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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: 811-21786

 

ING Global Advantage and Premium Opportunity Fund

(Exact name of registrant as specified in charter)

 

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

 

The Corporation Trust Company, 1209 Orange Street, Wilmington, DE 19801

(Name and address of agent for service)

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

Date of fiscal year end:                             February 29

Date of reporting period:                          August 31, 2012

 

 

 

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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):

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Semi-Annual Report

August 31, 2012

ING Global Advantage and Premium Opportunity Fund

 

 

		E-Delivery Sign-up – details inside

 

MUTUAL FUNDS

 

 

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TABLE OF CONTENTS

 

 

 

President’s Letter			1
Market Perspective			2
Portfolio Managers’ Report			4
Statement of Assets and Liabilities			6
Statement of Operations			7
Statements of Changes in Net Assets			8
Financial Highlights			9
Notes to Financial Statements			10
Summary Portfolio of Investments			19
Shareholder Meeting Information			25
Additional Information			26

 

		Go Paperless with E-Delivery!
Sign up now for on-line prospectuses, fund reports, and proxy statements. In less than five minutes, you can help reduce paper mail and lower fund costs.   Just go to www.inginvestment.com, click on the E-Delivery icon from the home page, follow the directions and complete the quick 5 Steps to Enroll.   You will be notified by e-mail when these communications become available on the internet. Documents that are not available on the internet will continue to be sent by mail.

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.inginvestment.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.inginvestment.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 Global Advantage and Premium Opportunity Fund (the “Fund”) is a diversified, closed-end management investment company whose shares are traded on the New York Stock Exchange under the symbol “IGA.” The primary objective of the Fund is to provide a high level of income, with a secondary objective of capital appreciation.

The Fund seeks to achieve its investment objectives by investing at least 80% of its managed assets in a diversified global equity portfolio and employing an option strategy of writing index call options equivalent to a significant portion of its equity portfolio. The Fund also hedges most of its foreign currency exposure to seek to reduce volatility of total returns.

For the period ended August 31, 2012, the Fund made quarterly distributions totaling $0.62 per share, characterized as $0.40 per share return of capital and $0.22 per share net investment income.

Based on net asset value (“NAV”), the Fund provided a total return of 2.28% including reinvestments for the period ended August 31, 2012.⁽¹⁾ This NAV return reflects a decrease in the Fund’s NAV from $12.66 on February 29, 2012 to $12.27 on August 31, 2012. Based on its

share price, the Fund provided a total return of 0.65% including reinvestments for the period ended August 31, 2012.⁽²⁾ This share price return reflects a decrease in the Fund’s share price from $11.90 on February 29, 2012 to $11.35 on August 31, 2012.

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 help you grow, protect and enjoy your wealth. 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.inginvestment.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 5, 2012

 

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.inginvestment.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.

 

(1)

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, capital gain distributions and return of capital distributions/allocations, if any, in accordance with the provisions of the Fund’s dividend reinvestment plan.

 

(2)

Total investment return at market value measures the change in the market value of your investment assuming reinvestment of dividends, capital gain distributions and return of capital distributions/allocations, if any, in accordance with the provisions of the Fund’s dividend reinvestment plan.

 

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MARKET PERSPECTIVE:  SIX MONTHS ENDED AUGUST 31, 2012

 

 

 

 

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BENCHMARK DESCRIPTIONS

 

 

 

Index		Description
MSCI World IndexSM		An unmanaged index that measures the performance of over 1,400 securities listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand and the Far East.
Barclays Capital U.S. Aggregate Bond Index		An unmanaged index of publicly issued investment grade U.S. Government, mortgage-backed, asset-backed and corporate debt securities.
Barclays Capital U.S. Corporate Investment Grade Bond Index		An unmanaged index consisting of publicly issued, fixed rate, nonconvertible, investment grade debt securities.
Barclays Capital U.S. Treasury Index		An unmanaged index that includes public obligations of the U.S. Treasury. Treasury bills, certain special issues, such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS and STRIPS, are excluded.
Barclays Capital High Yield Bond — 2% Issuer Constrained Composite Index		An unmanaged index that includes all fixed-income securities having a maximum quality rating of Ba1, a minimum amount outstanding of $150 million, and at least one year to maturity.
S&P 500® Index		An unmanaged index that measures the performance of securities of approximately 500 large-capitalization companies whose securities are traded on major U.S. stock markets.
MSCI Japan® Index		A free float-adjusted market capitalization index that is designed to measure developed market equity performance in Japan.
MSCI Europe ex UK® Index		A free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe, excluding the UK.
MSCI UK® Index		A free float-adjusted market capitalization index that is designed to measure developed market equity performance in the UK.
Chicago Board Options Exchange BuyWrite Monthly Index (“CBOE BuyWrite Monthly Index”)		A passive total return index based on selling the near-term, at-the-money S&P 500® Index call option against the S&P 500® stock index portfolio each month, on the day the current contract expires.
Morgan Stanley Capital International — Europe, Australasia and Far East® Index (“MSCI EAFE® Index”)		An unmanaged index that measures the performance of securities listed on exchanges in Europe, Australasia and the Far East. It includes the reinvestment of dividends net of withholding taxes, but does not reflect fees, brokerage commissions or other expenses of investing.

 

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ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND		PORTFOLIO MANAGERS’  REPORT

 

opportunities for the Fund. Under normal market conditions, the Fund seeks to maintain a target weighting of 60% in U.S. domestic common stocks and not less than 40% in international (ex-U.S.) common stocks.

The Fund’s Integrated Option Strategy: The option strategy of the Fund is designed to seek gains and lower volatility of total returns over a market cycle by writing (selling) index call options on selected indices and/or exchange traded funds (“ETFs”) in an amount equal to approximately 60% to 100% of the value of the Fund’s holdings in common stocks.

Writing index call options involves granting the buyer the right to appreciation of the value of an index above a particular price (the “strike price”) at a particular time. If the purchaser exercises an index call option sold by the Fund, the Fund will pay the purchaser the difference between the cash value of the index and the strike price of the option.

The Fund seeks to generate gains from its portfolio index call option strategy and, to a lesser extent, income from dividends on the common stocks held in the Fund’s portfolio. The extent of call option writing activity depends upon market conditions and the Sub-Adviser’s ongoing assessment of the attractiveness of writing call options on selected indices and/or ETFs. Call options are primarily written in over-the-counter markets with major international banks, broker-dealers and financial institutions. The Fund may also write call options in exchange-listed option markets.

 

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PORTFOLIO MANAGERS’ REPORT		ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND

 

reference index that consists of 60% the S&P 500^® Index and 40% the MSCI EAFE^® Index. For the reporting period, this reference index returned 0.87%. During the period, the Fund made quarterly distributions totaling $0.62 per share, characterized as $0.40 per share return of capital and $0.22 per share net investment income. As of August 31, 2012, the Fund had 18,340,467 shares outstanding.

Overview: It was a remarkably calm late summer; trading volumes dropped almost more than short-term interest rates. Despite little concrete action from policymakers, market worries over the euro crisis faded. In the background the global economic engine continued to hum at an uncomfortably low level, but it seemed that markets noticed that the level of activity was no longer decelerating and started to anticipate a modest rebound in output over the second half of the year.

Equity Portfolio: The domestic equity sleeve underperformed its reference index, the S&P 500^® Index, for the reporting period. Security selection among consumer staples and telecommunications services companies was the biggest drag on performance. Much of that drag, however, was offset by selection within the consumer discretionary, energy, industrial and information technology sectors.

The international equity sleeve also lagged its reference index, the MSCI EAFE^® Index. Selection among materials, utilities and consumer staples detracted the most from results; selection among the consumer discretionary, industrial and financial sectors contributed most to results.

Options Portfolio: The Fund generates premiums and seeks gains by writing (selling) call options on a variety of market indices on a portion of the value of the equity portfolio. During the period, the Fund sold short-maturity options on the S&P 500^® Index, the DJ Eurostoxx 50 Index^®, the Nikkei 225 Index, the FTSE 100 Index^® and the S&P/ASX 200 Index. The construction of the international option portfolio is such that there is a low tracking error with the reference index of the international portion of the equity portfolio, which is the MSCI EAFE^® Index. The strike prices of the traded options were typically at or near the money, and the expiration dates ranged between three and six weeks. We maintained the coverage ratio at approximately 65-70% throughout the period.

In aggregate, the options portfolio contributed to performance for the reporting period. Option positions particularly contributed during the middle of the period when equity markets were weak. Equity volatility, as measured by the VIX Index, was unstable during the period — although the VIX ended the period slightly lower than it began, there were a number of spikes along the way, with a peak in June.

The Fund continued its policy of hedging major foreign currency exposures in order to reduce volatility of NAV returns. These hedges contributed to performance during the period as the U.S. dollar strengthened against a number of the major currencies.

Outlook and Current Strategy: Our strategy uses a quantitative investment process to construct enhanced index portfolios. This process employs multiple, uncorrelated alpha streams and advanced forecasting techniques to determine which stocks to over- and underweight relative to the benchmark. The process seeks to combine the forecasted alpha with estimates of risk and trading costs for each stock to construct a diversified portfolio.

 

*

On September 6, 2012, the Fund’s Board of Trustees approved adding an additional sub-adviser and subsequent changes to the Fund’s investment strategies. Shareholder approval is required to add the new sub-adviser. The shareholder meeting is expected to occur on or about December 20, 2012.

Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. The outlook for this Fund is based only on the outlook of its portfolio managers through the end of this period, and may differ from that presented for other ING Funds. Performance data represents past performance and is no guarantee of future results. Past performance is not indicative of future results. The indices do not reflect fees, brokerage commissions, taxes or other expenses of investing. Investors cannot invest directly in an index.

 

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STATEMENT OF ASSETS AND LIABILITIES AS OF AUGUST 31, 2012 (UNAUDITED)

 

 

 

ASSETS:
Investments in securities at fair value*		$	225,030,481
Short-term investments at fair value**			1,531,235
Total Investments at fair value		$	226,561,716
Cash collateral for futures			73,660
Foreign currencies at value***			316,161
Receivables:
Investments securities sold			3,950
Dividends			590,391
Foreign tax reclaims			134,668
Unrealized appreciation on forward foreign currency contracts			133,793
Prepaid expenses			805
Reimbursement due from manager			6,351
Total assets			227,821,495
LIABILITIES:
Unrealized depreciation on forward foreign currency contracts			1,136,146
Payable for investment management fees			22,908
Payable for administrative fees			19,107
Payable to custodian due to bank overdraft			7,453
Payable for trustee fees			2,419
Other accrued expenses and liabilities			110,264
Written options, at fair value^			1,554,555
Total liabilities			2,852,852
NET ASSETS		$	224,968,643
NET ASSETS WERE COMPRISED OF:
Paid-in capital		$	225,925,004
Distributions in excess of net investment income			(581,371	)
Accumulated net realized loss			(5,711,061	)
Net unrealized appreciation			5,336,071
NET ASSETS		$	224,968,643
*      Cost of investments in securities		$	219,700,978
**    Cost of short-term investments		$	1,531,235
*** Cost of foreign currencies		$	311,307
^      Premiums received on written options		$	2,536,454
Net assets		$	224,968,643
Shares authorized			unlimited
Par value		$	0.01
Shares outstanding			18,340,467
Net asset value and redemption price per share		$	12.27

 

See Accompanying Notes to Financial Statements

 

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STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 31, 2012 (UNAUDITED)

 

 

 

INVESTMENT INCOME:
Dividends, net of foreign taxes withheld*		$	3,528,871
Interest			10,095
Total investment income			3,538,966
EXPENSES:
Investment management fees			846,524
Transfer agent fees			12,250
Administrative service fees			112,869
Shareholder reporting expense			24,012
Professional fees			27,398
Custody and accounting expense			99,878
Trustee fees			3,672
Miscellaneous expense			22,768
Total expenses			1,149,371
Net waived and reimbursed fees			(18,714	)
Net expenses			1,130,657
Net investment income			2,408,309
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments			3,012,884
Foreign currency related transactions			871,395
Futures			134,769
Written options			(1,120,018	)
Net realized gain			2,899,030
Net change in unrealized appreciation (depreciation) on:
Investments			(4,096,672	)
Foreign currency related transactions			429,784
Futures			(83,029	)
Written options			2,699,658
Net change in unrealized appreciation (depreciation)			(1,050,259	)
Net realized and unrealized gain			1,848,771
Increase in net assets resulting from operations		$	4,257,080
*      Foreign taxes withheld		$	176,611

 

See Accompanying Notes to Financial Statements

 

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STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

 

 

 

		Six Months Ended August 31, 2012				Year Ended February 29, 2012
FROM OPERATIONS:
Net investment income		$	2,408,309			$	4,035,464
Net realized gain			2,899,030				16,611,481
Net change in unrealized (depreciation)			(1,050,259	)			(16,786,516	)
Increase in net assets resulting from operations			4,257,080				3,860,429
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income			(4,007,469	)			(24,121,012	)
Return of capital			(7,436,982	)			—
Total distributions			(11,444,451	)			(24,121,012	)
FROM CAPITAL SHARE TRANSACTIONS:
Reinvestment of distributions			—				871,120
			—				871,120
Net increase in net assets resulting from capital share transactions			—				871,120
Net decrease in net assets			(7,187,371	)			(19,389,463	)
NET ASSETS:
Beginning of year or period			232,156,014				251,545,477
End of year or period		$	224,968,643			$	232,156,014
Undistributed (distributions in excess of) net investment income at end of year or period		$	(581,371	)		$	1,017,789

 

See Accompanying Notes to Financial Statements

 

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FINANCIAL HIGHLIGHTS (UNAUDITED)

 

 

 

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

 

		Per Share Operating Performance																																																Ratios and Supplemental Data
						Income (loss) from investment operations												Less distributions																																				Ratios to average net assets
		Net asset value, beginning of year or period				Net investment income gain (loss)				Net realized and unrealized gain (loss)				Total from investment operations				From net investment income				From net realized gains				From return of capital				Total distributions				Net asset value, end of year or period				Market value, end of year or period				Total investment return at net asset value(1)				Total investment return at market value(2)				Net assets, end of year or period (000’s)				Gross expenses prior to expense waiver/recoupment(3)				Net expenses after expense waiver/recoupment(3)(4)				Net investment income after expense waiver/recoupment(3)(4)				Portfolio turnover rate
Year or period ended		($)				($)				($)				($)				($)				($)				($)				($)				($)				($)				(%)				(%)				($000’s)				(%)				(%)				(%)				(%)
08-31-12			12.66				0.14				0.09				0.23				0.22				—				0.40				0.62				12.27				11.35				2.28				0.65				224,969				1.02				1.00				2.13				65
02-29-12			13.76				0.22	·			0.00	*			0.22				1.32				—				—				1.32				12.66				11.90				2.43				(3.44	)			232,156				1.00				1.00				1.76				135
02-28-11			13.37				0.20				1.57				1.77				1.38				—				—				1.38				13.76				13.72				14.05				6.32				251,545				0.98				0.99	†			1.48	†			164
02-28-10			11.29				0.21	·			3.64				3.85				—				—				1.77				1.77				13.37				14.30				35.81				57.38				242,426				1.01				1.00	†			1.61	†			141
02-28-09			17.79				0.31	·			(4.95	)			(4.64	)			0.74				—				1.12				1.86				11.29				10.42				(26.96	)			(28.32	)			204,546				0.99				0.99	†			2.01	†			178
02-29-08			21.19				0.30	·			(0.73	)			(0.43	)			—				2.40				0.57				2.97				17.79				16.73				(2.40	)			(7.87	)			324,275				0.97				0.97	†			1.45	†			194
02-28-07			20.24				0.26				2.55				2.81				0.04				1.54				0.28				1.86				21.19				21.11				14.81				24.40				385,433				0.95				0.95				1.29				132
10-31-05(5) - 02-28-06			19.06	(6)			0.06	·			1.28				1.34				0.16				—				—				0.16				20.24				18.61				7.08				(6.17	)			365,374				1.06				1.00				0.86				41

 

(1)

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, capital gain distributions and return of capital distributions/allocations, if any, in accordance with the provisions of the dividend reinvestment plan. Total investment return at net asset value is not annualized for periods less than one year.

(2)

Total investment return at market value measures the change in the market value of your investment assuming reinvestment of dividends, capital gain distributions and return of capital distributions/allocations, if any, in accordance with the provisions of the Fund’s dividend reinvestment plan. Total investment return at market value is not annualized for periods less than one year.

(3)	Annualized for periods less than one year.

(4)	The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage, extraordinary expenses and acquired fund fees and expenses) subject to possible recoupment by ING Investments, LLC within three years of being incurred.

(5)	Commencement of operations.

(6)	Net asset value at beginning of period reflects the deduction of the sales load of $0.90 per share and offering costs of $0.04 per share paid by the shareholder from the $20.00 offering price.

·	Calculated using average number of shares outstanding throughout the period.

†	Impact of waiving the advisory fee for the ING Institutional Prime Money Market Fund holding has less than 0.005% impact on the expense ratio and net investment income or loss ratio.

*	Amount is less than $0.005 or 0.005% or more than $(0.005) or (0.005)%.

 

See Accompanying Notes to Financial Statements

 

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NOTES TO FINANCIAL STATEMENTS AS OF AUGUST 31, 2012 (UNAUDITED)

 

 

 

NOTE 1 — ORGANIZATION

 

ING Global Advantage and Premium Opportunity Fund (the “Fund”) is a 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 (“GAAP”) for investment companies.

A. Security Valuation. All investments in securities are recorded at their estimated fair value, as described below. 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 fair 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. Investments in open-end mutual funds are valued at the net asset value. Investments in securities of sufficient credit quality maturing in 60 days or less from date of acquisition are valued at amortized cost which approximates fair value.

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.

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

 

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NOTES TO FINANCIAL STATEMENTS AS OF AUGUST 31, 2012 (UNAUDITED) (CONTINUED)

 

 

 

NOTE 2 — SIGNIFICANT ACCOUNTING

POLICIES (continued)

 

such models. Unlike the closing price of a security on an exchange, fair value determinations employ elements of judgment. Consequently, the fair value assigned to a security may not represent the actual value that the Fund could obtain if it were to sell the security at the time of the close of the NYSE.

Pursuant to procedures adopted by the Board, the Fund is not obligated to use the fair valuations suggested by any research service, and valuation recommendations provided by such research services may be overridden if other events have occurred or if other fair valuations are determined in good faith to be more accurate. Unless an event is such that it causes the Fund to determine that the closing prices for one or more securities do not represent readily available reliable and 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.

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.

The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the “Pricing Committee” as established by the Fund’s Administrator. The Pricing Committee considers all facts they deem relevant that are reasonably available, through either public information or information available to the Investment Adviser or sub-adviser, when determining the fair value of the security. In the event that a security or asset cannot be valued pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Pricing Committee. When the Fund uses these fair valuation methods that use significant unobservable inputs to determine its NAV, securities will be priced by a method that the Pricing Committee believes accurately reflects fair value and are categorized as Level 3 of the fair value hierarchy. The methodologies used for valuing securities are not necessarily an indication of the risks of investing in those securities valued in good faith at fair value nor can it be assured the Fund can obtain the fair value assigned to a security if they were to sell the security.

To assess the continuing appropriateness of security valuations, the Pricing Committee may compare prior day prices, prices on comparable securities, and traded prices to the prior or current day prices and the Pricing Committee challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued in good faith at fair value, the Pricing Committee reviews and affirms the reasonableness of the valuation on a regular basis after considering all relevant information that is reasonably available.

For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in or out of the Level 3 category during the period. The end of period timing recognition is used for the transfers between Levels of the Fund’s assets and liabilities. A reconciliation of Level 3 investments is

 

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NOTE 2 — SIGNIFICANT ACCOUNTING

POLICIES (continued)

 

presented when the Fund has a significant amount of Level 3 investments.

For the period ended August 31, 2012, 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:

 

(1)

Market value of investment securities, other assets and liabilities — at the exchange rates prevailing at the end of the day.

 

(2)

Purchases and sales of investment securities, income and expenses — at the rates of exchange prevailing on the respective dates of such transactions

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 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. Such quarterly distributions may also consist of return of capital. 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

 

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NOTE 2 — SIGNIFICANT ACCOUNTING

POLICIES (continued)

 

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.

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 mounts 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, futures 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.

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 duration, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter duration.

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

 

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NOTE 2 — SIGNIFICANT ACCOUNTING

POLICIES (continued)

 

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 credit risk associated with 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.

As of August 31, 2012, the maximum amount of loss the Fund would incur if the counterparties to its derivative transactions failed to perform would be $133,793, which represents the gross payments to be received by the Fund on open forward foreign currency contracts were they to be unwound as of August 31, 2012. There were no credit events during the six months ended August 31, 2012 that triggered any credit related contingent features.

The Fund’s master agreements with derivative counterparties have 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.

As of August 31, 2012, the Fund had a liability position of $2,690,701 on open forward foreign currency contracts and written options with credit related contingent features. If a contingent feature would have been triggered as of August 31, 2012, the Fund could have been required to pay this amount in cash to its counterparties. As of August 31, 2012 the Fund did not post collateral for its open derivatives transactions. There were no credit events during the six months ended August 31, 2012 that triggered any credit related contingent features.

H. Forward Foreign Currency Contracts and Futures Contracts. The Fund may enter into forward foreign currency contracts primarily to hedge against foreign currency exchange rate risks on its non-U.S. dollar denominated investment securities. When entering into a forward foreign currency contract, the Fund agrees to receive or deliver a fixed quantity of reign currency for an agreed-upon price on an agreed future date. These contracts are valued daily and the Fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the statement of assets and liabilities. Realized and unrealized gains and losses on forward foreign currency contracts are included on the Statement of Operations. These instruments involve market and/or credit risk in excess of the amount recognized in the statement of assets and liabilities. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movement in currency and securities values and interest rates.

During the period ended August 31, 2012, the Fund used forward foreign currency contracts to hedge its investments in non-U.S. dollar denominated equity securities in an attempt to decrease the volatility of the Fund’s NAV.

 

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NOTE 2 — SIGNIFICANT ACCOUNTING

POLICIES (continued)

 

During the period ended August 31, 2012, the Fund had average contract amounts on forward foreign currency contracts to buy and sell of $4,561,657 and $93,200,619, respectively.

The Fund may enter into futures contracts involving foreign currency, interest rates, securities and securities indices. During the period, the Fund limited its use of futures contracts and futures options to “bona fide hedging” transactions, as such term is defined in applicable regulations, interpretations and practice. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of foreign currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, the Fund is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margin and are recorded as unrealized gains or losses by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

Futures contracts are exposed to the market risk factor of the underlying financial instrument. During the period ended August 31, 2012, the Fund had purchased futures contracts on various equity indices primarily to provide exposures to such index returns while allowing the fund managers to maintain a certain level of cash balances in the Fund. Additional associated risks of entering into futures contracts include the possibility that there may be an illiquid market where the Fund is unable to liquidate the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Fund’s securities. With futures, there is minimal counterparty credit risk to the Fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

During the period ended August 31, 2012, the Fund had an average notional value of $4,456,048 on purchased futures contracts.

I. 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.

The Fund generates premiums and seeks gains by writing OTC call options on indices on a portion of the value of the equity portfolio. Please refer to Note 6 for the volume of written option activity during the period ended August 31, 2012.

J. 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 monthly, based on an annual rate of 0.75% 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

 

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NOTE 3 — INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES (continued)

 

by the Fund and the liquidation preference of any outstanding preferred shares). As of August 31, 2012, there were no preferred shares outstanding.

The Investment Adviser entered into a sub-advisory agreement (“Sub-Advisory Agreement”) with ING Investment Management Co. LLC (“ING IM”), a Delaware limited liability company. 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 Services, LLC (the “Administrator”), a Delaware limited liability company, 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 Adviser and its immediate affiliates, would be separated from ING Groep by the end of 2013. To achieve this goal, in a series of announcements beginning November 2010, ING Groep announced that it plans to pursue transactions to restructure certain businesses, including an initial public offering for its U.S. based insurance, retirement services, and investment management operations; and other transactions, which could include an initial public offering or other type of transaction, for its European based insurance and investment management operations and Asian based insurance and investment management operations. There can be no assurance that all or part of the restructuring plan will be carried out.

The restructuring plan and the uncertainty about its implementation, whether implemented through the planned public offerings or through other means, in whole or in part, may be disruptive to the businesses of ING entities, including the ING entities that service the Fund, and may cause, among other things, interruption or reduction of business and services, diversion of management’s attention from day-to-day operations,

and loss of key employees or customers. A failure to complete the offerings or other means of implementation on favorable terms could have a material adverse impact on the operations of the businesses subject to the restructuring plan. The restructuring plan may result in the Investment Adviser’s loss of access to services and resources of ING Groep, which could adversely affect its businesses and profitability. In addition, the divestment of ING businesses, including the Investment Adviser, may potentially be deemed a “change of control” of each entity. A change of control would result in the termination of the Fund’s advisory and sub-advisory agreements, which would trigger the necessity for new agreements that would require approval of the board, and may trigger the need for shareholder approval. Currently, the Investment Adviser does not anticipate that the restructuring will have a material adverse impact on the Fund or its operations and administration.

The Investment Adviser has entered into a written expense limitation agreement (“Expense Limitation Agreement”) with the Fund under which it will limit the expenses of the Fund, excluding interest, taxes, leverage expenses, and extraordinary expenses (and acquired fund fees and expenses) to 1.00% of average daily managed assets. The Investment Adviser may at a later date recoup from the Fund fees waived and other expenses assumed by the Investment Adviser during the previous 36 months, but only if, after such recoupment, the Fund’s expense ratio does not exceed the percentage described above. The Expense Limitation Agreement is contractual and shall renew automatically for one-year terms unless ING Investments or the Fund provides written notice of the termination within 90 days of the end of the then current term or upon written termination of the Management Agreement.

Waived and reimbursed fees and any recoupment by the Investment Adviser of such waived and reimbursed fees are reflected on the accompanying Statement of Operations for the Fund.

As of August 31, 2012, the amounts of waived or reimbursed fees that are subject to possible recoupment by the Investment Adviser, and the related expiration dates, are as follows:

 

August 31,
2013				2014				2015				Total
$	—			$	—			$	18,714			$	18,714

 

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NOTE 4 — OTHER TRANSACTIONS WITH AFFILIATED AND RELATED PARTIES

 

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 period ended August 31, 2012, excluding short-term securities, were $146,136,321 and $153,062,843, respectively.

NOTE 6 — TRANSACTIONS IN WRITTEN OPTIONS

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

 

		Number of Contracts				Premiums Received
Balance at 02/29/12			214,991			$	2,646,412
Options Written			1,341,046				18,132,278
Options Expired			(554,633	)			(6,072,083	)
Options Exercised			—				—
Options Terminated in Closing Purchase Transactions			(787,545	)			(12,170,153	)
Balance at 08/31/12			213,859			$	2,536,454

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 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 rate, 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. 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.

NOTE 8 — CAPITAL SHARES

Transactions in capital shares and dollars were as follows:

 

		Reinvestment of distributions				Net increase in shares outstanding						Reinvestment of distributions				Net increase
Year or period ended		#				#						($)				($)
8/31/2012			—				—						—				—
2/29/2012			66,109				66,109						871,120				871,120

NOTE 9 — FEDERAL INCOME TAXES

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 companies (PFICs) 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.

 

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NOTE 9 — FEDERAL INCOME TAXES (continued)

 

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, 2012. The tax composition of dividends and distributions as of the Fund’s most recent tax year-end was as follows:

 

Tax Year Ended December 31, 2011
Ordinary Income
$	24,121,012

The tax-basis components of distributable earnings and the capital loss carryforwards which may be used to offset future realized capital gains for federal income tax purposes as of December 31, 2011 are detailed in the table below. Capital loss carryforwards with no expiration, if any, must be utilized prior to those with expiration dates.

 

Unrealized Appreciation/ (Depreciation)				Short-term Capital Loss Carryforwards				Expiration
$	(11,123,258	)		$	(3,824,866	)			2017

The Fund’s major tax jurisdictions are U.S. federal and Arizona. The earliest tax year that remains subject to examination by these jurisdictions is 2007.

As of August 31, 2012, 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.

NOTE 10 — SUBSEQUENT EVENTS

Dividends: Subsequent to August 31, 2012, the Fund made distributions of:

 

Per Share Amount

Declaration Date

Payable Date

Record Date

$

0.280

9/17/2012

10/15/2012

10/3/2012

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. A significant portion of the quarterly distribution payments made by the Fund may constitute a return of capital.

On September 6, 2012, the Fund’s Board of Trustees approved adding a new sub-adviser and subsequent changes to the Fund’s investment strategies. Shareholder approval is required to add the new sub-adviser. The shareholder meeting is expected to occur on or about December 20, 2012.

The Fund has evaluated events occurring after the balance sheet 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.

 

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See Accompanying Notes to Financial Statements

 

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See Accompanying Notes to Financial Statements

 

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Fair Value Measurements^

The following is a summary of the fair valuations according to the inputs used as of August 31, 2012 in valuing the assets and liabilities:

 

		Quoted Prices in Active Markets for Identical Investments (Level 1)				Significant Other Observable Inputs# (Level 2)				Significant Unobservable Inputs (Level 3)				Fair Value at August 31, 2012
Asset Table
Investments, at fair value
Common Stock
Australia		$	—			$	8,741,994			$	—			$	8,741,994
Austria			—				443,669				—				443,669
Belgium			56				852,209				—				852,265
China			—				107,897				—				107,897
Denmark			—				1,073,588				—				1,073,588
Finland			—				1,117,163				—				1,117,163
France			—				8,265,909				—				8,265,909
Germany			—				7,176,931				—				7,176,931
Hong Kong			—				2,480,456				—				2,480,456
Ireland			1,241,429				—				—				1,241,429
Israel			—				519,869				—				519,869
Italy			—				1,469,578				—				1,469,578
Japan			47,963				19,418,237				—				19,466,200
Luxembourg			—				172,403				—				172,403
Macau			—				200,086				—				200,086
Netherlands			—				4,697,781				—				4,697,781
New Zealand			—				171,150				—				171,150
Norway			—				1,344,031				—				1,344,031
Portugal			—				731,912				—				731,912
Singapore			28,000				1,668,627				—				1,696,627
Spain			—				2,930,149				—				2,930,149
Sweden			—				3,212,551				—				3,212,551
Switzerland			646,760				7,327,552				—				7,974,312
United Kingdom			102,061				20,306,796				—				20,408,857
United States			128,262,684				—				—				128,262,684
Total Common Stock			130,328,953				94,430,538				—				224,759,491
Preferred Stock			—				256,270				—				256,270
Rights			—				—				14,720				14,720
Short-Term Investments			1,531,235				—				—				1,531,235
Total Investments, at fair value		$	131,860,188			$	94,686,808			$	14,720			$	226,561,716

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2012 (UNAUDITED) (CONTINUED)

 

		Quoted Prices in Active Markets for Identical Investments (Level 1)				Significant Other Observable Inputs# (Level 2)				Significant Unobservable Inputs (Level 3)				Fair Value at August 31, 2012
Other Financial Instruments+
Futures		$	29,059			$	—			$	—			$	29,059
Forward Foreign Currency Contracts			—				133,793				—				133,793
Total Assets		$	131,889,247			$	94,820,601			$	14,720			$	226,724,568
Liabilities Table
Other Financial Instruments+
Written Options		$	—			$	(1,554,555	)		$	—			$	(1,554,555	)
Forward Foreign Currency Contracts			—				(1,136,146	)			—				(1,136,146	)
Total Liabilities		$	—			$	(2,690,701	)		$	—			$	(2,690,701	)

 

^	See Note 2, “Significant Accounting Policies” in the Notes to Financial Statements for additional information.

+

Other Financial Instruments are derivatives not reflected in the Portfolio of Investments and may include open forward foreign currency contracts, equity forwards, futures, swaps, and written options. Forward foreign currency contracts, equity forwards and futures are valued at the unrealized gain (loss) on the instrument. Swaps and written options are valued at the fair value of the instrument.

#

The earlier close of the foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. Accordingly, a portion of the Fund’s investments are categorized as Level 2 investments.

There were no transfers in or out of Levels 1, 2 or 3 of the fair value hierarchy during the six months ended August 31, 2012.

At August 31, 2012, the following forward foreign currency contracts were outstanding for the ING Global Advantage and Premium Opportunity Fund:

 

Counterparty		Currency				Contract Amount				Buy/Sell				Settlement Date				In Exchange For				Fair Value				Unrealized Appreciation (Depreciation)
Brown Brothers Harriman & Co.			Singapore Dollar				2,150,000				Sell				09/19/12			$	1,720,160			$	1,724,812			$	(4,652	)
Barclays Bank PLC			Norwegian Krone				8,000,000				Sell				09/19/12				1,343,315				1,379,451				(36,136	)
Barclays Bank PLC			Swiss Franc				7,200,000				Sell				09/19/12				7,410,381				7,543,939				(133,558	)
Barclays Bank PLC			Australian Dollar				8,600,000				Sell				09/19/12				9,003,263				8,869,470				133,793
Brown Brothers Harriman & Co.			Japanese Yen				1,550,000,000				Sell				09/19/12				19,556,287				19,799,758				(243,471	)
Citigroup, Inc.			Swedish Krona				22,100,000				Sell				09/19/12				3,295,081				3,334,716				(39,635	)
Credit Suisse First Boston			British Pound				14,100,000				Sell				09/19/12				22,187,830				22,387,194				(199,364	)
Credit Suisse First Boston			EU Euro				20,900,000				Sell				09/19/12				25,832,086				26,293,013				(460,927	)
Credit Suisse First Boston			Danish Krone				6,550,000				Sell				09/19/12				1,087,710				1,106,113				(18,403	)
																										$	(1,002,353	)

ING Global Advantage and Premium Opportunity Fund Open Futures Contracts on August 31, 2012:

 

Contract Description		Number of Contracts				Expiration Date				Notional Value				Unrealized Appreciation/ (Depreciation)
Long Contracts
Mini MSCI EAFE Index			8				09/21/12			$	587,400			$	10,244
S&P 500 E-Mini			9				09/21/12				632,295				18,815
										$	1,219,695			$	29,059

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2012 (UNAUDITED) (CONTINUED)

 

ING Global Advantage and Premium Opportunity Fund Written OTC Options on August 31, 2012:

 

# of Contracts				Counterparty		Description		Exercise Price						Expiration Date		Premiums Received				Fair Value
	Options on Indices
	1,336			UBS Warburg LLC		Call on S&P/ASX 200 Index			4,308.300			AUD		09/13/12		$	70,671			$	(56,773	)
	5,376			Citigroup, Inc.		Call on Euro Stoxx 50® Index			2,437.040			EUR		09/13/12			409,246				(294,746	)
	2,544			Barclays Bank PLC		Call on FTSE 100 Index			5,851.510			GBP		09/13/12			330,495				(53,197	)
	140,011			Citigroup, Inc.		Call on Nikkei 225 Index			8,978.600			JPY		09/13/12			319,874				(99,782	)
	64,592			Barclays Bank PLC		Call on S&P 500® Index			1,413.490			USD		09/26/12			1,406,168				(1,050,057	)
									Total Written OTC Options							$	2,536,454			$	(1,554,555	)

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, 2012 was as follows:

 

Derivatives not accounted for as hedging instruments		Location on Statement of Assets and Liabilities		Fair Value
Asset Derivatives
Foreign exchange contracts		Unrealized appreciation on forward foreign currency contracts		$	133,793
Equity contracts		Net Assets- Unrealized appreciation*			29,059
Total Asset Derivatives				$	162,852
Liability Derivatives
Foreign exchange contracts		Unrealized depreciation on forward foreign currency contracts		$	1,136,146
Equity contracts		Written options, at fair value			1,554,555
Total Liability Derivatives				$	2,690,701

 

*	Includes cumulative appreciation/depreciation of futures contracts as reported in the table following the Summary Portfolio of Investments.

The effect of derivative instruments on the Fund’s Statement of Operations for the six months ended August 31, 2012 was as follows:

 

Derivatives not accounted for as hedging instruments		Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
		Foreign currency related transactions*				Futures				Written options				Total
Equity contracts		$	—			$	134,769			$	(1,120,018	)		$	(985,249	)
Foreign exchange contracts			1,165,003				—				—				1,165,003
Total		$	1,165,003			$	134,769			$	(1,120,018	)		$	179,754
Derivatives not accounted for as hedging instruments		Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income
		Foreign currency related transactions*				Futures				Written options				Total
Equity contracts		$	—			$	(83,029	)		$	2,699,658			$	2,616,629
Foreign exchange contracts			431,765				—				—				431,765
Total		$	431,765			$	(83,029	)		$	2,699,658			$	3,048,394

 

*	Amounts recognized for forward foreign currency contracts are included in net realized gain (loss) on foreign currency related transactions and net change in unrealized appreciation or depreciation on foreign currency related transactions.

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2012 (UNAUDITED) (CONTINUED)

 

Supplemental Option Information (Unaudited)

 

Supplemental Call Option Statistics as of August 31, 2012:
% of Total Net Assets against which calls written			67.70	%
Average Days to Expiration at time written			35 days
Average Call Moneyness* at time written			ATM
Premium received for calls		$	2,536,454
Value of calls		($	1,554,555	)

 

*

“Moneyness” is the term used to describe the relationship between the price of the underlying asset and the option’s exercise or strike price. For example, a call (buy) option is considered “in-the-money” when the value of the underlying asset exceeds the strike price. Conversely, a put (sell) option is considered “in-the-money” when its strike price exceeds the value of the underlying asset. Options are characterized for the purpose of Moneyness as, “in-the-money” (“ITM”), “out-of-the-money” (“OTM”) or “at-the-money” (“ATM”), where the underlying asset value equals the strike price.

 

See Accompanying Notes to Financial Statements

 

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SHAREHOLDER MEETING INFORMATION (UNAUDITED)

 

 

 

An annual meeting of shareholders of the ING Global Advantage and Premium Opportunity Fund was held July 5, 2012, at the offices of ING Funds, 7337 East Doubletree Ranch Road Suite 100, Scottsdale, AZ 85258.

ING Global Advantage and Premium Opportunity Fund, Class I Trustees

At this meeting, a proposal was submitted 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. The proposal passed with the following votes recorded.

 

		Proposal		Shares voted for				Shares voted against or withheld				Shares abstained		Total Shares Voted
Class I Trustees		Colleen D. Baldwin			16,129,633.760				1,096,570.391						17,226,204.151
		Robert W. Crispin			14,623,959.801				2,602,244.350						17,226,204.151
		Peter S. Drotch			16,108,320.794				1,117,883.357						17,226,204.151

 

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ADDITIONAL INFORMATION (UNAUDITED)

 

 

 

 

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ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)

 

 

 

 

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ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)

 

 

 

 

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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

 

		SAR-UIGA		(0812-102412)

 

 

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Item 2. Code of Ethics.

Not required for semi-annual filing.

Item 3. Audit Committee Financial Expert.

Not required for semi-annual filing.

Item 4. Principal Accountant Fees and Services.

Not required for semi-annual filing.

Item 5. Audit Committee Of Listed Registrants.

Not required for semi-annual filing.

Item 6. Schedule of Investments.

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ING GLOBAL ADVANTAGE AND PREMIUM  OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS
		as of August 31, 2012 (Unaudited)

 

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM  OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS
		as of August 31, 2012 (Unaudited) (Continued)

 

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM  OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS
		as of August 31, 2012 (Unaudited) (Continued)

 

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM  OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS
		as of August 31, 2012 (Unaudited) (Continued)

 

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM  OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS
		as of August 31, 2012 (Unaudited) (Continued)

 

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM  OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS
		as of August 31, 2012 (Unaudited) (Continued)

 

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM  OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS
		as of August 31, 2012 (Unaudited) (Continued)

 

 

See Accompanying Notes to Financial Statements

 

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ING GLOBAL ADVANTAGE AND PREMIUM  OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS
		as of August 31, 2012 (Unaudited) (Continued)

 

 

See Accompanying Notes to Financial Statements

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ING GLOBAL ADVANTAGE AND PREMIUM  OPPORTUNITY FUND		SUMMARY PORTFOLIO OF INVESTMENTS
		as of August 31, 2012 (Unaudited) (Continued)

 

 

See Accompanying Notes to Financial Statements

 

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Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-end Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-end Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-end Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

The Board has a Nominating Committee for the purpose of considering and presenting to the Board candidates it proposes for nomination to fill Independent Trustee vacancies on the Board. The Committee currently consists of all Independent Trustees of the Board. (6 individuals). The Nominating Committee operates pursuant to a Charter approved by the Board. The primary purpose of the Nominating Committee is to consider and present to the Board the candidates it proposes for nomination to fill vacancies on the Board. In evaluating candidates, the Nominating Committee may consider a variety of factors, but it has not at this time set any specific minimum qualifications that must be met. Specific qualifications of candidates for Board membership will be based on the needs of the Board at the time of nomination.

The Nominating Committee is willing to consider nominations received from shareholders and shall assess shareholder nominees in the same manner as it reviews its own nominees. A shareholder nominee for director should be submitted in writing to the Fund’s Secretary. Any such shareholder nomination should include at a minimum the following information as to each individual proposed for nomination as trustee: such individual’s written consent to be named in the proxy statement as a nominee (if nominated) and to serve as a trustee (if elected), and all information relating to such individual that is required to be disclosed in the solicitation of proxies for election of trustees, or is otherwise required, in each case under applicable federal securities laws, rules and regulations.

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The secretary shall submit all nominations received in a timely manner to the Nominating Committee. To be timely, any such submission must be delivered to the Fund’s Secretary not earlier than the 90th day prior to such meeting and not later than the close of business on the later of the 60th day prior to such meeting or the 10th day following the day on which public announcement of the date of the meeting is first made, by either disclosure in a press release or in a document publicly filed by the Fund with the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant): ING Global Advantage and Premium Opportunity Fund

 

By		/s/ Shaun P. Mathews
		Shaun P. Mathews
		President and Chief Executive Officer

Date: November 1, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By		/s/ Shaun P. Mathews
		Shaun P. Mathews
		President and Chief Executive Officer

Date: November 1, 2012

 

By		/s/ Todd Modic
		Todd Modic
		Senior Vice President and Chief Financial Officer

Date: November 1, 2012