit
quality. Investment decisions will be based largely on the credit analysis
performed by the Investment Manager, and not on rating agency evaluation. This
analysis may be difficult to perform. Information about a Senior Loan and its
issuer generally is not in the public domain. Moreover, Senior Loans are not
often rated by any nationally recognized rating service. Many issuers have not
issued securities to the public and are not subject to reporting requirements
under federal securities laws. Generally, however, issuers are required to
provide financial information to lenders and information may be available from
other Senior Loan participants or agents that originate or administer Senior
Loans.

INTEREST RATE RISK

During normal market conditions, changes in market interest rates will affect
the Trust in certain ways. The principal effect will be that the yield on the
Trust's Common Shares will tend to rise or fall as market interest rates rise
and fall. This is because almost all of the assets in which the Trust invests
pay interest at rates which float in response to changes in market rates.
However, because the interest rates on the Trust's assets reset over time, there
will be an imperfect correlation between changes in market rates and changes to
rates on the portfolio as a whole. This means that changes to the rate of
interest paid on the portfolio as a whole will tend to lag behind changes in
market rates.

Market interest rate changes may also cause the Trust's NAV to experience
moderate volatility. This is because the value of a loan asset in the Trust is
partially a function of whether it is paying what the market perceives to be a
market rate of interest for the particular loan, given its individual credit and
other characteristics. If market interest rates change, a loan's value could be
affected to the extent the interest rate paid on that loan does not reset at the
same time. As discussed above, the rates of interest paid on the loans in which
the Trust invests have a weighted average reset period that typically is less
than 90 days. Therefore, the impact of the lag between a change in market
interest rates and the change in the overall rate on the portfolio is expected
to be minimal.

To the extent that changes in market rates of interest are reflected not in a
change to a base rate such as LIBOR but in a change in the spread over the base
rate which is payable on loans of the type and quality in which the Trust
invests, the Trust's NAV could also be adversely affected. Again, this is
because the value of a loan asset in the Trust is partially

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                                  Risk Factors and Special Considerations     11

RISK FACTORS AND SPECIAL CONSIDERATIONS
--------------------------------------------------------------------------------

a function of whether it is paying what the market perceives to be a market rate
of interest for the particular loan, given its individual credit and other
characteristics. However, unlike changes in market rates of interest for which
there is only a temporary lag before the portfolio reflects those changes,
changes in a loan's value based on changes in the market spread on loans in the
Trust's portfolio may be of longer duration.

Finally, substantial increases in interest rates may cause an increase in loan
defaults as borrowers may lack the resources to meet higher debt services
requirements.

CHANGES TO NAV

The NAV of the Trust is expected to change in response to a variety of factors,
primarily in response to changes in the creditworthiness of the borrowers on the
loans in which the Trust invests. See "Credit Risk on Senior Loans" above.
Changes in market interest rates may also have a moderate impact on the Trust's
NAV. See "Interest Rate Risk." Another factor which can affect the Trust's NAV
is changes in the pricing obtained for the Trust's assets. See "Transaction
Policies -- Valuation of the Trust's Assets."

DISCOUNT FROM OR PREMIUM TO NAV

The Trust's Common Shares have traded in the market above, at, and below NAV
since March 9, 1992, when the Trust's shares were listed on the NYSE. The
reasons for the Trust's Common Shares trading at a premium to or discount from
NAV are not known to the Trust, and the Trust cannot predict whether its Common
Shares will trade in the future at a premium to or discount from NAV, and if so,
the level of such premium or discount. Shares of closed-end investment companies
frequently trade at a discount from NAV. The possibility that Common Shares of
the Trust will trade at a discount from NAV is a risk separate and distinct from
the risk that the Trust's NAV may decrease.

LEVERAGE

The Trust may borrow an amount up to 33-1/3% (or such other percentage permitted
by law) of its total assets (including the amount borrowed) less all liabilities
other than borrowings. The Trust may also issue preferred shares in an amount up
to 50% of the Trust's total assets (including the proceeds of preferred shares
and any borrowings). In November 2000, the Trust issued 18,000 Preferred Shares
for a total of $450 million. Borrowings and the issuance of preferred shares are
referred to in this prospectus collectively as "leverage." The Trust may use
leverage for investment purposes, to finance the repurchase of its Common
Shares, and to meet cash requirements. The use of leverage for investment
purposes increases both investment opportunity and investment risk.


Capital raised through leverage will be subject to interest and other costs, and
these costs could exceed the income earned by the Trust on the proceeds of such
leverage. There can be no assurance that the Trust's income from the proceeds of
leverage will exceed these costs. However, the Investment Manager seeks to use
leverage for the purposes of making additional investments only if it believes,
at the time of using leverage, that the total return on the assets purchased
with such funds will exceed interest payments and other costs on the leverage.
In addition, the Investment Manager intends to reduce the risk that the costs of
the use of leverage will exceed the total return on investments purchased with
the proceeds of leveraging by utilizing leverage mechanisms whose interest rates
float (or reset frequently). In the event of a default on one or more loans or
other interest-bearing instruments held by the Trust, the use of leverage would
exaggerate the loss to the Trust and may exaggerate the effect on the Trust's
NAV. The Trust's lenders and preferred shareholders have priority to the Trust's
assets over the Trust's Common shareholders.


12     Risk Factors and Special Considerations

                                         RISK FACTORS AND SPECIAL CONSIDERATIONS
--------------------------------------------------------------------------------

EFFECT OF LEVERAGE


The following table is designed to illustrate the effect on return to a holder
of the Trust's Common Shares of the leverage created by the Trust's use of
borrowing, using an assumed initial interest rate of 2.53%, assuming the Trust
has used leverage by borrowing an amount equal to 33 1/3%of the Trust's
Managed Assets and assuming hypothetical annual returns on the Trust's portfolio
of minus 10% to plus 10%. As can be seen, leverage generally increases the
return to shareholders when portfolio return is positive and decreases return
when the portfolio return is negative. Actual returns may be greater or less
than those appearing in the table.


                                                                    
     Assumed Portfolio Return, net of
       expenses(1) ...................     (10%)      (5%)        0%        5%       10%
     Corresponding Return to Common
       Shareholders(2) ...............  (16.26%)   (8.76%)    (1.26%)    6.23%    13.73%



     (1)  The Assumed Portfolio Return is required by regulation of the SEC and
          is not a prediction of, and does not represent, the projected or
          actual performance of the Trust.

     (2)  In order to compute the "Corresponding Return to Common Shareholders,"
          the "Assumed Portfolio Return" is multiplied by the total value of the
          Trust's assets at the beginning of the Trust's fiscal year to obtain
          an assumed return to the Trust. From this amount, all interest accrued
          during the year is subtracted to determine the return available to
          shareholders. The return available to shareholders is then divided by
          the total value of the Trust's net assets as of the beginning of the
          fiscal year to determine the "Corresponding Return to Common
          Shareholders."

The Trust's leveraged capital structure creates special risks not associated
with unleveraged funds having similar investment objectives and policies. The
funds borrowed pursuant to the credit facilities or obtained through the
issuance of Preferred Shares, or any other preferred shares, constitute a
substantial lien and burden by reason of their prior claim against the income of
the Trust and against the net assets of the Trust in liquidation.

The Trust is not permitted to declare dividends or other distributions,
including dividends and distributions with respect to Common Shares or Preferred
Shares, or any other preferred shares, or purchase Common Shares, Preferred
Shares or any other preferred shares unless (i) at the time thereof the Trust
meets certain asset coverage requirements and (ii) there is no event of default
under any credit facility program that is continuing. See "Risk Factors and
Special Considerations -- Restrictive Covenants and 1940 Act Restrictions"
below. In the event of a default under a credit facility program, the lenders
have the right to cause a liquidation of the collateral (I.E., sell Senior Loans
and other assets of the Trust) and, if any such default is not cured, the
lenders may be able to control the liquidation as well.

In addition, the Trust is not permitted to pay dividends on, or redeem Common
Shares unless all accrued dividends, or accrued interest on borrowings, on the
Preferred Shares or any other preferred shares, have been paid or set aside for
payment.

Because the fee paid to the Investment Manager will be calculated on the basis
of Managed Assets, the fee will be higher when leverage is utilized, giving the
Investment Manager an incentive to utilize leverage.

The Trust is subject to certain restrictions imposed by lenders to the Trust and
by guidelines of one or more rating agencies which issue ratings for the
Preferred Shares issued by the Trust. These restrictions impose asset coverage,
fund composition requirements and limits on investment techniques, such as the
use of financial derivative products, that are more stringent than those imposed
on the Trust by the 1940 Act. These covenants or guidelines could impede the
Investment Manager from fully managing the Trust's portfolio in accordance with
the Trust's investment objective and policies.

SECONDARY MARKET FOR THE TRUST'S SHARES

The issuance of Common Shares through the Offering may have an adverse effect on
the secondary market for the Trust's Common Shares. The increase in the number
of the Trust's outstanding Common Shares resulting from the Offering may put
downward pressure on the market price for Common Shares of the Trust. Common
Shares will not be issued pursuant to the Offering at any time when Common
Shares are trading at a price lower than the Trust's NAV per Common Share.

The Trust also issues Common Shares of the Trust through its Shareholder
Investment Program, and to specific investors pursuant to privately negotiated
transactions. See "Dividends and Distributions -- Shareholder Investment
Program." Common Shares may be issued under the Shareholder Investment Program
or pursuant to privately negotiated transactions at a discount to the market
price for such Common Shares, which may

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                                  Risk Factors and Special Considerations     13

RISK FACTORS AND SPECIAL CONSIDERATIONS
--------------------------------------------------------------------------------

put downward pressure on the market price for Common Shares of the Trust.

When the Trust's Common Shares are trading at a premium, the Trust may also
issue Common Shares that are sold through transactions effected on the NYSE or
through broker-dealers who have entered into selected dealer agreements with ING
Funds Distributor, Inc. (ING Funds Distributor), the Trust's distributor. The
increase in the number of outstanding Common Shares resulting from that offering
may also put downward pressure on the market price for the Common Shares.

LIMITED SECONDARY MARKET FOR LOANS

Although the resale, or secondary market for loans is growing, it is currently
limited. There is no organized exchange or board of trade on which loans are
traded. Instead, the secondary market for loans is an unregulated inter-dealer
or inter-bank re-sale market.


Loans usually trade in large denominations (typically more than $1 million
units) and trades can be infrequent. The market has limited transparency so that
information about actual trades may be difficult to obtain. Accordingly, some or
many of the loans in which the Trust invests will be relatively illiquid.


In addition, loans in which the Trust invests may require the consent of the
borrower and/or the agent prior to sale or assignment. These consent
requirements can delay or impede the Trust's ability to sell loans and can
adversely affect the price that can be obtained. The Trust may have difficulty
disposing of loans if it needs cash to repay debt, to pay dividends, to pay
expenses or to take advantage of new investment opportunities.

Although the Trust has not conducted a tender offer since 1992, if it determines
to again conduct a tender offer, limitations of a secondary market may result in
difficulty raising cash to purchase tendered Common Shares.

These considerations may cause the Trust to sell securities at lower prices than
it would otherwise consider to meet cash needs or cause the Trust to maintain a
greater portion of its assets in cash equivalents than it would otherwise, which
could negatively impact performance. The Trust seeks to avoid the necessity of
selling assets to meet such needs by the use of borrowings.

The Trust values its assets daily. However, because the secondary market for
loans is limited, it may be difficult to value loans. Market quotations may not
be readily available for some loans and valuation may require more research than
for liquid securities. In addition, elements of judgment may play a greater role
in valuation than for securities with a secondary market, because there is less
reliable, objective data available. In addition, if the Trust purchases a
relatively large loan to generate extra income sometimes paid to large lenders,
the limitations of the secondary market may inhibit the Trust from selling a
portion of the loan and reducing its exposure to a borrower when the Investment
Manager deems it advisable to do so.

LENDING PORTFOLIO SECURITIES.


To generate additional income, the Trust may lend portfolio securities in an
amount up to 33 1/3% of total Trust assets to broker-dealers, major banks, or
other recognized domestic institutional borrowers of securities. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower default or fail financially. The
Trust intends to engage in lending portfolio securities only when such lending
is fully secured by investment grade collateral held by an independent agent.


DEMAND FOR LOANS

Although the volume of loans has increased in recent years, demand for loans has
also grown. An increase in demand may benefit the Trust by providing increased
liquidity for loans, but may also adversely affect the rate of interest payable
on loans acquired by the Trust, the price of loans acquired in the secondary
market and the rights provided to the Trust under the terms of the loan.

UNSECURED LOANS AND SUBORDINATED LOANS

Subject to the 20% of the Trust's assets that may be invested in Other
Investments, the Trust may invest up to 5% of its total assets, measured at the
time of investment, in unsecured loans and in subordinated loans. Unsecured
loans and subordinated loans share the same credit risks as those discussed
above under "Credit Risk on Senior Loans" except that unsecured loans are not
secured by any collateral of the borrower and subordinated loans are not the
most senior debt in a borrower's capital structure. Unsecured loans do not enjoy
the security associated with collateralization and may pose a greater risk of
nonpayment of interest or loss of principal than do secured loans. The primary
additional risk in a subordinated loan is the potential loss in the event of
default by the issuer of the loan. Subordinated loans in an insolvency bear an
increased share, relative to senior secured lenders, of the ultimate risk that
the borrower's assets are insufficient to meet its obligations to its creditors.

SHORT-TERM DEBT SECURITIES

Subject to the 20% of the Trust's assets that may be invested in Other
Investments, the Trust may invest in short-term debt securities. Short-term debt
securities are subject to the risk of the issuer's inability to meet principal
and interest payments on the obligation and also may be subject to price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity.

Because short-term debt securities pay interest at a fixed-rate, when interest
rates decline, the value of the Trust's short-term debt securities can be
expected to

14     Risk Factors and Special Considerations

                                         RISK FACTORS AND SPECIAL CONSIDERATIONS
--------------------------------------------------------------------------------

rise,  and when  interest  rates  rise,  the  value of those  securities  can be
expected to decline.

INVESTMENTS IN EQUITY SECURITIES INCIDENTAL TO INVESTMENT IN LOANS


Subject to the 20% of the Trust's assets that may be invested in Other
Investments, the Trust may acquire equity securities as an incident to the
purchase or ownership of a loan or in connection with a reorganization of a
borrower. Investments in equity securities incidental to investment in loans
entail certain risks in addition to those associated with investment in loans.
The value of these securities may be affected more rapidly, and to a greater
extent, by company-specific developments and general market conditions. These
risks may increase fluctuations in the Trust's NAV. The Trust may frequently
possess material non-public information about a borrower as a result of its
ownership of a loan of such borrower. Because of prohibitions on trading in
securities of issuers while in possession of such information, the Trust might
be unable to enter into a transaction in a security of such a borrower when it
would otherwise be advantageous to do so.


BORROWINGS UNDER THE CREDIT FACILITY PROGRAM


In May 1996, the Trust began a policy of borrowing to acquire income-producing
investments which, by their terms, pay interest at a rate higher than the rate
the Trust pays on borrowings. Accordingly, borrowing has the potential to
increase the Trust's total income. The Trust currently is a party to two credit
facilities with financial institutions that permit the Trust to borrow up to an
aggregate of $550 million. Interest is payable on the credit facilities by the
Trust at a variable rate that is tied to either LIBOR, the federal funds rate,
or a commercial paper based rate and includes a facility fee on unused
commitments. As of June 14, 2002, the Trust had outstanding borrowings under the
credit facilities of approximately $176 million. Collectively, the lenders under
the credit facilities have a security interest in all assets of the Trust. Under
each of the credit facilities, the lenders have the right to liquidate Trust
assets in the event of default by the Trust under such credit facility, and the
Trust may be prohibited from paying dividends in the event of certain adverse
events or conditions respecting the Trust or Investment Manager until the credit
facility is repaid in full or until the event or condition is cured.


RANKING OF SENIOR INDEBTEDNESS

The rights of lenders to receive payments of interest on and repayments of
principal of any borrowings made by the Trust under the credit facility program
are senior to the rights of holders of Common Shares, Preferred Shares and any
other preferred shares, with respect to the payment of dividends or upon
liquidation.

RESTRICTIVE COVENANTS AND 1940 ACT RESTRICTIONS

The credit agreements governing the credit facility program (the Credit
Agreements) include usual and customary covenants for their respective type of
transaction, including limits on the Trust's ability to (i) issue preferred
shares, (ii) incur liens or pledge portfolio securities, (iii) change its
investment objective or fundamental investment restrictions without the approval
of lenders, (iv) make changes in any of its business objectives, purposes or
operations that could result in a material adverse effect, (v) make any changes
in its capital structure, (vi) amend the Trust documents in a manner which could
adversely affect the rights, interests or obligations of any of the lenders,
(vii) engage in any business other than the businesses currently engaged in,
(viii) create, incur, assume or permit to exist certain debt except for certain
specified types of debt, and (ix) permit any of its ERISA affiliates to cause or
permit to occur an event that could result in the imposition of a lien under the
Internal Revenue Code or ERISA. In addition, the Credit Agreements do not permit
the Trust's asset coverage ratio (as defined in the credit agreements) to fall
below 300% at any time (the Credit Agreement Asset Coverage Test).

Under the requirements of the 1940 Act, the Trust must have asset coverage of at
least 300% immediately after any borrowing, including borrowing under the credit
facility program. For this purpose, asset coverage means the ratio which the
value of the total assets of the Trust, less liabilities and indebtedness not
represented by senior securities, bears to the aggregate amount of borrowings
represented by senior securities issued by the Trust. The Credit Agreements
limit the Trust's ability to pay dividends or make other distributions on the
Trust's Common Shares, or purchase or redeem Common Shares, unless the Trust
complies with the Credit Agreement Asset Coverage Test. In addition, the Credit
Agreements do not permit the Trust to declare dividends or other distributions
or purchase or redeem Common Shares or any preferred shares (i) at any time that
an event of default under a Credit Agreement has occurred and is continuing; or
(ii) if, after giving effect to such declaration, the Trust would not meet the
Credit Agreement Asset Coverage Test set forth in the Credit Agreement.

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

                                  Risk Factors and Special Considerations     15


WHAT YOU PAY TO INVEST -- TRUST EXPENSES
--------------------------------------------------------------------------------

The following table is intended to assist you in understanding the various costs
and expenses associated with investing in the Trust.(1)


SHAREHOLDER TRANSACTION EXPENSES
  Commission (as a percentage of offering price)(2)                        4.00%
  Shareholder Investment Program Fees                                      NONE

ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Management and Administrative Fees(3)                                      2.04%
Other Operating Expenses(4)                                                0.38%
Total Annual Expenses before Interest Expense                              2.42%
Interest Expense on Borrowed Funds                                         1.26%
Total Annual Expenses                                                      3.68%


     (1)  The above table assumes that the Trust has used leverage by borrowing
          an amount equal to 33 1/3% of the Trust's Managed Assets and shows
          expenses as a percentage of net assets. However, certain expenses of
          the Trust, such as management fees, are calculated on the basis of
          Managed Assets. If the Trust's expenses assuming the use of leverage
          by borrowing an amount equal to 33 1/3% of Managed Assets are shown
          as a percentage of Managed Assets rather than as a percentage of net
          assets, the annual expenses in the fee table would read as follows:


             ANNUAL EXPENSES (AS A PERCENTAGE OF MANAGED ASSETS)
             Management and Administrative Fees                            1.05%
             Other Operating Expenses                                      0.20%
             Total Annual Expenses before Interest Expense                 1.25%
             Interest Expense on Borrowed Funds                            0.65%
             Total Annual Expenses                                         1.90%

             IF THE TRUST DOES NOT USE LEVERAGE BY BORROWING, THE TRUST'S
               ANNUAL EXPENSES AS A PERCENTAGE OF NET ASSETS WOULD BE:

             ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS)
             Management and Administrative Fees                            1.51%
             Other Operating Expenses                                      0.38%
             Total Annual Expenses                                         1.89%


          Borrowing may be made for the purpose of acquiring additional
          income-producing investments when the Investment Manager believes that
          such use of borrowed proceeds will enhance the Trust's net yield.


     (2)  The compensation to ING Funds Distributor with respect to the Common
          Shares will be at a fixed commission rate of 4% of the gross sales
          price per share of the Common Shares sold.

     (3)  Pursuant to the Investment Management Agreement with the Trust, ING
          Investments is paid a fee of 0.80% of the Trust's Managed Assets.
          Pursuant to its Administration Agreement with the Trust, ING Funds
          Services, LLC, the Trust's Administrator, is paid a fee of 0.25% of
          the Trust's Managed Assets. See "Investment Management and Other
          Services -- The Administrator."


     (4)  "Other Operating Expenses" are based on estimated amounts for the
          current fiscal year, which, in turn, are based on "other operating
          expenses" for the fiscal year ended February 28, 2002, and does not
          include the expenses of borrowing.

16     What You Pay to Invest -- Trust Expenses

                                        WHAT YOU PAY TO INVEST -- TRUST EXPENSES
--------------------------------------------------------------------------------

The following example applies to Common Shares issued in connection with the
Offering, which may have a maximum front-end commission of 4%.




EXAMPLE                                                   1 YEAR     3 YEARS     5 YEARS     10 YEARS
-------                                                   ------     -------     -------     --------
                                                                                 
You would pay the following expenses on a $1,000
investment, assuming a 5% annual return and where the
Trust has borrowed                                          $93        $203        $317        $624

You would pay the following expenses on a $1,000
investment, assuming a 5% annual return and where the
Trust has not borrowed                                      $58        $ 97        $138        $252


This hypothetical example assumes that all dividends and other distributions are
reinvested at NAV and that the percentage amounts listed under Annual Expenses
above remain the same in the years shown. The above table and the assumption in
the hypothetical example of a 5% annual return are required by regulation of the
SEC applicable to all investment companies; the assumed 5% annual return is not
a prediction of, and does not represent, the projected or actual performance of
the Trust's Shares. For more complete descriptions of certain of the Trust's
costs and expenses, see "Investment Management and Other Services."


THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

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

                                What You Pay to Invest -- Trust Expenses      17

TRANSACTION POLICIES
--------------------------------------------------------------------------------

NET ASSET VALUE

The NAV per Common Share of the Trust is determined once daily at the close of
regular trading on the NYSE (normally 4:00 p.m. Eastern Time) on each day the
NYSE is open. The NAV per Common Share is determined by dividing the value of
the Trust's loan assets plus all cash and other assets (including interest
accrued but not collected) less all liabilities (including accrued expenses but
excluding capital and less the liquidation preference of any outstanding
preferred shares) by the number of shares outstanding. The NAV per Common Share
is made available for publication.

VALUATION OF THE TRUST'S ASSETS

The assets in the Trust's portfolio are valued daily in accordance with the
Trust's Valuation Procedures adopted by the Board of Trustees. A majority of the
Trust's assets are valued using market quotations supplied by a third party loan
pricing service. However, the loans in which the Trust invests are not listed on
any securities exchange or board of trade. Some loans are traded by
institutional investors in an over-the-counter secondary market that has
developed in the past several years. This secondary market generally has fewer
trades and less liquidity than the secondary markets for other types of
securities. Some loans have few or no trades. Accordingly, determinations of the
market value of loans may be based on infrequent and dated trades. Because there
is less reliable, objective data available, elements of judgment may play a
greater role in valuation of loans than for other types of securities. For
further information, see "Risk Factors and Special Considerations -- Limited
Secondary Market for Loans."

Loans are normally valued at the mean of the means of one or more bid and asked
quotations obtained from a pricing service or other sources believed to be
reliable. Loans for which reliable quotations are not available may be valued
with reference to another loan or a group of loans for which quotations are more
readily available and whose characteristics are comparable to the loan being
valued. Under this approach, the comparable loan or loans serve as a "proxy" for
changes in value.

The Trust has engaged an independent pricing service to provide quotations from
dealers in loans and to calculate values under the "proxy" procedure described
above.

It is expected that most of the loans held by the Trust will be valued with
reference to quotations from the independent pricing service or with reference
to the "proxy" procedure described above. The Investment Manager may believe
that the price for a loan derived from market quotations or the "proxy"
procedure described above is not reliable or accurate. Among other reasons, this
may be the result of information about a particular loan or borrower known to
the Investment Manager that it believes may not be known to the pricing service
or reflected in a price quote. In this event, the loan is valued at fair value
as determined in good faith under procedures established by the Trust's Board of
Trustees, and in accordance with the provisions of the 1940 Act.

Under these procedures, fair value is determined by the Investment Manager and
monitored by the Trust's Board of Trustees through its Valuation Committee. In
fair valuing a loan, consideration is given to several factors, which may
include, among others, the following:

     *    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;

     *    the nature, adequacy and value of the collateral, including the
          Trust's rights, remedies and interests with respect to the collateral;

     *    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;

     *    information relating to the market for the loan, including price
          quotations for, and trading in, the loan and interests in similar
          loans and the market environment and investor attitudes towards the
          loan and interests in similar loans;

     *    the reputation and financial condition of the agent of the loan and
          any intermediate participants in the loans;

     *    the borrower's management; and

     *    the general economic and market conditions affecting the fair value of
          the loan.

Securities for which the primary market is a national securities exchange or the
NASDAQ National Market System are stated at the last reported sale price on the
day of valuation. Debt and equity securities traded in the over-the-counter
market and listed securities for which no sale was reported on that date are
valued at the mean between the last reported bid and asked price. Valuation of
short term cash equivalent investments will be at amortized cost.

ACCOUNT ACCESS

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

18     Transaction Policies

                                                            PLAN OF DISTRIBUTION
--------------------------------------------------------------------------------

The Trust has entered into a Distribution Agreement with ING Funds Distributor,
a form of which has been filed as an exhibit to the Registration Statement. The
summary of the Distribution Agreement contained herein is qualified by reference
to the Distribution Agreement. Subject to the terms and conditions of the
Distribution Agreement, the Trust may issue and sell Common Shares of the Trust
from time to time through ING Funds Distributor, which is the principal
underwriter of the Common Shares, through certain broker-dealers which have
entered into selected dealer agreements with ING Funds Distributor.


The Common Shares will only be sold on such days as shall be agreed to by the
Trust and ING Funds Distributor. The Common Shares will be sold at market
prices, which shall be determined with reference to trades on the NYSE, subject
to a minimum price to be established each day by the Trust. The minimum price on
any day will not be less than the current NAV per Common Share plus the per
share amount of the commission to be paid to ING Funds Distributor. The Trust
and ING Funds Distributor will suspend the sale of Common Shares if the per
share price of the Common Shares is less than the minimum price. As of June 14,
2002, the last reported sales price of a Common Share of the Trust on the NYSE
was $6.66.


The Trust reserves the right to reject any purchase order. Please note that
cash, travelers checks, third party checks, money orders and checks drawn on
non-U.S. banks (even if payment may be effected through a U.S. bank) will not be
accepted.

The compensation to ING Funds Distributor with respect to the Common Shares will
be at a fixed commission rate of 4% of the gross sales price per share of the
Common Shares sold. ING Funds Distributor will compensate broker-dealers
participating in the Offering at a rate of 3% of the gross sales price per share
of the Common Shares purchased from the Trust by such broker-dealer. Dealer
reallowance may be changed by ING Funds Distributor from time to time.

Settlements of sales of Common Shares will occur on the third business day
following the date on which any such sales are made. Unless otherwise indicated
in a further prospectus supplement, ING Funds Distributor as underwriter will
act as underwriter on a reasonable efforts basis.

In connection with the sale of the Common Shares on behalf of the Trust, ING
Funds Distributor may be deemed to be an underwriter within the meaning of the
1940 Act, and the compensation of ING Funds Distributor may be deemed to be
underwriting commissions or discounts. ING Funds Distributor also serves as
distributor for the Trust in connection with the sale of shares of the Trust
pursuant to privately negotiated transactions and pursuant to optional cash
investments in excess of $5,000. In addition, ING Funds Distributor provides
administrative services in connection with a separate at-the-market offering of
shares of the Trust.

The offering of Common Shares pursuant to the Distribution Agreement will
terminate upon the earlier of (i) the sale of all Common Shares subject thereto
or (ii) termination of the Distribution Agreement. The Trust and ING Funds
Distributor each have the right to terminate the Distribution Agreement in its
discretion at any time.

The Trust will bear the expenses of the Offering. These expenses include, but
are not limited to, the expense of preparation of the prospectus and SAI for the
Offering, the expense of counsel and auditors in connection with the Offering,
and others.

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

                                                     Plan of Distribution     19

USE OF PROCEEDS
--------------------------------------------------------------------------------


It is expected that the net proceeds of Common Shares issued pursuant to the
Offering will be invested in Senior Loans and other securities consistent with
the Trust's investment objective and policies. Pending investment in Senior
Loans, the proceeds will be used to pay down the Trust's outstanding borrowings
under its credit facilities. See "Investment Objective and Policies -- Policy on
Borrowing."

As of June 14, 2002, the Trust's outstanding borrowings under its credit
facilities was $176 million. By paying down the Trust's borrowings, the Trust
can avoid adverse impacts on yields pending investment of such proceeds in
Senior Loans. As investment opportunities are subsequently identified, it is
expected that the Trust will reborrow amounts previously repaid and invest such
amounts in additional Senior Loans.


DIVIDENDS AND DISTRIBUTIONS


DISTRIBUTION POLICY. Income dividends are declared and paid monthly. Income
dividends may be distributed in cash or reinvested in additional full and
fractional shares pursuant to the Trust's Shareholder Investment Program
discussed below. Shareholders receive statements on a periodic basis reflecting
any distributions credited or paid to their account. Income dividends consist of
interest accrued and amortization of fees earned less any amortization of
premiums paid and the estimated expenses of the Trust, including fees payable to
ING Investments. Income dividends are calculated monthly under guidelines
approved by the Trustees. Each dividend is payable to shareholders of record at
the time of declaration. Accrued amounts of fees received, including facility
fees, will be taken in as income and passed on to shareholders as part of
dividend distributions. Any fees or commissions paid to facilitate the sale of
portfolio Senior Loans in connection with tender offers or other portfolio
transactions may reduce the dividend yield. Capital gains, if any, are declared
and paid annually.

SHAREHOLDER INVESTMENT PROGRAM. The Trust's Shareholder Investment Program (the
Program) allows participating shareholders to reinvest all dividends and capital
gain distributions in additional shares of the Trust. The Program also allows
participants to make optional cash investments monthly through DST Systems, Inc.
(DST) (the Program Agent), in amounts ranging from a minimum of $100 to a
maximum of $5,000. Subject to the permission of the Trust, participating
shareholders may also make optional cash investments in excess of the monthly
maximum. Common Shares purchased by participants in the Program in connection
with the reinvestment of dividends or optional cash investments may be issued by
the Trust if the Trust's Common Shares are trading at a premium to NAV. If the
Trust's Common Shares are trading at a discount to NAV, Common Shares purchased
under the Program will be purchased on the open market. Common Shares issued by
the Trust in connection with the reinvestment of dividends will be issued at the
greater of (i) NAV or (ii) a discount of 5% to the market price. Common Shares
issued by the Trust in connection with optional cash investments will be issued
at the greater of (i) NAV or (ii) a discount, determined by the Trust, ranging
from 0% to 5% to the market price. All distributions to shareholders whose
Common Shares are registered in their own names automatically will be paid in
cash, unless the shareholder elects to reinvest the distributions in additional
shares of the Trust pursuant to the Program. Shareholders who receive dividends
and capital gain distributions in cash may elect to participate in the Program
by notifying DST. Additional information about the Program may be obtained from
ING's Shareholder Services Department at (800) 992-0180. For additional
information, see "Shareholder Investment Program" in the SAI.


20     Use of Proceeds

                                        INVESTMENT MANAGEMENT AND OTHER SERVICES
--------------------------------------------------------------------------------

INVESTMENT MANAGER

ING INVESTMENTS, LLC (the Investment Manager or ING Investments), an Arizona
limited liability company, (formerly ING Pilgrim Investments, LLC), serves as
Investment Manager to the Trust and has overall responsibility for the
management of the Trust under the general supervision of the Board of Trustees.
Its principal business address is 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258. The Trust and the Investment Manager have entered into an
Investment Management Agreement that requires ING Investments to provide all
investment advisory and portfolio management services for the Trust. It also
requires ING Investments to assist in managing and supervising all aspects of
the general day-to-day business activities and operations of the Trust,
including custodial, transfer agency, dividend disbursing, accounting, auditing,
compliance and related services. ING Investments provides the Trust with office
space, equipment and personnel necessary to administer the Trust. The agreement
with ING Investments can be canceled by the Board of Trustees upon 60 days'
written notice.


ING Investments is an indirect wholly-owned subsidiary of ING Groep N.V. (NYSE:
ING) (ING Groep). ING Groep is a global financial institution active in the
fields of insurance, banking and asset management in more than 65 countries with
more than 100,000 employees. The Investment Manager is registered as an
investment adviser with the SEC. As of May 31, 2002, ING Investments had assets
under management of over $35.7 billion.


The Investment Manager bears its expenses of providing the services described
above. The Investment Manager currently receives from the Trust an annual fee,
paid monthly, of 0.80% of the Trust's Managed Assets.

The Trust pays all operating and other expenses of the Trust not borne by ING
Investments including, but not limited to, audit and legal fees, transfer agent,
registrar and custodian fees, expenses in preparing repurchase offers,
shareholder reports and proxy solicitation materials and other miscellaneous
business expenses. The Trust also pays all taxes imposed on it and all brokerage
commissions and loan-related fees.

PORTFOLIO  MANAGEMENT.  A  portfolio management team consisting of the following
individuals manages the Trust.


DANIEL A. NORMAN serves as Senior Vice President, Treasurer and Co-Senior
Portfolio Manager of the Trust. Mr. Norman has served ING Prime Rate Trust in
various capacities from February 1992 to the present. He also serves as Senior
Vice President, Treasurer and Co-Senior Portfolio Manager of ING Senior Income
Fund, another closed-end fund that invests primarily in Senior Loans. Mr. Norman
is a Senior Vice President of ING Investments (since December 1994). Mr. Norman
has served as an officer of other affiliates of ING since February 1992. Mr.
Norman co-manages the Trust with Jeffrey A. Bakalar.

JEFFREY A. BAKALAR serves as Senior Vice President and Co-Senior Portfolio
Manager of the Trust. Mr. Bakalar has served ING Prime Rate Trust in various
capacities from February 1998 to the present. He also serves as Senior Vice
President and Co-Senior Portfolio Manager of ING Senior Income Fund, another
closed-end fund that invests primarily in Senior Loans. Prior to joining ING
Investments, Mr. Bakalar was Vice President of The First National Bank of
Chicago (July 1994 - January 1998). Mr. Bakalar co-manages the Trust with Daniel
A. Norman.

CURTIS F. LEE serves as Senior Vice President and Chief Credit Officer of the
Trust (since January 2001). He also serves as Senior Vice President and Chief
Credit Officer of ING Senior Income Fund, another closed-end fund that invests
primarily in Senior Loans. Mr. Lee is a Senior Vice President and Chief Credit
Officer of ING Investments (since August 1999). Prior to joining ING
Investments, Mr. Lee held a series of positions with Standard Chartered Bank in
the credit approval and problem loan management functions (August 1992 - June
1999).

ROBERT L. WILSON serves as Portfolio Manager of the Trust (since July 1998). He
also serves as Portfolio Manager of ING Senior Income Fund, another closed-end
fund that invests primarily in Senior Loans. Mr. Wilson is a Vice President of
ING Investments (since July 1998). Prior to joining ING Investments, Mr. Wilson
was a Vice President of Bank of Hawaii (May 1997 - June 1998) and Vice President
of Union Bank of California (November 1994 - May 1997).

MICHEL PRINCE serves as Portfolio Manager of the Trust (since May 1998). He also
serves as Portfolio Manager of ING Senior Income Fund, another closed-end fund
that invests primarily in Senior Loans. Mr. Prince is a Vice President of ING
Investments (since May 1998). Prior to joining ING Investments, Mr. Prince was
Vice President of Rabobank International, Chicago Branch (July 1996 - April
1998).

JASON T. GROOM serves as Portfolio Manager of the Trust (since November 2000).
He also serves as Portfolio Manager of ING Senior Income Fund, another
closed-end fund that invests primarily in Senior Loans. Mr. Groom is a Vice
President of ING Investments (since June 2000). He served as an Assistant Vice
President from July 1998 to May 2000. Prior to joining ING Investments, Mr.
Groom was an Associate in the Corporate Finance Group of NationsBank (January
1998 - June 1998) and Assistant Vice President, Corporate Finance Group of The
Industrial Bank of Japan Limited (August 1995 - December 1997).

CHARLES E. LEMIEUX serves as Portfolio Manager of the Trust (since July 1998).
He also serves as Portfolio Manager of ING Senior Income Fund, another
closed-end fund that invests primarily in Senior Loans. Mr. LeMieux is a Vice
President of ING Investments (since June 2000).


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

                                 Investment Management and Other Services     21

INVESTMENT MANAGEMENT AND OTHER SERVICES
--------------------------------------------------------------------------------


He served as an Assistant Vice President of ING Investments from July 1998 to
May 2000. Prior to joining ING Investments, Mr. LeMieux was Assistant Treasurer
Cash Management with Salt River Project (October 1993 - June 1998).

MARK F. HAAK serves as Portfolio Manager of the Trust (since June 1999). He also
serves as Portfolio Manager of ING Senior Income Fund, another closed-end fund
that invests primarily in Senior Loans. Mr. Haak is an Assistant Vice President
of ING Investments (since June 1999). Prior to joining ING Investments, Mr. Haak
was Assistant Vice President, Corporate Banking with Norwest Bank (December 1997
- June 1998); Lead Financial Analyst and Portfolio Manager for Bank One AZ, N.A.
(May 1996 - December 1997); and Credit Manager, Norwest Financial (May 1994 -
May 1996).

WILLIAM  F.  NUTTING,  JR. serves as Senior Portfolio Analyst and Secondary Loan
Trader  for  the Trust (since December 1999). He also serves as Senior Portfolio
Analyst  and  a  Secondary  Loan  Trader  for  ING  Senior  Income Fund, another
closed-end  fund  that  invests  primarily  in  Senior  Loans. Mr. Nutting is an
Assistant  Vice  President  of  ING Investments (since November 1999) and joined
ING Funds Services in July 1995 as an Operations Associate.

RALPH E. BUCHER serves as Portfolio Manager of the Trust and Vice President of
ING Investments (since November 2001). He also serves as Portfolio Manager of
ING Senior Income Fund, another closed-end fund that invests primarily in Senior
Loans. Prior to joining ING Investments, Mr. Bucher was the North American Head
of Special Assets for Standard Chartered Bank (June 1999 - November 2001). Mr.
Bucher has also held other senior credit approval positions with Societe
Generale (June 1997 - June 1999) and with Standard Chartered (February 1992 -
June 1997).

BRIAN S. HORTON serves as Portfolio Manager of the Trust and Vice President of
ING Investments (since September 2001). He also serves as Portfolio Manager of
ING Senior Income Fund, another closed-end fund that invests primarily in Senior
Loans. Prior to joining ING Investments, Mr. Horton was a Vice President in the
Corporate and Investment Banking Group at Bank of America Securities LLC, where
he worked in the Consumer and Retail Industry Group, providing clients in those
industries with services including debt and equity capital raising, mergers and
acquisitions advisory, credit, derivatives, and other corporate and investment
banking products (1999 - 2001). Mr. Horton also served in various other
corporate finance and relationship management positions during his seven years
at Bank of America, including corporate finance specialist for the Southeast
U.S. region from (1997 - 1999). Mr. Horton's other professional experience
includes positions as Associate at Salomon Brothers Inc. and Senior Investment
Analyst for Franchise Finance Corporation of America.


THE ADMINISTRATOR


The Administrator of the Trust is ING Funds Services, LLC (ING Funds Services).
Its principal business address is 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258. The Administrator is a wholly-owned subsidiary of ING Groep and
the immediate parent company of the Investment Manager.


Under an Administration Agreement between ING Funds Services and the Trust, ING
Funds Services administers the Trust's corporate affairs subject to the
supervision of the Board of Trustees of the Trust. In that connection, ING Funds
Services monitors the provisions of the Senior Loan agreements and any
agreements with respect to interests in Senior Loans and is responsible for
recordkeeping with respect to the Senior Loans in the Trust's repurchase offers
portfolio. ING Funds Services also furnishes the Trust with office facilities
and furnishes executive personnel together with clerical and certain
recordkeeping and administrative services. These services include preparation of
annual and other reports to shareholders and to the SEC. ING Funds Services also
handles the filing of federal, state and local income tax returns not being
furnished by the Custodian or Transfer Agent (as defined below). The
Administrator has authorized all of its officers and employees who have been
elected as Trustees or officers of the Trust to serve in the latter capacities.
All services furnished by the Administrator under the Administration Agreement
may be furnished by such officers or employees of the Administrator.

The Trust pays ING Funds Services an administration fee, computed daily and
payable monthly. The Administration Agreement states that ING Funds Services is
entitled to receive a fee at an annual rate of 0.25% of the Trust's Managed
Assets.

TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR


The transfer agent, dividend disbursing agent and registrar for the Common
Shares is DST Systems, Inc., whose principal business address is 816 Wyandotte,
Kansas City, Missouri 64105.


CUSTODIAN

The Trust's securities and cash are held and maintained under a Custody
Agreement with State Street Bank and Trust Company, whose principal place of
business is 801 Pennsylvania Avenue, Kansas City, Missouri 64105.

22     Investment Management and Other Services

                                                        DESCRIPTION OF THE TRUST
--------------------------------------------------------------------------------


The Trust is an unincorporated business trust established under the laws of the
Commonwealth of Massachusetts by the Declaration of Trust dated December 2,
1987, as amended. The Declaration of Trust provides that the Trustees of the
Trust may authorize separate classes of shares of beneficial interest. The
Trustees have authorized an unlimited number of shares of beneficial interest,
par value $0.01 per share, all of which were initially classified as Common
Shares. The Declaration of Trust also authorizes the creation of an unlimited
number of shares of beneficial interest with preference rights, including
preferred shares, having a par value of $0.01 per share, in one or more series,
with rights as determined by the Board of Trustees, by action of the Board of
Trustees without the approval of the shareholders. The following table shows the
amount of (i) shares authorized, (ii) shares held by the Trust for its own
account and (iii) shares outstanding, for each class of authorized securities of
the Trust as of June 14, 2002.

                                                   AMOUNT HELD BY
                                      AMOUNT       TRUST FOR ITS       AMOUNT
        TITLE OF CLASS              AUTHORIZED      OWN ACCOUNT      OUTSTANDING
        --------------              ----------      -----------      -----------
Common Shares                       unlimited            0           136,972,914
Preferred Shares, Series M            3,600              0              3,600
Preferred Shares, Series T            3,600              0              3,600
Preferred Shares, Series W            3,600              0              3,600
Preferred Shares, Series Th           3,600              0              3,600
Preferred Shares, Series F            3,600              0              3,600


The Common Shares outstanding are fully paid and nonassessable by the Trust.
Holders of Common Shares are entitled to share equally in dividends declared by
the Board of Trustees payable to holders of common shares and in the net assets
of the Trust available for distribution to holders of Common Shares after
payment of the preferential amounts payable to holders of any outstanding
Preferred Shares. Neither holders of Common Shares nor holders of Preferred
Shares have pre-emptive or conversion rights and Common Shares are not
redeemable. Upon liquidation of the Trust, after paying or adequately providing
for the payment of all liabilities of the Trust and the liquidation preference
with respect to any outstanding preferred shares, and upon receipt of such
releases, indemnities and refunding agreements as they deem necessary for their
protection, the Trustees may distribute the remaining assets of the Trust among
the holders of the Common Shares. Under the rules of the NYSE applicable to
listed companies, the Trust is required to hold an annual meeting of
shareholders in each year. If the Trust is converted to an open-end investment
company or if for any other reason Common Shares are no longer listed on the
NYSE (or any other national securities exchange the rules of which require
annual meetings of shareholders), the Trust does not intend to hold annual
meetings of shareholders.

Under Massachusetts law, shareholders, including holders of Preferred Shares,
could under certain circumstances be held personally liable for the obligations
of the Trust. However, the Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust would be unable to meet its
obligations.

Holders of Common Shares are entitled to one vote for each share held and will
vote with the holders of any outstanding Preferred Shares or any other preferred
shares on each matter submitted to a vote of holders of Common Shares, except as
described under "Description of Capital Structure--Preferred Shares."

Shareholders are entitled to one vote for each share held. The Common Shares,
Preferred Shares and any other preferred shares do not have cumulative voting
rights, which means that the holders of more than 50% of the shares of Common
Shares, Preferred Shares and any other preferred shares voting for the election
of Trustees can elect all of the Trustees standing for election by such holders,
and, in such event, the holders of the remaining shares of Common Shares,
Preferred Shares and any other preferred shares will not be able to elect any of
such Trustees.

So long as any Preferred Shares or any other preferred shares are outstanding,
holders of Common Shares will not be entitled to receive any dividends of or
other distributions from the Trust, unless at the time of such declaration, (1)
all accrued dividends on preferred shares or accrued interest on borrowings has
been paid and (2) the value of the Trust's total assets (determined after
deducting the amount of such dividend or other distribution), less all
liabilities and indebtedness of the Trust not represented by senior securities,
is at least 300% of the aggregate amount of such securities representing
indebtedness and at least 200% of the aggregate amount of securities
representing indebtedness plus the aggregate liquidation value of the
outstanding preferred shares (expected to equal the aggregate original purchase
price of the outstanding preferred shares plus redemption premium, if any,
together with any accrued and unpaid dividends thereon, whether or not earned or
declared and on a cumulative basis). In addition to the requirements of the 1940
Act, the Trust is required to comply with other asset coverage requirements as a
condition of the Trust obtaining a rating of the preferred shares from a rating
agency. These requirements include an asset coverage test more stringent than
under the 1940 Act.

The Trust will send unaudited reports at least semi-annually and audited
financial statements annually to all of its shareholders.

The Declaration of Trust further provides that obligations of the Trust are not
binding upon Trustees individually but only upon the property of the Trust and
that the Trustees will not be liable for errors of judgment or mistakes of fact
or law, but

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

                                                 Description of the Trust     23

DESCRIPTION OF THE TRUST
--------------------------------------------------------------------------------

nothing in the Declaration of Trust protects a Trustee against any liability to
which he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.

CONVERSION TO OPEN-END FUND

The Trustees may at any time propose conversion of the Trust to an open-end
management investment company depending upon their judgment as to the
advisability of such action in light of circumstances then prevailing. In
considering whether to submit an open-ending proposal to shareholders, the
Trustees might consider, among other factors, the differences in operating
expenses between open-end and closed-end funds (due to the expenses of
continuously selling shares and of standing ready to effect redemptions), the
potentially adverse tax consequences to non-redeeming shareholders once a fund
is open-ended, and the impact of open-ending on portfolio management policies.
Such a conversion would require the approval of both a majority of the Trust's
outstanding Common Shares and preferred shares voting together as a single class
and a majority of the outstanding preferred shares voting as a separate class on
such conversion. Conversion of the Trust to an open-end investment company would
require the redemption of all outstanding preferred shares, including the
Preferred Shares, which would eliminate the leveraged capital structure of the
Trust with respect to the Common Shares. A delay in conversion could result
following shareholder approval due to the Trust's inability to redeem the
preferred shares. Shareholders of an open-end investment company may require the
company to redeem their shares at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their next computed NAV less any
redemption charge as might be in effect at the time of redemption. If the Trust
is converted to an open-end management investment company, it could be required
to liquidate portfolio securities to meet requests for redemption, and its
shares would no longer be listed on the NYSE. If the Trust were to experience
significant redemptions as an open-end fund, the decrease in total assets could
result in a higher expense ratio and inefficiencies in portfolio management. In
this regard, the Trust could reserve the right to effect redemptions in-kind
with portfolio securities, which would subject redeeming shareholders to
transaction costs in liquidating those securities.

REPURCHASE OF COMMON SHARES


In recognition of the possibility that the Trust's Common Shares may trade at a
discount to their NAV, the Trust may from time to time take action to attempt to
reduce or eliminate a market value discount from NAV by repurchasing its Common
Shares in the open market or by tendering its Common Shares at NAV. So long as
any preferred shares are outstanding, the Trust may not purchase, redeem or
otherwise acquire any Common Shares unless (1) all accumulated dividends on the
preferred shares have been paid or set aside for payment through the date of
such purchase, redemption or other acquisition and (2) at the time of such
purchase, redemption or acquisition the asset coverage requirements set forth in
the Declaration of Trust and the Trust's Certificate of Designation for
Preferred Shares are met. Repurchases of Common Shares may result in the Trust
being required to redeem preferred shares to satisfy asset coverage
requirements.


FUNDAMENTAL AND NON-FUNDAMENTAL POLICIES OF THE TRUST

The investment objective of the Trust, certain policies of the Trust specified
herein as "fundamental" and the investment restrictions of the Trust described
in the SAI are fundamental policies of the Trust and may not be changed without
a "Majority Vote" of the shareholders of the Trust. The term "Majority Vote"
means the affirmative vote of (a) more than 50% of the outstanding shares of the
Trust or (b) 67% or more of the shares present at a meeting if more than 50% of
the outstanding shares of the Trust are represented at the meeting in person or
by proxy, whichever is less. All other policies of the Trust may be modified by
resolution of the Board of Trustees of the Trust.

24     Description of the Trust

                                                DESCRIPTION OF CAPITAL STRUCTURE
--------------------------------------------------------------------------------

COMMON SHARES

The Trust's Declaration of Trust authorizes the issuance of an unlimited number
of Common Shares of beneficial interest, par value $.01 per share. All Common
Shares have equal rights to the payment of dividends and the distribution of
assets upon liquidation. Common Shares will, when issued, be fully paid and
non-assessable, and will have no pre-emptive or conversion rights or rights to
cumulative voting.


Whenever preferred shares are outstanding, holders of Common Shares will not be
entitled to receive any distributions from the Trust, unless at the time of such
declaration, (1) all accrued dividends on preferred shares or accrued interest
on borrowings have been paid and (2) the value of the Trust's total assets
(determined after deducting the amount of such dividend or other distribution),
less all liabilities and indebtedness of the Trust not represented by senior
securities, is at least 300% of the aggregate amount of such securities
representing indebtedness and at least 200% of the aggregate amount of
securities representing indebtedness plus the aggregate liquidation value of the
outstanding preferred shares. In addition to the requirements of the 1940 Act,
the Trust is required to comply with the other asset coverage requirements as a
condition of the Trust obtaining a rating of the preferred shares from a rating
agency. These requirements include asset coverage tests more stringent than
under the 1940 Act. See "Preferred Shares" below.


BORROWINGS

The Trust's Declaration of Trust authorizes the Trust, without the prior
approval of holders of Common Shares, to borrow money. In this connection, the
Trust may issue notes or other evidence of indebtedness (including bank
borrowings or commercial paper) and may secure any such borrowings by
mortgaging, pledging or otherwise granting a security interest in the Trust's
assets. See "Risk Factors and Special Consideration -- Leverage."

PREFERRED SHARES

Under the 1940 Act, the Trust is permitted to have outstanding more than one
series of preferred shares as long as no single series has priority over another
series nor holders of preferred shares have pre-emptive rights to purchase any
Preferred Shares or any other preferred shares that might be issued.


The Trust's Declaration of Trust authorizes the issuance of a class of preferred
shares (which class may be divided into two or more series) as the Trustees may,
without shareholder approval, authorize. The preferred shares have such
preferences, voting powers, terms of redemption, if any, and special or relative
rights or privileges (including conversion rights, if any) as the Trustee may
determine and as are set forth in the Trust's Certificate of Designation
establishing the terms of the preferred shares. The number of shares of the
preferred class or series authorized is unlimited, and the shares authorized may
be represented in part by fractional shares. Under the Trust's Certificate of
Designation, the Trustees have authorized the creation of 18,000 Auction Rate
Cumulative Preferred Shares, having a par value of $0.01 per share, with a
liquidation preference of $25,000 per share, classified as Series M, T, W, Th
and F Auction Rate Cumulative Preferred Shares.

Any decision to offer preferred shares is subject to market conditions and to
the Board of Trustees' and the Investment Manager's continuing belief that
leveraging the Trust's capital structure through the issuance of preferred
shares is likely to achieve the benefits to the Common Shares described in this
Prospectus for long-term investors. The terms of the preferred shares will be
determined by the Board of Trustees in consultation with the Investment Manager
(subject to applicable law and the Trust's Declaration of Trust) if and when it
authorizes a preferred shares offering.


The preferred shares have complete priority over the Common Shares as to
distribution of assets. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Trust, holders of
preferred shares will be entitled to receive a preferential liquidating
distribution (expected to equal the original purchase price per share plus
accumulated and unpaid dividends thereon, whether or not earned or declared)
before any distribution of assets is made to holders of Common Shares.

                             SENIOR SECURITIES TABLE

The table below sets forth certain specified information for the senior
securities that are outstanding for the Trust; these securities are the Series
M, T, W, Th and F Preferred Shares. The calculation of asset coverage per share
is explained in a note to the table below.




                                                                     FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2002
                                                            --------------------------------------------------------------
                                                            SERIES M     SERIES T     SERIES W     SERIES TH      SERIES F
                                                            --------     --------     --------     ---------      --------
                                                                                                  
Total Number of Preferred Shares Outstanding                  3,600        3,600        3,600         3,600         3,600
Asset Coverage Per Preferred Share(1)                           235%         235%         235%          235%          235%
Involuntary Liquidating Preference Per Preferred Share      $25,000      $25,000      $25,000       $25,000       $25,000
Stated Value Per Preferred Share                            $25,000      $25,000      $25,000       $25,000       $25,000


                                                                     FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2001
                                                            --------------------------------------------------------------
                                                            SERIES M     SERIES T     SERIES W     SERIES TH      SERIES F
                                                            --------     --------     --------     ---------      --------
Total Number of Preferred Shares Outstanding                  3,600        3,600        3,600         3,600         3,600
Asset Coverage Per Preferred Share(1)                           215%         215%         215%          215%          215%
Involuntary Liquidating Preference Per Preferred Share      $25,000      $25,000      $25,000       $25,000       $25,000
Stated Value Per Preferred Share                            $25,000      $25,000      $25,000       $25,000       $25,000


(1)  Asset Coverage per share means the ratio of the total assets of the Trust
     to the total number of Preferred Shares outstanding at the end of the
     period.


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

                                         Description of Capital Structure     25

TAX MATTERS
--------------------------------------------------------------------------------

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

The federal income tax treatment of the Trust's Preferred Shares is not entirely
clear, but the Trust believes, based on the advice of its counsel, that the
Preferred Shares will constitute stock of the Trust. It is possible, however,
that the IRS might take a contrary position, asserting, for example, that the
Preferred Shares constitute debt of the Trust. The discussion below assumes that
the Preferred Shares are stock.

The Trust will distribute all or substantially all of its net investment income
and net, realized capital gains, if any, to its shareholders each year. Although
the Trust will not be taxed on amounts it distributes, most shareholders will be
taxed on amounts they receive. A particular distribution generally will be
taxable as either ordinary income or long-term capital gain. The Trust will
allocate a proportionate amount of each type of its income to the Common Shares
and to the Preferred Shares. It does not matter how long a shareholder has held
the Trust's Common Shares or Preferred Shares or whether the shareholder elects
to receive distributions in cash or reinvest them in additional Trust's Common
Shares or Preferred Shares. For example, if the Trust designates a particular
distribution as a long-term capital gains distribution, it will be taxable to a
shareholder at his or her long-term capital gains rate.

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

Each shareholder will receive an annual statement summarizing the shareholder's
dividend and capital gains distributions.

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

There may be tax consequences to a shareholder if the shareholder sells the
Trust's Common Shares or Preferred Shares. A shareholder will generally have a
capital gain or loss, which will be long-term or short-term, generally depending
on how long the shareholder holds those Common Shares or Preferred Shares. If a
shareholder exchanges shares, the shareholder may be treated as if he or she
sold them. Shareholders are responsible for any tax liabilities generated by
their own transactions.

As with all investment companies, the Trust may be required to withhold U.S.
federal income tax at the rate of 30% of all taxable distributions payable to a
shareholder if the shareholder fails to provide the Trust with his or her
correct taxpayer identification number or to make required certifications, or if
the shareholder has been notified by the IRS that he or she is subject to backup
withholding. Backup withholding is not an additional tax; rather, it is a way in
which the IRS ensures it will collect taxes otherwise due. Any amounts withheld
may be credited against a shareholder's U.S. federal income tax liability.

26     Tax Matters

                                                                MORE INFORMATION
--------------------------------------------------------------------------------

LEGAL MATTERS

The validity of the Common Shares offered hereby will be passed on for the Trust
by Dechert, 1775 Eye Street, NW, Washington, DC, counsel to the Trust.

AUDITORS


KPMG LLP serves as independent auditors for the Trust. The auditors' address is
355 South Grand Avenue, Los Angeles, California 90071.


REGISTRATION STATEMENT

The Trust has filed with the SEC, Washington, DC, a Registration Statement under
the Securities Act, relating to the Common Shares offered hereby. For further
information with respect to the Trust and its Common Shares, reference is made
to such Registration Statement and the exhibits filed with it.

SHAREHOLDER REPORTS

The Trust issues reports that include financial information to its shareholders
at least semi-annually.

PRIVACY POLICY

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

HOUSEHOLDING


To reduce expenses and eliminate duplicate documents sent to your home, we may
mail only one copy of the Trust's Prospectus and each annual and semi-annual
report, or any other required documents to those addresses shared by two or more
account holders. If you wish to receive individual copies of these documents,
please call us at (800) 992-0180 or contact your financial consultant. We will
begin sending you individual copies thirty days after receiving your request.


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

                                                         More Information     27

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

FINANCIAL HIGHLIGHTS TABLE

The table below sets forth selected financial information which has been derived
from the financial statements in the Trust's Annual Report dated as of February
28, 2002. For the fiscal years ended February 28, 2002, February 28, 2001,
February 29, 2000, February 28, 1999, 1998 and 1997, and February 29, 1996, the
information in the table below has been audited by KPMG LLP, independent
auditors. For all periods ended prior to February 29, 1996, the financial
information was audited by the Trust's former auditors.




                                                                 YEARS ENDED FEBRUARY 28 OR FEBRUARY 29,
                                          --------------------------------------------------------------------------------------
                                             2002           2001          2000           1999(8)         1998(8)       1997(8)
                                          ---------      ----------    ----------      ----------      ----------     ----------
                                                                                                    
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period      $    8.09      $     8.95    $     9.24      $     9.34      $     9.45     $     9.61
Net investment income                          0.74            0.88          0.79            0.79            0.87           0.82
Net realized and unrealized gain (loss)
 on investments                               (0.89)          (0.78)        (0.30)          (0.10)          (0.13)         (0.02)
                                          ---------      ----------    ----------      ----------      ----------     ----------
Increase (decrease) in net asset value
 from investment operations                   (0.15)           0.10          0.49            0.69            0.74           0.80
Distributions to Common Shareholders
 from net investment income                   (0.63)          (0.86)        (0.78)          (0.82)          (0.85)         (0.82)
Distribution to Preferred Shareholders        (0.11)          (0.06)           --              --              --             --
Increase in net asset value from share
 offerings                                       --              --            --            0.03              --             --
Reduction in net asset value from
 rights offering                                 --              --            --              --              --          (0.14)
Increase in net asset value from
 repurchase of capital stock                     --              --            --              --              --             --
Reduction in net asset value from
 Preferred Shares offerings                      --           (0.04)           --              --              --             --
                                          ---------      ----------    ----------      ----------      ----------     ----------
Net asset value, end of period            $    7.20      $     8.09    $     8.95      $     9.24      $     9.34     $     9.45
                                          =========      ==========    ==========      ==========      ==========     ==========
Closing market price at end of period     $    6.77      $     8.12    $     8.25      $     9.56      $    10.31     $    10.00
TOTAL RETURN(3)
Total investment return at closing
 market price(4)                              (9.20)%          9.10%        (5.88)%          1.11%          12.70%         15.04%(6)
Total investment return at net asset
 value (5)                                    (3.02)%          0.19%         5.67%           7.86%           8.01%          8.06%(6)
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (000's)          $ 985,982      $1,107,432    $1,217,339      $1,202,565      $1,034,403     $1,031,089
Preferred Rate Shares
 Aggregate amount outstanding
 (000's)                                  $ 450,000      $  450,000            --              --              --             --
Liquidation and market value
 Per Share                                $  25,000      $   25,000            --              --              --             --
Asset coverage Per Share**                      235%            215%           --              --              --             --
Average borrowings (000's)                $ 365,126      $  450,197    $  524,019      $  490,978      $  346,110     $  131,773
Ratios to average net assets including
 preferred*
 Expenses (before interest and other
  fees related to revolving credit
  facility)                                    1.57%           1.62%           --              --              --             --
 Expenses                                      2.54%           3.97%           --              --              --             --
 Net investment income                         6.83%(A)        9.28%           --              --              --             --
Ratios to average net assets plus
 borrowing
 Expenses (before interest and other
  fees related to revolving credit
  facility)                                    1.66%           1.31%         1.00%(9)        1.05%(9)        1.04%          1.13%
 Expenses                                      2.70%           3.21%         2.79%(9)        2.86%(9)        2.65%          1.92%
 Net investment income                         7.24%(B)        7.50%         6.12%           6.00%           6.91%          7.59%
Ratios to average net assets
 Expenses (before interest and other
  fees related to revolving credit
  facility)                                    2.25%           1.81%         1.43%(9)        1.50%(9)        1.39%          1.29%
 Expenses                                      3.64%           4.45%         4.00%(9)        4.10%(9)        3.54%          2.20%
 Net investment income                         9.79%(C)       10.39%         8.77%           8.60%           9.23%          8.67%
 Portfolio turnover rate                         53%             46%           71%             68%             90%            82%
 Common shares outstanding at end
  of period (000's)                         136,973         136,847       136,036         130,206         110,764        109,140


----------
(1)  Annualized.
(2)  Prior to the waiver of expenses, the ratios of expenses to average net
     assets were 1.95% (annualized), 1.48% and 1.44% for the period from May 12,
     1988 to February 28, 1989, and for the fiscal years ended February 28, 1990
     and February 29, 1992, respectively, and the ratios of net investment
     income to average net assets were 8.91% (annualized), 10.30% and 7.60% for
     the period from May 12, 1988 to February 28, 1989, and for the fiscal years
     ended February 28, 1990 and February 29, 1992, respectively.
(3)  Total return calculations are attributable to common shareholders.
(4)  Total investment return measures the change in the market value of your
     investment assuming reinvestment of dividends and capital gain
     distributions, if any, in accordance with the provisions of the dividend
     reinvestment plan. On March 9, 1992, the shares of the Trust were initially
     listed for trading on the New York Stock Exchange. Accordingly, the total
     investment return for the year ended February 28, 1993, covers only the
     period from March 9, 1992, to February 28, 1993. Total investment return
     for periods prior to the year ended February 28, 1993, are not presented
     since market values for the Trust's shares were not available. Total
     returns for less than one year are not annualized.
(5)  Total investment return at net asset value has been calculated assuming a
     purchase at net asset value at the beginning of each period and a sale at
     net asset value at the end of each period and assumes reinvestment of
     dividends and capital gain distributions in accordance with the provisions
     of the dividend reinvestment plan. This calculation differs from total
     investment return because it excludes the effects of changes in the market
     values of the Trust's shares. Total returns for less than one year are not
     annualized.
(6)  Calculation of total return excludes the effects of the per share dilution
     resulting from the rights offering as the total account value of a fully
     subscribed shareholder was minimally impacted.


28     Financial Highlights

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




     YEARS ENDED FEBRUARY 28 OR FEBRUARY 29,
--------------------------------------------------
 1996(7)       1995            1994         1993
--------     --------        --------     --------

$   9.66     $  10.02        $  10.05     $   9.96
    0.89         0.74            0.60         0.60
   (0.08)        0.07           (0.05)        0.01
--------     --------        --------     --------
    0.81         0.81            0.55         0.61
   (0.86)       (0.73)          (0.60)       (0.57)
      --           --              --           --
      --           --              --           --
      --        (0.44)             --           --
      --           --            0.02         0.05
      --           --              --           --
--------     --------        --------     --------
$   9.61     $   9.66        $  10.02     $  10.05
========     ========        ========     ========
$   9.50     $   8.75        $   9.25     $   9.13
   19.19%        3.27%(6)        8.06%       10.89%
    9.21%        5.24%(6)        6.28%        7.29%
$862,938     $867,083        $719,979     $738,810
      --           --              --           --
      --           --              --           --
      --           --              --           --
      --           --              --           --
      --           --              --           --
      --           --              --           --
      --           --              --           --
      --           --              --           --
      --           --              --           --
      --           --              --           --
      --           --              --           --
    1.23%        1.30%           1.31%        1.42%
    9.23%        7.59%           6.04%        5.88%
      88%         108%             87%          81%
  89,794       89,794          71,835       73,544

----------
(7)  ING Investments, LLC, the Trust's investment manager, acquired certain
     assets of Pilgrim Management Corporation, the Trust's former investment
     manager, in a transaction that closed on April 7, 1995.
(8)  The Manager agreed to reduce its fee for a period of three years from the
     Expiration Date of the November 12, 1996 Rights Offering to 0.60% of the
     average daily net assets, plus the proceeds of any outstanding borrowings,
     over $1.15 billion.
(9)  Calculated on total expenses before impact of earnings credits.
 *    Ratios do not reflect the effect of dividend payments to Preferred
     Shareholders; income ratios reflect income earned on assets attributable to
     preferred shares.
**   Asset coverage represents the total assets available for settlement of
     Preferred Stockholder's interest and notes payables in relation to the
     Preferred Shareholder interest and notes payable balance outstanding. The
     Preferred Shares were first offered November 2, 2000.
(A)  Had the Trust not amortized premiums and accreted discounts, the ratio of
     net investment income to average net assets including preferred shares
     would have been 6.43% for the year ended February 28, 2002.
(B)  Had the Trust not amortized premiums and accreted discounts, the ratio of
     net investment income to average net assets plus borrowings applicable to
     common shares would have been 6.82% for the year ended February 28, 2002.
(C)  Had the Trust not amortized premiums and accreted discounts, the ratio of
     net investment income to average net assets applicable to common shares
     would have been 9.22% for the year ended February 28, 2002.


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

                                                     Financial Highlights     29

STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

                               TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
Change of Name ...........................................................     2
Investment Objective .....................................................     2
Investment Restrictions ..................................................     2
Additional Information About Investments and Investment Techniques .......     3
Trustees and Officers ....................................................    12
Compensation Table .......................................................    20
Code of Ethics ...........................................................    26
Investment Management and Other Services .................................    26
Portfolio Transactions ...................................................    28
Net Asset Value ..........................................................    30
Plans of Distribution ....................................................    31
Federal Taxation .........................................................    36
Advertising and Performance Data .........................................    39
General Information ......................................................    41
Financial Statements .....................................................    42

30     Statement of Additional Information

                              ING PRIME RATE TRUST
                          7337 E. DOUBLETREE RANCH ROAD
                            SCOTTSDALE, ARIZONA 85258
                                 (800) 992-0180


                 5,000,000 COMMON SHARES OF BENEFICIAL INTEREST

--------------------------------------------------------------------------------
                            TRUST ADVISORS AND AGENTS
--------------------------------------------------------------------------------

INVESTMENT MANAGER                          DISTRIBUTOR

ING Investments, LLC                        ING Funds Distributor, Inc.
7337 E. Doubletree Ranch Road               7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258                        Scottsdale, AZ 85258

ADMINISTRATOR                               TRANSFER AGENT

ING Funds Services, LLC                     DST Systems, Inc.
7337 E. Doubletree Ranch Road               816 Wyandotte
Scottsdale, AZ 85258                        Kansas City, MO 64105

CUSTODIAN                                   LEGAL COUNSEL

State Street Bank and Trust Company         Dechert
801 Pennsylvania Avenue                     1775 Eye Street, NW
Kansas City, MO 64105                       Washington, DC 20006

INDEPENDENT AUDITORS                        INSTITUTIONAL INVESTORS AND ANALYSTS


KPMG LLP                                    Call ING Prime Rate Trust
355 South Grand Avenue                      1-800-336-3436
Los Angeles, California 90071


THE TRUST HAS NOT AUTHORIZED ANY PERSON TO PROVIDE YOU WITH ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THIS OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION IN THIS
PROSPECTUS OR OTHER INFORMATION TO WHICH WE HAVE REFERRED YOU. THIS PROSPECTUS
IS NOT AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE COMMON SHARES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE COMMON SHARES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT
TO THIS PROSPECTUS DOES NOT IMPLY THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS. HOWEVER,
IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE
DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED.

WHEN CONTACTING THE SEC, YOU WILL WANT TO REFER TO THE TRUST'S SEC FILE NUMBER.
THE FILE NUMBER IS AS FOLLOWS:

1940 Act File No. 811-5410

[LION LOGO]
 ING FUNDS                                                  PR2PROS070102-070102

                              ING Prime Rate Trust

                      (formerly, Pilgrim Prime Rate Trust)

                         7337 East Doubletree Ranch Road
                            Scottsdale, Arizona 85258

                       STATEMENT OF ADDITIONAL INFORMATION

                                  July 1, 2002

     ING Prime Rate Trust (the "Trust") is a diversified,  closed-end management
investment  company  registered  under the  Investment  Company Act of 1940,  as
amended  (the  "1940  Act").  The  Trust's  investment  objective  is to provide
investors  with as high a level of  current  income  as is  consistent  with the
preservation  of capital.  There is no assurance that the Trust will achieve its
investment  objective.  The  Trust is  managed  by ING  Investments,  LLC  ("ING
Investments" or the  "Investment  Manager"),  formerly ING Pilgrim  Investments,
LLC.

     This  Statement of  Additional  Information  ("SAI") does not  constitute a
prospectus,  but  should be read in  conjunction  with the  prospectus  relating
thereto-dated  July 1, 2002.  This SAI does not include all  information  that a
prospective  investor should consider  before  purchasing  Common Shares in this
offering,  and  investors  should  obtain  and  read  the  prospectus  prior  to
purchasing such shares.  A copy of the prospectus may be obtained without charge
by calling the Investment Manager at (800) 992-0180.

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

CHANGE OF NAME...............................................................  2
INVESTMENT OBJECTIVE.........................................................  2
INVESTMENT RESTRICTIONS......................................................  2
ADDITIONAL INFORMATION ABOUT INVESTMENTS AND INVESTMENT TECHNIQUES...........  3
TRUSTEES AND OFFICERS........................................................ 12
COMPENSATION TABLE........................................................... 20
CODE OF ETHICS............................................................... 26
INVESTMENT MANAGEMENT AND OTHER SERVICES..................................... 26
PORTFOLIO TRANSACTIONS....................................................... 28
NET ASSET VALUE.............................................................. 30
PLANS OF DISTRIBUTION........................................................ 31
FEDERAL TAXATION............................................................. 36
ADVERTISING AND PERFORMANCE DATA............................................. 39
GENERAL INFORMATION.......................................................... 41
FINANCIAL STATEMENTS......................................................... 42


     The  prospectus  and  SAI  omit  certain   information   contained  in  the
registration  statement  filed  with  the  Securities  and  Exchange  Commission
("Commission"  or "SEC"),  Washington,  DC. The  registration  statement  may be
obtained from the Commission upon payment of the fee prescribed, or inspected at
the  Commission's  office  for no charge.  The  registration  statement  is also
available on the Commission's website (www.sec.gov).

                                       1

                                 CHANGE OF NAME


     The Trust  changed  its name from  "Pilgrim  Prime Rate  Trust" to "Pilgrim
America  Prime Rate  Trust" in April  1996,  and then  changed  its name back to
"Pilgrim  Prime Rate Trust" on November  16, 1998.  Effective  March 1, 2002 the
Trust changed its name to "ING Prime Rate Trust".


                              INVESTMENT OBJECTIVE


     The Trust's  investment  objective  is to obtain as high a level of current
income as is consistent  with the  preservation  of capital.  The Trust seeks to
achieve its  investment  objective by investing  under normal  circumstances  at
least 80% of its Managed Assets in higher  yielding,  U.S.  dollar  denominated,
floating rate secured senior loans ("Senior  Loans").  The Trust only invests in
Senior Loans made to  corporations  or other business  entities  organized under
U.S.  or Canadian  law and which are  domiciled  in the U.S.,  Canada or in U.S.
territories and or possessions. The Trust can also invest up to 20% of its total
assets in other  investments,  including  unsecured loans,  subordinated  loans,
short-term  debt  instruments,  equity  securities  acquired in connection  with
investments  in loans and  other  instruments  as  described  under  "Additional
Information About Investments and Investment  Techniques."  During periods when,
in the opinion of the Trust's Investment  Manager, a temporary defensive posture
in the  market is  appropriate,  the Trust may hold up to 100% of its  assets in
cash and/or in short-term debt instruments.


                             INVESTMENT RESTRICTIONS

     The  Trust  has  adopted  the  following   restrictions   relating  to  its
investments and activities, which may not be changed without a Majority Vote, as
defined in the 1940 Act. The Trust may not:

     1. Issue senior  securities,  except  insofar as the Trust may be deemed to
have issued a senior  security by reason of (i) entering  into certain  interest
rate hedging transactions,  (ii) entering into reverse repurchase agreements, or
(iii)  borrowing  money  in an  amount  not  exceeding  33 1/3%,  or such  other
percentage permitted by law, of the Trust's total assets (including the borrowed
amount) less all liabilities  other than borrowings,  or (iv) issuing a class or
classes  of  preferred  shares in an amount  not  exceeding  50%,  or such other
percentage  permitted by law, of the Trust's  total assets less all  liabilities
and indebtedness not represented by senior securities.

     2. Invest more than 25% of its total assets in any industry.

     3. Invest in marketable  warrants  other than those acquired in conjunction
with Senior  Loans and such  warrants  will not  constitute  more than 5% of its
assets.

     4. Make investments in any one issuer other than U.S. government securities
if, immediately after such purchase or acquisition, more than 5% of the value of
the Trust's  total assets  would be invested in such issuer,  or the Trust would
own more than 25% of any outstanding issue, except that up to 25% of the Trust's
total assets may be invested without regard to the foregoing  restrictions.  For
the purpose of the foregoing  restriction,  the Trust will consider the borrower
of a Senior Loan to be the issuer of such Senior Loan. In addition, with respect
to a Senior Loan under which the Trust does not have  privity  with the borrower
or would not have a direct cause of action  against the borrower in the event of
the failure of the borrower to pay  scheduled  principal or interest,  the Trust
will  also  separately  meet  the  foregoing   requirements  and  consider  each
interpositioned  bank (a lender from which the Trust  acquires a Senior Loan) to
be an issuer of the Senior Loan.

                                       2

     5. Act as an underwriter of securities, except to the extent that it may be
deemed to act as an underwriter in certain cases when disposing of its portfolio
investments  or acting as an agent or one of a group of co-agents in originating
Senior Loans.

     6.  Purchase  or  sell  equity  securities  (except  that  the  Trust  may,
incidental  to the purchase or ownership of an interest in a Senior Loan,  or as
part of a borrower  reorganization,  acquire,  sell and exercise warrants and/or
acquire or sell other  equity  securities),  real estate,  real estate  mortgage
loans,  commodities,  commodity futures contracts,  or oil or gas exploration or
development  programs;  or sell short,  purchase or sell straddles,  spreads, or
combinations thereof, or write put or call options.

     7. Make loans of money or property to any person, except that the Trust (i)
may make loans to corporations or other business entities,  or enter into leases
or other  arrangements  that have the  characteristics  of a loan; (ii) may lend
portfolio  instruments;  and (iii) may acquire  securities subject to repurchase
agreements.

     8. Purchase shares of other investment companies, except in connection with
a merger, consolidation, acquisition or reorganization.

     9. Make investments on margin or hypothecate, mortgage or pledge any of its
assets  except for the  purpose of securing  borrowings  as  described  above in
connection with the issuance of senior  securities and then only in an amount up
to 33 1/3% (50% in the case of the issuance of a preferred class of shares),  or
such other percentage permitted by law, of the value of the Trust's total assets
(including,   with  respect  to  borrowings,   the  amount  borrowed)  less  all
liabilities  other than  borrowings  (or, in the case of the  issuance of senior
securities,  less all  liabilities  and  indebtedness  not represented by senior
securities).

     If a  percentage  restriction  is adhered to at the time of  investment,  a
later increase or decrease in percentage resulting from a change in value of the
Trust's investments or amount of total assets will not be considered a violation
of any of the foregoing restrictions.

     There is no limitation  on the  percentage of the Trust's total assets that
may be invested in  instruments  which are not readily  marketable or subject to
restrictions on resale, and to the extent the Trust invests in such instruments,
the Trust's  portfolio  should be considered  illiquid.  The extent to which the
Trust  invests in such  instruments  may affect its  ability to realize  the net
asset value  ("NAV") of the Trust in the event of the  voluntary or  involuntary
liquidation of its assets.


     The Trust has also  adopted a  non-fundamental  policy as  required by Rule
35d-1 under the 1940 Act to invest, under normal circumstances,  at least 80% of
its Managed Assets in higher yielding,  U.S. dollar  denominated,  floating rate
secured  senior  loans.  The Trust has also  adopted  a policy  to  provide  its
shareholders  with  at  least  60  days'  prior  notice  of any  change  in such
investment  policy.  If, subsequent to an investment,  the 80% requirement is no
longer met, the Trust's  future  investments  will be made in a manner that will
bring the Trust into compliance with this policy.


       ADDITIONAL INFORMATION ABOUT INVESTMENTS AND INVESTMENT TECHNIQUES

     Some of the  different  types of  securities in which the Trust may invest,
subject to its investment objective, policies and restrictions, are described in
the prospectus under "Investment Objective and Policies." Additional information
concerning certain of the Trust's  investments and investment  techniques is set
forth below.

                                       3

EQUITY SECURITIES


     In  connection  with its purchase or holding of interests in Senior  Loans,
the Trust may acquire  (and  subsequently  sell) equity  securities  or exercise
warrants  that it receives.  The Trust will acquire  such  interests  only as an
incident to the intended  purchase or ownership of loans or in connection with a
reorganization of a borrower.  The Trust normally will not hold more than 20% of
its total assets in equity securities.  Equity securities will not be treated as
Senior Loans;  therefore, an investment in such securities will not count toward
the 80% of the Trust's  Managed  Assets that normally will be invested in Senior
Loans.  Equity  securities  are subject to financial and market risks and can be
expected to fluctuate in value.


LEASE PARTICIPATIONS

     The  credit  quality  standards  and  general  requirements  that the Trust
applies to Lease Participations including collateral quality, the credit quality
of the  borrower and the  likelihood  of payback are  substantially  the same as
those  applied to  conventional  Senior  Loans.  A Lease  Participation  is also
required to have a floating  interest  rate that is indexed to the federal funds
rate,  London  Inter-Bank  Offered Rate ("LIBOR"),  or Prime Rate in order to be
eligible for investment.

     The Office of the Comptroller of the Currency has  established  regulations
which set forth  circumstances  under which  national  banks may engage in lease
financings.  Among  other  things,  the  regulation  requires  that a lease be a
net-full payout lease  representing the noncancelable  obligation of the lessee,
and that the bank make  certain  determinations  with  respect to any  estimated
residual value of leased property relied upon by the bank to yield a full return
on the  lease.  The  Trust  may  invest  in lease  financings  only if the Lease
Participation meets these banking law requirements.

INTEREST RATES AND PORTFOLIO MATURITY

     Interest rates on loans in which the Trust invests adjust periodically. The
interest  rates are adjusted  based on a base rate plus a premium or spread over
the base rate. The base rate usually is LIBOR, the Federal Reserve federal funds
rate,  the Prime Rate or other base lending  rates used by  commercial  lenders.
LIBOR usually is an average of the interest  rates quoted by several  designated
banks as the rates at which they pay interest to major  depositors in the London
interbank market on U.S. dollar  denominated  deposits.  The Investment  Manager
believes that changes in short-term  LIBOR rates are closely  related to changes
in the Federal Reserve federal funds rate,  although the two are not technically
linked.  The Prime Rate quoted by a major U.S.  bank is  generally  the interest
rate at which that bank is willing to lend U.S. dollars to its most creditworthy
borrowers, although it may not be the bank's lowest available rate.

     Loans in which the Trust invests  typically have interest rates which reset
at least quarterly and may reset as frequently as daily. The maximum duration of
an  interest  rate  reset on any loan in which the Trust can invest is one year.
The maximum maturity on any loan in which the Trust can invest is ten years. The
Trust's portfolio of loans will ordinarily have a  dollar-weighted  average time
until the next  interest rate  adjustment of 90 days or less,  although the time
may  exceed 90 days.  The  Trust may find it  possible  and  appropriate  to use
interest  rate swaps and other  investment  practices  to shorten the  effective
interest rate adjustment period of loans. If the Trust does so, it will consider
the  shortened  period to be the  adjustment  period of the loan.  As short-term
interest  rates  rise,  interest  payable  to  the  Trust  should  increase.  As
short-term  interest  rates  decline,  interest  payable  to  the  Trust  should
decrease.  The amount of time that will pass  before the Trust  experiences  the
effects of changing short-term interest rates will depend on the dollar-weighted
average time until the next interest rate adjustment on the Trust's portfolio of
loans.

                                       4

     Loans usually have mandatory and optional prepayment provisions. Because of
prepayments,  the actual remaining  maturity of a loan may be considerably  less
than its stated maturity.  If a loan is prepaid, the Trust will have to reinvest
the  proceeds in other loans or  securities  which may have a lower fixed spread
over its base rate.  In such a case,  the amount of  interest  paid to the Trust
would likely decrease.

     In the event of a change in the benchmark interest rate on a loan, the rate
payable to lenders  under the loan will, in turn,  change at the next  scheduled
reset  date.  If the  benchmark  rate goes up,  the Trust as lender  would  earn
interest  at a higher  rate,  but  only on and  after  the  reset  date.  If the
benchmark  rate goes down,  the Trust as lender  would earn  interest at a lower
rate, but only on and after the reset date.

     During  normal market  conditions,  changes in market  interest  rates will
affect the Trust in certain ways. The principal effect will be that the yield on
the Trust's  Common  Shares will tend to rise or fall as market  interest  rates
rise and  fall.  This is  because  almost  all of the  assets in which the Trust
invests  pay  interest  at rates  which  float in  response to changes in market
rates.  However,  because the  interest  rates on the Trust's  assets reset over
time, there will be an imperfect correlation between changes in market rates and
changes to rates on the  portfolio  as a whole.  This means that  changes to the
rate of  interest  paid on the  portfolio  as a whole  will  tend to lag  behind
changes in market rates.

     Market  interest  rate changes may also cause the Trust's NAV to experience
moderate  volatility.  This is because the value of a loan asset in the Trust is
partially a function of whether it is paying what the market  perceives  to be a
market rate of interest for the particular loan, given its individual credit and
other characteristics.  If market interest rates change, a loan's value could be
affected to the extent the interest rate paid on that loan does not reset at the
same time. As discussed  above, the rates of interest paid on the loans in which
the Trust invests have a weighted  average  reset period that  typically is less
than 90 days.  Therefore,  the  impact  of the lag  between  a change  in market
interest  rates and the change in the overall rate on the  portfolio is expected
to be minimal.

     Finally,  to the  extent  that  changes  in market  rates of  interest  are
reflected  not in a change  to a base  rate such as LIBOR but in a change in the
spread  over the base rate which is payable on loans of the type and  quality in
which the Trust  invests,  the Trust's NAV could be adversely  affected.  Again,
this is because  the value of a loan asset in the Trust is  partially a function
of  whether  it is  paying  what the  market  perceives  to be a market  rate of
interest  for the  particular  loan,  given  its  individual  credit  and  other
characteristics.  However,  unlike changes in market rates of interest for which
there is only a  temporary  lag before the  portfolio  reflects  those  changes,
changes in a loan's value based on changes in the market  spread on loans in the
Trust's portfolio may be of longer duration.

OTHER INVESTMENTS

     Assets  not  invested  in Senior  Loans  will  generally  consist  of other
instruments, including unsecured loans and subordinated loans up to a maximum of
5% of the  Trust's  net  assets,  short-term  debt  instruments  with  remaining
maturities  of 120 days or less  (which may have  yields tied to the Prime Rate,
commercial paper rates,  the federal funds rate or LIBOR) and equity  securities
acquired in connection with  investments in loans.  Short-term debt  instruments
may include (i) commercial paper rated A-1 by Standard & Poor's Ratings Services
or  P-1  by  Moody's  Investors  Service,  Inc.,  or of  comparable  quality  as
determined by the Investment  Manager,  (ii)  certificates of deposit,  bankers'
acceptances,  and other bank  deposits  and  obligations,  and (iii)  securities
issued or guaranteed by the U.S. Government,  its agencies or instrumentalities.
During  periods when,  in the judgment of the  Investment  Manager,  a temporary
defensive posture in the market is appropriate, the Trust may hold up to 100% of
its assets in cash and/or in short-term debt instruments.

                                       5

REPURCHASE AGREEMENTS


     The  Trust  has the  ability,  pursuant  to its  investment  objective  and
policies, to enter into repurchase agreements. Such agreements may be considered
to be loans by the Trust for purposes of the 1940 Act. Each repurchase agreement
must be  collateralized  fully,  in accordance  with the provisions of Rule 5b-3
under the 1940 Act, at all times.  Pursuant to such repurchase  agreements,  the
Trust acquires securities from financial  institutions such as brokers,  dealers
and banks,  subject to the  seller's  agreement  to  repurchase  and the Trust's
agreement to resell such  securities  at a mutually  agreed upon date and price.
The term of such an agreement is generally  quite short,  possibly  overnight or
for a few days,  although it may extend over a number of months (up to one year)
from the date of delivery.  The repurchase price generally equals the price paid
by the Trust plus interest  negotiated on the basis of current  short-term rates
(which may be more or less than the rate on the underlying  portfolio security).
The securities  underlying a repurchase agreement will be marked to market every
business day so that the value of the  collateral is at least equal to the value
of the loan,  including the accrued interest thereon, and the Investment Manager
will  monitor  the value of the  collateral.  Securities  subject to  repurchase
agreements  will be held by the  Custodian  or in the  Federal  Reserve/Treasury
Book-Entry System or an equivalent foreign system. If the seller defaults on its
repurchase  obligation,  the Trust  will  suffer a loss to the  extent  that the
proceeds from a sale of the  underlying  securities is less than the  repurchase
price under the agreement.  Bankruptcy or insolvency of such a defaulting seller
may cause the Trust's  rights with respect to such  securities  to be delayed or
limited.  To  mitigate  this  risk,  the Trust may only  enter  into  repurchase
agreements  that qualify for an exclusion  from any automatic stay of creditors'
rights against the counterparty under applicable  insolvency law in the event of
the counterparty's insolvency.


REVERSE REPURCHASE AGREEMENTS


     The  Trust  has the  ability,  pursuant  to its  investment  objective  and
policies,  to enter into reverse  repurchase  agreements.  A reverse  repurchase
agreement is an  instrument  under which the Trust may sell an  underlying  debt
instrument and simultaneously obtain the commitment of the purchaser to sell the
security  back to the Trust at an agreed  upon  price on an  agreed  upon  date.
Reverse repurchase agreements will be considered borrowings by the Trust, and as
such are  subject to the  restrictions  on  borrowing.  Borrowings  by the Trust
create an opportunity for greater total return,  but at the same time,  increase
exposure to capital risk.  The Trust will maintain in a segregated  account with
its  custodian  cash or liquid  high  grade  portfolio  securities  in an amount
sufficient  to cover its  obligations  with  respect to the  reverse  repurchase
agreements.  The  Trust  will  receive  payment  for such  securities  only upon
physical  delivery  or  evidence  of  book  entry  transfer  by  its  custodian.
Regulations of the Commission  require either that  securities sold by the Trust
under a reverse  repurchase  agreement be segregated  pending repurchase or that
the proceeds be segregated on the Trust's books and records pending  repurchase.
Reverse repurchase  agreements may involve certain risks in the event of default
or  insolvency  of the other  party,  including  possible  loss  from  delays or
restrictions  upon the Trust's ability to dispose of the underlying  securities.
An  additional  risk is that the market  value of  securities  sold by the Trust
under a reverse repurchase  agreement could decline below the price at which the
Trust is obligated to repurchase them.


LENDING LOANS AND OTHER PORTFOLIO INSTRUMENTS

     To generate additional income, the Trust may lend its portfolio  securities
including  an  interest  in a Senior  Loan,  in an amount up to 33 1/3% of total
Trust  assets to  broker-dealers,  major  banks,  or other  recognized  domestic
institutional borrowers of securities. No lending may be made with any companies
affiliated with the Investment Manager. During the time portfolio securities are
on loan,  the borrower  pays the Trust any  dividends  or interest  paid on such
securities,  and the Trust may invest the cash  collateral  and earn  additional
income,  or it may receive an  agreed-upon  amount of  interest  income from the

                                       6

borrower who has delivered equivalent  collateral or a letter of credit. As with
other extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower fail financially.

     The Trust may seek to increase its income by lending financial  instruments
in its portfolio in accordance with present regulatory policies, including those
of the Board of Governors of the Federal Reserve System and the Commission.  The
lending  of  financial  instruments  is a  common  practice  in  the  securities
industry.  The loans are  required  to be secured  continuously  by  collateral,
consistent with the requirements of the 1940 Act discussed below,  maintained on
a current basis at an amount at least equal to the market value of the portfolio
instruments  loaned.  The  Trust  has the  right to call a loan and  obtain  the
portfolio  instruments  loaned at any time on such  notice as  specified  in the
transaction documents.  For the duration of the loan, the Trust will continue to
receive  the  equivalent  of the  interest  paid by the issuer on the  portfolio
instruments  loaned  and may  also  receive  compensation  for  the  loan of the
financial  instrument.  Any gain or loss in the market price of the  instruments
loaned that may occur during the term of the loan will be for the account of the
Trust.


     The Trust may lend its portfolio  instruments  so long as the terms and the
structure of such loans are not  inconsistent  with the requirements of the 1940
Act, which currently  require that (a) the borrower pledge and maintain with the
Trust  collateral  consisting  of cash, a letter of credit  issued by a domestic
U.S. bank, or securities  issued or guaranteed by the U.S.  government  having a
value at all times not less  than 100% of the value of the  instruments  loaned,
(b) the borrowers add to such  collateral  whenever the price of the instruments
loaned  rises  (i.e.,  the value of the loan is  "marked  to  market" on a daily
basis),  (c) the loan be made subject to  termination  by the Trust at any time,
and (d) the Trust  receives  reasonable  interest on the loan (which may include
the  Trust's  investing  any cash  collateral  in  interest  bearing  short-term
investments),  any distributions on the loaned instruments and increase in their
market value.  The Trust may lend its portfolio  instruments  to member banks of
the Federal Reserve System,  members of the New York Stock Exchange  ("NYSE") or
other entities  determined by the  Investment  Manager to be  creditworthy.  All
relevant  facts  and  circumstances,   including  the  creditworthiness  of  the
qualified institution,  will be monitored by the Investment Manager, and will be
considered  in  making  decisions  with  respect  to the  lending  of  portfolio
instruments.


     The Trust may pay  reasonable  negotiated  fees in  connection  with loaned
instruments.  In addition, voting rights may pass with loaned securities, but if
a material event were to occur  affecting such a loan, the Trust will retain the
right to call the loan and vote the securities. If a default occurs by the other
party to such transaction,  the Trust will have contractual remedies pursuant to
the agreements  related to the transaction,  but such remedies may be subject to
bankruptcy and insolvency laws which could  materially and adversely  affect the
Trust's  rights as a  creditor.  However,  the loans  will be made only to firms
deemed by the Investment  Manager to be of good financial  standing and when, in
the judgment of the Investment  Manager,  the consideration  which can be earned
currently from loans of this type justifies the attendant risk.

INTEREST RATE HEDGING TRANSACTIONS


     The  Trust has the  ability,  pursuant  to its  investment  objectives  and
policies,  to engage in certain  hedging  transactions  including  interest rate
swaps and the purchase or sale of interest  rate caps and floors.  The Trust may
undertake these transactions  primarily for the following reasons: to preserve a
return  on or  value  of a  particular  investment  or  portion  of the  Trust's
portfolio,  to protect against  decreases in the  anticipated  rate of return on
floating  or  variable  rate  financial  instruments  which  the  Trust  owns or
anticipates  purchasing at a later date, or for other risk management strategies
such as managing the effective  dollar-weighted  average duration of the Trust's
portfolio. Market conditions will determine


                                       7


whether and in what circumstances the Trust would employ any of the hedging
techniques described below.

     Interest rate swaps involve the exchange by the Trust with another party of
their respective commitments to pay or receive interest, e.g., an exchange of an
obligation to make floating rate payments on a specified  dollar amount referred
to as the  "notional"  principal  amount  for an  obligation  to make fixed rate
payments. For example, the Trust may seek to shorten the effective interest rate
redetermination  period of a Senior Loan in its  portfolio  that has an interest
rate  redetermination  period of one year. The Trust could exchange its right to
receive  fixed  income  payments  for one year from a borrower  for the right to
receive payments under an obligation that readjusts  monthly.  In such an event,
the Trust would consider the interest rate redetermination period of such Senior
Loan to be the shorter period. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined interest
rate, to receive  payments of interest on a notional  principal  amount from the
party  selling such  interest  rate cap. The purchase of an interest  rate floor
entitles  the  purchaser,  to the extent  that a  specified  index falls below a
predetermined  interest  rate,  to receive  payments  of  interest on a notional
principal amount from the party selling such interest rate floor. The Trust will
not enter into swaps, caps or floors if, on a net basis, the aggregate  notional
principal  amount with respect to such agreements  exceeds the net assets of the
Trust  or to the  extent  the  purchase  of  swaps,  caps  or  floors  would  be
inconsistent with the Trust's other investment restrictions.


     The Trust  will not treat  swaps  covered  in  accordance  with  applicable
regulatory  guidance as senior  securities.  The Trust will  usually  enter into
interest  rate  swaps on a net  basis,  i.e.,  where  the two  parties  make net
payments  with the Trust  receiving or paying,  as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the Trust's
obligations over its entitlement with respect to each interest rate swap will be
accrued and an amount of cash or liquid  securities  having an aggregate  NAV at
least equal to the accrued excess will be maintained in a segregated account. If
the Trust enters into a swap on other than a net basis,  the Trust will maintain
in the segregated account the full amount of the Trust's  obligations under each
such swap. The Trust may enter into swaps,  caps and floors with member banks of
the Federal Reserve System,  members of the NYSE or other entities determined by
ING Investments. If a default occurs by the other party to such transaction, the
Trust will have contractual  remedies pursuant to the agreements  related to the
transaction  but such remedies may be subject to bankruptcy and insolvency  laws
which could materially and adversely affect the Trust's rights as a creditor.

     The swap, cap and floor market has grown substantially in recent years with
a large number of banks and financial  services  firms acting both as principals
and as agents  utilizing  standardized  swap  documentation.  As a result,  this
market has become relatively liquid.  There can be no assurance,  however,  that
the Trust will be able to enter into interest rate swaps or to purchase interest
rate caps or floors at prices or on terms the  Investment  Manager  believes are
advantageous  to the Trust.  In addition,  although  the terms of interest  rate
swaps,  caps and floors may provide for  termination,  there can be no assurance
that the Trust will be able to  terminate  an  interest  rate swap or to sell or
offset interest rate caps or floors that it has purchased.


     The  successful  utilization  of hedging and risk  management  transactions
requires  skills  different  from those  needed in the  selection of the Trust's
portfolio  securities and depends on the Investment Manager's ability to predict
correctly the direction and degree of movements in interest rates.  Although the
Trust believes that use of the hedging and risk management  techniques described
above will benefit the Trust,  if the  Investment  Manager's  judgment about the
direction or extent of the movement in interest rates is incorrect,  the Trust's
overall  performance  would be worse  than if it had not  entered  into any such
transactions.  The Trust will incur brokerage and other costs in connection with
its hedging transactions.


                                       8



ORIGINATING SENIOR LOANS


     The  Trust  has  an  ability  to  act  as an  "agent"  in  originating  and
administering  a  loan  on  behalf  of all  lenders  or as  one  of a  group  of
"co-agents" in originating Senior Loans. The agent is required to administer and
manage the Senior  Loan and to service or monitor the  collateral.  The agent is
also  responsible  for the collection of principal and interest and fee payments
from the borrower and the  apportionment  of these payments to the credit of all
lenders which are parties to the loan  agreement.  The agent is charged with the
responsibility  of monitoring  compliance  by the borrower with the  restrictive
covenants  in the loan  agreement  and of  notifying  the lenders of any adverse
change in the borrower's financial condition.  In addition,  the agent generally
is  responsible  for  determining  that the  lenders  have  obtained a perfected
security interest in the collateral securing the Senior Loan.


     Lenders  generally  rely on the  agent  to  collect  their  portion  of the
payments on a Senior Loan and to use the appropriate  creditor  remedies against
the  borrower.  Typically  under  loan  agreements,  the  agent is  given  broad
discretion in enforcing the loan agreement and is obligated to use the same care
it would use in the management of its own property. The borrower compensates the
agent for these  services.  Such  compensation  may include special fees paid on
structuring  and funding the Senior Loan and other fees on a  continuing  basis.
The precise duties and rights of an agent are defined in the loan agreement.

     When the Trust is an agent,  it has,  as a party to the loan  agreement,  a
direct  contractual  relationship  with the borrower  and,  prior to  allocating
portions of the Senior Loan to the lenders, if any, assumes all risks associated
with the Senior Loan. The agent may enforce  compliance by the borrower with the
terms of the loan  agreement.  Agents also have voting and consent  rights under
the applicable loan agreement. Action subject to agent vote or consent generally
requires the vote or consent of the holders of some specified  percentage of the
outstanding  principal  amount  of the  Senior  Loan,  which  percentage  varies
depending on the relative loan agreement.  Certain  decisions,  such as reducing
the amount or  increasing  the time for payment of interest on or  repayment  of
principal of a Senior Loan, or relating collateral therefor,  frequently require
the unanimous vote or consent of all lenders affected.

     Pursuant to the terms of a loan  agreement,  the agent  typically  has sole
responsibility  for  servicing and  administering  a loan on behalf of the other
lenders.  Each lender in a Senior Loan is generally  responsible  for performing
its own credit analysis and its own investigation of the financial  condition of
the  borrower.  Generally,  loan  agreements  will hold the agent liable for any
action taken or omitted that amounts to gross negligence or willful  misconduct.
In the event of a borrower's default on a loan, the loan agreements provide that
the lenders do not have recourse  against the Trust for its activities as agent.
Instead, lenders will be required to look to the borrower for recourse.

     Acting in the  capacity  of an agent in a Senior Loan may subject the Trust
to certain risks in addition to those  associated  with the Trust's current role
as  lender.   An  agent  is  charged  with  the  above   described   duties  and
responsibilities  to  lenders  and  borrowers  subject  to the terms of the loan
agreement.  Failure to adequately discharge such  responsibilities in accordance
with the standard of care set forth in the loan  agreement  may expose the Trust
to liability for breach of contract. If a relationship of trust is found between
the  agent  and the  lenders,  the agent  will be held to a higher  standard  of
conduct in  administering  the loan. In  consideration  of such risks, the Trust
will  invest no more than 10% of its  total  assets in Senior  Loans in which it
acts as agent or co-agent and the size of any individual loan will not exceed 5%
of the Trust's total assets.

                                       9

ADDITIONAL INFORMATION ON SENIOR LOANS

     Senior  Loans are direct  obligations  of  corporations  or other  business
entities and are arranged by banks or other commercial lending  institutions and
made  generally  to  finance  internal  growth,  mergers,  acquisitions,   stock
repurchases,  and leveraged  buyouts.  Senior Loans usually include  restrictive
covenants which must be maintained by the borrower.  Such covenants, in addition
to  the  timely  payment  of  interest  and  principal,  may  include  mandatory
prepayment  provisions  arising from free cash flow and restrictions on dividend
payments,  and usually  state that a borrower  must  maintain  specific  minimum
financial  ratios  as well as  establishing  limits on total  debt.  A breach of
covenant,   which  is  not  waived  by  the  agent,  is  normally  an  event  of
acceleration, i.e., the agent has the right to call the outstanding Senior Loan.
In addition, loan covenants may include mandatory prepayment provisions stemming
from free  cash  flow.  Free  cash  flow is cash  that is in  excess of  capital
expenditures plus debt service requirements of principal and interest.  The free
cash flow shall be applied  to prepay  the Senior  Loan in an order of  maturity
described in the loan documents.  Under certain  interests in Senior Loans,  the
Trust  may have an  obligation  to make  additional  loans  upon  demand  by the
borrower.  The Trust intends to reserve against such  contingent  obligations by
segregating  sufficient assets in high quality  short-term liquid investments or
borrowing to cover such obligations.

     In a typical interest in a Senior Loan, the agent  administers the loan and
has the right to monitor the collateral. The agent is also required to segregate
the principal and interest payments received from the borrower and to hold these
payments for the benefit of the lenders.  The Trust  normally looks to the agent
to  collect  and  distribute  principal  of  and  interest  on  a  Senior  Loan.
Furthermore, the Trust looks to the agent to use normal credit remedies, such as
to  foreclose  on  collateral,  monitor  credit loan  covenants,  and notify the
lenders  of  any  adverse  changes  in the  borrower's  financial  condition  or
declarations of insolvency. At times the Trust may also negotiate with the agent
regarding the agent's exercise of credit remedies under a Senior Loan. The agent
is  compensated  for these  services  by the  borrower  as set forth in the loan
agreement.  Such  compensation  may take the form of a fee or other  amount paid
upon the making of the Senior Loan and/or an ongoing fee or other amount.

     The loan  agreements in connection with Senior Loans set forth the standard
of care to be  exercised  by the  agents on behalf of the  lenders  and  usually
provide for the  termination  of the agent's  agency status in the event that it
fails to act properly,  becomes insolvent,  enters FDIC receivership,  or if not
FDIC insured,  enters into  bankruptcy or if the agent resigns.  In the event an
agent is unable to  perform  its  obligations  as agent,  another  lender  would
generally serve in that capacity.

     The Trust believes that the principal credit risk associated with acquiring
Senior Loans from another lender is the credit risk associated with the borrower
of the  underlying  Senior  Loan.  The Trust may incur  additional  credit risk,
however,  when the Trust acquires a participation  in a Senior Loan from another
lender because the Trust must assume the risk of insolvency or bankruptcy of the
other lender from which the Senior Loan was acquired.

     Senior Loans,  unlike certain bonds,  usually do not have call  protection.
This means that  investments  comprising the Trust's  portfolio,  while having a
stated one to ten-year term, may be prepaid,  often without  penalty.  The Trust
generally holds Senior Loans to maturity unless it has become  necessary to sell
them to satisfy any shareholder tender offers or to adjust the Trust's portfolio
in accordance with the Investment Managers' view of current or expected economic
or specific industry or borrower conditions.

     Senior Loans frequently  require full or partial  prepayment of a loan when
there are asset sales or a securities issuance.  Prepayments on Senior Loans may
also be made by the borrower at its election.  The rate of such  prepayments may
be affected by, among other things, general business and economic

                                       10

conditions,  as well as the financial  status of the borrower.  Prepayment would
cause  the  actual  duration  of a Senior  Loan to be  shorter  than its  stated
maturity.  Prepayment may be deferred by the Trust. This should,  however, allow
the Trust to reinvest in a new loan and recognize as income any unamortized loan
fees. In many cases this will result in a new facility fee payable to the Trust.

     Because  interest rates paid on these Senior Loans  fluctuate  periodically
with the market, it is expected that the prepayment and a subsequent purchase of
a new Senior  Loan by the Trust will not have a material  adverse  impact on the
yield of the portfolio. See "Portfolio Transactions."

     Under a Senior  Loan,  the  borrower  generally  must pledge as  collateral
assets  which  may  include  one  or  more  of  the  following:  cash,  accounts
receivable,  inventory, property, plant and equipment, both common and preferred
stock in its subsidiaries,  trademarks,  copyrights, patent rights and franchise
value.  The Trust may also receive  guarantees as a form of collateral.  In some
instances,  a Senior  Loan may be  secured  only by stock in a  borrower  or its
affiliates.  There is no  assurance,  however,  that the borrower  would provide
additional  collateral or that the liquidation of the existing  collateral would
satisfy  the  borrower's  obligation  in the event of  nonpayment  of  scheduled
interest or principal, or that such collateral could be readily liquidated.

     The Trust may be required to pay and receive  various fees and  commissions
in the  process  of  purchasing,  selling  and  holding  Senior  Loans.  The fee
component  may  include  any,  or a  combination  of,  the  following  elements:
arrangement fees, non-use fees, facility fees, letter of credit fees and ticking
fees.  Arrangement  fees are paid at the  commencement of a loan as compensation
for the  initiation  of the  transaction.  A non-use  fee is paid based upon the
amount committed but not used under the loan.  Facility fees are on-going annual
fees paid in  connection  with a loan.  Letter of credit fees are paid if a loan
involves a letter of credit.  Ticking fees are paid from the initial  commitment
indication until loan closing if for an extended  period.  The amount of fees is
negotiated at the time of transaction.

     In order to allow national banks to purchase  shares of the Trust for their
own accounts without limitation, the Trust invests only in obligations which are
eligible for purchase by national  banks for their own accounts  pursuant to the
provisions of paragraph  seven of Section 24 of the U.S. Code Title 12. National
banks  which  are  contemplating  purchasing  shares  of the Trust for their own
accounts should refer to Banking Circular 220, issued by the U.S. Comptroller of
the Currency on November 21, 1986, for a description  of certain  considerations
applicable to such purchases.

                                       11

                              TRUSTEES AND OFFICERS


Board of Trustees. The Trust is governed by its Board of Trustees. A Trustee who
is not an  interested  person of the Trust,  as  defined in the 1940 Act,  is an
independent  trustee  ("Independent  Trustee").  The  Trustees  of the Trust are
listed below.



                                                  TERM OF
                                                 OFFICE AND                                     NUMBER OF             OTHER
                                                 LENGTH OF                                  PORTFOLIOS IN FUND    DIRECTORSHIPS
                                POSITION(S)        TIME         PRINCIPAL OCCUPATION(S)      COMPLEX OVERSEEN        HELD BY
NAME, ADDRESS AND AGE         HELD WITH TRUST    SERVED(1)      DURING THE PAST 5 YEARS         BY TRUSTEE           TRUSTEE
---------------------         ---------------    ---------      -----------------------         ----------           -------
                                                                                                 

INDEPENDENT TRUSTEES

PAUL S. DOHERTY                  Trustee        10-29-99 to   Retired. Mr. Doherty was              102         Mr. Doherty is a
7337 E. Doubletree Ranch Rd.                    Present       formerly President and                            Trustee of The GCG
Scottsdale, Arizona 85258                                     Partner, Doherty, Wallace,                        Trust (February 2002
Age: 68                                                       Pillsbury and Murphy, P.C.,                       to Present).
                                                              Attorneys (1996 to 2001);
                                                              Director of Tambrands, Inc.
                                                              (1993 to 1998); and Trustee of
                                                              each of the funds managed by
                                                              Northstar Investment
                                                              Management Corporation (1993
                                                              to 1999).

                                 Trustee        2-26-02 to    President and Chief Executive         102         Mr. Earley is a
J. MICHAEL EARLEY                               Present       Officer of Bankers Trust                          Trustee of The GCG
7337 E. Doubletree Ranch Rd.                                  Company, N.A. (1992 to                            Trust (1997 to
Scottsdale, Arizona 85258                                     Present).                                         Present).
Age: 57

R. BARBARA GITENSTEIN            Trustee        2-26-02 to    President of the College of           102         Dr. Gitenstein is a
7337 E. Doubletree Ranch Rd.                    Present       New Jersey (1999 to Present);                     Trustee of The GCG
Scottsdale, Arizona 85258                                     Executive Vice President and                      Trust (1997 to
Age: 54                                                       Provost at Drake University                       Present).
                                                              (1992 to 1998).

WALTER H. MAY                    Trustee        10-29-99 to   Retired. Mr. May was formerly         102         Mr. May is a Trustee
7337 E. Doubletree Ranch Rd.                    Present       Managing Director and Director                    of the Best Prep
Scottsdale, Arizona 85258                                     of Marketing for Piper                            Charity (1991 to
Age: 65                                                       Jaffray, Inc., an investment                      Present) and The GCG
                                                              banking/underwriting firm. Mr.                    Trust (February 2002
                                                              May was formerly a Trustee of                     to Present).
                                                              each of the funds managed by
                                                              Northstar Investment
                                                              Management Corporation (1996
                                                              to 1999).



----------
(1)  Trustees serve until their successors are duly elected and qualified.

                                       12




                                                  TERM OF
                                                 OFFICE AND                                     NUMBER OF             OTHER
                                                 LENGTH OF                                  PORTFOLIOS IN FUND    DIRECTORSHIPS
                                POSITION(S)        TIME         PRINCIPAL OCCUPATION(S)      COMPLEX OVERSEEN        HELD BY
NAME, ADDRESS AND AGE         HELD WITH TRUST    SERVED(1)      DURING THE PAST 5 YEARS         BY TRUSTEE           TRUSTEE
---------------------         ---------------    ---------      -----------------------         ----------           -------
                                                                                                 
JOCK PATTON                      Trustee        8-28-95 to    Private Investor. Mr. Patton          102         Mr. Patton is a
7337 E. Doubletree Ranch Rd.                    Present       was formerly a Director and                       Trustee of The GCG
Scottsdale, Arizona 85258                                     Chief Executive Officer of                        Trust (February 2002
Age: 56                                                       Rainbow Multimedia Group, Inc.                    to Present) and
                                                              (January 1999 to December                         Director of
                                                              2001); Director of Stuart                         Hypercom, Inc.
                                                              Entertainment, Inc.; Director                     (January 1999 to
                                                              of Artisoft, Inc. (1994 to                        Present); JDA
                                                              1998); President and co-owner                     Software Group, Inc.
                                                              of StockVal, Inc. (November                       (January 1999 to
                                                              1992 to June 1997) and a                          Present); Buick of
                                                              Partner and Director at                           Scottsdale, Inc.;
                                                              Streich, Lang P.A. (1972 to                       National Airlines,
                                                              1993).                                            Inc.; BG Associates,
                                                                                                                Inc; BK
                                                                                                                Entertainment, Inc.;
                                                                                                                and Arizona
                                                                                                                Rotorcraft, Inc.

DAVID W.C. PUTNAM                Trustee        10-29-99 to   President and Director of F.L.        102         Mr. Putnam is a
7337 E. Doubletree Ranch Rd.                    Present       Putnam Securities Company,                        Trustee of The GCG
Scottsdale, Arizona 85258                                     Inc. and its affiliates. Mr.                      Trust (February 2002
Age: 62                                                       Putnam is also President,                         to Present and
                                                              Secretary and Trustee of The                      Director of F.L.
                                                              Principled Equity Market Fund.                    Putnam Securities
                                                              Mr. Putnam was formerly a                         Company, Inc. (June
                                                              Director/Trustee of Trust                         1978 to Present);
                                                              Realty Corp., Anchor                              F.L. Putnam
                                                              Investment Trust; Bow Ridge                       Investment
                                                              Mining Company; and each of                       Management Company
                                                              the funds managed by Northstar                    (December 2001 to
                                                              Investment Management                             Present); Asian
                                                              Corporation (1994 to 1999).                       American Bank and
                                                                                                                Trust Company (June
                                                                                                                1992 to Present);
                                                                                                                and Notre Dame
                                                                                                                Health Care Center
                                                                                                                (1991 to Present).
                                                                                                                He is also a Trustee
                                                                                                                of The Principled
                                                                                                                Equity Market Fund
                                                                                                                (November 1996 to
                                                                                                                Present);
                                                                                                                Progressive Capital
                                                                                                                Accumulation Trust
                                                                                                                (August 1998 to
                                                                                                                Present); Anchor
                                                                                                                International Bond
                                                                                                                Trust (December 2000
                                                                                                                to Present); F.L.
                                                                                                                Putnam Foundation
                                                                                                                (December 2000 to
                                                                                                                Present); Mercy
                                                                                                                Endowment Foundation
                                                                                                                (1995 to Present);
                                                                                                                and an Honorary
                                                                                                                Trustee of Mercy
                                                                                                                Hospital (1973 to
                                                                                                                Present).



                                       13




                                                  TERM OF
                                                 OFFICE AND                                     NUMBER OF             OTHER
                                                 LENGTH OF                                  PORTFOLIOS IN FUND    DIRECTORSHIPS
                                POSITION(S)        TIME         PRINCIPAL OCCUPATION(S)      COMPLEX OVERSEEN        HELD BY
NAME, ADDRESS AND AGE         HELD WITH TRUST    SERVED(1)      DURING THE PAST 5 YEARS         BY TRUSTEE           TRUSTEE
---------------------         ---------------    ---------      -----------------------         ----------           -------
                                                                                                 
BLAINE E. RIEKE                  Trustee        2-26-01 to    General Partner of Huntington         102         Mr. Rieke is a
7337 E. Doubletree Ranch Rd.                    Present       Partners, an investment                           Trustee of the
Scottsdale, Arizona 85258                                     partnership (1997 to Present).                    Morgan Chase Trust
Age: 68                                                       Mr. Rieke was formerly                            Co. (January 1998 to
                                                              Chairman and Chief Executive                      Present) and The GCG
                                                              Officer of Firstar Trust                          Trust (February 2002
                                                              Company (1973 to 1996). Mr.                       to Present).
                                                              Rieke was formerly the
                                                              Chairman of the Board and a
                                                              Trustee of each of the funds
                                                              managed by ING Investment
                                                              Management Co., LLC (1998 to
                                                              2001).

ROGER B. VINCENT                 Trustee        2-26-02 to    President of Springwell               102         Mr. Vincent is a
7337 E. Doubletree Ranch Rd.                    Present       Corporation, a corporate                          Trustee of The GCG
Scottsdale, Arizona 85258                                     advisory firm (1989 to                            Trust (1994 to
Age: 56                                                       Present). Mr. Vincent was                         Present) and
                                                              formerly a Director of Tatham                     Director of AmeriGas
                                                              Offshore, Inc. (1996 to 2000)                     Propane, Inc. (1998
                                                              and Petrolane, Inc. (1993 to                      to Present).
                                                              1995).

RICHARD A. WEDEMEYER             Trustee        2-26-01 to    Vice President - Finance and          102         Mr. Wedemeyer is a
7337 E. Doubletree Ranch Rd.                    Present       Administration - of the                           Trustee of
Scottsdale, Arizona 85258                                     Channel Corporation, an                           Touchstone
Age: 66                                                       importer of specialty alloy                       Consulting Group
                                                              aluminum products (1996 to                        (1997 to Present)
                                                              Present). Mr. Wedemeyer was                       and The GCG Trust
                                                              formerly Vice President -                         (February 2002 to
                                                              Finance and Administration -                      Present).
                                                              of Performance Advantage,
                                                              Inc., a provider of training
                                                              and consultation services
                                                              (1992 to 1996) and Vice
                                                              President, Operations and
                                                              Administration, of Jim Henson
                                                              Productions (1979 to 1997).
                                                              Mr. Wedemeyer was formerly a
                                                              Trustee of First Choice Funds
                                                              (1997 to 2001). Mr. Wedemeyer
                                                              was also a Trustee of each of
                                                              the funds managed by ING
                                                              Investment Management Co., LLC
                                                              (1998 to 2001).

TRUSTEES WHO ARE "INTERESTED PERSONS"

R. GLENN HILLIARD(2)             Trustee        2-26-02 to    Chairman and CEO of ING               102         Mr. Hilliard is a
7337 E. Doubletree Ranch Rd.                    Present       Americas and a member of its                      Trustee of The GCG
Scottsdale, Arizona 85258                                     Americas Executive Committee                      Trust (February 2002
Age: 59                                                       (1999 to Present). Mr.                            to Present). Mr.
                                                              Hilliard was formerly Chairman                    Hilliard also serves
                                                              and CEO of ING North America,                     as a member of the
                                                              encompassing the U.S., Mexico                     Board of Directors
                                                              and Canada regions (1994 to                       of the Clemson
                                                              1999).                                            University
                                                                                                                Foundation, the
                                                                                                                Board of Councilors
                                                                                                                for the Carter
                                                                                                                Center, a Trustee of
                                                                                                                the Woodruff Arts
                                                                                                                Center and sits


----------
(2)  Mr. Hilliard is an "interested person," as defined in the 1940 Act, because
     of his relationship with ING Americas, an affiliate of ING Investments,
     LLC.


                                       14




                                                  TERM OF
                                                 OFFICE AND                                     NUMBER OF             OTHER
                                                 LENGTH OF                                  PORTFOLIOS IN FUND    DIRECTORSHIPS
                                POSITION(S)        TIME         PRINCIPAL OCCUPATION(S)      COMPLEX OVERSEEN        HELD BY
NAME, ADDRESS AND AGE         HELD WITH TRUST    SERVED(1)      DURING THE PAST 5 YEARS         BY TRUSTEE           TRUSTEE
---------------------         ---------------    ---------      -----------------------         ----------           -------
                                                                                                 
                                                                                                                on the Board of
                                                                                                                Directors for the
                                                                                                                High Museum of Art.

THOMAS J. MCINERNEY(3)           Trustee        2-26-01 to    Chief Executive Officer, ING          154         Mr. McInerney serves
7337 E. Doubletree Ranch Rd.                    Present       U.S. Financial Services                           as a
Scottsdale, Arizona 85258                                     (September 2001 to Present)                       Director/Trustee of
Age: 45                                                       and member of ING Americas                        Aeltus Investment
                                                              Executive Committee (2001 to                      Management, Inc.
                                                              Present); President, Chief                        (1997 to Present);
                                                              Executive Officer and Director                    and each of the ING
                                                              of Northern Life Insurance                        Funds (February 2001
                                                              Company (2001 to Present); and                    to Present); the
                                                              President and Director of ING                     Ameribest Life
                                                              Life Insurance and Annuity                        Insurance Co. (2001
                                                              Company (1997 to Present), ING                    to Present); ING
                                                              Retirement Holdings, Inc.                         Equitable Life (2001
                                                              (1997 to Present), ING Aeltus                     to Present); First
                                                              Holdings Company Inc. (2000 to                    Columbine Life
                                                              Present), and ING Retail                          Insurance Co. (2001
                                                              Holding Company (2000 to                          to Present); Golden
                                                              Present). Mr. McInerney was                       American Life
                                                              formerly General Manager and                      Insurance Co. (2001
                                                              Chief Executive Officer of ING                    to Present); ING
                                                              Worksite Division (December                       Life of Georgia
                                                              2000 to October 2001);                            (2001 to Present);
                                                              President of Aetna Financial                      Midwestern United
                                                              Services (August 1997 to                          Life Insurance Co;
                                                              December 2000); Head of                           ReliaStar Life
                                                              National Accounts and Core                        Insurance Co. (2001
                                                              Sales and Marketing for Aetna                     to Present); ING
                                                              U.S. Healthcare (April 1996 to                    Security Life (2001
                                                              March 1997); Head of Corporate                    to Present);
                                                              Strategies for Aetna Inc.                         Security Connecticut
                                                              (July 1995 to April 1996), and                    Life Insurance Co.
                                                              has held a variety of line and                    (2001 to Present);
                                                              corporate staff positions                         ING Southland Life
                                                              since 1978.                                       (2001 to Present);
                                                                                                                ING USG Annuity
                                                                                                                (2001 to Present);
                                                                                                                and ING United Life
                                                                                                                (March 2001 to
                                                                                                                Present); and a
                                                                                                                Trustee of The GCG
                                                                                                                Trust (February 2002
                                                                                                                to Present). Mr.
                                                                                                                McInerney is a
                                                                                                                member of the Board
                                                                                                                of the National
                                                                                                                Commission on
                                                                                                                Retirement Policy;
                                                                                                                the Governor's
                                                                                                                Council on Economic
                                                                                                                Competitiveness and
                                                                                                                Technology of
                                                                                                                Connecticut; the
                                                                                                                Board of Directors
                                                                                                                of the Connecticut
                                                                                                                Business and
                                                                                                                Industry
                                                                                                                Association; the
                                                                                                                Board


----------
(3)  Mr. McInerney is an "interested person," as defined in the 1940 Act,
     because of his affiliation with ING U.S. Financial Services, an affiliate
     of ING Investments, LLC.


                                       15




                                                  TERM OF
                                                 OFFICE AND                                     NUMBER OF             OTHER
                                                 LENGTH OF                                  PORTFOLIOS IN FUND    DIRECTORSHIPS
                                POSITION(S)        TIME         PRINCIPAL OCCUPATION(S)      COMPLEX OVERSEEN        HELD BY
NAME, ADDRESS AND AGE         HELD WITH TRUST    SERVED(1)      DURING THE PAST 5 YEARS         BY TRUSTEE           TRUSTEE
---------------------         ---------------    ---------      -----------------------         ----------           -------
                                                                                                 
                                                                                                                of Trustees of
                                                                                                                the Bushnell; the
                                                                                                                Board for the
                                                                                                                Connecticut Forum;
                                                                                                                and the Board of the
                                                                                                                Metro Hartford
                                                                                                                Chamber of Commerce;
                                                                                                                and is Chairman of
                                                                                                                Concerned Citizens
                                                                                                                for Effective
                                                                                                                Government.

JOHN G. TURNER(4)                Chairman and   10-29-99 to   President, Turner Investment          102         Mr. Turner serves as
7337 E. Doubletree Ranch Rd.     Trustee        Present       Company (January 2002 to                          a member of the
Scottsdale, Arizona 85258                                     Present). Mr. Turner was                          Board of The GCG
Age: 62                                                       formerly Vice Chairman of ING                     Trust. Mr. Turner
                                                              Americas (2000 to 2001);                          also serves as
                                                              Chairman and Chief Executive                      Director of the
                                                              Officer of ReliaStar Financial                    Hormel Foods
                                                              Corp. and ReliaStar Life                          Corporation (May
                                                              Insurance Company (1993 to                        2000 to Present);
                                                              2000); Chairman of ReliaStar                      Shopko Stores, Inc.
                                                              United Services Life Insurance                    (August 1999 to
                                                              Company (1995 to 1998);                           Present); and M.A.
                                                              Chairman of ReliaStar Life                        Mortenson Co. (March
                                                              Insurance Company of New York                     2002 to Present).
                                                              (1995 to 2001); Chairman of
                                                              Northern Life Insurance
                                                              Company (1992 to 2001);
                                                              Chairman and Director/Trustee
                                                              of the Northstar affiliated
                                                              investment companies (1993 to
                                                              2001) and Director, Northstar
                                                              Investment Management
                                                              Corporation and its affiliates
                                                              (1993 to 1999).


----------
(4)  Mr. Turner is an "interested person," as defined in the 1940 Act, because
     of his former affiliation with ING Americas, an affiliate of ING
     Investments, LLC.


                                       16

     The Trust currently has an Executive Committee, Audit Committee,  Valuation
Committee,  Nominating Committee, and an Investment Review Committee. The Audit,
Valuation and Nominating Committees consist entirely of Independent Trustees.

     COMMITTEES


     The Board of Trustees has an Executive  Committee  whose function is to act
on behalf of the full Board of Trustees  between  regularly  scheduled  meetings
when necessary. The Committee currently consists of two Independent Trustees and
two Trustees who are "interested  persons," as defined in the 1940 Act:  Messrs.
May,  McInerney,  Patton  and  Turner.  Mr.  Turner  serves as  Chairman  of the
Committee.  During the fiscal year ended  February 28, 2002,  the Committee held
three meetings.

     The Board of Trustees has an Audit Committee whose function is to meet with
the independent  auditors of the Trust to review the scope of the Trust's audit,
its  financial  statements  and interim  accounting  controls,  and to meet with
management concerning these matters, among other things. The Committee currently
consists of five Independent Trustees:  Messrs. Doherty, Earley, Rieke, Vincent,
and Wedemeyer. Mr. Rieke serves as Chairman of the Committee.  During the fiscal
year ended February 28, 2002, the Committee held four meetings.

     The Board of Trustees has a Valuation Committee whose function is to review
the  determination of the value of securities held by the Trust for which market
quotations are not available. The Valuation Committee currently consists of four
Independent  Trustees:  Dr. Gitenstein and Messrs.  May, Patton, and Putnam. Mr.
Patton  serves as  Chairman  of the  Committee.  During  the  fiscal  year ended
February 28, 2002, the Committee held five meetings.

     The  Board of  Trustees  has a  Nominating  Committee  for the  purpose  of
considering  and presenting to the Board of Trustees  candidates it proposes for
nomination to fill Independent  Trustee vacancies on the Board of Trustees.  The
Committee  currently consists of four Independent  Trustees:  Dr. Gitenstein and
Messrs.  Doherty,  May,  and  Wedemeyer.  Mr.  May  serves  as  Chairman  of the
Committee.  The Committee does not currently have a policy regarding  whether it
will consider nominees recommended by shareholders. During the fiscal year ended
February 28, 2002, the Committee held one meeting.

     The Board of Trustees has an Investment  Review Committee whose function is
to monitor the investment  performance of the Trust and to make  recommendations
to the Board of Trustees  with  respect to the Trust.  The  Committee  currently
consists of two  Independent  Trustees  and one  Trustee  who is an  "interested
person," as defined in the 1940 Act: Messrs. Doherty, Earley and McInerney.  Mr.
Doherty  serves as Chairman of the Committee.  The Committee was  established on
February 26, 2002. During the fiscal year ended February 28, 2002, the Committee
held one meeting.


                                       17

TRUSTEE OWNERSHIP OF SECURITIES

Set forth below is the dollar range of equity securities owned by each Trustee.




                                                                  AGGREGATE DOLLAR RANGE OF EQUITY
                                  DOLLAR RANGE OF EQUITY      SECURITIES IN ALL REGISTERED INVESTMENT
                               SECURITIES IN THE TRUST AS OF      COMPANIES OVERSEEN BY TRUSTEE IN
       NAME OF TRUSTEE               DECEMBER 31, 2001             FAMILY OF INVESTMENT COMPANIES
       ---------------               -----------------             ------------------------------
                                                                   
INDEPENDENT TRUSTEES
Paul S. Doherty                            None                          $10,001 - $50,000
J. Michael Earley(1)                       None                                None
R. Barbara Gitenstein(1)                   None                                None
Walter H. May                              None                            Over $100,000
Jock Patton                            $1 - 10,000                       $50,001 - $100,000
David W. C. Putnam                         None                                None
Blaine E. Rieke                            None                          $50,001 - $100,000
Roger B. Vincent(1)                        None                                None
Richard A. Wedemeyer                       None                          $10,001 - $50,000

TRUSTEES WHO ARE "INTERESTED PERSONS"
R. Glenn Hilliard (1)                      None                            Over $100,000
Thomas J. McInerney                        None                            $1 - $10,000
John G. Turner                         Over $100,000                       Over $100,000


(1)  Commenced service as a Trustee on February  26, 2002.


                                       18


INDEPENDENT TRUSTEE OWNERSHIP OF SECURITIES

     Set forth in the table  below is  information  regarding  each  Independent
Trustee's  (and  his  or her  immediate  family  members')  share  ownership  in
securities of the Trust's investment adviser or principal  underwriter,  and the
ownership of securities in an entity controlling,  controlled by or under common
control with the investment  adviser or principal  underwriter of the Trust (not
including registered investment companies) as of December 31, 2001.



                           NAME OF OWNERS
                          AND RELATIONSHIP                              VALUE OF   PERCENTAGE OF
    NAME OF TRUSTEE          TO TRUSTEE     COMPANY   TITLE OF CLASS   SECURITIES      CLASS
    ---------------          ----------     -------   --------------   ----------      -----
                                                                         
Paul S. Doherty                  N/A          N/A          N/A             $0           N/A
J. Michael Earley(1)             N/A          N/A          N/A             $0           N/A
R. Barbara Gitenstein(1)         N/A          N/A          N/A             $0           N/A
Walter H. May                    N/A          N/A          N/A             $0           N/A
Jock Patton                      N/A          N/A          N/A             $0           N/A
David W. C. Putnam               N/A          N/A          N/A             $0           N/A
Blaine E. Rieke                  N/A          N/A          N/A             $0           N/A
Roger B. Vincent(1)              N/A          N/A          N/A             $0           N/A
Richard A. Wedemeyer             N/A          N/A          N/A             $0           N/A


(1)  Commenced service as a Trustee on February  26, 2002.


COMPENSATION OF TRUSTEES


     The Trust currently pays each Trustee who is not an "interested  person" of
the Investment  Manager a pro rata share,  as described  below, of (i) an annual
retainer of $35,000 (Messrs. Patton and May, as lead Trustees, receive an annual
retainer of $45,000); (ii) $5,500 for each in person meeting of the Board; (iii)
$1,000 for  attendance  at any  committee  meeting;  (iv) $1,000 per  telephonic
meeting; and (v) out-of-pocket expenses. The pro rata share paid by the Trust is
based on the  Trust's  average  net assets as a  percentage  of the  average net
assets of all the funds managed by the Investment Manager for which the Trustees
serve  in  common  as  Directors/Trustees  or  as  Advisory  Board  Members,  if
applicable.

     The Trustees who are "interested persons" of the Investment Manager receive
no  compensation  from the Trust.  The  following  table sets forth  information
regarding  the  compensation  paid to the  Trustees  for service on the Board of
Trustees  of the Trust and on the Boards of  Directors/Trustees  of other  funds
within the ING fund complex for the Trust's fiscal year ended February 28, 2002.


                                       19


                               COMPENSATION TABLE



                                           PENSION OR
                                           RETIREMENT                          TOTAL
                                            BENEFITS       ESTIMATED        COMPENSATION
                            AGGREGATE      ACCRUED AS        ANNUAL        FROM TRUST AND
                           COMPENSATION   PART OF FUND    BENEFITS UPON     FUND COMPLEX
     NAME AND POSITION      FROM TRUST      EXPENSES      RETIREMENT(7)   PAID TO TRUSTEES
     -----------------      ----------      --------      -------------   ----------------
                                                                  
Mary A. Baldwin              $  5,239          N/A             N/A            $ 43,688
Advisory Board Member(1)

Paul S. Doherty,             $  5,626          N/A             N/A            $ 52,688
Trustee

J. Michael Earley            $    215          N/A             N/A            $  1,000
Trustee(2)

R. Barbara Gitenstein        $      0          N/A             N/A            $  1,000
Trustee(2)

Alan S. Gosule,              $  6,775          N/A             N/A            $ 43,165
Trustee(3)

R. Glenn Hilliard            $      0          N/A             N/A            $      0
Trustee(2)(4)

Walter H. May,               $  6,680          N/A             N/A            $ 63,188
Trustee

Thomas J. McInerney,         $      0          N/A             N/A            $      0
Trustee(5)

Jock Patton,                 $  6,536          N/A             N/A            $ 62,188
Trustee

David W.C. Putnam,           $  5,412          N/A             N/A            $ 52,688
Trustee

Blaine E. Rieke,             $  5,274          N/A             N/A            $ 51,688
Trustee

John G. Turner,              $      0          N/A             N/A            $      0
Trustee (6)

Roger B. Vincent             $  1,106          N/A             N/A            $ 17,563
Trustee(2)

Richard A. Wedemeyer         $  4,656          N/A             N/A            $ 45,688
Trustee


----------
(1)  Resigned as an Advisory  Board Member  effective  December  31,  2001.  Ms.
     Baldwin was paid $132,500 by the Investment  Manager upon her  resignation.
     Such payment was equal to twice the  compensation  normally paid to her for
     one year of service.

(2)  Commenced service as a Trustee on February 26, 2002.

(3)  Resigned  as a Trustee  effective  December  28,  2001.  Mr.  Gosule was an
     "interested  person," as defined in the 1940 Act, of the Trust.  Mr. Gosule
     is a partner at  Clifford  Chance  Rogers & Wells LLP,  which has  provided
     certain legal services for the Trust. Mr. Gosule was paid $132,500 upon his
     resignation  pursuant to a retirement  policy adopted by the ING Funds. Mr.
     Gosule  satisfied  the criteria for such payment  (which was equal to twice
     the  compensation  normally  paid to him for one year of service)  since he
     served as an  Independent  Trustee of certain of the ING Funds for at least
     five years prior to his resignation.  $16,419 of this payment was funded by
     the Trust.

(4)  Mr. Hilliard is an "interested person," as defined in the 1940 Act, because
     of his  relationship  with ING Americas,  an affiliate of ING  Investments,
     LLC.

(5)  Mr.  McInerney  is an  "interested  person,"  as  defined  in the 1940 Act,
     because of his affiliation with ING U.S. Financial  Services,  an affiliate
     of ING Investments, LLC.

(6)  Mr. Turner is an "interested  person," as defined in the 1940 Act,  because
     of  his  former  affiliation  with  ING  Americas,   an  affiliate  of  ING
     Investments, LLC.

(7)  The  ING  Funds  have   adopted  a   retirement   policy   under   which  a
     director/trustee who has served as an Independent Director/Trustee for five
     years  or more  will be paid  by the ING  Funds  at the  time of his or her
     retirement an amount equal to twice the  compensation  normally paid to the
     Independent Director/Trustee for one year of service.


                                       20


OFFICERS.Information about the Trust's officers is set forth in the table below:



                                  POSITION(S) HELD          TERM OF OFFICE AND LENGTH             PRINCIPAL OCCUPATION(S)
   NAME, ADDRESS AND AGE           WITH THE TRUST            OF TIME SERVED (1)(2)(3)          DURING THE LAST FIVE YEARS (4)
   ---------------------           --------------            ------------------------          ------------------------------
                                                                                 
JAMES M. HENNESSY              President and Chief           February 2001 - Present      President and Chief Executive Officer, ING
7337 E. Doubletree Ranch Rd.   Executive Officer                                          Capital Corporation, LLC, ING Funds
Scottsdale, Arizona 85258                                                                 Services, LLC, ING Advisors, Inc., ING
Age: 52                        Chief Operating Officer       July 2000 - Present          Investments, LLC, Lexington Funds
                                                                                          Distributor, Inc., Express America TC,
                                                                                          Inc. and EAMC Liquidation Corp. (since
                                                                                          December 2001); Executive Vice President
                                                                                          and Chief Operating Officer, ING
                                                                                          Quantitative Management, Inc. (since
                                                                                          October 2001) and ING Funds Distributor,
                                                                                          Inc. (since June 2000). Formerly, Senior
                                                                                          Executive Vice President (June 2000 -
                                                                                          December 2000) and Secretary (April 1995 -
                                                                                          December 2000), ING Capital Corporation,
                                                                                          LLC, ING Funds Services, LLC, ING
                                                                                          Investments, LLC, ING Advisors, Inc.,
                                                                                          Express America TC Inc. and EAMC
                                                                                          Liquidation Corp.; and Executive Vice
                                                                                          President, ING Capital Corporation, LLC
                                                                                          and its affiliates (May 1998 - June 2000)
                                                                                          and Senior Vice President, ING Capital
                                                                                          Corporation, LLC and its affiliates (April
                                                                                          1995 - April 1998).

MICHAEL J. ROLAND              Executive Vice President      March 2002 - Present         Executive Vice President, Chief Financial
7337 E. Doubletree Ranch Rd.   and Assistant Secretary                                    Officer and Treasurer, ING Funds Services,
Scottsdale, Arizona 85258                                                                 LLC, ING Funds Distributor, Inc., ING
Age: 43                        Chief Financial Officer       June 1998 - Present          Advisors, Inc., ING Investments, LLC, ING
                                                                                          Quantitative Management, Inc., Lexington
                               Senior Vice President         June 1998 - February 2002    Funds Distributor, Inc., Express America
                                                                                          TC, Inc. and EAMC Liquidation Corp. (since
                                                                                          December 2001). Formerly, Senior Vice
                                                                                          President, ING Funds Services, LLC, ING
                                                                                          Investments, LLC and ING Funds
                                                                                          Distributor, Inc. (June 1998 - December
                                                                                          2001) and Chief Financial Officer of
                                                                                          Endeavor Group (April 1997 - June 1998).

ROBERT S. NAKA                 Senior Vice President         November 1999 - Present      Senior Vice President and Assistant
7337 E. Doubletree Ranch Rd.                                                              Secretary, ING Funds Services, LLC, ING
Scottsdale, Arizona 85258      Assistant Secretary           July 1996 - Present          Funds Distributor, Inc., ING Advisors,
Age: 38                                                                                   Inc., ING Capital Corporation, LLC, ING
                                                                                          Investments, LLC, ING Quantitative
                                                                                          Management, Inc. (since October 2001) and
                                                                                          Lexington Funds Distributor, Inc. (since
                                                                                          December 2001).  Formerly, Vice President,
                                                                                          ING Investments, LLC (April 1997 - October
                                                                                          1999), ING Funds Services, LLC (February
                                                                                          1997 - August 1999) and Assistant Vice
                                                                                          President, ING Funds Services, LLC (August
                                                                                          1995 - February 1997).



                                       21




                                  POSITION(S) HELD          TERM OF OFFICE AND LENGTH             PRINCIPAL OCCUPATION(S)
   NAME, ADDRESS AND AGE           WITH THE TRUST            OF TIME SERVED (1)(2)(3)          DURING THE LAST FIVE YEARS (4)
   ---------------------           --------------            ------------------------          ------------------------------
                                                                                 
ROBYN L. ICHILOV               Vice President                November 1997 - Present      Vice President of ING Funds Services, LLC
7337 E. Doubletree Ranch Rd.                                                              (since October 2001) and ING Investments,
Scottsdale, Arizona 85258                                                                 LLC (since August 1997); Accounting
Age: 34                                                                                   Manager, ING Investments, LLC (since
                                                                                          November 1995).

KIMBERLY A. ANDERSON           Vice President and Secretary  February 2001 - Present      Vice President for ING Quantitative
7337 E. Doubletree Ranch Rd.                                                              Management, Inc. (since October 2001);
Scottsdale, Arizona 85258                                                                 Vice President and Assistant Secretary of
Age: 37                                                                                   ING Funds Services, LLC, ING Funds
                                                                                          Distributor, Inc., ING Advisors, Inc., ING
                                                                                          Investments, LLC (since October 2001) and
                                                                                          Lexington Funds Distributor, Inc. (since
                                                                                          December 2001). Formerly, Assistant Vice
                                                                                          President of ING Funds Services, LLC
                                                                                          (November 1999 - January 2001) and has
                                                                                          held various other positions with ING
                                                                                          Funds Services, LLC for more than the last
                                                                                          five years.

LOURDES R. BERNAL              Vice President                February 2002 - Present      Vice President of ING Investments, LLC
7337 E. Doubletree Ranch Rd.                                                              (since January 2002). Prior to joining ING
Scottsdale, Arizona 85258                                                                 Investments, LLC in 2002, Ms. Bernal was a
Age: 32                                                                                   Senior Manager in the Investment
                                                                                          Management Practice,
                                                                                          PricewaterhouseCoopers LLP (July 2000 -
                                                                                          December 2001); Manager,
                                                                                          PricewaterhouseCoopers LLP (July 1998 -
                                                                                          July 2000); Manager, Coopers & Lybrand LLP
                                                                                          (July 1996 - June 1998).

TODD MODIC                     Assistant Vice President      August 2001 - Present        Assistant Vice President and Director of
7337 E. Doubletree Ranch Rd.                                                              Financial Reporting of ING Investments,
Scottsdale, Arizona 85258                                                                 LLC (since March 2001). Formerly, Director
Age: 34                                                                                   of Financial Reporting, Axient
                                                                                          Communications, Inc. (May 2000 - January
                                                                                          2001) and Director of Finance, Rural/Metro
                                                                                          Corporation (March 1995 - May 2000).

MARIA M. ANDERSON              Assistant Vice President      August 2001 - Present        Assistant Vice President of ING Funds
7337 E. Doubletree Ranch Rd.                                                              Services, LLC (since October 2001).
Scottsdale, Arizona 85258                                                                 Formerly, Manager of Fund Accounting and
Age: 43                                                                                   Fund Compliance, ING Investments, LLC
                                                                                          (September 1999 - November 2001); Section
                                                                                          Manager of Fund Accounting, Stein Roe
                                                                                          Mutual Funds (July 1998 - August 1999);
                                                                                          and Financial Reporting Analyst, Stein Roe
                                                                                          Mutual Funds (August 1997 to July 1998).



                                       22




                                  POSITION(S) HELD          TERM OF OFFICE AND LENGTH             PRINCIPAL OCCUPATION(S)
   NAME, ADDRESS AND AGE           WITH THE TRUST            OF TIME SERVED (1)(2)(3)          DURING THE LAST FIVE YEARS (4)
   ---------------------           --------------            ------------------------          ------------------------------
                                                                                 
DANIEL NORMAN                  Senior Vice President         April 1995 - Present         Senior Vice President, ING Investments,
7337 E. Doubletree Ranch Rd.                                                              LLC (since December 1994); and ING Funds
Scottsdale, Arizona 85258      Co-Senior Portfolio Manager   February 1992 - Present      Distributor, Inc. (since December 1995);
Age: 44                                                                                   has served as an officer of other
                               Treasurer                     June 1997 - Present          affiliates of ING since February 1992.

JEFFREY A. BAKALAR             Senior Vice President         November 1999 - Present      Senior Vice President, ING Investments,
7337 E. Doubletree Ranch Rd.                                                              LLC (since November 1999). Formerly, Vice
Scottsdale, Arizona 85258      Co-Senior Portfolio           February 1998 - Present      President and Assistant Portfolio Manager,
Age: 42                        Manager                                                    ING Investments, LLC (February 1998 -
                                                                                          November 1999); Vice President of The
                                                                                          Communications Positions of First National
                                                                                          Bank of Chicago (July 1994 - January
                                                                                          1998).

ELLIOT ROSEN                   Senior Vice President         May 2002 - Present           Senior Vice President, ING Investments,
7337 E. Doubletree Ranch Rd.                                                              LLC (since February 1999). Formerly,
Scottsdale, Arizona 85258                                                                 Senior Vice President IPS-Sendero (May
Age: 49                                                                                   1997 - February 1999) and President of
                                                                                          Sendero, which merged into IPS (August
                                                                                          1993 - May 1997).

WILLIAM H. RIVOIR III          Senior Vice President and     February 2001 - Present      Senior Vice President and Secretary of ING
7337 E. Doubletree Ranch Rd.   Assistant Secretary                                        Capital Corporation, LLC and ING Funds
Scottsdale, Arizona 85258                                                                 Services, LLC (since February 2001), ING
Age: 51                                                                                   Funds Distributor, Inc., ING Advisors,
                                                                                          Inc., ING Investments, LLC and ING
                                                                                          Quantitative Management, Inc. (since
                                                                                          October 2001), Lexington Funds
                                                                                          Distributor, Inc., ING Pilgrim Funding,
                                                                                          Inc., Pilgrim America Financial, Inc.,
                                                                                          Express America TC, Inc. and EAMC
                                                                                          Liquidation Corp. (since December 2001).
                                                                                          Formerly, Senior Vice President and
                                                                                          Assistant Secretary of ING Funds Services,
                                                                                          LLC (since June 1998), ING Investments,
                                                                                          LLC, and Pilgrim America Financial, Inc.
                                                                                          (since February 1999), Senior Vice
                                                                                          President of ING Investments, LLC (since
                                                                                          December 1998) and Assistant Secretary of
                                                                                          ING Funds Distributor, Inc. (since
                                                                                          February 1999) and ING Investments, LLC
                                                                                          (since June 1998).

CURTIS F. LEE                  Senior Vice President and     January 2001 - Present       Senior Vice President and Chief Credit
7337 E. Doubletree Ranch Rd.   Chief Credit Officer                                       Officer Senior Loans of ING Investments,
Scottsdale, Arizona 85258                                                                 LLC (since August 1999). Formerly, held a
Age: 48                                                                                   series of positions with Standard
                                                                                          Chartered Bank in the credit approval and
                                                                                          problem loan management functions (August
                                                                                          1992 - June 1999).



                                       23


(1)  The officers hold office until the next annual  meeting of the Trustees and
     until their successors shall have been elected and qualified.

(2)  Prior to May 1999, the Pilgrim  family of funds  consisted of 5 registrants
     with 8 series.  As of May 24, 1999, the former  Nicholas-Applegate  Capital
     Management  funds  (consisting  of 1 registrant  with 11 series) joined the
     fund complex and the fund complex  retained  the name  "Pilgrim  Funds." On
     November 16, 1999, the former Northstar funds  (consisting of 9 registrants
     with 22 series)  joined the fund complex and the fund complex  retained the
     name  "Pilgrim  Funds."  On July  26,  2000,  the  former  Lexington  funds
     (consisting of 14  registrants  with 14 series) joined the fund complex and
     the fund complex  retained the name "Pilgrim Funds." On March 23, 2001, the
     original ING funds  (consisting of 2 registrants with 18 series) joined the
     fund complex and the fund complex retained the name "Pilgrim Funds."

(3)  On March 1, 2002, the former Aetna funds  (consisting of 8 registrants with
     50 series)  joined the fund  complex and the name of the fund  complex name
     changed to "ING Funds."

(4)  The following  documents the evolution of the name of each corporate entity
     referenced in the above biographies:


                                       24

ING Investments, LLC (March 2002 - name changed from ING Pilgrim Investments,
  LLC)
    ING Mutual Funds Management Co., LLC (April 2001 - merged into ING Pilgrim
      Investments, LLC)
    ING Pilgrim Investments, Inc. (February 2001 - merged into ING Pilgrim
      Investments, LLC)
    ING Pilgrim Investments, LLC (February 2001 - formed)
    ING Pilgrim Investments, Inc. (September 2000 - name changed from Pilgrim
      Investments, Inc.)
    Pilgrim Advisors, Inc.** (April 2000 - merged into Pilgrim Investments,
      Inc.)
    Pilgrim Investments, Inc. (October 1998 - name changed from Pilgrim America
      Investments, Inc.)
    Pilgrim America Investments, Inc. (April 1995 - name changed from Newco
      Advisory Corporation)
    Newco Advisory Corporation (December 1994 - incorporated)

     **   Pilgrim Advisors, Inc. (November 1999 - name changed from Northstar
          Investment Management Corporation)

ING Funds Distributor, Inc. (March 2002 - name changed from ING Pilgrim
  Securities, Inc.)
    ING Pilgrim Securities, Inc. (September 2000 - name changed from Pilgrim
      Securities, Inc.)
    Northstar Distributors Inc. (November 1999 - merged into Pilgrim Securities,
      Inc.)
    Pilgrim Securities, Inc. (October 1998 - name changed from Pilgrim America
      Securities, Inc.)
    Pilgrim America Securities, Inc. (April 1995 - name changed from Newco
      Distributors Corporation)
    Newco Distributors Corporation (December 1994 - incorporated)

ING Advisors, Inc. (March 2002 - name changed from ING Pilgrim Advisors, Inc.)
    ING Pilgrim Advisors, Inc. (March 2001 - name changed from ING Lexington
      Management Corporation)
    ING Lexington Management Corporation (October 2000 name changed from
      Lexington Management Corporation)
    Lexington Management Corporation (December 1996 - incorporated)

ING Funds Services, LLC (March 2002 - name changed from ING Pilgrim Group, LLC)
    ING Pilgrim Group, Inc. (February 2001 - merged into Pilgrim Group LLC)
    ING Pilgrim Group, LLC (February 2001 - formed)
    ING Pilgrim Group, Inc. (September 2000 - name changed from Pilgrim Group,
      Inc.)
    Lexington Global Asset Managers, Inc. (July 2000 - merged into Pilgrim
      Group, Inc.)
    Northstar Administrators, Inc. (November 1999 - merged into Pilgrim Group,
      Inc.)
    Pilgrim Group, Inc. (October 1998 - name changed from Pilgrim American
      Group, Inc.)
    Pilgrim America Group, Inc. (April 1995 - name changed from Newco Holdings
      Management Corporation)
    Newco Holdings Management Corporation (December 1994 - incorporated)

ING Capital Corporation, LLC (March 2002 - name changed from ING Pilgrim Capital
  Corporation, LLC)
    ING Pilgrim Capital Corporation (February 2001 - merged into ING Pilgrim
      Capital Corporation, LLC)
    ING Pilgrim Capital Corporation, LLC (February 2001 - formed)
    ING Pilgrim Capital Corporation (September 2000 - name changed from Pilgrim
      Capital Corporation)
    Pilgrim Capital Corporation (February 2000 - name changed from Pilgrim
      Holdings Corporation)
    Pilgrim Holdings Corporation (October 1999 - name changed from Northstar
      Holdings, Inc.)
    Northstar Holdings, Inc. (October 1999 - merged into Pilgrim Capital
      Corporation)
    Pilgrim Capital Corporation (June 1999 - name changed from Pilgrim America
      Capital Corporation)
    Pilgrim Capital Corporation (June 1999 - merged into Pilgrim America Capital
      Corporation)
    Pilgrim America Capital Corporation (April 1997 - incorporated)

ING Quantitative Management, Inc. (March 2002 - name changed from ING Pilgrim
  Quantitative Management, Inc.)
    ING Pilgrim Quantitative Management, Inc. (March 2001 - name changed from
      Market Systems Research Advisors)
    Market Systems Research Advisors, Inc. (November 1986 - incorporated)

                                       25


     As of June 3, 2002, the Trustees and Officers of the Trust as a group owned
beneficially less than 1% of the Trust's Common Shares.

     As of June 3, 2002, the Trustees and Officers of the Trust as a group owned
beneficially less than 1% of the Trust's Preferred Shares.

     As of June 3,  2002,  no  person,  to the  knowledge  of the  Trust,  owned
beneficially or of record more than 5% of the  outstanding  Common Shares of the
Trust.

     As of June 3,  2002,  no  person,  to the  knowledge  of the  Trust,  owned
beneficially  or of record more than 5% of the outstanding  Preferred  Shares of
the Trust.


                                 CODE OF ETHICS

     The Trust's distributor, ING Funds Distributor,  Inc. (the "Distributor" or
"ING Funds  Distributor"),  the Investment  Manager and the Trust have adopted a
Code of Ethics  governing  personal  trading  activities of all Trustees and the
officers of the Trust and ING Funds  Distributor  and persons who, in connection
with their regular functions,  play a role in the recommendation of any purchase
or sale of a  security  by the Trust or obtain  information  pertaining  to such
purchase or sale.  The Code of Ethics is intended to prohibit  fraud against the
Trust that may arise from  personal  trading.  Personal  trading is permitted by
such  persons  subject  to certain  restrictions;  however,  they are  generally
required to pre-clear  all  security  transactions  with the Trust's  Compliance
Officer or her designee and to report all transactions on a regular basis.

     The Code of Ethics can be reviewed and copied at the SEC's Public Reference
Room located at 450 Fifth Street, NW, Washington,  DC 20549.  Information on the
operation  of the Public  Reference  Room may be  obtained by calling the SEC at
(202)  942-8090.   The  Code  of  Ethics  is  available  on  the  SEC's  website
(http://www.sec.gov)  and copies may also be  obtained  at  prescribed  rates by
electronic  request  at  publicinfo@sec.gov,  or by  writing  the  SEC's  Public
Reference Section at the address listed above.

                    INVESTMENT MANAGEMENT AND OTHER SERVICES

THE INVESTMENT MANAGER

     The Investment  Manager  serves as investment  manager to the Trust and has
overall   responsibility  for  the  management  of  the  Trust.  The  Investment
Management  Agreement between the Trust and the Investment  Manager requires the
Investment Manager to oversee the provision of all investment  advisory services
for the Trust.


     The Investment Manager is an indirect, wholly-owned subsidiary of ING Group
N.V.  (NYSE:  ING) ("ING Group").  ING Group is a global  financial  institution
active in fields of  insurance,  banking  and asset  management  in more than 65
countries,  with more than 100,000 employees.  On February 26, 2001, the name of
the Investment Adviser changed from ING Pilgrim Investments, Inc. to ING Pilgrim
Investments,  LLC.  On March 1, 2002,  the name of the  Investment  Adviser  was
changed from ING Pilgrim Investments, LLC, to ING Investments, LLC.


     The Investment Manager pays all of its expenses from the performance of its
obligations  under the  Investment  Management  Agreement,  including  executive
salaries  and  expenses  of the  Trustees  and  Officers  of the  Trust  who are
employees of the Investment  Manager or its affiliates.  Other expenses incurred
in the  operation  of the  Trust  are  borne by the  Trust,  including,  without
limitation, expenses

                                       26

incurred in connection with the sale, issuance, registration and transfer of its
Common  Shares;  fees of its  Custodian,  Transfer  and  Shareholder  Servicing;
salaries  of  officers  and fees and  expenses  of  Trustees  or  members of any
advisory board or committee of the Trust who are not members of, affiliated with
or  interested  persons of the  Investment  Manager;  the cost of preparing  and
printing  reports,  proxy  statements  and  prospectuses  of the  Trust or other
communications  for  distribution  to  its  shareholders;  legal,  auditing  and
accounting  fees;  the fees of any  trade  association  of which  the Trust is a
member;  fees and expenses of registering  and  maintaining  registration of its
Common Shares for sale under federal and applicable  state  securities laws; and
all  other  charges  and  costs  of its  operation  plus  any  extraordinary  or
non-recurring expenses.


     For the fiscal  years  ended  February  28,  2002,  February  28,  2001 and
February 29, 2000 the Investment  Manager was paid $14,838,307,  $14,077,382 and
$13,076,669, respectively, for services rendered to the Trust.


     The  Investment  Management  Agreement  continues  from  year  to  year  if
specifically approved at least annually by the Trustees or the Shareholders.  In
either event, the Investment  Management Agreement must also be approved by vote
of a majority of the Trustees who are not parties to the  Investment  Management
Agreement  or  "interested  persons"  of any party,  cast in person at a meeting
called for that purpose.

     In  connection  with their  deliberations  relating to the Trust's  current
Investment  Management Agreement,  the Board of Trustees considered  information
that had been provided by the Investment  Manager. In considering the Investment
Management  Agreement,  the Board of Trustees  considered  several  factors they
believed,  in light of the legal advice  furnished to them by their  independent
legal  counsel and their own  business  judgment,  to be  relevant.  The matters
considered  by the Board of  Trustees in  reviewing  the  Investment  Management
Agreement included,  but were not limited to the following:  (1) the performance
of the Trust  compared  to those of a peer  group of funds;  (2) the  nature and
quality of the services provided by the Investment Manager to the Trust; (3) the
fairness of the compensation under the Investment  Management Agreement in light
of the services  provided to the Trust; (4) the  profitability to the Investment
Manager from the Investment Management Agreement; (5) the personnel, operations,
financial condition, and investment management  capabilities,  methodologies and
resources of the Investment  Manager,  as well as its efforts in recent years to
build its investment management capabilities and administrative  infrastructure;
(6) the expenses  borne by  shareholders  of the Trust and a  comparison  of the
Trust's fees and expenses to those of a peer group of funds;  (7) the Investment
Manager's  compliance  capabilities  and efforts on behalf of the Trust; (8) the
complexity  of the  instruments  in which the Trust  invests and the  investment
research associated with those instruments  performed by the Investment Manager;
and (9) the substantial time and resources  devoted to the valuation  process by
the Investment Manager. The Board of Trustees also considered the total services
provided by ING Funds Services,  LLC, the Trust's administrator,  as well as the
fees it receives for such services.


     In  reviewing  the  terms of the  Investment  Management  Agreement  and in
discussions with the Investment  Manager  concerning such Investment  Management
Agreement,  the  Independent  Trustees were  represented  by  independent  legal
counsel.  Based upon its review,  the Board of Trustees has determined  that the
Investment  Management  Agreement  is in the  interest  of  the  Trust  and  its
shareholders.  Accordingly,  after consideration of the factors described above,
and such other  factors and  information  it considered  relevant,  the Board of
Trustees of the Trust, including the unanimous vote of the Independent Trustees,
approved the Investment Management Agreement.


     The Investment  Management Agreement is terminable without penalty with not
less than 60 days'  notice by the Board of  Trustees or by a vote of the holders
of a majority of the Trust's  outstanding  shares voting as a single  class,  or
upon not less than 60 days' notice by the Investment Adviser. The

                                       27

Investment Management Agreement will terminate automatically in the event of its
"assignment" (as defined in the 1940 Act).


     As of May 31, 2002, the Investment  Manager had assets under  management of
over $35.7 billion.


     The use of the name "ING" in the Trust's name is pursuant to the Investment
Management  Agreement between the Trust and the Investment  Manager,  and in the
event  that the  Agreement  is  terminated,  the Trust  has  agreed to amend its
Agreement and Declaration of Trust to remove the reference to "ING."

THE ADMINISTRATOR


     The   Administrator   of  the  Trust  is  ING  Funds  Services,   LLC  (the
"Administrator" or "ING Funds Services") which is an affiliate of the Investment
Manager.  In connection with its  administration of the corporate affairs of the
Trust, the Administrator bears the following expenses: the salaries and expenses
of all  personnel  of the Trust and the  Administrator  except  for the fees and
expenses of Trustees not  affiliated  with the  Administrator  or the Investment
Manager;  costs  to  prepare  information;  determination  of  daily  NAV by the
recordkeeping and accounting agent;  expenses to maintain certain of the Trust's
books  and  records  that are not  maintained  by the  Investment  Manager,  the
custodian,  or transfer  agent;  costs incurred to assist in the  preparation of
financial  information  for the Trust's  income tax returns,  proxy  statements,
quarterly,  semi-annual,  and annual  shareholder  reports;  costs of  providing
shareholder  services in connection  with any tender  offers or to  shareholders
proposing  to transfer  their  shares to a third  party;  providing  shareholder
services in connection  with the dividend  reinvestment  plan;  and all expenses
incurred by the  Administrator or by the Trust in connection with  administering
the  ordinary  course of the Trust's  business  other than those  assumed by the
Trust, as described below.


     Except as indicated  immediately above and under "The Investment  Manager,"
the Trust is  responsible  for the payment of its expenses  including:  the fees
payable to the Investment  Manager;  the fees payable to the Administrator;  the
fees and certain expenses of the Trust's custodian and transfer agent, including
the cost of  providing  records  to the  Administrator  in  connection  with its
obligation  of  maintaining  required  records of the  Trust;  the  charges  and
expenses of the Trust's legal counsel and independent  accountants;  commissions
and any issue or transfer taxes  chargeable to the Trust in connection  with its
transactions;  all taxes and corporate fees payable by the Trust to governmental
agencies;  the fees of any trade association of which the Trust is a member; the
costs  of  share   certificates   representing   Common  Shares  of  the  Trust;
organizational  and  offering  expenses  of the Trust and the fees and  expenses
involved in registering and maintaining registration of the Trust and its Common
Shares  with the  Commission,  including  the  preparation  and  printing of the
Trust's  registration  statement and prospectuses  for such purposes;  allocable
communications  expenses with respect to investor services,  and all expenses of
shareholders'  and  Trustees'  meetings and of  preparing,  printing and mailing
reports,  proxy  statements  and  prospectuses  to  shareholders;  the  cost  of
insurance;   and  litigation  and  indemnification  expenses  and  extraordinary
expenses not incurred in the ordinary course of the Trust's business.


     For the fiscal  years  ended  February  28,  2002,  February  28,  2001 and
February  29,  2000  the  Administrator  was  paid  $4,637,682,  $4,077,743  and
$2,139,091, respectively, for services rendered to the Trust.


                             PORTFOLIO TRANSACTIONS


     The Trust will generally  have at least 80% of its Managed Assets  invested
in Senior Loans.  The remaining  assets of the Trust will  generally  consist of
short-term  debt  instruments  with  remaining  maturities  of 120 days or less,
longer-term  debt  securities,  certain other  instruments  such as subordinated


                                       28


loans up to a maximum of 5% of the Trust's net assets, unsecured loans, interest
rate  swaps,  caps  and  floors,   repurchase  agreements,   reverse  repurchase
agreements  and equity  securities  acquired in connection  with  investments in
loans.  The Trust will acquire Senior Loans from and sell Senior Loans to banks,
insurance  companies,  finance  companies,  and other  investment  companies and
private investment funds. The Trust may also purchase Senior Loans from and sell
Senior  Loans to U.S.  branches  of foreign  banks  which are  regulated  by the
Federal Reserve System or appropriate state regulatory authorities.  The Trust's
interest in a particular Senior Loan will terminate when the Trust receives full
payment  on the loan or  sells a  Senior  Loan in the  secondary  market.  Costs
associated  with  purchasing  or selling  investments  in the  secondary  market
include  commissions  paid to brokers and processing fees paid to agents.  These
costs are  allocated  between  the  purchaser  and seller as agreed  between the
parties.


     Purchases and sales of short-term debt and other financial  instruments for
the Trust's portfolio usually are principal transactions, and normally the Trust
will deal  directly  with the  underwriters  or dealers who make a market in the
securities involved unless better prices and execution are available  elsewhere.
Such market makers usually act as principals for their own account. On occasion,
securities  may  be  purchased   directly  from  the  issuer.   Short-term  debt
instruments  are  generally  traded on a net basis and do not  normally  involve
either brokerage commissions or transfer taxes. The cost of portfolio securities
transactions of the Trust that are not transactions with principals will consist
primarily of brokerage  commissions or dealer or underwriter spreads between the
bid and  asked  price,  although  purchases  from  underwriters  may  involve  a
commission or concession paid by the issuer.

     In placing portfolio transactions, the Investment Manager will use its best
efforts to choose a broker capable of providing the brokerage services necessary
to obtain the most favorable price and execution  available.  The full range and
quality of  brokerage  services  available  will be  considered  in making these
determinations,  such as the size of the order, the difficulty of execution, the
operational  facilities of the firm  involved,  the firm's risk in positioning a
block of securities  and other factors.  While the  Investment  Manager seeks to
obtain the most favorable net results in effecting  transactions  in the Trust's
portfolio  securities,  brokers or dealers who  provide  research  services  may
receive orders for transactions by the Trust. Such research services  ordinarily
consist of  assessments  and analyses of the business or prospects of a company,
industry,  or economic  sector.  The  Investment  Manager is  authorized  to pay
spreads or commissions to brokers or dealers  furnishing such services which are
in excess of spreads or commissions  that other brokers or dealers not providing
such research may charge for the same transaction, even if the specific services
were not  imputed  to the Trust and were  useful to the  Investment  Manager  in
advising other clients.  Information so received will be in addition to, and not
in lieu of, the  services  required to be performed  by the  Investment  Manager
under the Investment Management Agreement between the Investment Manager and the
Trust. The expenses of the Investment Manager will not necessarily be reduced as
a result of the receipt of such supplemental information. The Investment Manager
may use any research  services  obtained in providing  investment  advice to its
other investment advisory accounts. Conversely, such information obtained by the
placement of business for the Investment  Manager or other  entities  advised by
the Investment Manager will be considered by and may be useful to the Investment
Manager in carrying out its  obligations  to the Trust.  As permitted by Section
28(e) of the  Securities  Exchange Act of 1934,  as amended (the "1934 Act") the
Investment  Manager may cause the Trust to pay a  broker-dealer  which  provides
"brokerage and research services" (as defined in the 1934 Act) to the Investment
Manager  an  amount  of  disclosed   commissions   for  effecting  a  securities
transaction   for  the  Trust  in  excess  of  the   commission   which  another
broker-dealer would have charged for effecting the transaction.

     The Trust  does not  intend  to effect  any  brokerage  transaction  in its
portfolio  securities with any broker-dealer  affiliated  directly or indirectly
with the  Investment  Manager,  except  for any  sales of  portfolio  securities
pursuant to a tender offer,  in which event the  Investment  Manager will offset
against  the  management  fee a part of any  tender  fees which  legally  may be
received by such affiliated broker-

                                       29

dealer.  To the extent certain  services which the Trust is obligated to pay for
under the  Investment  Management  Agreement  are  performed  by the  Investment
Manager,  the Trust  will  reimburse  the  Investment  Manager  for the costs of
personnel   involved  in  placing   orders  for  the   execution   of  portfolio
transactions.


     There  were no  brokerage  commissions  paid by the Trust for the  previous
three fiscal years.


PORTFOLIO TURNOVER RATE


     The annual rate of the Trust's total portfolio turnover for the years ended
February 28, 2002,  February 28, 2001,  and February 29, 2000 was 53%,  46%, and
71% respectively. The annual turnover rate of the Trust is generally expected to
be between 50% and 100%, although as part of its investment policies,  the Trust
places  no  restrictions  on  portfolio  turnover  and the  Trust  may  sell any
portfolio  security  without  regard to the period of time it has been held. The
annual  turnover rate of the Trust also includes Senior Loans on which the Trust
has received full or partial payment.  The Investment Manager believes that full
and partial payments on loans generally comprise approximately 25% to 75% of the
Trust's total portfolio turnover each year.


                                 NET ASSET VALUE

     The NAV per Common Share of the Trust is determined once daily at the close
of regular trading on the NYSE (normally 4:00 p.m. Eastern Time) on each day the
NYSE is open.  The NAV per Common Share is  determined  by dividing the value of
the  Trust's  loan  assets plus all cash and other  assets  (including  interest
accrued but not collected) less all liabilities  (including accrued expenses but
excluding capital and surplus) by the number of Common Shares  outstanding.  The
NAV per Common Share is made available for publication.

VALUATION OF THE TRUST'S ASSETS

     The assets in the Trust's portfolio are valued daily in accordance with the
Trust's Valuation Procedures adopted by the Board of Trustees. A majority of the
Trust's assets are valued using market quotations supplied by a third party loan
pricing service. However, the loans in which the Trust invests are not listed on
any  securities   exchange  or  board  of  trade.   Some  loans  are  traded  by
institutional  investors  in  an  over-the-counter  secondary  market  that  has
developed in the past several years.  This secondary  market generally has fewer
trades  and less  liquidity  than  the  secondary  markets  for  other  types of
securities. Some loans have few or no trades. Accordingly, determinations of the
market value of loans may be based on infrequent and dated trades. Because there
is less  reliable,  objective  data  available,  elements of judgment may play a
greater role in valuation of loans than for other types of securities.

     Loans are normally valued on the basis of one or more  quotations  obtained
from a pricing service or other sources believed to be reliable. Loans for which
reliable  quotations  are not available may be valued with  reference to another
loan or a group of loans for which  quotations  are more readily  available  and
whose  characteristics  are  comparable  to the loan  being  valued.  Under this
approach, the comparable loan or loans serve as a "proxy" for changes in value.

     The Trust has engaged an independent  pricing service to provide quotations
from  dealers  in loans and to  calculate  values  under the  "proxy"  procedure
described above. Loans are valued at the mean between bid and asked quotations.

                                       30

     It is expected that most of the loans held by the Trust will be valued with
reference to quotations from the  independent  pricing service or with reference
to the "proxy"  procedure  described above.  The Investment  Manager may believe
that  the  price  for a loan  derived  from  market  quotations  or the  "proxy"
procedure described above is not reliable or accurate. Among other reasons, this
may be the result of  information  about a particular  loan or borrower known to
the Investment  Manager that it believes may not be known to the pricing service
or reflected in a price quote.  In this event,  the loan is valued at fair value
as determined in good faith under procedures established by the Trust's Board of
Trustees, and in accordance with the provisions of the 1940 Act.

     Under these procedures,  fair value is determined by the Investment Manager
and monitored by the Trust's Board of Trustees through its Valuation  Committee.
In fair valuing a loan,  consideration  is given to several  factors,  which may
include, among others, the following: (i) the 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;  (iv)  information  relating  to the  market  for  the  loan,
including  price  quotations  for,  and  trading in, the loan and  interests  in
similar  loans and the market  environment  and investor  attitudes  towards the
senior loan and  interests  in similar  senior  loans;  (v) the  reputation  and
financial  condition of the agent of the loan and any intermediate  participants
in the loans; (vi) the borrower's management; and (vii) the general economic and
market conditions affecting the fair value of the loan.

     Securities for which the primary market is a national  securities  exchange
or the NASDAQ  National Market System are stated at the last reported sale price
on  the  day  of   valuation.   Debt  and  equity   securities   traded  in  the
over-the-counter  market and listed securities for which no sale was reported on
that date are valued at the mean between the last  reported bid and asked price.
Valuation of short term cash equivalent investments are at amortized cost.

                              PLANS OF DISTRIBUTION

DISTRIBUTION AGREEMENT

     The  Trust  has  entered  into a  Distribution  Agreement  with  ING  Funds
Distributor,  Inc. ("ING Funds  Distributor") which has been filed as an exhibit
to  the  Registration  Statement.  The  summary  of the  Distribution  Agreement
contained  herein is  qualified  by  reference  to the  Distribution  Agreement.
Subject to the terms and conditions of the Distribution Agreement, the Trust may
issue and sell  Common  Shares of the Trust from time to time  through ING Funds
Distributor,  which is the principal  underwriter of the Common Shares,  through
certain  broker-dealers  which have entered into selected dealer agreements with
ING Funds Distributor.


     The Common  Shares  will only be sold on such days as shall be agreed to by
the Trust and ING Funds  Distributor.  The Common  Shares will be sold at market
prices,  which shall be determined with reference to trades on the NYSE, subject
to a minimum price to be established each day by the Trust. The minimum price on
any day will not be less than the  current  NAV per  Common  Share  plus the per
share amount of the  commission to be paid to ING Funds  Distributor.  The Trust
and ING Funds  Distributor  will  suspend  the sale of Common  Shares if the per
share price of the Common Shares is less than the minimum price.


                                       31

     The compensation to ING Funds Distributor with respect to the Common Shares
will be at a fixed  commission  rate of 4% of the gross sales price per share of
the Common Shares sold. ING Funds  Distributor  will  compensate  broker-dealers
participating  in this  offering  at a rate of 3% of the gross  sales  price per
share of the  Common  Shares  purchased  from the  Trust by such  broker-dealer.
Dealer reallowance may be changed by ING Funds Distributor from time to time.

     Settlements  of sales of Common Shares will occur on the third business day
following the date on which any such sales are made. Unless otherwise  indicated
in a further  prospectus  supplement,  ING Funds Distributor as underwriter will
act as underwriter on a reasonable efforts basis.

     In  connection  with the sale of the Common  Shares on behalf of the Trust,
ING Funds  Distributor may be deemed to be an underwriter  within the meaning of
the 1940 Act, and the compensation of ING Funds  Distributor may be deemed to be
underwriting commissions or discounts. As described below, ING Funds Distributor
also serves as distributor  for the Trust in connection  with the sale of Common
Shares of the Trust pursuant to privately  negotiated  transactions and pursuant
to  optional  cash  investments  in excess of  $5,000.  In  addition,  ING Funds
Distributor  provides  administrative  services  in  connection  with a separate
at-the-market offering of Common Shares of the Trust.

     The offering of Common Shares pursuant to the  Distribution  Agreement will
terminate upon the earlier of (i) the sale of all Common Shares subject  thereto
or (ii)  termination  of the  Distribution  Agreement.  The  Trust and ING Funds
Distributor each have the right to terminate the  Distribution  Agreement in its
discretion at any time.

SHAREHOLDER INVESTMENT PROGRAM

     The Trust maintains a Shareholder Investment Program (the "Program"), which
allows  participating  shareholders  to reinvest all  dividends and capital gain
distributions  ("Dividends")  in  additional  Common  Shares of the  Trust.  The
Program also allows  participants to purchase  additional  Common Shares through
optional cash investments in amounts ranging from a minimum of $100 to a maximum
of $5,000  per  month.  Subject to the  permission  of the Trust,  participating
shareholders  may also make optional cash  investments  in excess of the monthly
maximum.  Common Shares may be issued by the Trust under the Program only if the
Trust's  Common  Shares  are  trading at a premium  to net asset  value.  If the
Trust's  Common  Shares are  trading at a discount  to net asset  value,  Common
Shares purchased under the Program will be purchased on the open market.


     Shareholders  may elect to participate  in the Program by  telephoning  the
Trust or submitting a completed Participation Form to DST Systems, Inc. ("DST"),
the Program  administrator.  DST will credit to each participant's account funds
it receives from:  (a) Dividends  paid on Trust Common Shares  registered in the
participant's  name  and (b)  optional  cash  investments.  DST will  apply  all
Dividends and optional cash  investments  received to purchase  Common Shares as
soon as  practicable  beginning on the relevant  Investment  Date (as  described
below) and not later than six business days after the  investment  Date,  except
when necessary to comply with  applicable  provisions of the federal  securities
laws.  For  more  information  on  distribution   policy,   see  "Dividends  and
Distributions" in the Trust's Prospectus.


     In order for  participants to purchase Common Shares through the Program in
any month, the Administrator must receive from the participant any optional cash
investment  not  exceeding  $5,000 by the OCI Payment Due Date and any  optional
cash  investment  exceeding  $5,000 by the Waiver  Payment  Due Date.  The "DRIP
Investment  Date" will be the date upon which  Dividends  will be  reinvested in
additional  Common  Shares of the Trust,  which will be on the Dividend  Payment
Date. The "OCI  Investment  Date" will be the date, set in advance by the Trust,
upon which optional cash investments not exceeding $5,000,  are first applied by
DST to the purchase of Common Shares. The "Waiver Investment

                                       32

Date" will be the date,  set in advance by the Trust,  upon which  optional cash
investments  exceeding $5,000,  which have been approved by the Trust, are first
applied by the Administrator to the purchase of Common Shares.  Participants may
obtain a schedule of upcoming  OCI Payment Due Dates,  Waiver  Payment Due Dates
and Investment Dates by referring to the Summary Program  Description or calling
the Trust at (800) 992-0180.

     If the Market Price (the volume-weighted average sales price, per share, as
reported  on the New York Stock  Exchange  Composite  Transaction  Tape as shown
daily on Bloomberg's AQR screen) plus estimated commissions for Common Shares of
the  Trust is less  than the net  asset  value on the  Valuation  Date  (defined
below),  DST will purchase  Common  Shares on the open market  through a bank or
securities  broker as provided herein.  Open market purchases may be effected on
any  securities  exchange  on which  Common  Shares of the Trust trade or in the
over-the-counter  market.  If the  Market  Price,  plus  estimated  commissions,
exceeds the net asset value before DST has completed its purchases, DST will use
reasonable  efforts to cease purchasing Common Shares, and the Trust shall issue
the remaining Common Shares. If the Market Price, plus estimated commissions, is
equal to or exceeds the net asset value on the  Valuation  Date,  the Trust will
issue the Common Shares to be acquired by the Program. The "Valuation Date" is a
date  preceding  the DRIP  Investment  Date,  OCI  Investment  Date,  and Waiver
Investment  Date on which it is  determined,  based on the Market  Price and net
asset  value of Common  Shares of the Trust,  whether DST will  purchase  Common
Shares on the open  market or the Trust  will  issue the  Common  Shares for the
Program. The Trust may, without prior notice to participants,  determine that it
will not issue new Common Shares for purchase pursuant to the Program, even when
the Market Price plus estimated  commissions  equals or exceeds net asset value,
in which case DST will purchase Common Shares on the open market.

     With the exception of Common Shares  purchased in connection  with optional
cash  investments  in excess of $5,000,  Common Shares issued by the Trust under
the Program will be issued  commission  free.  Common  Shares  purchased for the
Program directly from the Trust in connection with the reinvestment of Dividends
will be  acquired on the DRIP  Investment  Date at the greater of (i) NAV at the
close of business on the Valuation  Date or (ii) the average of the daily Market
Price of the shares  during the "DRIP Pricing  Period,"  minus a discount of 5%.
The "DRIP Pricing Period" for a dividend  reinvestment is the Valuation Date and
the prior  Trading  Day.  A "Trading  Day" means any day on which  trades of the
Common Shares of the Trust are reported on the NYSE.

     Except in the case of cash investments made pursuant to Requests for Waiver
(as discussed below),  Common Shares purchased  directly from the Trust pursuant
to optional cash  investments  will be acquired on an OCI Investment Date at the
greater of (i) net asset value at the close of business on the Valuation Date or
(ii) the average of the daily Market Price of the shares  during the OCI Pricing
Period  minus a discount,  determined  at the sole  discretion  of the Trust and
announced in advance, ranging from 0% to 5%. The "OCI Pricing Period" for an OCI
Investment  Date  means the  period  beginning  four  Trading  Days prior to the
Valuation  Date  through and  including  the  Valuation  Date.  The discount for
optional cash  investments  is set by the Trust and may be changed or eliminated
by the Trust without prior notice to  participants at any time. The discount for
optional cash  investments is determined on the last business day of each month.
In all instances,  however, the discount on Common Shares issued directly by the
Trust  shall not exceed 5% of the  market  price,  and Common  Shares may not be
issued at a price less than net asset value without prior  specific  approval of
shareholders or of the Commission.  Optional cash investments received by DST no
later than 4:00 p.m.  Eastern time on the OCI payment Due Date to be invested on
the relevant OCI Investment Date.

     Optional  cash  investments  in excess of $5,000 per month may be made only
pursuant to a Request for Waiver accepted in writing by the Trust. A Request for
Waiver must be received by the Trust no later than 4:00 p.m. Eastern time on the
Request for Waiver Deadline date. Good funds on all

                                       33

approved  Requests  For Waiver  must be received by DST not later than 4:00 P.M.
Eastern  time on the  Waiver  Payment  Due  Date in order  for such  funds to be
invested on the relevant Waiver Investment Date.

     It is solely within the Trust's  discretion as to whether  approval for any
cash  investments  in excess of $5,000 will be granted.  In deciding  whether to
approve  a  Request  for  Waiver,  the  Trust  will  consider  relevant  factors
including,  but not limited to,  whether  the  Program is then  acquiring  newly
issued  Common Shares  directly  from the Trust or acquiring  Common Shares from
third parties in the open market,  the Trust's need for  additional  funds,  the
attractiveness  of obtaining  such  additional  funds through the sale of Common
Shares as compared to other sources of funds, the purchase price likely to apply
to any sale of Common Shares under the Program,  the participant  submitting the
request,  the extent and nature of such participant's prior participation in the
Program,  the number of Common Shares held by such participant and the aggregate
amount of cash  investments for which Requests for Waiver have been submitted by
all participants.  If such requests are submitted for any Waiver Investment Date
for an  aggregate  amount in excess of the amount  the Trust is then  willing to
accept,  the Trust may honor such  requests in order of receipt,  pro rata or by
any  other  method  that  the  Trust  determines  in its sole  discretion  to be
appropriate.

     Common Shares purchased directly from the Trust in connection with approved
Requests  for  Waiver  will be  acquired  on the Waiver  Investment  Date at the
greater of (i) net asset value at the close of business on the  Valuation  Date,
or (ii) the  average  of the daily  Market  Price of the  shares  for the Waiver
Pricing Period minus the  pre-announced  Waiver Discount (as defined below),  if
any,  applicable  to such  shares.  The  "Waiver  Pricing  Period"  for a Waiver
Investment  Date  means the  period  beginning  four  Trading  Days prior to the
Valuation Date through and including the Valuation Date. The Trust may establish
a  discount  applicable  to  cash  investments  exceeding  $5,000  (the  "Waiver
Discount") on the last business day of each month.  The Waiver  Discount,  which
may vary each month between 0% and 5%, will be  established  in the Trust's sole
discretion  after  a  review  of  current  market   conditions,   the  level  of
participation  in the Program and current  and  projected  capital  needs of the
Trust. The Waiver Discount will apply only to Common Shares  purchased  directly
from the Trust.

     The Trust may  establish  for each Waiver  Pricing  Period a minimum  price
applicable to the purchase of newly issued Common  Shares  through  Requests for
Waiver, which will be a stated dollar amount that the Market Price of the Common
Shares for a Trading Day of the Waiver Pricing  Period must equal or exceed.  In
the event that such  minimum  price is not  satisfied  for a Trading  Day of the
Waiver Pricing Period, then such Trading Day and the trading prices for that day
will be excluded from (i) the Waiver pricing  Period and (ii) the  determination
of the  purchase  price  of the  Common  Shares  for all cash  investments  made
pursuant to Requests for Waiver  approved by the Trust.  The minimum price shall
apply only to cash  investments made pursuant to Requests for Waiver approved by
the Trust and not to the  reinvestment of Dividends or optional cash investments
that do not exceed $5,000.  No Common Shares will be issued and funds  submitted
pursuant to Requests  for Waiver  will be  returned  to the  participant  if the
minimum price is not obtained for at least three of the five Trading Days.

     Participants  will  pay a pro  rata  share of  brokerage  commissions  with
respect to DST's open market  purchases in connection  with the  reinvestment of
Dividends or purchases made with optional cash investments.

     From time to time, financial intermediaries, including brokers and dealers,
and other  persons may wish to engage in  positioning  transactions  in order to
benefit from the discount from market price of the Common Shares  acquired under
the Program.  Such transactions  could cause  fluctuations in the trading volume
and price of the Common Shares. The difference between the price such owners pay
to the Trust for Common Shares  acquired under the Program,  after  deduction of
the applicable discount from the

                                       34

market  price,  and the price at which such  Common  Shares are  resold,  may be
deemed  to  constitute  underwriting  commissions  received  by such  owners  in
connection with such transactions.

     Subject to the availability of Common Shares  registered for issuance under
the  Program,  there is no total  maximum  number of Common  Shares  that can be
issued pursuant to the Program.

     The Program is intended  for the benefit of  investors in the Trust and not
for persons or entities  who  accumulate  accounts  under the Program over which
they have  control for the  purpose of  exceeding  the $5,000 per month  maximum
without seeking the advance  approval of the Trust or who engage in transactions
that cause or are designed to cause  aberrations  in the price or trading volume
of the Common Shares.  Notwithstanding  anything in the Program to the contrary,
the Trust  reserves the right to exclude from  participation,  at any time,  (i)
persons or entities who attempt to  circumvent  the  Program's  standard  $5,000
maximum by accumulating  accounts over which they have control or (ii) any other
persons or entities, as determined in the sole discretion of the Trust.

     Currently,   persons  who  are  not  Shareholders  of  the  Trust  may  not
participate  in the  Program.  The Board of  Trustees  of the Trust may elect to
change this policy at a future date, and permit  non-Shareholders to participate
in the Program.

     Shareholders  may request to receive their Dividends in cash at any time by
giving DST written  notice or by  contacting  the Trust's  Shareholder  Services
Department at (800) 992-0180.  Shareholders  may elect to close their account at
any time by giving DST written notice.  When a participant closes their account,
the  participant  upon request will receive a certificate for full Common Shares
in the Account.  Fractional Common Shares will be held and aggregated with other
Fractional  Common  Shares being  liquidated  by DST as agent of the Program and
paid for by check when actually sold.

     The  automatic   reinvestment   of  Dividends   does  not  affect  the  tax
characterization  of the Dividends (i.e.,  capital gains and income are realized
even though cash is not received).  If Common Shares are issued  pursuant to the
Program's  dividend  reinvestment  provisions or cash  purchase  provisions at a
discount from market price, participants may have income equal to the discount.

     Additional  information  about the Program may be obtained from the Trust's
Shareholder Services Department at (800) 992-0180.

     See  "Federal  Taxation--Distributions"  for a  discussion  of the  federal
income tax ramifications of obtaining Common Shares under the Program.

PRIVATELY NEGOTIATED TRANSACTIONS

     The Common  Shares may also be offered  pursuant  to  privately  negotiated
transactions  between  the  Trust  and  specific  investors.  The  terms of such
privately  negotiated  transactions  will be  subject to the  discretion  of the
management of the Trust.  In determining  whether to sell Common Shares pursuant
to a privately negotiated transaction,  the Trust will consider relevant factors
including,  but not limited to, the attractiveness of obtaining additional funds
through the sale of Common Shares,  the purchase price to apply to any such sale
of Common Shares and the person seeking to purchase the Common Shares.

     Common Shares issued by the Trust in connection  with privately  negotiated
transactions  will be issued at the  greater of (1) NAV per Common  Share of the
Trust's Common Shares or (ii) at a discount ranging from 0% to 5% of the average
of the daily market price of the Trust's  Common Shares at the close of business
on the two business  days  preceding  the date upon which Common Shares are sold

                                       35

pursuant to the privately negotiated transaction.  The discount to apply to such
privately negotiated transactions will be determined by the Trust with regard to
each specific transaction.

                                FEDERAL TAXATION

     The  following  is only a  summary  of  certain  U.S.  federal  income  tax
considerations generally affecting the Trust and its shareholders. No attempt is
made to present a detailed  explanation of the tax treatment of the Trust or its
shareholders,  and the following  discussion is not intended as a substitute for
careful tax planning.  Shareholders  should  consult with their own tax advisers
regarding the specific federal, state, local, foreign and other tax consequences
of investing in the Trust.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY

     The  Trust  will  elect  each  year to be taxed as a  regulated  investment
company  under  Subchapter M of the Internal  Revenue  Code (the  "Code").  As a
regulated investment company, the Trust generally will not be subject to federal
income tax on the  portion  of its  investment  company  taxable  income  (i.e.,
taxable interest,  dividends and other taxable ordinary income, net of expenses,
and net short-term  capital gains in excess of long-term capital losses) and net
capital gain (i.e.,  the excess of net  long-term  capital gains over the sum of
net short-term capital losses and capital loss carryovers from prior years) that
it distributes to shareholders, provided that it distributes at least 90% of its
investment  company  taxable  income  for the  taxable  year (the  "Distribution
Requirement"),  and satisfies  certain other  requirements  of the Code that are
described below.

     In  addition  to  satisfying  the  Distribution  Requirement  and an  asset
diversification requirement discussed below, a regulated investment company must
derive at least 90% of its gross income for each  taxable  year from  dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other  disposition  of stock or  securities or foreign  currencies  and other
income  (including,  but not limited to, gains from options,  futures or forward
contracts)  derived  with  respect to its  business of  investing in such stock,
securities or currencies.

     In addition to satisfying the requirements  described above, the Trust must
satisfy  an  asset  diversification  test in  order to  qualify  as a  regulated
investment company. Under this test, at the close of each quarter of the Trust's
taxable  year,  at least 50% of the value of the Trust's  assets must consist of
cash  and  cash  items  (including  receivables),  U.S.  government  securities,
securities of other  regulated  investment  companies,  and  securities of other
issuers (as to which the Trust has not invested more than 5% of the value of the
Trust's  total assets in securities of any such issuer and as to which the Trust
does not hold more than 10% of the  outstanding  voting  securities  of any such
issuer),  and no more than 25% of the value of its total  assets may be invested
in the securities of any one issuer (other than U.S.  government  securities and
securities of other regulated investment  companies),  or in two or more issuers
which the Trust  controls and which are engaged in the same or similar trades or
businesses.

     In general,  gain or loss  recognized by the Trust on the disposition of an
asset  will  be a  capital  gain  or  loss.  However,  gain  recognized  on  the
disposition  of a debt  obligation  purchased by the Trust at a market  discount
(generally at a price less than its principal amount) other than at the original
issue  will be treated as  ordinary  income to the extent of the  portion of the
market  discount which accrued during the period of time the Trust held the debt
obligation.

     In general, investments by the Trust in zero coupon or other original issue
discount securities will result in income to the Trust equal to a portion of the
excess of the face value of the securities over their issue price (the "original
issue discount") each year that the Trust holds the securities,  even though the

                                       36

Trust receives no cash interest payments. This income is included in determining
the amount of income which the Trust must distribute to maintain its status as a
regulated investment company and to avoid federal income and excise taxes.

     If for  any  taxable  year  the  Trust  does  not  qualify  as a  regulated
investment  company,  all of its taxable income (including its net capital gain)
will be subject to tax at regular  corporate  rates  without any  deduction  for
distributions  to  shareholders,  and  such  distributions  will be  taxable  as
ordinary dividends to the extent of the Trust's current and accumulated earnings
and  profits.   Such   distributions   generally   would  be  eligible  for  the
dividends-received deduction in the case of corporate shareholders.

     If the Fund fails to qualify as a regulated investment company in any year,
it must pay out its  earnings and profits  accumulated  in that year in order to
qualify again as a regulated investment company. Moreover, if the Fund failed to
qualify as a regulated  investment company for a period greater than one taxable
year,  the Fund may be required to recognize any net built-in gains with respect
to certain of its assets (the excess of the aggregate gains,  including items of
income, over aggregate losses that would have been realized if the Fund had been
liquidated)  in  order  to  qualify  as  a  regulated  investment  company  in a
subsequent year.

EXCISE TAX ON REGULATED INVESTMENT COMPANIES

     A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to the sum of (1)
98% of its ordinary taxable income for the calendar year, (2) 98% of its capital
gain net  income  (i.e.,  capital  gains in excess of  capital  losses)  for the
one-year  period ended on October 31 of such calendar year, and (3) any ordinary
taxable  income and  capital  gain net income  for  previous  years that was not
distributed or taxed to the regulated  investment  company during those years. A
distribution will be treated as paid on December 31 of the current calendar year
if it is declared by the Trust in  October,  November or December  with a record
date in such a month  and paid by the  Trust  during  January  of the  following
calendar year. Such  distributions will be taxed to shareholders in the calendar
year in which the distributions  are declared,  rather than the calendar year in
which the distributions are received.

     The Trust intends to make sufficient  distributions or deemed distributions
(discussed  below) of its ordinary taxable income and capital gain net income to
avoid liability for the excise tax.

HEDGING TRANSACTIONS

     The  Trust has the  ability,  pursuant  to its  investment  objectives  and
policies,  to hedge its  investments  in a variety  of  transactions,  including
interest  rate swaps and the purchase or sale of interest  rate caps and floors.
The treatment of these  transactions for federal income tax purposes may in some
instances  be  unclear,  and  the  regulated  investment  company  qualification
requirements  may limit the  extent  to which  the Trust can  engage in  hedging
transactions.

     Under  certain   circumstances,   the  Trust  may  recognize  gain  from  a
constructive sale of an appreciated financial position. If the Trust enters into
certain transactions in property while holding substantially identical property,
the Trust  would be treated as if it had sold and  immediately  repurchased  the
property  and would be taxed on any gain (but not  loss)  from the  constructive
sale.  The  character  of gain from a  constructive  sale would  depend upon the
Trust's holding period in the property.  Loss from a constructive  sale would be
recognized  when the property was  subsequently  disposed of, and its  character
would depend on the Trust's  holding period and the  application of various loss
deferral  provisions in the Code.  Constructive sale treatment does not apply to
transactions  closed in the  90-day  period  ending  with the 30th day after the
close of the taxable year, if certain conditions are met.

                                       37

DISTRIBUTIONS

     The  Trust  anticipates  distributing  all  or  substantially  all  of  its
investment  company taxable income for the taxable year. Such distributions will
be taxable to  shareholders  as  ordinary  income.  If a portion of the  Trust's
income  consists  of  dividends  paid by U.S.  corporations,  a  portion  of the
dividends paid by the Trust may be eligible for the corporate dividends received
deduction.

     The Trust may either retain or distribute to  shareholders  its net capital
gain for each taxable year. The Trust  currently  intends to distribute any such
amounts.  If net capital gain is  distributed  and  designated as a capital gain
dividend,  it will generally be taxable to shareholders at a maximum federal tax
rate of 20%.  Distributions  are subject to these capital gains rates regardless
of the length of time the  shareholder has held his shares.  Conversely,  if the
Trust  elects to retain its net capital  gain,  the Trust will be taxed  thereon
(except  to  the  extent  of  any  available  capital  loss  carryovers)  at the
applicable corporate tax rate. In such event, it is expected that the Trust also
will elect to treat such gain as having been distributed to  shareholders.  As a
result,  each  shareholder will be required to report his pro rata share of such
gain on his tax return as long-term  capital  gain,  will be entitled to claim a
tax credit for his pro rata share of tax paid by the Trust on the gain, and will
increase  the  tax  basis  for his  shares  by an  amount  equal  to the  deemed
distribution less the tax credit.

     Distributions  by the Trust in excess of the Trust's  earnings  and profits
will be treated as a return of  capital to the extent of (and in  reduction  of)
the  shareholder's  tax  basis  in  his  shares;  any  such  return  of  capital
distributions in excess of the  shareholder's  tax basis will be treated as gain
from the sale of his shares, as discussed below.

     Distributions  by the Trust will be treated in the manner  described  above
regardless  of whether  such  distributions  are paid in cash or  reinvested  in
additional  shares of the Trust. If the NAV at the time a shareholder  purchases
shares of the Trust reflects undistributed income or gain, distributions of such
amounts will be taxable to the shareholder in the manner described  above,  even
though such  distributions  economically  constitute  a return of capital to the
shareholder.

     The Trust will be  required in certain  cases to withhold  and remit to the
U.S.  Treasury  30% of all  dividends  and  redemption  proceeds  payable to any
shareholder  (1) who  fails to  provide  the  Trust  with a  certified,  correct
identification number or other required  certifications,  or (2) if the Internal
Revenue  Service  notifies the Trust that the  shareholder  is subject to backup
withholding. Corporate shareholders and other shareholders specified in the Code
are exempt from such backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the shareholder's U.S. federal
income tax liability if the appropriate information is provided to the IRS.

SALE OF COMMON SHARES

     A shareholder will recognize gain or loss on the sale or exchange of shares
of the Trust in an amount generally equal to the difference between the proceeds
of the sale and the shareholder's  adjusted tax basis in the shares. In general,
any such gain or loss will be considered  capital gain or loss if the shares are
held as  capital  assets,  and gain or loss  will be  long-term  or  short-term,
depending upon the  shareholder's  holding period for the shares.  However,  any
capital loss arising from the sale of shares held for six months or less will be
treated as a long-term capital loss to the extent of any long-term capital gains
distributed (or deemed distributed) with respect to such shares.  Also, any loss
realized on a sale or exchange  of shares will be  disallowed  to the extent the
shares  disposed  of  are  replaced   (including  shares  acquired  through  the
Shareholder  Investment  Program  within a period of 61 days  beginning  30 days
before and ending 30 days after the shares are  disposed  of. In such case,  the
tax basis of the  acquired  shares will be  adjusted  to reflect the  disallowed
loss.

                                       38

FOREIGN SHAREHOLDERS

     U.S.  taxation  of a  shareholder  who,  as  to  the  United  States,  is a
nonresident alien individual,  foreign trust or estate, foreign corporation,  or
foreign  partnership  ("foreign  shareholder")  depends, in part, on whether the
shareholder's income from the Trust is "effectively connected" with a U.S. trade
or business carried on by such shareholder.

     If the income from the Trust is not effectively connected with a U.S. trade
or business  carried on by a foreign  shareholder,  distributions  of investment
company  taxable income will be subject to U.S.  withholding  tax at the rate of
30% (or lower treaty rate). Such a foreign shareholder would generally be exempt
from U.S. federal income tax on gains realized on the sale or exchange of shares
of the Trust, capital gain dividends, and amounts retained by the Trust that are
designated as undistributed capital gains.

     If the income from the Trust is effectively  connected with a U.S. trade or
business carried on by a foreign  shareholder,  then distributions of investment
company taxable income,  capital gain dividends,  amounts  retained by the Trust
that are designated as  undistributed  capital gains and any gains realized upon
the sale or  exchange  of shares of the Trust will be  subject  to U.S.  federal
income tax at the rates  applicable to U.S.  citizens or domestic  corporations.
Such shareholders that are classified as corporations for U.S. tax purposes also
may be subject to a branch profits tax.

     In the case of foreign noncorporate shareholders, the Trust may be required
to withhold U.S. federal income tax at a rate of 30% on  distributions  that are
otherwise  exempt from  withholding  tax (or taxable at a reduced  treaty  rate)
unless such  shareholders  furnish the Trust with proper  notification  of their
foreign status. See "Distributions."

     The tax  consequences  to a  foreign  shareholder  entitled  to  claim  the
benefits  of an  applicable  tax treaty may be  different  from those  described
herein.  Foreign  shareholders  are urged to consult their own tax advisers with
respect to the  particular  tax  consequences  to them of an  investment  in the
Trust, including the applicability of foreign taxes.

EFFECT OF FUTURE LEGISLATION; OTHER TAX CONSIDERATIONS

     The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this SAI.  Future  legislative  or  administrative  changes or court
decisions may significantly  change the conclusions  expressed  herein,  and any
such  changes or  decisions  may have a  retroactive  effect with respect to the
transactions contemplated herein.

     Income  received  by the Trust  from  foreign  sources  may be  subject  to
withholding and other taxes imposed by such foreign jurisdictions, absent treaty
relief.  Distributions to shareholders  also may be subject to state,  local and
foreign  taxes,   depending  upon  each  shareholder's   particular   situation.
Shareholders  are urged to  consult  their  tax  advisers  as to the  particular
consequences to them of an investment in the Trust.

                        ADVERTISING AND PERFORMANCE DATA

ADVERTISING

     From time to time,  advertisements  and other sales materials for the Trust
may include information  concerning the historical performance of the Trust. Any
such information may include trading volume of

                                       39

the Trust's Common Shares,  the number of Senior Loan investments,  annual total
return,   aggregate  total  return,   distribution   rate,   average  compounded
distribution  rates and yields of the Trust for specified  periods of time,  and
diversification  statistics. Such information may also include rankings, ratings
and other information from independent  organizations  such as Lipper Analytical
Services, Inc. ("Lipper"),  Morningstar, Value Line, Inc., CDA Technology, Inc.,
Standard & Poor's,  Portfolio Management Data (a division of Standard & Poor's),
Moody's, Bloomberg or other industry publications. These rankings will typically
compare the Trust to all closed-end  Funds,  to other Senior Loan funds,  and/or
also to taxable  closed-end  fixed  income  funds.  Any such use of rankings and
ratings in advertisements  and sales literature will conform with the guidelines
of the NASD approved by the Commission.  Ranking  comparisons and ratings should
not be considered  representative  of the Trust's  relative  performance for any
future period.

     Reports  and   promotional   literature  may  also  contain  the  following
information:  (i) number of  shareholders;  (ii)  average  account  size;  (iii)
identification  of  street  and  registered  account  holdings;  (iv)  lists  or
statistics  of certain of the Trust's  holdings  including,  but not limited to,
portfolio  composition,  sector weightings,  portfolio turnover rates, number of
holdings,  average market  capitalization and modern portfolio theory statistics
alone or in  comparison  with itself (over time) and with its peers and industry
group;  (v) public  information  about the assets  class;  and (vi)  discussions
concerning coverage of the Trust by analysts.

     In addition,  reports and  promotional  literature may contain  information
concerning  the  Investment  Manager,  ING Group,  the Portfolio  Managers,  the
Administrator  or affiliates of the Trust including (i) performance  rankings of
other funds managed by the Investment  Manager,  or the individuals  employed by
the Investment Manager who exercise responsibility for the day-to-day management
of the Trust,  including rankings and ratings of investment  companies published
by Lipper, Morningstar, Inc., Value Line, Inc., CDA Technologies, Inc., or other
rating  services,  companies,  publications  or other  persons  who rank or rate
investment  companies or other  investment  products on overall  performance  or
other criteria;  (ii) lists of clients,  the number of clients,  or assets under
management;  (iii) information regarding the acquisition of the ING Funds by ING
Capital;  (iv) the past  performance of ING Capital and ING Funds Services;  (v)
the past  performance  of other funds managed by the  Investment  Manager;  (vi)
quotes from a portfolio manager of the Trust or industry specialists;  and (vii)
information  regarding rights offerings conducted by closed-end funds managed by
the Investment Manager.

     The Trust may compare the  frequency of its reset  period to the  frequency
which LIBOR changes. Further, the Trust may compare its yield to (i) LIBOR, (ii)
the federal  funds rate,  (iii) the Prime Rate,  quoted daily in the Wall Street
Journal  as the  base  rate on  corporate  loans  at  large  U.S.  money  center
commercial  banks,  (iv) the average  yield  reported  by the Bank Rate  Monitor
National  Index for money  market  deposit  accounts  offered by the 100 leading
banks  and  thrift  institutions  in  the  ten  largest  standard   metropolitan
statistical  areas,  (v) yield  data  published  by Lipper,  Bloomberg  or other
industry sources, or (vi) the yield on an investment in 90-day Treasury bills on
a rolling basis, assuming quarterly compounding.  Further, the Trust may compare
such other yield data described above to each other.  The Trust may also compare
its total return, NAV stability and yield to fixed income  investments.  As with
yield and total return calculations,  yield comparisons should not be considered
representative  of the  Trust's  yield or  relative  performance  for any future
period.

     The Trust may provide information  designed to help individuals  understand
their  investment  goals  and  explore  various   financial   strategies.   Such
information may include information about current economic, market and political
conditions;  materials that describe  general  principles of investing,  such as
asset allocation,  diversification, risk tolerance, and goal setting; worksheets
used  to  project  savings  needs  based  on  assumed  rates  of  inflation  and
hypothetical rates of return; and action plans offering investment alternatives.
Materials may also include  discussion of other investment  companies in the ING
Funds,

                                       40

products  and  services,  and  descriptions  of the  benefits  of  working  with
investment professionals in selecting investments.

PERFORMANCE DATA

     The Trust  may  quote  annual  total  return  and  aggregate  total  return
performance  data.  Total return  quotations  for the specified  periods will be
computed by finding the rate of return (based on net  investment  income and any
capital gains or losses on portfolio  investments  over such periods) that would
equate the initial amount invested to the value of such investment at the end of
the period. On occasion, the Trust may quote total return calculations published
by  Lipper,  a widely  recognized  independent  publication  that  monitors  the
performance of both open-end and closed-end investment companies.

     The  Trust's  distribution  rate  is  calculated  on  a  monthly  basis  by
annualizing  the  dividend  declared  in the month and  dividing  the  resulting
annualized  dividend  amount by the Trust's  corresponding  month-end  net asset
value  (in the case of NAV) or the last  reported  market  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.

     Total return and distribution rate and compounded distribution rate figures
utilized by the Trust are based on historical  performance  and are not intended
to indicate future performance.  Distribution rate, compounded distribution rate
and NAV per share can be expected to fluctuate over time. Total return will vary
depending  on  market  conditions,   the  Senior  Loans,  and  other  securities
comprising the Trust's portfolio,  the Trust's operating expenses and the amount
of net realized and unrealized capital gains or losses during the period.

                               GENERAL INFORMATION

CUSTODIAN

     State Street Bank and Trust Company, 801 Pennsylvania Avenue,  Kansas City,
Missouri  64105 has been retained to act as the  custodian for the Trust.  State
Street  Bank and  Trust  Company  does not  have  any  part in  determining  the
investment  policies of the Trust or in determining  which portfolio  securities
are to be purchased or sold by the Trust or in the  declaration of dividends and
distributions.

LEGAL COUNSEL

     Legal  matters for the Trust are passed  upon by Dechert,  1775 Eye Street,
NW, Washington, DC 20006.

INDEPENDENT AUDITORS


     KPMG LLP, 355 South Grand Avenue,  Los Angeles,  California 90071, has been
selected  as  independent  auditors  for the Trust for the  fiscal  year  ending
February 28, 2003.


                                       41

                              FINANCIAL STATEMENTS

     The Financial  Statements and the independent  auditors'  reports  thereon,
appearing in the Trust's Annual Report for the period ending  February 28, 2002,
and the Financial  Statements  (unaudited)  appearing in the Trust's Semi-Annual
Report for the period ended August 31, 2001,  are  incorporated  by reference in
this Statement. The Trust's Annual and Semi-Annual Reports are available at 7337
East Doubletree Ranch Road, Scottsdale,  Arizona 85258, upon request and without
charge by calling 1-800- 992-0180.


206265.6.03


                                       42

                                     PART C

                                OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

     1.   Financial Statements

          Contained in Part A:

          Financial Highlights for the years ended February 28, 2002, 2001;
          February 29, 2000; February 28, 1999, 1998, 1997; February 29, 1996;
          February 28, 1995, 1994, and 1993.

          Financial Statements are incorporated in Part B by reference to
          Registrant's February 28, 2002 Annual Report (audited).

     2.   Exhibits

          (a)  (i)    Agreement and Declaration of Trust(1)

               (ii)   Amendment to the Agreement and Declaration of Trust dated
                      March 26, 1996 and effective April 12, 1996(1)

               (iii)  Amendment to the Agreement and Declaration of Trust dated
                      October 23, 1998 and effective November 16, 1998(7)

               (iv)   Amendment to the Agreement and Declaration of Trust dated
                      October 20, 2000 and effective October 20, 2000(10)

               (v)    Amendment to the Agreement and Declaration of Trust dated
                      February 20, 2002 and effective March 1, 2002(11)

          (b)  (i)    By-Laws(2)

               (ii)   Amendment to By-Laws(2)

               (iii)  Amendment to By-Laws(9)

               (iv)   Amendment to By-Laws(10)

          (c)  Not Applicable

          (d)  (i)    Certificate of Designation for Preferred Shares(10)

               (ii)   Form of Share Certificate

                                      C-1

          (e)  Form of Shareholder Investment Program(5)

          (f)  Not Applicable

          (g)  (i)    Form of Amended and Restated Investment Management
                      Agreement(3)

               (ii)   Form of Amendment to Investment Management Agreement(6)

               (iii)  Amended and Restated Investment Management Agreement(9)

               (iv)   Form of Amendment to the Amended and Restated Investment
                      Management Agreement(9)

               (v)    Investment Management Agreement(10)

          (h)  (i)    Form of Distribution Agreement(5)

               (ii)   Form of Dealer Agreement(8)

               (iii)  Form of Underwriting Agreement for the Preferred
                      Shares(10)

          (i)  Not Applicable

          (j)  (i)    Form of Custody Agreement(3)

               (ii)   Form of Custody and Investment Accounting Agreement
                      between Registrant and State Street Bank and Trust
                      Company(11)

          (k)  (i)    Form of Amended and Restated Administration Agreement(9)

               (ii)   Amendment to the Amended and Restated Administration
                      Agreement(11)

               (iii)  Form of Recordkeeping Agreement(3)

               (iv)   Form of Revolving Loan Agreement(6)

               (v)    Form of Credit Agreement(7)

               (vi)   Form of Auction Agency Agreement(10)

               (vii)  Form of Broker-Dealer Agreement(10)

               (viii) Form of DTC Letter of Representations as to Preferred
                      Shares(10)

                                      C-2

          (l)  Opinion of Dechert Price & Rhoads(7)

          (m)  Not Applicable

          (n)  (i) Consent of Dechert is filed herewith

               (ii) Consent of KPMG LLP is filed herewith

          (o)  Not Applicable

          (p)  Certificate of Initial Capital(4)

          (q)  Not Applicable

          (r)  Not Applicable

          (s)  Pilgrim Group Funds Code of Ethics(9)

----------
(1)  Incorporated herein by reference to Amendment No. 20 to Registrant's
     Registration Statement under the Investment Company Act of 1940 (the "1940
     Act") on Form N-2 (File No. 811-5410), filed on September 16, 1996.

(2)  Incorporated herein by reference to Amendment No. 24 to Registrant's
     Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410),
     filed on November 7, 1997.

(3)  Incorporated herein by reference to Amendment No. 22 to Registrant's
     Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410),
     filed on June 23, 1997.

(4)  Incorporated herein by reference to Pre-Effective Amendment No. 1 to
     Registrant's initial registration statement on form N-2 (File No.
     33-18886), filed on January 22, 1988.

(5)  Incorporated herein by reference to Amendment No. 27 to Registrant's
     Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410),
     filed on May 15, 1998.

(6)  Incorporated herein by reference to Amendment No. 28 to Registrant's
     Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410),
     filed on August 19, 1998.

(7)  Incorporated herein by reference to Amendment No. 29 to Registrant's
     Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410),
     filed on December 2, 1998.

(8)  Incorporated herein by reference to Amendment No. 30 to Registrant's
     Registration Statement under the 1940 Act Form N-2 (File No. 811-5410),
     filed on March 3, 1999.

                                      C-3

(9)  Incorporated herein by reference to Amendment No. 33 to Registrant's
     Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410),
     filed on May 9, 2000.

(10) Incorporated herein by reference to Amendment No. 38 to Registrant's
     Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410),
     filed on October 23, 2000.

(11) Incorporated herein by reference to Amendment No. 46 to Registrant's
     Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410),
     filed on April 30, 2002.

ITEM 25. MARKETING AGREEMENTS

     Not Applicable.


ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth expenses incurred or estimated to be
incurred in connection with the offering described in the Registration
Statement.

Registration Fees.....................................................   $     0

Trustee Fees..........................................................   $     0

Rating Agency Fees....................................................   $     0

Printing Expenses.....................................................   $ 7,500

Legal Fees............................................................   $30,000

Accounting Fees and Expenses..........................................   $ 5,500

Miscellaneous Expenses................................................   $     0
                                                                         -------
         Total........................................................   $43,000
                                                                         =======

ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

     Not Applicable.


ITEM 28. NUMBER OF HOLDERS OF SECURITIES

     (1) Title of Class                             (2) Number of Record Holders
     ------------------                             ----------------------------
     Auction Rate Cumulative Preferred Shares       7 as of June 1, 2002
     of beneficial interest, par value $0.01 per
     share, Series M, T, W, Th and F

     Common Shares of beneficial interest,          57,083 as of June 1, 2002
     par value $0.01 per share

                                      C-4

ITEM 29. INDEMNIFICATION

     Registrant's Agreement and Declaration of Trust generally provides that the
Trust shall indemnify each of its Trustees and officers (including persons who
serve at the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a shareholder, creditor or
otherwise) ("Covered Persons") against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred in connection with the defense
or disposition of any action, suit or other proceeding, whether civil or
criminal, by reason of being or having been such a Covered Person except with
respect to any matter as to which such Covered Person shall have been finally
adjudicated (a) not to have acted in good faith in the reasonable belief that
such Covered Person's action was in the best interest of the Trust or (b) to be
liable to the Trust or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of duties involved in the conduct
of such Covered Person's office.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment of the Registrant of expenses incurred or
paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will submit, unless in the opinion of its counsel the
matter has been settled by controlling precedent, to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

     Information as to the Trustees and officers of the Adviser, together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by the directors and officers of the Adviser in
the last two years, is included in its application for registration as an
investment adviser on Form ADV (File No. 801-48282) filed under the Investment
Advisers Act of 1940, as amended ("Advisers Act"), and is incorporated herein by
reference thereto.

                                      C-5

ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

     The amounts and records of the Registrant will be maintained at its office
at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258 and at the office of
its custodian, State Street Bank & Trust - Kansas City, 801 Pennsylvania, Kansas
City, Missouri 64105.

ITEM 32. MANAGEMENT SERVICES

     Not Applicable.

ITEM 33. UNDERTAKINGS

     1.   The Registrant undertakes to suspend the Offer until the prospectus is
amended if (1) subsequent to the effective date of this registration statement,
the net asset value declines more than ten percent from its net asset value as
of the effective date of this registration statement or (2) the net asset value
increases to an amount greater than the net proceeds as stated in the prospectus
included in this registration statement.

     2.   Not Applicable.

     3.   Not Applicable.

     4.   Not Applicable.

     5.   a.   The Registrant undertakes that for the purpose of determining any
     liability under the 1933 Act, the information omitted from the form of
     prospectus filed as part of this Registration Statement in reliance upon
     Rule 430A and contained in a form of prospectus filed by the Registrant
     under Rule 497(h) under the 1933 Act [17 CFR 230.497(h)] shall be deemed to
     be part of this Registration Statement as of the time it was declared
     effective; and

          b.   that for the purpose of determining any liability under the 1933
     Act, each post-effective amendment that contains a form of prospectus shall
     be deemed to be a new registration statement relating to the securities
     offered therein, and the offering of the securities at that time shall be
     deemed to be the initial bona fide offering thereof.

     6.   The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of receipt
of a written or oral request, any Statement of Additional Information.

                                      C-6

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Scottsdale in the State of Arizona this 21st day
of June, 2002.

                                        ING PRIME RATE TRUST


                                        By: /s/ Kimberly A. Anderson
                                            ------------------------------------
                                            Kimberly A. Anderson,
                                            Vice President and Secretary


Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated:

        SIGNATURE                        TITLE                         DATE
        ---------                        -----                         ----

                                 Trustee and Chairman              June 21, 2002
--------------------------
     John G. Turner*

                                 President and Chief Executive     June 21, 2002
--------------------------       Officer
    James M. Hennessy*

                                 Executive Vice President and      June 21, 2002
--------------------------       Chief Financial Officer
    Michael J. Roland*

                                 Trustee                           June 21, 2002
--------------------------
     Paul S. Doherty*

                                 Trustee                           June 21, 2002
--------------------------
    J. Michael Earley*

                                 Trustee                           June 21, 2002
--------------------------
  R. Barbara Gitenstein*

                                      C-7

                                 Trustee                           June 21, 2002
--------------------------
      Walter H. May*

                                 Trustee                           June 21, 2002
--------------------------
   Thomas J. McInerney*

                                 Trustee                           June 21, 2002
--------------------------
       Jock Patton*

                                 Trustee                           June 21, 2002
--------------------------
    David W.C. Putnam*

                                 Trustee                           June 21, 2002
--------------------------
     Blaine E. Rieke*

                                 Trustee                           June 21, 2002
--------------------------
    Roger B. Vincent*

                                 Trustee                           June 21, 2002
--------------------------
  Richard A. Wedemeyer*


*By: /s/ Kimberly A. Anderson
     -------------------------
     Kimberly A. Anderson
     Attorney-in-Fact**


----------
**   Pursuant to Powers of Attorney filed previously in Amendment No. 46 to the
     Registrant's Registration Statement under the 1940 Act on Form N-2 (File
     No. 811-5410) on April 30, 2002, and incorporated herein by reference.

                                      C-8

                                  EXHIBIT LIST

EXHIBIT NUMBER                  NAME OF EXHIBIT
--------------                  ---------------
   2(n)(i)                    Consent of Dechert

   2(n)(ii)                   Consent of KPMG LLP