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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-21938

ING Risk Managed Natural Resources Fund

(Exact name of registrant as specified in charter)

7337 E. Doubletree Ranch Rd., Scottsdale, AZ		85258
(Address of principal executive offices)		(Zip code)

Huey P. Falgout, Jr., 7337 E. Doubletree Ranch Rd. Scottsdale, AZ 85258
(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-800-992-0180

Date of fiscal year end:                       February 28

Date of reporting period:                    August 31, 2010

 

 

 

Item 1. Reports to Stockholders.

 

The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1):

Semi-Annual Report

 

August 31, 2010

 

ING Risk Managed Natural Resources Fund

 

 

       E-Delivery Sign-up — details inside

 

 

   FUNDS

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TABLE OF CONTENTS

 

 

 

 

 

PROXY VOTING INFORMATION

 

A description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio securities is available: (1) without charge, upon request, by calling Shareholder Services toll-free at (800)-992-0180; (2) on the ING Funds’ website at www.ingfunds.com; and (3) on the SEC’s website at www.sec.gov. Information regarding how the Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30 is available without charge on the ING Funds’ website at www.ingfunds.com and on the SEC’s website at www.sec.gov.

 

QUARTERLY PORTFOLIO HOLDINGS

 

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This report contains a summary portfolio of investments for the Fund. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The Fund’s Forms N-Q, as well as a complete portfolio of investments, are available without charge upon request from the Fund by calling Shareholder Services toll-free at (800) 992-0180.

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PRESIDENT’S LETTER

 

 

Dear Shareholder,

 

ING Risk Managed Natural Resources Fund (the “Fund”) is a non-diversified, closed-end management investment company whose shares are traded on the New York Stock Exchange under the symbol “IRR.” The Fund’s investment objective is total return through a combination of current income, realized capital gains and capital appreciation.

 

The Fund will seek to achieve its investment objective by investing in a portfolio of equity securities of companies in the energy and natural resources industries and by employing an integrated options “collar” strategy. The Fund’s collar strategy seeks to reduce the volatility of total returns relative to the natural resources equity sector and to help the Fund achieve its investment objective by seeking to generate capital gains in declining markets from the purchase of put options and premiums from writing call options.

 

For the six month period ended August 31, 2010, the Fund made quarterly total distributions of $0.74 per share, including net investment income of $0.47 per share and a return of capital of $0.27 per share. During the six month period, the Fund reduced its quarterly distribution from $0.382 to $0.363 per quarter, commencing with the distribution paid on July 15, 2010.

 

Based on net asset value (“NAV”), the Fund provided a total return of (8.18)% for the six month period ended August 31, 2010.⁽¹⁾ This NAV return reflects a decrease in the Fund’s NAV from $15.86 on February 28, 2010 to $13.87 on August 31, 2010. Based on its share price as of August 31, 2010, the Fund provided a total return of (9.94)% for the six month period ended August 31, 2010.⁽²⁾ This share price return reflects a decrease in its share price from $16.67 on February 28, 2010 to $14.30 on August 31, 2010.

 

The global equity markets have witnessed a challenging and turbulent period. Please read the Market Perspective and Portfolio Managers’ Report for more information on the market and the Fund’s performance.

 

At ING Funds our mission is to set the standard in helping our clients manage their financial future. We seek to assist you and your financial advisor by offering a range of global investment solutions. We invite you to visit our website at www.ingfunds.com. Here you will find information on our products and services, including current market data and fund statistics on our open- and closed-end funds. You will see that we offer a broad variety of equity, fixed income and multi-asset funds that aim to fulfill a variety of investor needs.

 

We thank you for trusting ING Funds with your investment assets, and we look forward to serving you in the months and years ahead.

 

Sincerely,

 

Shaun P. Mathews

President & Chief Executive Officer

ING Funds

October 8, 2010

The views expressed in the President’s Letter reflect those of the President as of the date of the letter. Any such views are subject to change at any time based upon market or other conditions and ING Funds disclaim any responsibility to update such views. These views may not be relied on as investment advice and because investment decisions for an ING Fund are based on numerous factors, may not be relied on as an indication of investment intent on behalf of any ING Fund. Reference to specific company securities should not be construed as recommendations or investment advice. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic.

 

For more complete information, or to obtain a prospectus for any ING Fund, please call your Investment Professional or the Fund’s Shareholder Service Department at (800) 992-0180 or log on to www.ingfunds.com. The prospectus should be read carefully before investing. Consider the fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this information and other information about the fund. Check with your Investment Professional to determine which funds are available for sale within their firm. Not all funds are available for sale at all firms.

 

 

Market Perspective:  Six Months Ended August 31, 2010

 

 

Our previous fiscal year ended near the anniversary of March 9, 2009, when global equities in the form of the MSCI World Index^sm measured in local currencies, including net reinvested dividends (“MSCI” for regions discussed below), touched levels last seen six years earlier. From that low point, the index was 58% higher as the new fiscal year started and continued to rise through mid April 2010. But from there a confluence of local and global concerns sent prices on a downward path. For the six months to August 31, 2010 global equities fell 3.35%. (The MSCI World Index^sm fell 3.48% for the six months ended August 31, 2010, measured in U.S. dollars.) In currencies, the dollar gained 7.3% against the euro, but lost 4.7% to the yen and 1.8% against the pound.

 

The 12-month rally in equities had become increasingly edgy. The rescue of failing institutions by governments and central banks in Europe and the U.S., together with unprecedented fiscal and monetary stimulus to counter the ensuing recession, had led to enormous, unsustainable budget deficits. Not only would stimulus programs end, but debt would need to be wound down.

 

Beacons of hope in this rather bleak outlook were the United States and emerging markets, centered on China. The U.S. with its vast, dynamic, flexible economy would surely bounce back most quickly in the developed world and generate global economic activity. Emerging market economies, much more fiscally robust these days, had never suffered much of a financial crisis and recession anyway and were again showing vibrant growth. The demand for capital goods from China might sustain Japan’s export led revival, while in Europe, growth may be tepid but at least the situation was stable.

 

By early May all of these premises were disintegrating, the erosion gathering pace over the summer, as attention lurched from one economic statistic to the next.

 

In the U.S., the critical housing market seemed to be improving, boosted by tax credits for home buyers. After sliding for more than three years, house prices (based on the S&P/Case-Shiller 20-City Composite Home Price Index), finally showed year-over-year increases from February. But when the credits expired, sales of new and existing homes slumped to multi-year low levels. Prices would surely follow. Unemployment remained stubbornly high, near 10%, barely scratched by new private sector jobs only averaging about 50,000 per month. Gross Domestic Product (“GDP”) growth in the second quarter of 2010 decelerated to 1.6% annualized. In July testimony, Federal Reserve Chairman Bernanke referred to an “unusually uncertain” outlook, exactly what investors didn’t want to hear and three weeks later the Federal Open Market Committee formally downgraded its assessment for the U.S. economy. Record low Treasury bond yields in the U.S., Germany and the U.K. in August were compelling evidence to some commentators that developed economies were on the cusp of a second recession.

 

China’s version of a recession was to grow at “only” 9.1% in 2009. In response, the government instructed the banks to expand lending. They did so and first quarter GDP growth rebounded to 11.9%. But inflation picked up and a housing bubble developed. The authorities quickly back-pedaled and repeatedly raised banks’ reserve ratio requirements while tightening the rules on mortgage issuance. Second quarter GDP growth slipped to 10.3% and by the end of August the official Chinese manufacturing purchasing managers suggested the slowest activity in 17 months. The unofficial version compiled by HSBC signaled contraction.

 

In the Eurozone, default on billions of euro of Greece’s maturing bonds loomed. Amid downgrades, ballooning yields, fears of contagion and doubts about the viability of the euro itself, Eurozone countries dithered until, at last in May, finance ministers and the International Monetary Fund agreed on a Financial Stabilization “mechanism” funded with up to €750 billion. The European Central Bank (“ECB”) started buying the worst-affected countries’ sovereign debt, much of it held in the vulnerable European banking system. The new mechanism and positive results from some rather soft stress testing on banks in July seemed to calm nerves. But uncertainty remained: August ended with a gaping 9.48% spread between the yields on Greek and German 10-year bonds.

 

U.S. equities, represented by the S&P 500^® Index including dividends, fell 4.04% in the first half of the fiscal year. Early economic data were, on balance, favorable, with stock prices also supported by strong earnings reports. First quarter operating earnings per share for S&P 500^® companies were, on average, about 92% above those for the corresponding quarter of 2009. By April 23, 2010 the index was up over 10% and at the high point for 2010, before factors described above drove investor sentiment and the market back down amid surging volatility.

 

In international markets, the MSCI Japan^® Index sagged 9.72% for the six months through August. Apparently impressive 1.1% quarterly GDP growth in the first quarter was heavily exports-dependent and gave way to a barely perceptible 0.1% in the second, with domestic demand and consumer prices falling. The MSCI Europe ex UK^® Index fell just 0.05%. The sovereign debt trauma subsided after it became clear that the ECB stood behind the banking system, and stress testing on the latter at least revealed no new problems. In the meantime, GDP grew 1.0% in the second quarter. The MSCI UK^® Index slipped 0.61%, but excluding BP would have risen about 2%. Having suffered during the sovereign debt crisis due to the U.K.’s own 11% budget deficit, investors seemed to take heart from the newly elected coalition government’s aggressively austere budget that would reduce the deficit to 3.9% by 2015. Supporting this was the return to profit of most banks and second quarter GDP growth of 1.2%.

 

Parentheses denote a negative number.

 

Past performance does not guarantee future results.  The performance quoted represents past performance. Investment return and principal value of an investment will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The Fund’s performance is subject to change since the period’s end and may be lower or higher than the performance data shown. Please call (800) 992-0180 or log on to www.ingfunds.com to obtain performance data current to the most recent month end.

 

Market Perspective reflects the views of ING’s Chief Investment Risk Officer only through the end of the period, and is subject to change based on market and other conditions.

 

Benchmark Descriptions

 

 

ING Risk Managed Natural Resources Fund

Portfolio Managers’ Report

 

 

Industry Allocation
as of August 31, 2010
(as a percent of net assets)

 

Energy			76.0%
Materials			19.5%
Purchased Option			3.5%
Other Assets and Liabilities – Net*			1.0%
Net Assets			100.0%
* Includes short-term investments related to ING Institutional Prime Money Market Fund – Class I.
Portfolio holdings are subject to change daily.

 

ING Risk Managed Natural Resources Fund (the “Fund”) seeks total return through a combination of current income, realized capital gains and capital appreciation. The Fund is managed by Paul Zemsky, David Powers, Joseph Bassett, and Jody I. Hrazanek and Frank van Etten, Portfolio Managers, ING Investment Management Co. — the Sub-Adviser.*

 

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its managed assets in the equity securities of, or derivatives linked to the equity securities of, companies that are primarily engaged in owning or developing energy, other natural resources and basic materials, or supplying goods and services to such companies (“Natural Resources Companies”). Equity securities held by the Fund could include common stocks, preferred shares, convertible securities, warrants and depository receipts. The Fund may also invest in exchange traded funds (“ETFs”) comprised primarily of Natural Resources Companies. Additionally, the Fund employs an integrated options “collar” strategy which seeks to partially reduce the exposure of the Fund to declines in the value of the energy and natural resources securities in its portfolio and helps the Fund achieve its investment objective by seeking to generate capital gains in declining markets from the purchase of put options and premiums from writing call options.

 

Equity Portfolio Construction: When selecting equity investments for the Fund, the Sub-Adviser uses fundamental and quantitative research provided by its analysts. The Sub-Adviser normally seeks to identify securities of companies that it believes to be undervalued relative to the value of the energy and natural resources assets they hold or their business fundamentals and outlook. This identification process takes into account current and anticipated economic and financial conditions, as well as company-specific considerations that may cause the issuer’s equity to lead or lag the performance of the broader natural resources investment universe. The Sub-Adviser believes that the best investment candidates are those that feature superior capital allocation, strong competitive position and operations in industries with robust demand. Furthermore, the Sub-Adviser favors companies that can grow their production rather than those that simply rely upon strengthening commodity prices to improve their earnings outlooks. In constructing the portfolio, the Sub-Adviser takes into account the objectives of the Fund’s collar strategy and the instruments through which it is implemented. Under normal market conditions, the Fund generally holds approximately 130 equity securities in its portfolio.

 

“Collar” Strategy: Under normal market conditions, the Fund seeks to manage risk by employing an integrated options collar strategy. The Fund’s collar strategy includes: purchasing put options and writing call options on energy and materials indices (“Resource Indices”) and/or ETFs, correlated with the Fund’s portfolio, or securities held in the Fund’s portfolio. Under normal market conditions, the Fund generally purchases put options approximately 5% “out-of-the-money,” usually on a three-month basis and for an amount approximating 100% of the value of the Fund’s underlying assets. The Fund usually writes call options “at-the-money” or “near-to-the-money,” usually on a one-month basis and for an amount equal to 50-100% of the value of the Fund’s underlying assets. The Fund’s collar strategy seeks to partially reduce the exposure of the Fund to declines in the value of energy and natural resources securities in its portfolio, while simultaneously generating capital gains in declining markets from the purchase of put options and premiums from writing call options to help the Fund achieve its total return investment objective. Put options may be financed by a portion of the premiums received by the Fund from the sale of call options. The Fund may purchase put options and write call options on Resource Indices and/or ETFs including, but not limited to the Energy Select Sector Index and the Materials Select Sector Index^® (each a “Sector Index” and collectively, the “Sector Indices”), and/or the Energy Select Sector SPDR^® Fund and the Materials Select Sector SPDR^® Fund (each a “SPDR^® Fund” and collectively, the “SPDR^® Funds”). The collar strategy may be executed primarily in over-the-counter markets with major international banks, broker-dealers and financial institutions. Under certain market conditions, the Fund may deviate from its “collar strategy” and may elect not to buy puts or sell calls.

 

Top Ten Holdings
as of August 31, 2010
(as a percent of net assets)

 

ExxonMobil Corp.			13.3	%
Chevron Corp.			9.1	%
Schlumberger Ltd.			6.2	%
ConocoPhillips			5.0	%
Apache Corp.			2.8	%
Occidental Petroleum Corp.			2.6	%
Devon Energy Corp.			2.4	%
Halliburton Co.			1.9	%
National Oilwell Varco, Inc.			1.8	%
Hess Corp.			1.6	%

 

Portfolio holdings are subject to change daily.

 

 

ING Risk Managed Natural Resources Fund

Portfolio Managers’ Report

 

Performance: Based on net asset value (“NAV”) as of August 31, 2010, the Fund provided a total return of (8.18)% for the six month period. This NAV return reflects a decrease in the Fund’s NAV from $15.86 on February 28, 2010 to $13.87 on August 31, 2010. Based on its share price as of August 31, 2010, the Fund provided a total return of (9.94)% for the six month period. This share price return reflects a decrease in its share price from $16.67 on February 28, 2010 to $14.30 on August 31, 2010. A composite of 80% Energy Select Sector Index^® (“IXE”)⁽¹⁾ and 20% Materials Select Sector Index^® (“IXB”)⁽²⁾ returned (6.49)% for the reporting period. The portfolio is designed to generally participate in only a part of an upside of the market and help protect against part of the downside. During the period, the Fund made quarterly total distributions of $0.74 per share, including net investment income of $0.47 per share and a return of capital of $0.27 per share. During the six month period, the Fund reduced its quarterly distribution from $0.382 to $0.363 per quarter, commencing with the distribution paid on July 15, 2010. As of August 31, 2010, the Fund had 22,614,842 shares outstanding.

 

Market Review: Being more exposed to the global economy than the rest of the market, the natural resources sector lagged the broader market during the period as investors pulled back and rotated away from economically sensitive companies. Within energy, early cycle stocks with high exposure to commodity prices, such coal and consumable fuels, and equipment and services companies, were the weakest performers. The drilling subsector was also weak due to the effects of the spill at the BP-operated Macondo oil well in the Gulf of Mexico. Within materials too, the more highly exposed sectors underperformed the most, with construction materials and aluminum being the weakest sub-sectors during the period.

 

Equity Portfolio: In order to implement the collar strategy, the Fund manages about 70% of the value of the underlying equity portfolio in a risk-managed style. To reduce basis risk between the portfolio and the collar, the portfolio generally holds the securities in the energy and materials indices in which the collar is implemented and the portfolio weights for stocks reflect index weights. For the reporting period, this sleeve of the portfolio performed roughly in line with the reference index.

 

The actively managed equity portion (no collar strategy) of the Fund outperformed the reference index for the period. The Fund’s positions in companies that were sensitive to the global recovery were unfavorable due to the strong pullback and risk aversion that characterized the market during the reporting period. In particular within energy, our picks among exploration and production companies were unfavorable for the portfolio. Within materials, the Fund did not own certain gold companies, which was unfavorable to returns; investors fled to gold as a safe haven in reaction to the recent European credit turmoil and bleak growth outlook for the United States. Selection in the coal and consumable fuels sub-sector and storage and transportation companies was favorable during the period.

 

Option Portfolio: For the period, the Fund’s collar strategy had a significantly negative impact on relative returns. The collar strategy seeks to exploit the high volatility of the natural resources sector — it attempts to protect the Fund from large NAV declines while seeking to generate premiums and retain some potential for upside appreciation.

 

The Fund purchases put options and writes call options on the IXE and IXB indexes to implement its collar. Put options were held against 100% of the value of the underlying equity portfolio, with strike prices at roughly 5% out of the money with expiration dates of about three months at inception. The Fund’s call coverage generally consisted of options written at or near the money and expirations of about one month. During this period, the puts negatively impacted performance as most settled out-of-the-money. Call options contributed positively to performance and added to total returns during the period.

 

Current Strategy & Outlook: For the actively managed equity portion, we continue to believe the long-term case for commodities remains intact and will be driven by industrialization and urbanization trends in emerging economies, and the need for infrastructure spending globally. We are cautiously optimistic about the economy; nevertheless, the current global financial stress has caused a longer than estimated interruption in this secular theme.

 

Volatility spiked upward from its April lows, and then stabilized higher at the end of the period. Current volatility levels remains high, indicating continued opportunities for attractive call writing.

 

Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Performance data represents past performance and is no guarantee of future results.

 

An index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index.

STATEMENT OF ASSETS AND LIABILITIES as of August 31, 2010 (Unaudited)

 

 

See Accompanying Notes to Financial Statements

STATEMENT OF OPERATIONS for the six months ended August 31, 2010 (Unaudited)

 

 

See Accompanying Notes to Financial Statements

STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)

 

 

See Accompanying Notes to Financial Statements

ING Risk Managed Natural Resources Fund Financial Highlights (Unaudited)

 

Selected data for a share of beneficial interest outstanding throughout each year or period.

 

 

 

 

See Accompanying Notes to Financial Statements

NOTES TO FINANCIAL STATEMENTS as of August 31, 2010 (Unaudited)

 

 

NOTE 1 — ORGANIZATION

 

ING Risk Managed Natural Resources Fund (the “Fund”) is a non-diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund is organized as a Delaware statutory trust.

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

 

The following significant accounting policies are consistently followed by the Fund in the preparation of its financial statements, and such policies are in conformity with U.S. generally accepted accounting principles for investment companies.

 

A. Security Valuation. Investments in equity securities traded on a national securities exchange are valued at the last reported sale price. Securities reported by NASDAQ are valued at the NASDAQ official closing prices. Securities traded on an exchange or NASDAQ for which there has been no sale and equity securities traded in the over-the-counter-market are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at that time. Debt securities with more than 60 days to maturity are valued using matrix pricing methods determined by an independent pricing service which takes into consideration such factors as yields, maturities, liquidity, ratings and traded prices in similar or identical securities. Securities for which valuations are not readily available from an independent pricing service may be valued by brokers which use prices provided by market makers or estimates of fair market value obtained from yield data relating to investments or securities with similar characteristics. Investments in open-end mutual funds are valued at the net asset value. Investments in securities of sufficient credit quality maturing 60 days or less from date of acquisition are valued at amortized cost which approximates fair value.

 

Securities and assets for which market quotations are not readily available (which may include certain restricted securities that are subject to limitations as to their sale) are valued at their fair values, as defined by the 1940 Act, and as determined in good faith by or under the supervision of the Fund’s Board of Trustees (“Board”), in accordance with methods that are specifically authorized by the Board. Securities traded on exchanges, including foreign exchanges, which close earlier than the time that the Fund calculates its net asset value (“NAV”) may also be valued at their fair values, as defined by the 1940 Act and as determined in good faith by or under the supervision of the Board, in accordance with methods that are specifically authorized by the Board. The value of a foreign security traded on an exchange outside the United States is generally based on its price on the principal foreign exchange where it trades as of the time the Fund determines its NAV or if the foreign exchange closes prior to the time the Fund determines its NAV, the most recent closing price of the foreign security on its principal exchange. Trading in certain non-U.S. securities may not take place on all days on which the NYSE Euronext (“NYSE”) is open. Further, trading takes place in various foreign markets on days on which the NYSE is not open. Consequently, the calculation of the Fund’s NAV may not take place contemporaneously with the determination of the prices of securities held by the Fund in foreign securities markets. Further, the value of the Fund’s assets may be significantly affected by foreign trading on days when a shareholder cannot purchase or redeem shares of the Fund. In calculating the Fund’s NAV, foreign securities denominated in foreign currency are converted to U.S. dollar equivalents. If an event occurs after the time at which the market for foreign securities held by the Fund closes but before the time that the Fund’s NAV is calculated, such event may cause the closing price on the foreign exchange to not represent a readily available reliable market value quotation for such securities at the time the Fund determines its NAV. In such a case, the Fund will use the fair value of such securities as determined under the Fund’s valuation procedures. Events after the close of trading on a foreign market that could require the Fund to fair value some or all of its foreign securities include, among others, securities trading in the U.S. and other markets, corporate announcements, natural and other disasters, and political and other events. Among other elements of analysis in the determination of a security’s fair value, the Board has authorized the use of one or more independent research services to assist with such determinations. An independent research service may use statistical analyses and quantitative models to help determine fair value as of the time the Fund calculates its NAV. There can be no assurance that such models accurately reflect the behavior of the applicable markets or the effect of the behavior of such markets on the fair value of securities, or that such markets will continue to behave in a fashion that is consistent with such models. Unlike the closing price of a security on an

NOTES TO FINANCIAL STATEMENTS as of August 31, 2010 (Unaudited) (continued)

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)

 

exchange, fair value determinations employ elements of judgment. Consequently, the fair value assigned to a security may not represent the actual value that the Fund could obtain if it were to sell the security at the time of the close of the NYSE. Pursuant to procedures adopted by the Board, the Fund is not obligated to use the fair valuations suggested by any research service, and valuation recommendations provided by such research services may be overridden if other events have occurred or if other fair valuations are determined in good faith to be more accurate. Unless an event is such that it causes the Fund to determine that the closing prices for one or more securities do not represent readily available reliable market value quotations at the time the Fund determines its NAV, events that occur between the time of the close of the foreign market on which they are traded and the close of regular trading on the NYSE will not be reflected in the Fund’s NAV.

 

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

 

Fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than quoted prices for an asset or liability that are observable are classified as “Level 2” and unobservable inputs, including the sub-adviser’s judgment about the assumptions that a market participant would use in pricing an asset or liability are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Short-term securities of sufficient credit quality which are valued at amortized cost, which approximates fair value, are generally considered to be Level 2 securities under applicable accounting rules. A table summarizing the Fund’s investments under these levels of classification is included following the Summary Portfolio of Investments.

 

For the six months ended August 31, 2010, there have been no significant changes to the fair valuation methodologies.

 

B. Security Transactions and Revenue Recognition. Security transactions are recorded on the trade date. Realized gains or losses on sales of investments are calculated on the identified cost basis. Interest income is recorded on the accrual basis. Premium amortization and discount accretion are determined using the effective yield method. Dividend income is recorded on the ex-dividend date, or in the case of some foreign dividends, when the information becomes available to the Fund.

 

C. Foreign Currency Translation. The books and records of the Fund are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

 

 

Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities, which are subject to foreign withholding tax upon disposition, liabilities are recorded on the Statement of Assets and Liabilities for the estimated tax withholding based on the securities current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of

NOTES TO FINANCIAL STATEMENTS as of August 31, 2010 (Unaudited) (continued)

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)

 

dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at period end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, revaluation of currencies and future adverse political and economic developments which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and U.S. government securities.

 

D. Distributions to Shareholders. The Fund intends to make quarterly distributions from its cash available for distribution, which consists of the Fund’s dividends and interest income after payment of Fund expenses, net option premiums and net realized and unrealized gains on investments. At least annually, the Fund intends to distribute all or substantially all of its net realized capital gains. Distributions are recorded on the ex-dividend date. Distributions are determined annually in accordance with federal tax principles, which may differ from U.S. generally accepted accounting principles for investment companies.

 

The tax treatment and characterization of the Fund’s distributions may vary significantly from time to time depending on whether the Fund has gains or losses on the call options written on its portfolio versus gains or losses on the equity securities in the portfolio. Each quarter, the Fund will provide disclosures with distribution payments made that estimate the percentages of that distribution that represent net investment income, other income or capital gains, and return of capital, if any. The final composition of the tax characteristics of the distributions cannot be determined with certainty until after the end of the Fund’s tax year, and will be reported to shareholders at that time. A significant portion of the Fund’s distributions may constitute a return of capital. The amount of quarterly distributions will vary, depending on a number of factors. As portfolio and market conditions change, the rate of dividends on the common shares will change. There can be no assurance that the Fund will be able to declare a dividend in each period.

 

E. Federal Income Taxes. It is the policy of the Fund to comply with the requirements of subchapter M of the Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of its net investment income and any net realized capital gains to its shareholders. Therefore, a federal income tax or excise tax provision is not required. Management has considered the sustainability of the Fund’s tax positions taken on federal income tax returns for all open tax years in making this determination. No capital gain distributions shall be made until the capital loss carryforwards have been fully utilized or expire.

 

F. Use of Estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

 

G. Risk Exposures and the use of Derivative Instruments. The Fund’s investment objectives permit the Fund to enter into various types of derivatives contracts, including, but not limited to, forward foreign currency exchange contracts and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase or decrease the level of risk, or change the level or types of exposure to market risk factors. This may allow the Fund to pursue its objectives more quickly and efficiently, than if it were to make direct purchases or sales of securities capable of affecting a similar response to market factors.

 

Market Risk Factors. In pursuit of its investment objectives, the Fund may seek to use derivatives to increase or decrease its exposure to the following market risk factors:

 

Credit Risk. Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.

 

Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.

NOTES TO FINANCIAL STATEMENTS as of August 31, 2010 (Unaudited) (continued)

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.

 

Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer durations, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter durations.

 

Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions.

 

The use of these strategies involves certain special risks, including a possible imperfect correlation, or even no correlation, between price movements of derivative instruments and price movements of related investments. While some strategies involving derivative instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in related investments or otherwise, due to the possible inability of the Fund to purchase or sell a portfolio security at a time that otherwise would be favorable or the possible need to sell a portfolio security at a disadvantageous time because the Fund is required to maintain asset coverage or offsetting positions in connection with transactions in derivative instruments. Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. Associated risks can be different for each type of derivative and are discussed by each derivative type in the following notes.

 

Counterparty Credit Risk and Credit Related Contingent Features. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that it believes to be creditworthy at the time of the transaction. To reduce this risk, the Fund generally enters into master netting arrangements, established within the Fund’s International Swap and Derivatives Association, Inc. (“ISDA”) Master Agreements (“Master Agreements”). These agreements are with select counterparties and they govern transactions, including certain over-the-counter (“OTC”) derivative and forward foreign currency contracts, entered into by the Fund and the counterparty. The Master Agreements maintain provisions for general obligations, representations, agreements, collateral, and events of default or termination. The occurrence of a specified event of termination may give a counterparty the right to terminate all of its contracts and affect settlement of all outstanding transactions under the applicable Master Agreement.

 

The Fund may also enter into collateral agreements with certain counterparties to further mitigate OTC derivative and forward foreign currency contracts. Subject to established minimum levels, collateral is generally determined based on the net aggregate unrealized gain or loss on contracts with a certain counterparty. Collateral pledged to the Fund is held in a segregated account by a third-party agent and can be in the form of cash or debt securities issued by the U.S. government or related agencies.

 

The Fund’s maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain in excess of any collateral pledged by the counterparty to the Fund. For

NOTES TO FINANCIAL STATEMENTS as of August 31, 2010 (Unaudited) (continued)

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)

 

purchased OTC options, the Fund bears the risk of loss in the amount of the premiums paid and the change in market value of the options should the counterparty not perform under the contracts. As of August 31, 2010, the total value of purchased OTC options subject to counterparty credit risk was $11,212,074. The counterparty did not post any collateral to the Fund at period end.

 

The Fund has credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s NAV, which could cause the Fund to accelerate payment of any net liability owed to the counterparty. The contingent features are established within the Fund’s Master Agreements.

 

Written options by the Fund do not give rise to counterparty credit risk, as written options obligate the Fund to perform and not the counterparty. As of August 31, 2010, the total value of written OTC call options subject to Master Agreements in a net liability position was $937,583. If a contingent feature had been triggered, the Fund could have been required to pay this amount in cash to its counterparties. The Fund did not hold or post collateral for its open written OTC call options at year end.

 

H. Options Contracts. The Fund may purchase put and call options and may write (sell) put options and covered call options. The premium received by the Fund upon the writing of a put or call option is included in the Statement of Assets and Liabilities as a liability which is subsequently marked-to-market until it is exercised or closed, or it expires. The Fund will realize a gain or loss upon the expiration or closing of the option contract. When an option is exercised, the proceeds on sales of the underlying security for a written call option or purchased put option or the purchase cost of the security for a written put option or a purchased call option is adjusted by the amount of premium received or paid. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. Risks may also arise from an illiquid secondary market or from the inability of counterparties to meet the terms of the contract.

 

Under normal market conditions, the Fund will seek to manage risk by employing an integrated options “collar” strategy. The Fund’s collar strategy will include purchasing put options and writing call options on Resource Indices and/or Exchange Traded Funds, correlated with the Fund’s portfolio, or securities held in the Fund’s portfolio. Under normal market conditions, the Fund will generally purchase put options approximately 5% “out-of-the-money,” usually on a three-month basis and for an amount approximating 100% of the value of the Fund’s underlying assets. The Fund will usually write call options “at-the-money” or “near-to-the-money,” usually on a one-month basis and for an amount equal to 50-100% of the value of the Fund’s underlying assets. The Fund’s collar strategy seeks to partially reduce the exposure of the Fund to declines in the value of the securities of Natural Resources Companies in its portfolio, while simultaneously generating capital gains from the purchase of put options and premiums from writing call options to help the Fund achieve its total return investment objective. Put options will be financed by a portion of the premiums received by the Fund from the sale of call options.

 

Please refer to Note 6 for the volume of both purchased and written option activity during the six months ended August 31, 2010.

 

I. Indemnifications. In the normal course of business, the Fund may enter into contracts that provide certain indemnifications. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated; however, based on experience, management considers the risk of loss from such claims remote.

 

NOTE 3 — INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES

 

ING Investments, LLC (“ING Investments” or the “Investment Adviser”), an Arizona limited liability company, is the Investment Adviser of the Fund. The Fund pays the Investment Adviser for its services under the investment management agreement (“Management Agreement”), a fee, payable

NOTES TO FINANCIAL STATEMENTS as of August 31, 2010 (Unaudited) (continued)

 

NOTE 3 — INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES (continued)

 

monthly, based on an annual rate of 1.00% of the Fund’s average daily managed assets. For purposes of the Management Agreement, managed assets are defined as the Fund’s average daily gross asset value, minus the sum of the Fund’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 Fund and the liquidation preference of any outstanding preferred shares). As of August 31, 2010, there were no preferred shares outstanding.

 

The Investment Adviser entered into a sub-advisory agreement (“Sub-Advisory Agreement”) with ING Investment Management Co. (“ING IM”). Subject to policies as the Board or the Investment Adviser might determine, ING IM manages the Fund’s assets in accordance with the Fund’s investment objectives, policies and limitations.

 

ING Funds are permitted to invest end-of-day cash balances into ING Institutional Prime Money Market Fund. Investment management fees paid by the Fund will be reduced by an amount equal to the management fees paid indirectly to the ING Institutional Prime Money Market Fund with respect to assets invested by the Fund. For the six months ended August 31, 2010, the Fund waived $1,917 of such management fees. These fees are not subject to recoupment.

 

ING Funds Services, LLC (the “Administrator”) serves as Administrator to the Fund. The Fund pays the Administrator for its services a fee based on an annual rate of 0.10% of the Fund’s average daily managed assets. The Investment Adviser, ING IM, and the Administrator are indirect, wholly-owned subsidiaries of ING Groep N.V. (“ING Groep”). ING Groep is a global financial institution of Dutch origin offering banking, investments, life insurance and retirement services.

 

ING Groep has adopted a formal restructuring plan that was approved by the European Commission in November 2009 under which the ING life insurance businesses, including the retirement services and investment management businesses, which include the Investment Adviser and its affiliates, would be divested by ING Groep by the end of 2013. While there can be no assurance that it will be carried out, the restructuring plan presents certain risks, including uncertainty about the effect on the businesses of the ING entities that service the Fund and potential termination of the Fund’s existing advisory agreement, which may trigger the need for shareholder approval of new agreements.

 

NOTE 4 — OTHER TRANSACTIONS WITH AFFILIATED AND RELATED PARTIES

 

As of August 31, 2010, the Fund had the following amounts recorded as payable to affiliates on the accompanying Statement of Assets and Liabilities:

 

 

The Fund has adopted a Retirement Policy (“Policy”) covering independent trustees of the Fund who were trustees on or before May 9, 2007, and who will have served as an independent trustee for at least five years as of the date of their retirement (as that term is defined in the Policy). Benefits under the Policy are based on an annual rate as defined in the Policy.

 

The Fund has adopted a Deferred Compensation Plan (the “Plan”), which allows eligible non-affiliated trustees as described in the Plan to defer the receipt of all or a portion of the trustees fees payable. Amounts deferred are treated as though invested in various “notional” funds advised by ING Investments until distribution in accordance with the Plan.

 

NOTE 5 — PURCHASES AND SALES OF INVESTMENT SECURITIES

 

The cost of purchases and proceeds from sales of investments for the six months ended August 31, 2010, excluding short-term securities, were $43,607,196 and $66,060,414, respectively.

NOTES TO FINANCIAL STATEMENTS as of August 31, 2010 (Unaudited) (continued)

 

NOTE 6 — PURCHASED AND WRITTEN OPTIONS

 

Transactions in both purchased and written options for the six months ended August 31, 2010 were as follows:

 

Transactions in purchased OTC put options on indices were as follows:

 

 

Transactions in written OTC call options on indices were as follows:

 

 

NOTE 7 — CONCENTRATION OF INVESTMENT RISKS

 

All mutual funds involve risk — some more than others — and there is always the chance that you could lose money or not earn as much as you hope. The Fund’s risk profile is largely a factor of the principal securities in which it invests and investment techniques that it uses. For more information regarding the types of securities and investment techniques that may be used by the Fund and its corresponding risks, see the Fund’s most recent Prospectus and/or the Statement of Additional Information.

 

Foreign Securities and Emerging Markets. The Fund makes significant investments in foreign securities and may invest up to 20% of its managed assets, measured at the time of investment, in securities issued by companies located in countries with emerging markets. Investments in foreign securities may entail risks not present in domestic investments. Since investments in securities are denominated in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, as well as from movements in currency, security value and interest rates, all of which could affect the market and/or credit risk of the investments. The risks of investing in foreign securities can be intensified in the case of investments in issuers located in countries with emerging markets.

 

Leverage. Although the Fund has no current intention to do so, the Fund is authorized to utilize leverage through the issuance of preferred shares and/or borrowings, including the issuance of debt securities. The Fund also may enter into a working capital facility to facilitate its collar strategy. In the event that the Fund determines in the future to utilize investment leverage, there can be no assurance that such a leveraging strategy will be successful during any period in which it is employed.

 

Non-Diversified and Natural Resources Companies. The Fund may be subject to large price volatility due to non-diversification and concentration in Natural Resources Companies. Securities of such companies may be subject to broad price fluctuations, reflecting volatility of energy and basic materials’ prices and possible instability of supply of various natural resources. Because many Natural Resources Companies have significant operations in many countries worldwide, the Fund’s portfolio will be more exposed than a more diversified portfolio to unstable political, social and economic conditions, including expropriation and disruption of licenses or operations. This means that the Fund’s portfolio of Natural Resources Companies may be more exposed to price volatility, liquidity and other risks that accompany an investment in equities of foreign companies than portfolios of international equities generally.

 

NOTE 8 — CAPITAL SHARES

 

Transactions in capital shares and dollars were as follows:

 

NOTES TO FINANCIAL STATEMENTS as of August 31, 2010 (Unaudited) (continued)

 

NOTE 8 — CAPITAL SHARES (continued)

 

Share Repurchase Program

 

Effective December 2008, the Board authorized an open-market share repurchase program pursuant to which the Fund could purchase, over the period ending December 31, 2009, up to 10% of its stock, in open-market transactions. There was no assurance that the Fund would purchase shares at any particular discount level or in any particular amounts. The share repurchase program sought to enhance shareholder value by purchasing shares trading at a discount from their NAV per share, in an attempt to reduce or eliminate the discount or to increase the NAV per share of the applicable remaining shares of the Fund.

 

For the year ended February 28, 2010, the Fund repurchased 127,550 shares, representing approximately 0.6% of the Fund’s outstanding shares for a net purchase price of $1,564,216 (including commissions of $3,826). Shares were repurchased at a weighted-average discount from NAV per share of 18.91% and a weighted-average price per share of $12.23.

 

 

The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles for investment companies. These book/tax differences may be either temporary or permanent. Permanent differences are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences are not reclassified. Key differences include the treatment of short-term capital gains, foreign currency transactions, income from passive foreign investment corporations and wash sale deferrals. Distributions in excess of net investment income and/or net realized capital gains for tax purposes are reported as return of capital.

 

Dividends paid by the Fund from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders.

 

The tax composition of dividends and distributions in the current period will not be determined until after the Fund’s tax year-end of December 31, 2010. The tax composition of dividends and distributions as of the Fund’s most recent tax year-end was as follows:

 

 

The tax-basis components of distributable earnings and the expiration dates of the capital loss carryforwards which may be used to offset future realized capital gains for federal income tax purposes as of the tax year ended December 31, 2009 were:

 

 

The Fund’s major tax jurisdictions are federal and Arizona. The earliest tax year that remains subject to examination by these jurisdictions is the Fund’s initial tax year of 2006.

 

As of August 31, 2010, no provision for income tax is required in the Fund’s financial statements as a result of tax positions taken on federal and state income tax returns for open tax years. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state department of revenue.

 

 

Distributions:  Subsequent to August 31, 2010, the Fund made a distribution of:

 

 

Each quarter, the Fund will provide disclosures with distribution payments made that estimate the percentages of that distribution that represent net investment income, capital gains, and return of capital, if any. At the Fund’s tax year end, the Fund may re-characterize payments over the course of the year across ordinary income, capital gains, and return of capital, if any. A significant portion of the quarterly distribution payments made by the Fund may constitute a return of capital.

NOTES TO FINANCIAL STATEMENTS as of August 31, 2010 (Unaudited) (continued)

 

 

The Fund has evaluated events occurring after the Statement of Assets and Liabilities date (subsequent events) to determine whether any subsequent events necessitated adjustment to or disclosure in the financial statements. Other than the above, no such subsequent events were identified.

SUMMARY PORTFOLIO OF INVESTMENTS

ING Risk Managed Natural
Resources Fund

as of August 31, 2010 (Unaudited)

 

 

See Accompanying Notes to Financial Statements

SUMMARY PORTFOLIO OF INVESTMENTS

ING Risk Managed Natural
Resources Fund

as of August 31, 2010 (Unaudited) (continued)

 

 

Gross Unrealized Appreciation		$	36,579,342
Gross Unrealized Depreciation			(26,905,543	)
Net Unrealized Appreciation		$	9,673,799

 

Fair Value Measurements^

 

The following is a summary of the fair valuations according to the inputs used as of August 31, 2010 in valuing the Fund’s assets and liabilities:

 

 

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund’s assets and liabilities during the period ended August 31, 2010:

 

 

See Accompanying Notes to Financial Statements

SUMMARY PORTFOLIO OF INVESTMENTS

ING Risk Managed Natural
Resources Fund

as of August 31, 2010 (Unaudited) (continued)

 

As of August 31, 2010, total change in unrealized gain (loss) on Level 3 securities still held at period end and included in the change in net assets was $(1,193,104).

 

 

Transfers in or out of Level 3 represents either the beginning value (for transfers in), or the ending value (for transfers out) of any security or derivative instrument where a change in the pricing level occurred from the beginning to the end of the period. The Fund’s policy is to recognize transfers between levels at the end of the reporting period.

 

Written OTC Call Options

 

 

A summary of derivative instruments by primary risk exposure is outlined in the following tables.

 

The fair value of derivative instruments as of August 31, 2010 was as follows:

 

 

 

The effect of derivative instruments on the Fund’s Statement of Operations for the six months ended August 31, 2010 was as follows:

 

 

 

 

See Accompanying Notes to Financial Statements

SUMMARY PORTFOLIO OF INVESTMENTS

ING Risk Managed Natural
Resources Fund

as of August 31, 2010 (Unaudited) (continued)

 

 

Supplemental Option Information (Unaudited)

 

 

 

See Accompanying Notes to Financial Statements

SHAREHOLDER MEETING INFORMATION (Unaudited)

 

A special meeting of shareholders of the ING Risk Managed Natural Resources Fund was held June 22, 2010, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258.

 

Proposal:

 

To elect three members of the Board of Trustees to represent the interests of the holders of Common Shares of the Fund, with all three individuals to serve as Class I Trustees, for a term of three-years, and until the election and qualification of their successors.

 

ADDITIONAL INFORMATION (Unaudited)

 

During the period, there were no material changes in the Fund’s investment objective or policies that were not approved by the shareholders or the Fund’s charter or by-laws or in the principal risk factors associated with investment in the Fund. Effective April 19, 2010, Joseph Bassett replaced Chris Corapi as an individual primarily responsible for the day to day management of the Fund’s portfolio. Effective September 30, 2010, Frank van Etten was added an individual primarily responsible for the day-to-day management of the Fund’s portfolio.

 

During the period, the Fund reduced its quarterly distribution from $0.382 to $0.363, commencing with the distribution paid on July 15, 2010.

 

Dividend Reinvestment Plan

 

Unless the registered owner of Common Shares elects to receive cash by contacting BNY (the “Plan Agent”), all dividends declared on Common Shares of the Fund will be automatically reinvested by the Plan Agent for shareholders in additional Common Shares of the Fund through the Fund’s Dividend Reinvestment Plan (the “Plan”). Shareholders who elect not to participate in the Plan will receive all dividends and other distributions in cash paid by check mailed directly to the shareholder of record (or, if the Common Shares are held in street or other nominee name, then to such nominee) by the Plan Agent. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Plan Agent prior to the dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution. Some brokers may automatically elect to receive cash on your behalf and may re-invest that cash in additional Common Shares of the Fund for you. If you wish for all dividends declared on your Common Shares of the Fund to be automatically reinvested pursuant to the Plan, please contact your broker.

 

The Plan Agent will open an account for each Common Shareholder under the Plan in the same name in which such Common Shareholder’s Common Shares are registered. Whenever the Fund declares a dividend or other distribution (together, a “Dividend”) payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in Common Shares. The Common Shares will be acquired by the Plan Agent for the participants’ accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized Common Shares from the Fund (“Newly Issued Common Shares”) or (ii) by purchase of outstanding Common Shares on the open market (“Open-Market Purchases”) on the NYSE or elsewhere. Open-market purchases and sales are usually made through a broker affiliated with the Plan Agent.

 

If, on the payment date for any Dividend, the closing market price plus estimated brokerage commissions per Common Share is equal to or greater than the net asset value per Common Share, the Plan Agent will invest the Dividend amount in Newly Issued Common Shares on behalf of the participants. The number of Newly Issued Common Shares to be credited to each participant’s account will be determined by dividing the dollar amount of the Dividend by the net asset value per Common Share on the payment date; provided that, if the net asset value is less than or equal to 95% of the closing market value on the payment date, the dollar amount of the Dividend will be divided by 95% of the closing market price per Common Share on the payment date. If, on the payment date for any Dividend, the net asset value per Common Share is greater than the closing market value plus estimated brokerage commissions, the Plan Agent will invest the Dividend amount in Common Shares acquired on behalf of the participants in Open-Market Purchases. In the event of a market discount on the payment date for any Dividend, the Plan Agent will have until the last business day before the next date on which the Common Shares trade on an “ex-dividend” basis or 30 days after the payment date for such Dividend, whichever is sooner (the “Last Purchase Date”), to invest the Dividend amount in Common Shares acquired in Open-Market Purchases.

 

It is contemplated that the Fund will pay quarterly Dividends. Therefore, the period during which Open-Market Purchases can be made will exist only from the payment date of each Dividend through the date before the next “ex-dividend” date, which typically will be approximately ten days.

 

If, before the Plan Agent has completed its Open-Market Purchases, the market price per common share exceeds the net asset value per Common Share, the average per Common Share purchase price paid by the Plan Administrator may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than if the Dividend had been paid in Newly Issued Common Shares on the Dividend payment date. Because of the foregoing difficulty with

ADDITIONAL INFORMATION (Unaudited) (continued)

 

respect to Open-Market Purchases, the Plan provides that if the Plan Agent is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent will cease making Open-Market Purchases and will invest the un-invested portion of the Dividend amount in Newly Issued Common Shares at the net asset value per common share at the close of business on the Last Purchase Date provided that, if the net asset value is less than or equal to 95% of the then current market price per Common Share, the dollar amount of the Dividend will be divided by 95% of the market price on the payment date.

 

The Plan Agent maintains all shareholders’ accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common Shares in the account of each Plan participant will be held by the Plan Agent on behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instructions of the participants.

 

In the case of shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholder’s name and held for the account of beneficial owners who participate in the Plan.

 

There will be no brokerage charges with respect to Common Shares issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with Open-Market Purchases. The automatic reinvestment of Dividends will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such Dividends. Participants that request a partial or full sale of shares through the Plan Agent are subject to a $15.00 sales fee and a $0.10 per share brokerage commission on purchases or sales, and may be subject to certain other service charges.

 

The Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.

 

All questions concerning the Plan should be directed to the Fund’s Shareholder Service Department at (800) 992-0180.

 

KEY FINANCIAL DATES — CALENDAR 2010 DISTRIBUTIONS:

 

 

Record date will be two business days after each Ex-Dividend Date. These dates are subject to change.

 

Stock Data

 

The Fund’s common shares are traded on the NYSE (Symbol: IRR).

 

Repurchase of Securities by Closed-End Companies

 

In accordance with Section 23(c) of the 1940 Act, and Rule 23c-1 under the 1940 Act the Fund may from time to time purchase shares of beneficial interest of the Fund in the open market, in privately negotiated transactions and/or purchase shares to correct erroneous transactions.

 

Number of Shareholders

 

The approximate number of record holders of Common Stock as of August 31, 2010 was 17,653, which does not include beneficial owners of shares held in the name of brokers or other nominees.

 

Certifications

 

In accordance with Section 303A.12 (a) of the New York Stock Exchange Listed Company Manual, the Fund’s CEO submitted the Annual CEO Certification on May 28, 2010 certifying that he was not aware, as of that date, of any violation by the Fund of the NYSE’s Corporate governance listing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund’s principal executive and financial officers have made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q, relating to, among other things, the Fund’s disclosure controls and procedures and internal controls over financial reporting.

 

Investment Adviser

ING Investments, LLC

7337 East Doubletree Ranch Road, Suite 100

Scottsdale, Arizona 85258

 

Administrator

ING Funds Services, LLC

7337 East Doubletree Ranch Road, Suite 100

Scottsdale, Arizona 85258

 

Transfer Agent

BNY Mellon Shareowner Services

480 Washington Boulevard

Jersey City, NJ 07310-1900

 

Custodian

The Bank of New York Mellon

One Wall Street

New York, New York 10286

 

Legal Counsel

Dechert LLP

1775 I Street, N.W.

Washington, D.C. 20006

 

Toll-Free Shareholder Information

Call us from 9:00 a.m. to 7:00 p.m. Eastern time on any business day for account or other information, at (800)-992-0180

PRSAR-UIRR                  (0810-102210)

 

		PORTFOLIO OF INVESTMENTS
ING Risk Managed Natural Resources Fund		as of August 31, 2010 (Unaudited)

Shares														Value
COMMON STOCK:							95.5	%
				Energy:							76.0	%
	39,290	@		Alpha Natural Resources, Inc.										$	1,458,838
	105,050			Anadarko Petroleum Corp.											4,831,250
	98,391			Apache Corp.											8,840,432
	88,388			Arch Coal, Inc.											1,989,614
	165,297	@		Australian Worldwide Exploration Ltd.											230,118
	89,771			Baker Hughes, Inc.											3,373,594
	23,500	@		Bill Barrett Corp.											765,160
	35,650			Cabot Oil & Gas Corp.											992,496
	71,617	@		Cal Dive International, Inc.											327,290
	76,324	@		Cameron International Corp.											2,807,197
	103,782			Canadian Natural Resources Ltd.											3,330,364
	136,900			Chesapeake Energy Corp.											2,831,092
	386,832			Chevron Corp.											28,687,461
	1,189,813			China Petroleum & Chemical Corp.											944,811
	298,736			ConocoPhillips											15,662,729
	57,000			Consol Energy, Inc.											1,835,400
	205,000	@		Denbury Resources, Inc.											3,021,700
	125,055			Devon Energy Corp.											7,538,315
	18,000			Diamond Offshore Drilling											1,047,240
	175,450			El Paso Corp.											1,998,376
	86,690			EnCana Corp.											2,383,108
	33,715			Ensco International PLC ADR											1,386,698
	25,900			Ensign Energy Services, Inc.											281,017
	48,750			EOG Resources, Inc.											4,234,913
	22,400			EQT Corp.											730,240
	544,824	S		ExxonMobil Corp.											32,231,788
	157,923			ExxonMobil Corp.											9,342,725
	34,600	@		FMC Technologies, Inc.											2,140,010
	213,721			Halliburton Co.											6,029,070
	16,700			Helmerich & Payne, Inc.											618,568
	100,300			Hess Corp.											5,040,075
	126			Inpex Holdings, Inc.											570,540
	20,174			Lukoil-Spon ADR											1,066,196
	131,600			Marathon Oil Corp.											4,012,484
	52,450			Massey Energy Co.											1,507,938
	23,300	@		McMoRan Exploration Co.											330,627
	73,000			Murphy Oil Corp.											3,909,880
	82,900	@		Nabors Industries Ltd.											1,299,872
	153,525			National Oilwell Varco, Inc.											5,771,005
	104,535			Nexen, Inc.											1,934,943
	37,550			Noble Energy, Inc.											2,620,239
	55,069			OAO Gazprom ADR											1,126,161
	111,950			Occidental Petroleum Corp.											8,181,306
	61,900			Peabody Energy Corp.											2,649,320
	61,700	@		PetroHawk Energy Corp.											932,904
	41,500			Pioneer Natural Resources Co.											2,399,530
	27,600			QEP Resources, Inc.											801,228
	39,550			Range Resources Corp.											1,337,186
	48,850	@		Rowan Cos., Inc.											1,255,934
	35,127			Royal Dutch Shell PLC ADR — Class A											1,863,487
	362,807			Schlumberger Ltd.											19,348,487
	69,900	@		Southwestern Energy Co.											2,287,128
	137,379			Spectra Energy Corp.											2,794,289
	148,970			Suncor Energy, Inc.											4,507,832
	45,400			Sunoco, Inc.											1,529,072
	27,800			Teekay Shipping Corp.											675,818
	70,300			Tesoro Corp.											789,469
	512,900			Thai Oil PCL											722,579
	12,679	@		Transocean Ltd.											645,361
	6,600	@		Unit Corp.											224,862
	124,700			Valero Energy Corp.											1,966,519
	130,150			Williams Cos., Inc.											2,359,620
															238,353,505
				Materials:							19.5	%
	27,350			Air Products & Chemicals, Inc.											2,024,721
	11,200			Airgas, Inc.											736,960
	15,550			AK Steel Holding Corp.											198,108
	23,100			Alamos Gold, Inc.											367,399
	131,700			Alcoa, Inc.											1,344,657
	13,200			Allegheny Technologies, Inc.											537,504
	37,638			Anglo American PLC ADR											670,333
	12,350			Ball Corp.											692,588
	80,165			Barrick Gold Corp.											3,748,515
	15,200			Bemis Co.											438,824
	84,800			Centerra Gold, Inc.											1,190,468
	9,600			CF Industries Holdings, Inc.											888,000
	17,600			Cliffs Natural Resources, Inc.											1,076,944
	43,700	@		Coeur d’Alene Mines Corp.											749,892
	18,900			Domtar Corp.											1,134,378
	145,950			Dow Chemical Co.											3,556,802
	9,750			Eastman Chemical Co.											600,113
	30,350			Ecolab, Inc.											1,438,590
	114,450			EI Du Pont de Nemours & Co.											4,666,127
	9,800			FMC Corp.											610,344
	59,553			Freeport-McMoRan Copper & Gold, Inc.											4,286,625
	41,664			GoldCorp, Inc.											1,842,382
	24,400	@		Harry Winston Diamond Corp.											245,522
	10,900			International Flavors & Fragrances, Inc.											498,021
	129,480			International Paper Co.											2,649,161
	12,200			Kaiser Aluminum Corp.											450,424
	190,200	@		Lundin Mining Corp.											756,270
	23,100			MeadWestvaco Corp.											502,656
	68,900			Monsanto Co.											3,627,585
	75,650			Newmont Mining Corp.											4,638,858
	40,650			Nucor Corp.											1,495,107
	21,900	@		Owens-Illinois, Inc.											548,814
	18,300	@		Pactiv Corp.											587,064
	21,650			PPG Industries, Inc.											1,425,220
	38,650			Praxair, Inc.											3,325,060
	17,684			Rio Tinto PLC ADR											891,804
	22,000			Sealed Air Corp.											451,220
	11,700			Sherwin-Williams Co.											823,446
	16,000			Sigma-Aldrich Corp.											850,720
	49,482			Teck Cominco Ltd. — Class B											1,651,709
	12,950	@		Titanium Metals Corp.											234,654
	38,977			United States Steel Corp.											1,656,913
	16,900			Vulcan Materials Co.											621,244
	27,600			Weyerhaeuser Co.											433,320
															61,165,066
				Total Common Stock ( Cost $279,636,429 )											299,518,571